It's been nearly half a year since KeyBank converted First Niagara Bank's branches to its own systems, signaling to customers that the transition was truly complete.
The bank is still wrapping up some details of its shift from two banks into one – especially with real estate – but is also trying to build on what First Niagara brought to the fold. Among the items on Key's to-do list:
• Finding buyers for eight area branches that it closed last year due to overlap.
• Completing a shuffle of office space, as it assesses how much space it needs.
• Expanding three business lines – indirect auto lending, insurance and mortgages – that Key acquired through the First Niagara deal.
As a result of the $4 billion acquisition completed last August, Key has climbed to No. 2 in the region in deposit market share. While branches have changed identities and staffs have been combined, Key still owns eight former First Niagara and Key branches that were shut down last year and that Key is marketing for sale. The bank also closed 14 area branches that Key and First Niagara had leased; at least three of those locations are spoken for.
The bank is also scaling back on office space as it digests the acquisition. Key is exiting relatively new corporate space at 250 Delaware Ave., and moving those employees to Larkinville, home of its Northeast regional headquarters. Meanwhile, Key by the start of 2018 will move out of an Amherst building it leases for a customer contact center, and combine those operations under one roof at First Niagara's onetime corporate headquarters, in the Town of Pendleton.
Key said the office space shuffles won't eliminate jobs, but will create more cohesion by bringing employees together. Along with the locations in Pendleton and Larkinville, Key will retain office space on Ridge Lea Road in Amherst that it picked up from First Niagara.
Key's deal for First Niagara allowed Key to add three notable lines of business: indirect auto lending, residential mortgages and insurance, each of which has operations in Buffalo. Key intends to capitalize on those business lines, by expanding their reach across a much wider territory, said Buford Sears, Key's Buffalo region market president.
"Now the people who run these businesses are taking the existing, legacy First Niagara platform, and they're expanding that to a much broader geography than they operated across before ," Sears said. "These people are extremely excited. They're like kids in a candy store, because they have this opportunity to build a truly sort of national business."
On its own, First Niagara had a four-state footprint; the combined Key-First Niagara has a presence in 15 states.
When Sears was a First Niagara executive, the indirect auto lending business -- which refers to making loans to customers through auto dealers -- reported to him. Back then, that business line was "doing very well, but we were very limited where in term of where we did business, and that was by design. And now there is a much broader market we can sell into," as it expands state by state.
One challenge any bank faces following a merger is retaining employees and customers. Key has pledged to cut no more 250 jobs in upstate New York stemming from the merger, and to add jobs over time. Meanwhile, rival banks have pushed hard – through promotions and marketing – to woo customers amid the acquisition.
"Across the entire board, whether it's customers in any line of business, as well as employees in any line of business, we're really pleased with where we are from a retention standpoint," Sears said. Key declined to disclose the percentages of customers and employees it has retained.
Sears noted Key recently paid out incentive compensation for employees who were eligible to collect it. "If someone was going to leave, they probably would have left by now. And our retention has been nothing short of spectacular."
Similarly, the bank has not had any "regrettable" losses of commercial customer relationships, Sears said. He drew a contrast with cases where a customer may be "underperforming financially, we have a difference of opinion as to how their loan should be restructured, and they go somewhere else, perhaps. That happens every day."
"Other than that, we haven't lost any customers that we didn't want to lose," Sears said.
Cleveland-based Key will issue a financial report card on April 20, when it releases its first-quarter earnings. That will be Key's first complete quarter of results since the First Niagara branches were converted, since the switch took place just as the fourth quarter was starting. Investors will be eager to learn how well Key is capitalizing on the expanded operations, as well its progress toward achieving $400 million in cost savings. Key has said its undisclosed internal cost savings target is even higher.
Key executives will speak to shareholders at the bank's annual meeting on May 18. The Buffalo area figures prominently into Key's plans: this is its second-most important market in terms of its book of business, behind the bank's home base of Cleveland. Key's list of 26 markets includes places like Denver, Salt Lake City and Portland, Ore.
"When I was asked to serve as regional president, my mandate was to make sure we stay No. 2 within KeyBank," Sears said. "We don't want to become No. 3 or No. 4." That means not only retaining its share of business in Buffalo, "but hopefully growing that over time."
Sears knows that is a challenge, "because we have very effective competition in this market," including M&T Bank, which is based here.
"M&T is a very effective competitor, believe me," said Sears, who worked for M&T earlier in his career. "But we feel like we can compete with anyone."