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A guide to Buffalo Niagara’s surprisingly big financial sector

The Buffalo Niagara region’s financial services sector – a broad collection of businesses from banks to insurance companies to debt collectors – hit a rough patch during the recession, but has bounced back with some sectors adapting their business models.

The region last year averaged about 31,700 “financial activities” jobs, a wide category that includes traditional financial industries but not debt collectors, according to the state Department of Labor.

The recession dealt a blow, notably to jobs at mortgage brokers, but the sector has mostly rebounded since 2010.

“The financial industry in Western New York is a regional one, not a national or international one, for the most part,” said John Slenker, a regional economist with the Labor Department. “We didn’t get hit as hard as some places.”

The region’s largest annual average job count for financial activities in the past 25 years of Labor Department data was 34,800, in 2006. Since then, the average has sunk as low as 30,500, in 2010.

Financial activities jobs now represent about 6 percent of the region’s total jobs. (Manufacturing, by comparison, accounts for 9 percent.)

“I think it’s a very stable part of the overall economy, and I think we continue to see growth across all banks that are active here,” said Kevin Quinn, HSBC’s top Buffalo-based executive, referring to financial services. “Our presence provides good stability.”

Banks

Think of banks and big players like M&T, HSBC, First Niagara and KeyBank might come to mind. Combined, they employ thousands of people. But a range of institutions are in the mix. A total of 17 banks have branches in Erie and Niagara counties, according to the Federal Deposit Insurance Corp. Based on the most recently available data, they had a combined 295 offices in the market, with $36.3 billion in total deposits.

M&T was the clear deposit market share leader, at 50.3 percent, followed by First Niagara’s 26.4 percent and KeyBank’s 9.7 percent. Those three banks combined accounted for 86 percent of the local deposit market share. But the region also is populated by a host of smaller banks, adding to the competitive climate for lenders.

Banks are adding jobs in compliance, as they try to keep up with regulators’ requirements. At the same time, many banks are shrinking their branch networks as more transactions go online.

M&T and First Niagara are based here, giving the region the clout that comes with corporate headquarters. M&T has about 6,500 employees in the region, while First Niagara has about 2,000.

But even some banks based elsewhere have a lot of jobs here. Citi’s financial services center in Getzville has 1,588 employees. KeyBank has about 900 employees in the region, while HSBC has about 3,000 employees here. “I think that’s a good and steady number for us going forward,” said Quinn, senior vice president and managing director for HSBC Bank USA’s upstate commercial banking business.

HSBC last year saw strong loan growth in upstate New York in a host of sectors, Quinn said. Supporting U.S.-based companies’ international activities is a significant growth area for the bank.

“We’ve intently tried to position ourselves as the international banking voice within this market,” Quinn said.

HSBC’s worldwide presence is one reason for that, but the bank also expects global trade to grow annually by 8 percent starting in 2016. “We know that export activity continues to be a bright spot not just for the U.S. economy, but also New York State,” he said.

Mark Czarnecki, president and chief operating officer of M&T Bank, said the region’s long history in banking, and its collection of colleges and universities, have helped create a hub for banking.

“I think there’s been a long-term core of people who have worked in the banking industry, from Goldome and Empire and M&T and the old Marine Midland. And that employee base has transitioned to continue to be a real powerhouse, in terms of talent,” he said.

“Secondly, there’s nine colleges and universities, all producing graduates, many of whom come here to work,” Czarnecki said. “And the cost structure’s pretty good [in the Buffalo Niagara region] – the cost structure’s relatively cheap, relative to the U.S.”

M&T regularly hires young natives of Buffalo who were working in other parts of the country but wanted to return home, Czarnecki said.

“What I always tell them is, the quality of the intellectual dialogue at M&T is about as good as you’re going to see in Boston or New York or whatever, and you get to come home.”

Credit unions

Credit unions, which have eligibility requirements for membership, also have a significant presence. The New York Credit Union Association’s Erie-Niagara Chapter consists of 70 credit unions with combined membership of about 306,000 and assets of about $2.3 billion. In the past three years, those credit unions have made $1.3 billion in loans.

