HSBC Bank USA and M&T Bank Corp. continue to dominate the Buffalo Niagara deposit market,

but there is a new No. 3: First Niagara Financial Group.

The Lockport-based savings bank has overtaken Cleveland-based KeyCorp as the third-largest

deposit-taker in Erie and Niagara counties, according to new branch-level deposit data from

the Federal Deposit Insurance Corp.

The market share data, as of June 30, shows that First Niagara Bank and the separately

chartered First Niagara Commercial Bank together hold 11.23 percent of the local market,

compared with 9.11 percent for KeyBank.

The two banks operate a comparable number of retail branches -35 for KeyBank, 34 for First

Niagara - but KeyBank holds $2.98 billion in deposits, while First Niagara controls $3.68

billion.

First Niagara has a stated goal of being one of the top two or three banks in each of its

markets, especially in upstate New York, so "it's a proud day for us," said Daniel E. Cantara

III, executive vice president of commercial business services and Western New York regional

president.

"We've been very pleased with our core retail deposit growth, our municipal deposit growth

and our commercial growth with all the deposits that have come with that," Cantara said.

"It's really a reflection of the success we've had as we've continued to do business," he

added.

First Niagara's primary operating subsidiary is First Niagara Bank, but it uses its smaller

commercial bank unit to handle the loan and deposit business of municipal customers, such as

towns and villages, which by law can't put their deposits at savings banks. KeyBank, HSBC and

M&T aren't limit ed in the same way, so they don't have separate charters.

KeyBank says its Buffalo Niagara deposit numbers "are up significantly," and the bank is

increasing its presence in the region with several new branches, said Western New York

president Sterling Kozlowski. Two have just opened, with two more planned for 2010, and they

are not included in the latest deposit figures.

"The one-day snapshot represented by the FDIC deposit share numbers do not fully represent

KeyBank's focus on building enduring client relationships," Kozlowski said.

Overall, 19 institutions held $32.74 billion in deposits in the Buffalo Niagara area, down

5.2 percent from $34.54 billion in June 2008.

HSBC and M&T still rule the roost locally, with 67 percent of the market sewn up between

them. However, that is down from a year ago, when they controlled 73 percent.

HSBC is No. 1, with $12.46 billion in deposits, for a 38.07 percent market share. But

that's down 27 percent from a year ago, when HSBC held $16.98 billion in deposits,

representing a 49.15 percent market share.

M&T comes in second, with $9.6 billion, or 29.35 percent. That's up 16.5 percent from $8.24

billion and a 23.85 percent share in 2008.

M&T hasn't had "any kind of structural reallocation of deposits" locally in the last year,

said spokesman C. Michael Zabel. So its year-to-year growth is all "organic" or internal.

"What you're seeing is ... a steady migration of folks putting deposits in banks that

they perceive to be strong and stable and secure," Zabel said.

HSBC bases a significant portion of its HSBC Direct online savings account deposits in its

Buffalo office, even though the customers are nationwide. That inflates its figures for

Buffalo.

The company's U.S. bank had $15.6 billion in that product in the first half of the year,

although not all of it was centered in Buffalo.

In the past year, though, the bank has changed that policy, shifting deposits back to the

home state of the depositor if HSBC has a branch network there, such as Florida or California.

The deposits stay in Buffalo if the bank has no branch in the customer's state, said

spokeswoman Juanita Gutierrez. Still, that change accounted for the drop in deposits locally.

To examine true deposit growth here, The Buffalo News pulled out the headquarters branch

for each of the top four banks. That left total area deposits of $18.5 billion in June 2009,

compared with $16.67 billion a year ago.

Without those headquarters deposits, HSBC was still No. 1 here, with $5.41 billion in

deposits in Erie and Niagara counties, up 11.9 percent from 2008. That's 29.2 percent of the

market.

"We are pleased that HSBC has retained its No. 1 position," said Andy Ireland, HSBC's

executive vice president and regional president for upstate retail banking. "HSBC continues

its focus on serving Buffalo-area clients with a wide range of products and services to meet

their banking needs."

M&T was second, with $3.72 billion, up 5.5 percent from $3.53 billion, for a 20.1 percent

share.

First Niagara was third, with $2.9 billion, up 16.8 percent from $2.49 billion, for 15.7

percent of the market. KeyBank was fourth with $2.47 billion, up 8.4 percent from $2.28

billion, and 13.3 percent of the market.

After KeyBank, RBS Citizens is fifth, followed by Bank of America Corp., Evans Bancorp's

Evans Bank, Northwest Bancorp's Northwest Savings Bank, Alden State Bank, Bank of Akron,

Financial Institutions' Five Star Bank and Lake Shore Bancorp's Lake Shore Savings Bank.

In the larger eight-county Western New York area, HSBC is on top with 34.8 percent,

followed by M&T with 26.78 percent, First Niagara with 10.05 percent and KeyBank with 8.83

percent.