ADVERTISEMENT

For the past nine months, executives of First Niagara Financial Group have said they were preparing for their biggest test ever.

Monday, they appeared to pass with flying colors.

When the business day began, First Niagara opened more than 100 new branches -- which had been HSBC branches when they closed Friday -- and began serving half a million new customers across the state. Glitches, they said, were minimal.

"It was a phenomenal outcome," said First Niagara President and CEO John R. Koelmel. "I expect a lot of this team. They blew me away with how effectively they navigated what we had prepared for, as well as dealt with the string of nuances and challenges that you can't anticipate."

Officials said the offices, ATMs, online banking, direct deposits and automatic bill payments generally opened or kicked into operation on schedule, with only a couple of hundred customers across the state experiencing ATM delays.

"If anything, we were ahead of schedule all weekend long," Koelmel said.

A software issue, together with heavy call volume, held up some credit cards from being activated, and some debit cards didn't get to customers because the bank had wrong addresses.

But the bank quickly rerouted calls, fixed technical problems, lined up alternative solutions and rebated any fees customers incurred, either from First Niagara or other banks, if they had to use another bank's ATM.

"All in all, it was a home run," said Mark Rendulic, executive vice president of retail banking.

The computer system conversion, integration and reopening of the former HSBC branches marks a major accomplishment for Buffalo-based First Niagara, which has been battling doubts among consumers and investors about its ability to smoothly handle such a large transaction.

First Niagara boosted its call center staff from 200 to 350 and put them on duty throughout the weekend and late into Monday evening if needed. The bank also sent at least two "buddies" from its existing branches to each of the HSBC offices to assist for as long as six weeks if needed.

Meanwhile, the three banks that are buying other HSBC branches from First Niagara -- KeyCorp, Community Bank System and Financial Institutions' Five Star Bank -- are preparing for their own conversions.

Key will complete its purchase July 13 and convert over that weekend, followed by Community Bank a week later. Five Star will follow Aug. 17. Until then, officials said, customers at the affected branches will not see any changes and should continue banking with HSBC.

KeyBank is sending out its welcome letter this week, to reach households by Friday, and will send out more formal conversion kits June 13.

"That will pretty well lay out what the conversion process will look like for us, and what the steps and important actions they should expect and be prepared for [are]," said Gary Quenneville, president of the Western New York district for Key.

Community Bank will mail welcome packets in mid-June, outlining details of its conversion. "Our team is working closely with employees of both First Niagara and HSBC to ensure a smooth transition," said spokesman Hal Wentworth.

Five Star began official communications this month. "The feedback has been positive," said spokesman Shaun Seufert. "Each bank involved in each transition has been mutually supportive, and our employees have been working diligently to make certain each conversion takes place in a smooth and seamless manner."

First Niagara agreed last July 31 to pay $1 billion to acquire 195 HSBC branches in upstate New York and southeastern Connecticut. The branches included $15 billion in deposits, $2.8 billion in loans and $4.3 billion in brokerage assets under management. The deal also included more than 1 million accounts, more than 650,000 retail customers, more than 250,000 consumer credit card accounts and 1,900 employees.

First Niagara said it would keep half, closing 35 overlapping offices and selling 64 branches with $3.8 billion in deposits and $713 million in loans.

The deals were supposed to leave First Niagara with a gain of $11 billion in deposits and $2 billion in loans. However, the total volume of deposits and loans that were acquired, as well as the purchase price, were reduced slightly by a combination of customer attrition to other banks and errors.

Koelmel said some of the accounts that were included in the original $15 billion deposit estimate should have been excluded by HSBC because they were out-of-state or other business that was not tied to those branches.

The banks have also battled stiff competition from other banks seeking to steal customers.

As a result, the final sale included $14.5 billion in deposits, $2.2 billion in loans and more than $4 billion in brokerage and insurance assets under management. Of that, First Niagara is keeping $9.8 billion in deposits and $1.6 billion in loans in two states, while adding 1,200 employees in New York and Connecticut. First Niagara now has nearly 430 branches and 6,000 employees in four states.

The purchase price also fell, to just over $900 million, although that may be adjusted.

"We're incredibly proud to complete this transaction," Koelmel said. "We won't disappoint."

email: jepstein@buffnews.com

***

The First Niagara changeover

Questions and answers after the conversion of more than 100 HSBC bank branches to First Niagara:

>Q: How do I make sure my direct deposit works?

A: First Niagara has already transferred most direct deposits, but customers should make sure by giving their employers the new routing and transit numbers for First Niagara. Account numbers are not changing.

>Q: What if my new debit card or credit card won't work?

A: Stop by any First Niagara branch; call the bank's Customer Contact Center at 1-800-421-0004; or visit www.welcometofirstniagara.com.

>Q: Can I still use my old checks?

A: Yes, but only for another 90 days.

>Q:What do I do if my branch is going to KeyBank, Community Bank or Five Star Bank?

A:Those sales and branch conversions are scheduled to occur on the weekends of July 13, July 20 and Aug. 17, respectively.