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Poloncarz objects to Key-First Niagara deal

Erie County Executive Mark C. Poloncarz thinks KeyCorp’s acquisition of First Niagara Financial Group would be a bad deal for the Buffalo Niagara region.

“The impact on the community will be great and it will not be positive,” Poloncarz said Friday. “There’s no doubt about that.”

The high-profile criticism came the same day First Niagara released its fourth-quarter earnings, which were weighed down by merger-related costs.

Poloncarz said the Key-First Niagara deal, now valued at $3.5 billion, would cause “significant job loss” and reduce banking choices for local residents. He was joined by Rep. Brian Higgins, D-Buffalo, and representatives of the Western New York Law Center and PUSH Buffalo, who made similar points.

Federal regulators won’t decide whether to approve the Key-First Niagara deal based on job impact. But some elected leaders and community groups are pressuring Cleveland-based KeyCorp to protect jobs and branches imperiled by the purchase.

Regulators will judge the deal based on factors such as the impact on banking competition in markets where Key and First Niagara operate. Poloncarz argued the deal would have a detrimental effect.

“The proposed takeover of First Niagara Bank by KeyBank will create a very anti-competitive market as it pertains to banking, not just in Buffalo, not just in Erie County, but in some ways all of upstate New York,” he said.

Poloncarz spelled out his objections in a letter to the Federal Reserve last month, before its public comments period closed.

Based on their most recent regional deposit market share figures, a combined KeyCorp and First Niagara would have nearly 34 percent market share, not counting any divestitures Key would make to win approval for the deal. Poloncarz said that creates the prospect of just two banks – M&T and a combined Key-First Niagara – controlling about 83 percent of the region’s deposit market share. “From an anti-competitive nature and the impact that this will have, whether it’s on businesses, or individuals to have access to multiple products, having competition between banks so that they can get the best rate, the best types of products that are offered, is something we’re all worried about,” Poloncarz said.

Responding to complaints raised by Poloncarz and Higgins, KeyCorp spokeswoman Therese Myers said that post-acquisition, New York State will be home to 30 percent of its combined company.

“Retaining the knowledge and experience of those employees within First Niagara operations is critical, and expanding our footprint will provide job opportunities in many departments within Key,” she said.

Higgins also criticized the deal, saying it will reduce banking competition locally and throughout upstate. “That’s not good for the consumers of Buffalo and Western New York,” he said.

Higgins cited “published reports” that the deal could eliminate 1,200 to 1,500 jobs, but he did not specify the origin of those numbers. KeyCorp has not said how many jobs it would cut in the Buffalo area.

“You don’t know what the plan is, but I think we can safely conclude (the job cuts) would be substantial, at a time when this community is growing and its economy is diversifying,” Higgins said.

First Niagara has about 2,300 jobs in Western New York, while Key has about 1,000 employees in the Buffalo and Rochester areas.

Higgins said the deal also would mean the loss of a local corporate headquarters, and he questioned what would happen to the financial support First Niagara provides to arts and cultural institutions. “Without having a corporate headquarters here in Buffalo, you lose some of those things, invariably.” KeyCorp has not disclosed any decisions about the amount of office space it would use locally post-acquisition, nor how many branches it would sell or close.

Groups such as PUSH Buffalo and the Western New York Law Center worry the deal will further reduce the number of branches available to low-income residents on the East and West sides of Buffalo. Poloncarz said branch access is also an issue in rural areas, where the closest bank branch might be miles away.

KeyCorp hopes to complete its deal for Buffalo-based First Niagara in the third quarter. The acquisition still needs approval from shareholders and regulators.

In the meantime, First Niagara still operates as an independent company. Its fourth-quarter profits matched analyst forecasts even though the costs of the bank’s impending merger with KeyCorp and restructuring efforts caused a 30 percent drop in earnings.

First Niagara said it earned $43.3 million, or 12 cents per share, during the final three months of last year, down from $61.5 million, or 17 cents per share, a year ago.

Excluding $14 million in merger-related expenses and $3 million in restructuring costs, the bank’s operating profits improved by 4 percent to $55.3 million, or 15 cents per share, matching analyst forecasts. The bank’s operating earnings a year ago were $53.2 million, or 15 cents per share.

For all of 2015 – perhaps its final full year as an independent bank – First Niagara reported net income of $224 million, compared to a $715 million loss in 2014 driven by a massive accounting writedown.

News Business Reporter David Robinson contributed to this report.

email: mglynn@buffnews.com