It’s been 10 months since Cleveland-based KeyCorp’s $4.1 billion acquisition of Buffalo-based First Niagara Financial Group was approved by the Federal Reserve. Joseph F. Markey, senior vice president at KeyBank and its market president for the Hudson Valley and Metro New York, said that except for some technical hiccups, the transition has been smooth.
“Bringing two massive systems and organizations together, there’s always going to be glitches,” Markey said. “But in the history of bank mergers, this one went very well. It’s actually a good case study for how to do a bank merger.”
The deal added about $29 billion in deposits and $40 billion in total assets and placed KeyBank as the 13th largest commercial bank in the nation.
In October 2016, KeyBank had what was called Customer Day One, where all systems were merged and all clients from First Niagara came over to KeyBank.
That part was not so smooth. Former First Niagara customers complained of being locked out of accounts and unable to reach KeyBank customer service reps. KeyBank eventually apologized and deposited $100 into each of the new KeyBank accounts of more than 10,000 First Niagara customers, according to the.
But despite early troubles, Markey said the overall impact of the deal, which expanded KeyBank’s network to more than 1,200 branches in 15 states, is showing several positive signs.
KeyCorp reported first-quarter net income of $296 million, nearly 63 percent higher than last year’s $182 million in the first quarter. KeyCorp Chairman and CEO Beth Mooney said in the bank’s first quarter earnings call last month that the First Niagara acquisition had been transformative, particularly for KeyBank’s presence upstate.
Markey pointed to a client retention rate that he said was over 90 percent following the merger.
The deal required KeyBank to close 106 First Niagara and KeyBank locations in four states, 15 of which were in the Hudson Valley. That included locations in Rye Brook, Mount Kisco, Ossining and Bedford Hills. Markey said that all branch closures for Hudson Valley region are complete.
The region didn’t require as many closures as areas farther upstate, according to Markey, because First Niagara’s presence in Westchester and the rest of the region was smaller than other parts of the state such as Rochester, Albany, Buffalo and Syracuse.
“There was overlap, but not as much,” he said. “So I don’t think we had as big a reduction as they had upstate.”
KeyBank now has 57 total branches in the region, which includes Westchester, Dutchess, Rockland, Ulster, Putnam and Orange counties.
First Niagara had only been active in the lower Hudson Valley for half a decade before it was acquired by KeyBank. In 2012, First Niagara completed a $1 billion acquisition of nearly 200 HSBC Bank USA branches, greatly expanding its footprint in lower New York and Connecticut. The bank launched a Tarrytown regional headquarters two years later, where it oversaw 26 branches in the lower Hudson Valley region.
Now KeyBank can capitalize on the customer base and business relationships First Niagara built during its time operating in the region, Markey said. Offering services that are more developed than what First Niagara was able to offer will be crucial to that effort, he said.
“We’re a bigger bank, a bigger balance sheet, but more importantly, the products we are able to offer is really where the opportunity is,” Markey said.
He said KeyBank is seeing strong deposit growth in the region and has beefed up its private banking leadership team. For personal banking clients, Markey cited the bank’s new HelloWallet software, which provides customers with an interface that displays information on all customer accounts, even outside of KeyBank.
That’s a new product KeyBank was able to deliver to First Niagara customers. But Markey said First Niagara had offerings that were beneficial to KeyBank as well, such as a more developed residential mortgage product.
On the commercial banking side, both in middle markets and small business, KeyBank has “seen a lot of activity that we wouldn’t have had” without the merger, Markey said.
“These were good relationships with commercial banking clients that First Niagara had that they brought over to KeyBank. And we were able to introduce products that they didn’t have and as a result we were able to do more for those clients,” he said.
He cited KeyBank’s more developed business cash management, foreign exchange product and equipment financing and leasing through Key Equipment Finance. Markey added that KeyBank’s commercial banking group works with Key’s investment bank, Keybanc Capital Markets, to provide a wider range of insights for businesses it works with.
In the small-business sector, which KeyBank defines as businesses with revenues of $30 million and less, the Hudson Valley has the largest backlog of businesses seeking services, such as loans or cash management, across the KeyBank footprint, according to Markey.
He said the most important part of the transition was the similar cultures between the two banks, a point KeyBank’s leadership has stressed throughout the acquisition process.
Markey said the Cleveland-based bank has a Midwestern culture. While First Niagara’s Buffalo roots don’t quite place it in the Midwest, the bank’s home base was far closer to Cleveland than Manhattan. Markey said this created similar corporate cultures that allowed the banks to come together with less friction.
“The numbers are one thing,” he said. “But the culture trumps the numbers. The culture is so important in getting people to work together.”