Share this article

print logo

Region’s banks compete for an edge in the current low-rate environment

First Niagara Financial Group has settled on a new chief executive officer, and M&T is still working to complete a $3.7 billion deal.

It’s already shaping up to be another newsworthy year in local banking.

Long-term leadership at First Niagara was settled in December, when Gary M. Crosby was named First Niagara’s chief executive officer and president. He had served in those roles on an interim basis since last March, when John Koelmel was removed.

First Niagara has been under investor pressure to show greater profitability from the banks it absorbed through acquisitions, a challenge given the slow economic climate.

“I would say the economy is a little better than it was last year, but it’s not healthy yet,” Crosby said. “The rate environment continues to be a big problem for banks.”

On top of that, he said, new regulations are driving up banks’ costs.

“Don’t get me wrong: these regulations are all well-intended,” Crosby said. “They’re aimed at ensuring our financial system is safe and sound and that consumers are protected. That’s really important, and we needed more regulation to ensure safety and soundness and consumer protection. But it’s coming at the banks so fast, and so furiously, that we’re running the risk of overwhelming the banking industry with new regulation. It’s just a lot to absorb.”

Since he joined the bank in 2009, Crosby has seen employment in First Niagara’s compliance department grow tenfold. “We still don’t have enough people,” he said. “I tell young people, one of the best areas to pursue is financial services compliance, because the demand for compliance people is huge.”

Aside from keeping pace with regulations, First Niagara has continued to invest in new products and services while managing its expenses, Crosby said.

“The good news for us is, we’ve built a great franchise over the last four years that has tremendous potential,” he said. “Once the economy starts to grow and ultimately gets healthy again, we expect our revenues to take off.”


At this time last year, M&T was working to complete a $3.7 billion acquisition of Hudson City Bancorp, a major push by M&T into New Jersey. M&T is still trying to complete that deal after hitting an unexpected obstacle.

M&T is working to satisfy the Federal Reserve Bank of New York’s concerns about the strength of its anti-money laundering/Bank Secrecy Act program. On two different occasions, M&T and Hudson City have agreed to extend the deadline after which either party could walk away without a financial penalty. The new deadline is Dec. 31.

Despite the delay, Mark Czarnecki, M&T’s president and chief operating officer, said M&T remains “bullish” on the Hudson City deal and is eager to access the New Jersey market.

“It will take our way of doing banking to a whole new market in New Jersey,” he said. “We can do well there.”

M&T’s efforts to upgrade its anti-money laundering program to the Federal Reserve’s satisfaction have taken longer than some analysts expected. The bank has hired hundreds of additional employees to support its efforts, an expensive but necessary step. Czarnecki said the bank is about two-thirds to three-quarters of the way through that hiring.

The delay has reverberated through the financial services industry. Some observers wonder if the tough scrutiny M&T has faced has made other banks wary of mergers.

Meanwhile, Czarnecki said M&T has invested in infrastructure that will serve the bank well in the long run as it copes with a stricter regulatory climate. And M&T this year will finish equipping a new data center in Amherst, another long-term investment aimed at supporting the bank’s future growth.

Like Crosby, Czarnecki sees an economy that is improved from a year ago but not dazzling. He expects upstate New York will turn out to be M&T’s leading territory for loan growth for 2013, once all the numbers are compiled.


With HSBC Bank USA out of upstate retail banking, KeyBank moved up to third place last year in Buffalo Niagara market share, as measured by deposits. KeyBank increased its share to 10.7 percent, behind M&T and First Niagara, respectively. (The three banks accounted for a combined 85 percent of the deposit market share.)

Gary Quenneville, regional sales executive for the bank’s Western New York region and president for its Buffalo market, does not anticipate the interest rate environment changing much this year. “One of the objectives we have is to put our deposits to work,” he said.

Banks are also adjusting to the demands of the regulatory climate and will have to spend more money to stay in compliance, he said.

Quenneville sees promising signs in business lending, though those customers are cautious. “You’re not seeing reckless spending,” he said.

And KeyBank, like its rivals, knows it has to meet customers’ demands to provide banking services in multiple ways, whether mobile, online, in branches or at ATMs. While branch traffic for all banks is not what it used to be, customers still rely on branches for more complex questions and transactions.


Even without its upstate retail network, HSBC still has a major local presence, with about 3,000 local employees.

The bank has finished moving out of the downtown tower that once bore its name and logo, said Kevin Quinn, senior vice president and managing director for HSBC’s upstate commercial banking business. The employees have shifted to the downtown Atrium and a building in Depew. HSBC made a splash last year when it announced a $35 million investment in those facilities.

Quinn said he sees some favorable economic signals for banks, and he believes the region in general benefits from a healthy financial services sector.

“The level of competition here is very high,” he said, “and the appetite for loan growth in the commercial space is equally high.”

Quinn also sees good prospects for HSBC’s commercial loan growth, with activity by manufacturers, service companies and the health care industry. Upstate New York remains an important market for the bank’s commercial loan business, he said. All four of its upstate business lines: large corporate, middle market, Canadian cross-border and health care/nonprofit – showed growth in 2013.

“Some of that growth really back-ended in 2013, which gives us good reason to believe that we have some momentum going into 2014,” Quinn said.

Evans Bancorp

Evans Bancorp’s chief executive officer, David Nasca, expects this year to be just as competitive for banks as last year. “There’s a lot of people chasing a few deals,” he said.

Evans is smaller than its big rivals in the region – Evans’ deposit market share last year was about 2 percent – but it still finds its own niche, Nasca said.

And just like the larger banks, Evans is evaluating how to balance demand for the different methods that customers use to interact with the bank. Last year, Evans promoted an employee to the position of manager of alternative distribution channels, overseeing services including online and mobile services.

“We’re not looking at it as a product; we’re looking at it as a way to reach customers,” Nasca said.