First Empire and KeyCorp Energized by Goldome Deal
By parceling out the Goldome franchise to KeyCorp and First Empire State Corp., the government has redrawn the Buffalo banking map.
Through its Manufacturers & Traders Trust Co. subsidiary, First Empire supplants Goldome as the market leader, with an estimated 34.6% of deposits in Erie and Niagara counties.
Albany, N.Y.-based KeyCorp catapults into second place, with about 20.2% of the local deposits. It overtakes Marine Midland Banks Inc., which has been weakened by real estate loan woes, in its home town.
Higher Profile for Empire
First Empire, a stock market darling since investor Warren Buffett bought a large stake in it early this year, is known for strong management and is expected to parlay the acquisition into a higher profile.
"They're a very well-run, conservative institution," said Donald Kauth, an analyst for First Albany Cos.
"The company is doing well now," Mr. Kauth said. "It'll do better when the Canadian recession" comes to an end, he added, noting Buffalo's proximity to the Canadian market. A recent U.S. free-trade agreement with Canada is expected to give business in the region a further shot in the arm.
Robert Wilmers, chief executive officer of First Empire, said, "We will be constantly developing our business in Canada, although our main market will always be western New York."
No Big Edge Conceded
From the government's point of view, the deal solves the Goldome crisis without giving one player in a titanic lead in the upstate New York market.
"The FDIC is not just handing the market over to one player," said Felice Gelman, an analyst for Dillon Read & Co. in New York. "No one is top dog."
Marine Midland may be left in the dust by its expanding competitors. "Marine used to be the No. 1 bank in the market," Ms. Gelman said. "But they've really been weakened by real estate problems."
Resale to First Empire
Under the Goldome deal completed Friday, KeyCorp acquired $7.2 billion in assets and immediately sold $2 billion of that total to First Empire. The Federal Deposit Insurance Corp. agreed to pay KeyCorp $163 million and First Empire $40 million.
KeyCorp and First Empire had a test run of joint acquisition last year, when they bought $2 billion in deposits from the failed Empire of America Federal Savings Bank.
In the latest deal, KeyCorp acquired a total of 31 branches and agreed to inject $190 million into its new franchise. First Empire gained 14 branches and will inject $45 million.
Concentration in Buffalo
In New York, KeyCorp now has 324 branches, versus 125 for First Empire. KeyCorp, with $19.3 billion in assets, added 15 branches in the Buffalo area. First Empire, which has $11.5 billion in assets, acquired 11 branches in the Buffalo market.
First Empire's strong reputation is driven in part by the high level of management ownership. Some 30% of First Empire's stock is owned by two management-led investment groups.
First Empire attracted investor interest after Mr. Buffett bought $40 million worth of convertible preferred stock in March. If Mr. Buffett exercises his conversion rights, he would control 7.1% of the company.
As part of the government-assisted deal, KeyCorp received Goldome's mortgage company, with rights to service $14 billion in home loans.
In addition to the Buffalo branches acquired by First Empire, three New York city branches will reopen as part of East New York Savings Bank, another unit of First Empire.
One Goldome unit was excluded from the deal. Goldome Savings Bank in St. Petersburg, Fla. with assets of $1.4 billion will be turned over to the Resolution Trust Corp. Ten other Goldome branches were sold to Manufacturers Hanover in New York last week.
PHOTO : Goldome's Demise Reshapes Buffalo Market Share of deposits in Erie and Niagara counties