Asset growth for the Erie-Niagara Chapter’s members was 3.8 percent in 2014, and its loan growth 4.55 percent last year. In both categories, the growth rate declined from the year before.

The credit unions are aiming to generate more loans, with their loan-to-share ratio at a lower than typical level, said Marie Betti, president of the local chapter. “There’s lots of competition, and the bread and butter for credit unions is auto loans.”

Based on assets as of last September, Western New York’s largest credit union was Cornerstone Community Federal Credit Union, with $357 million in assets, followed by the Moog Employees Federal Credit Union’s $153 million, and Niagara’s Choice Federal Credit Union’s $136 million, according to the National Credit Union Administration.

Insurance

The insurance industry has a large footprint through agents and call centers as well as companies such as Merchants Insurance Group. The underwriter, which was founded in 1918, has about 220 employees locally, along with another 100 in three offices outside the region, said Robert Zak, Merchants’ president and chief executive officer.

“I always think of insurance as the grease to keep an economy’s engine running,” Zak said.

Zak said he views the local insurance industry as fairly big, not to mention competitive. Merchants deals exclusively through independent agencies, and competes with some large players, such as Travelers and The Hartford, who are based outside the region. Zak said Merchants benefits from being based here and knowing the market and customers, as well as attracting talent from local colleges.

GEICO, one of the largest insurance companies in the nation, has built a massive workforce. It now has 2,800 employees at its Getzville customer service center, with an additional 100 or so employees in the region, said Rick Hoagland, regional vice president. GEICO started out in leased space in Amherst in 2004, before moving into its CrossPoint Business Park location the following year.

Its local growth continues: GEICO plans to add another 400 to 500 positions this year, Hoagland said.

“Western New York, Buffalo in particular, is probably one of the best areas for us to hire,” Hoagland said, citing the region’s highly educated workforce and work ethic as assets.

GEICO’s automotive insurance business has driven much of the center’s growth. The Getzville customer service center is one of 10 locations of similar size around the country. Five years ago, the Getzville site added a GEICO Insurance Agency subsidiary location at the site, to sell and service non-auto policies; that subsidiary accounts for about 800 of the employees at the site.

“We get some tremendous results out of this office,” Hoagland said.

Debt collection

The region is home to a number of debt-collection operations, including Pioneer Credit Recovery in Wyoming County. Pioneer was acquired in 2001 by financial services giant Sallie Mae, which has since split into two companies, one of which is called Navient. Pioneer is now a Navient subsidiary and has about 950 employees at those two sites.

Continental Service Group, known as ConServe for short, recently moved its local operations from Lancaster to Cheektowaga to accommodate its expansion. The Rochester-based collections agency’s local office has 150 employees and wants to hire more people to bring that number to 200 by the end of the year, said Stacy Bartl, public relations manager.

Bartl described the company’s experience in the Buffalo Niagara region as “tremendous. That’s why we decided to stay there and expand there.”

Debt collectors have had their ups and downs in Western New York.

The sector’s employment boomed when the recession struck. But in the post-recession years, banks have tightened their lending habits, and many consumers have become more conservative in their spending. The number of bankruptcy cases filed in the Buffalo-Rochester region has fallen for five straight years. Some call centers have even shifted their focus from collecting debt to customer-service work.

But Bartl said ConServe, which handles work for the U.S. Department of Education, has not undergone those kinds of fluctuations with the economy’s health.

Anita M. Manghisi, president of the New York State Collections Association, called Buffalo a “hot” area for collections agencies, because of its readily available workforce and operating costs. Debt stemming from student loans and health care expenses are probably the industry’s fastest-growing areas, she said.

Some area debt collectors have run afoul of the law over their business practices, leading to fines or, in some cases, even agency shutdowns. In December, Gov. Andrew M. Cuomo announced new regulations aimed at protecting consumers from “abusive and deceptive” debt-collection practices. Last year, New York State consumers filed more than 20,000 complaints about such practices.

email: mglynn@buffnews.com