Albank Financial Corp. is taking on more than $500 million in new deposits with the purchase of 35 New York State branches that KeyCorp doesn't want.
Albank, a $4 billion-asset thrift based in Albany, N.Y., will pay a premium of about 7% based on average deposit balances, or about $37 million.
Albank also has the option to purchase $53 million in small business, consumer, and mortgage loans from KeyBank, a KeyCorp subsidiary. The deal is part of the growing thrift's five-year strategy to increase its size through branch acquisitions.
Herbert G. Chorbajian, Albank's chairman, called it a strategy of "controlled growth." The acquisition would be Albank's sixth major purchase since 1992. The thrift, which has 71 branches in upstate New York, Vermont, and Massachusetts, has acquired both whole banks and branches in the past four years, including six branches from Green Mountain Bank.
The proposed sale is also the first of many for $67 billion-asset KeyCorp, which has stated publicly that it will be selling off some of its 280 branches in 14 states. The focus is on reducing the number of rural branches and consolidating metropolitan branches. The company also plans to slash 10% of its work force.
An analyst who follows KeyCorp, a Cleveland-based company, said the 7% premium was expensive. She expects the company to continue selling off blocks of branches but said this sale was the first.
"That's pretty hefty," said Nancy Bush, a bank analyst at Brown Brothers Harriman in New York. "It looks like KeyCorp is getting a good price on them."
But Richard J. Heller, executive vice president for Albank, said the bank found it to be a fair price and that premiums on deposits in upstate New York banks typically range around 8%.
The new branches will give Albank 106 branches in three states, including 85 in New York State.
Mr. Chorbajian said in a prepared statement that the new branches fill in gaps that exist between Glens Falls and Plattsburgh, N.Y. It will also increase Albank market share in the Hudson Valley and introduce it to the Binghamton, N.Y., area.
Albank will enter nine new counties and nab the third-largest market share of deposits in upstate, eastern and central New York.
The sale of the KeyCorp branches is expected to close this summer.