KeyCorp said Thursday that it would sell all 28 of its Long Island, N.Y., branches to Dime Bancorp for a $210 million premium.

The deal includes $1.3 billion of deposits and $415 million of loans.

The transaction, expected to close in the third quarter, would more than double Dime's Long Island branches, to 51. Dime would move from eighth in Long Island deposits to fifth, with $4.4 billion.

"Long Island is a very attractive market," said Lawrence J. Toal, Dime's chairman and chief executive officer, who noted its population of 2.7 million, median household income of $63,800, and low unemployment.

"In terms of our own strategy, which is to be more bank-like, it fits very nicely," Mr. Toal said.

In addition, Dime, a New York-based thrift, is paying a "reasonable" 16.25% premium on the deposits, according to Thomas O'Donnell, a thrift analyst with Salomon Smith Barney. Mr. O'Donnell said the average premium for similar deals over the last two years has been 29%.

The sale is part of a strategic shift for $80 billion-asset KeyCorp, which is investing in other areas of the company and exiting businesses that do not meet profitability targets.

The Cleveland company's planned sale of its Long Island branches was first reported in American Banker in March. Ranking a lowly 15th in Long Island deposits has made it difficult for KeyCorp to compete there.

KeyCorp "is deploying some of the proceeds from their no-growth Long Island market into their faster-growing markets," said Joseph Duwan, an analyst with Keefe, Bruyette & Woods Inc. "They've hinted at all this. It's in line with what they've said they want to do."

Meanwhile, KeyCorp said it would open as many as 25 branches in the next year and a half in the West.

It identified Denver, Portland, Ore., Seattle, and Salt Lake City as places where it would like to expand. New branches in these areas would be concerned primarily with asset management, middle-market commercial business, and small business lending, the company said.

Mr. Duwan said he believed some of the proceeds might also be used to buy back stock. KeyCorp's board authorized a repurchase of up to 10 million shares this year. It repurchased two million in the first quarter, said a spokesman.

"It's consistent with what KeyCorp has been saying. They're cutting back areas where they can't grow," said Diana Yates, an analyst with A.G. Edwards & Sons in St. Louis. As for opening new branches in the West, Ms. Yates said KeyCorp may have difficulty gaining market share in the highly competitive markets it has identified. "I guess it's one way to get there. Is it too late? That's the question," Ms. Yates said.

KeyCorp has been retooling its consumer banking operations. Earlier this month its stock rose on speculation that it would be sold to Cleveland rival National City Corp. Shares of KeyCorp closed Thursday up/down $TK to $TK while stock in the Dime ended at $TK, up/down $TK.

Ms. Yates said she does not believe KeyCorp is interested in a merger. The company's management prefers to restructure, she said.

This is a clear sign that "KeyCorp doesn't want to sell," Ms. Yates added. National City has declined to comment on merger speculation.

KeyCorp has indicated it may sell all or part of its credit card and indirect automobile loan portfolios.

Dime, which has $21.6 billion of assets, said it intends to retain all of KeyCorp's Long Island branch personnel.

It also said the acquisition of those branches would complement a deal announced last month for Citigroup's auto finance business. Both transactions would double Dime's consumer loan portfolio to $2 billion. Dime has been diversifying its loan portfolio to be less dependent on mortgage lending.

The KeyCorp branches are "a great strategic fit for the company," said Salvatore DiMartino, an analyst at Advest Group. "It really accelerates Dime's transition to a commercial banking platform. It starts to profile much more like a commercial bank than a thrift," he said.

"Dime has one of the better business models out there among thrifts," he added.

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