When KeyCorp announced its deal for First Niagara Financial Group last fall, elected officials warned massive job cuts could follow the acquisition.
There were fears Key would eliminate hundreds of branch jobs. And no one knew how many jobs might be lost at operations like those at First Niagara’s Larkinville headquarters, due to duplication with positions Cleveland-based Key already had. First Niagara’s Western New York workforce of about 2,200 people looked vulnerable.
But the actual outcome is coming into focus, and the picture is much different. Key plans to close 70 First Niagara branches in four states, and 36 Key branches in New York State. But under an agreement announced with Sen. Charles E. Schumer and Rep. Brian Higgins, Key has pledged to offer jobs to all branch employees.
Key also said it will make no more than 250 job cuts statewide once the acquisition is complete – not to mention add hundreds of more jobs at Key operations in upstate New York in the future.
“I think at the end of the day, we got to a place where I’m comfortable, I’m confident, I’m proud that this, I think, is consistent with what we said at the beginning. That we are building a better company together and that Buffalo will be an important part of that,” said Beth Mooney, Key’s CEO and chairman, during a visit to Buffalo on Monday.
A few factors worked in Buffalo’s favor:
• Elected leaders like Schumer and Higgins, who were critical of potentially large job cuts, worked with Key to secure job pledges.
• First Niagara CEO Gary Crosby advocated for First Niagara’s personnel and locations like Larkinville.
• Community groups called for protecting First Niagara’s local operations as the deal unfolded.
• Key liked the opportunities it saw with First Niagara’s workforce and business units, particularly those lines that would be new to Key.
Mooney said Schumer “had a clear and sharpened focus around what would happen to the employees. As we were evolving our plans, I think they came together nicely.”
Key identified a chance to keep intact – and build on – First Niagara’s auto insurance and mortgage businesses in the region, Mooney said. “We’re actually going to scale those businesses across the balance of Key, so we’ll be able to add jobs as we do that.”
Key also sees opportunities to “in-source” work like mortgage servicing to Buffalo that the bank might have outsourced elsewhere, she said. In other cases, some work performed at Key operations centers around the country will be moved here.
Key has pledged to add at least 500 to 600 jobs in New York over the next three years. And Mooney said she expects “normal business growth” will help generate even more jobs down the road.
But how will Key still achieve the $400 million in cost savings it has projected, while offering job opportunities to branch employees? One factor, Mooney said, is how much of First Niagara’s information technology is outsourced to vendors. Key can achieve a “huge piece” of the total savings by bringing that work in-house, without eliminating First Niagara jobs in the process, Mooney said.
Other cost savings will come from saving on combined spending on areas like facilities, marketing and insurance premiums. “The plan behind that $400 million number is very specific and solid,” she said.
The up to 250 jobs that could be cut statewide is actually based on an estimate. Mooney said that figure reflects how many people Key expects will want to stay with the bank post-merger, but won’t have job opportunities available to them. Mooney said there was no “wholesale area of the bank” where cuts will come from.
The Federal Reserve still needs to give its blessing to the Key-First Niagara deal. And the Office of the Comptroller of the Currency has to sign off on Key’s branch consolidation plan in order for the closings to go through.
Key hopes to complete the deal in the third quarter. It has already identified a host of branches it expects to close in October and November, while other closings would follow sometime next year. Mooney said Key plans to start converting First Niagara’s branches later this year, and to have the integration complete by the end of 2017. “Our plans are pretty detailed at this point and we’re ready to go.”
Crosby said Key’s jobs plan for the region “exceeds my expectations. These mergers are always tough. They’re done in part to achieve economies of scale, which means reductions in expenses, and while Key is achieving that, it’s not on the backs of all of the First Niagara people. So I’m very thankful for that.”
Crosby said the first meeting he, Schumer and Mooney had about the deal took place in his Larkinville office.
After that meeting, Crosby took Mooney on a tour of Larkinville.
“Early on, in my conversations with Beth, it was very clear she understood the importance of First Niagara, not just in New York State but Western New York in particular,” Crosby said. “She and her team remained sensitive to that every step of the way.”
As far as the branch reductions, Crosby said a bank “can’t justify keeping two branches open that are anywhere near within a mile, plus or minus, of one other.” In some cases, the branch being closed is across the street or even across a parking lot from another one. A total of 304 First Niagara branches will be converted to Key locations.
Crosby praised Key for maintaining branch jobs: “The best thing they can do is keep as many familiar faces around as possible, especially if they’re as good as the ones we have.”
And he said Key “has the horsepower and plans in place to grow the businesses we have here, which include three businesses they didn’t have before the merger.” Crosby noted that another potential merger partner for First Niagara was already operating in all three of those business lines, and he believes that bank would have transferred the work out of the region.
Crosby said he is pleased at how much of First Niagara’s operations and jobs Key is not only keeping, but planning to grow.
“I have to give Key a lot of credit,” he said. “They could have come in here with an attitude of, ‘We’re bigger, we’re better, and we know best.’ But they didn’t. They listened very closely to us, they listened very closely to the community, to the local representatives. They listened to our advice and concerns we have. They were collaborative every step of the way.”