KeyCorp pledged to lend and invest about $5.8 billion over five years in the markets where a combined KeyCorp and First Niagara Financial Group would operate, as part of a plan to address community concerns about the planned acquisition.
KeyCorp also committed to opening a new branch on the East Side of Buffalo.
The $5.8 billion is part of $16.5 billion Cleveland-based Key said it would disperse across all 23 of its markets, as part of a “National Community Benefits Plan” it signed Friday. The money will be used in a combination of mortgage lending, small business lending, community development lending, and investing and grants.
Key developed its plan in partnership with the National Community Reinvestment Coalition, which includes more than 80 community organizations. Community groups have raised concerns about Key’s planned deal for Buffalo-based First Niagara, in areas such as jobs and consumer access to banking services.
The $5.8 billion targeted for the combined Key-First Niagara territory would include five markets where the two banks overlap – including Buffalo – and four markets that would be new to KeyBank. That $5.8 billion represents about 35 percent of the total investment Key plans to make.
The five-year plan is set to begin Jan. 1. Key and First Niagara are still seeking shareholder and regulatory approval for their deal, but hope to complete it in the third quarter.
A summary of the community benefits agreement provided by the NCRC said Key pledged to open a new branch in a low- and moderate-income census tract on Buffalo’s East Side, but did not provide details.
“Buffalo residents living on the city’s East Side have been unbanked or underbanked for decades,” said Pastor James Giles, president of VOICE-Buffalo, in a statement. “The new branch will be an integral contribution to the future revitalization of the East Side of Buffalo.”
The NCRC summary also said four branches located in low- and moderate-income areas that were considered at risk of closing will be kept open, based on NCRC members’ feedback. Those locations were not identified.
Community groups in the Buffalo area, including the Western New York Law Center, have spotlighted community issues surrounding the Key-First Niagara deal since it was announced last October. Thomas Keily, the center’s consumer data and research coordinator, said the agreement will provide “necessary banking infrastructure in areas that are traditionally underserved in Buffalo and Western New York.”
John Taylor, president and CEO of the NCRC, praised Key’s leaders for reaching out to the organization early in the acquisition process – instead of waiting to respond to objections – and for setting up a system to track the plan’s progress.
“In the end, we have a great agreement, including the ability to have advisory boards so that we can be looking at the performance and effectiveness of this agreement going on, and even have the ability to revise it, amend it as it goes on,” he said.
Bruce Murphy, Key’s executive vice president of corporate responsibility, said the bank had not yet set the size of the national council nor determined who would serve on it. But half of the national council will consist of NCRC representatives.
Taylor said Key initially proposed a $12 billion plan, but increased the total to $16.5 billion after negotiations with the NCRC.
The final version, he said, will make more funds available for small businesses loans. “There’s a dearth of funding in many of these communities, like Buffalo and Rochester and Pittsburgh and Dayton (Ohio) and other places. This is going to be a real shot in the arm, it’s really helpful.”
Key CEO Beth Mooney said while the bank’s dollar commitments to the plan’s different categories are significant, so will be the involvement of community groups in making the plan work.
“The real magic, or bringing it to life will be in how does this come to life in the communities,” she said. “And it will be the member organizations in the communities, as well as KeyBank working collaboratively together.”
While Key’s plan covers all of its markets, Mooney said, Key “took the time and the care to identify what would be the markets that we both overlapped with First Niagara as well as what would be the new markets.”
Mooney said she had no new details to share about the deal’s impact on the combined work force or branches that would be sold off to satisfy anti-trust concerns by the U.S. Justice Department.
The issue of what branches to be sold is “in the purview of the Department of Justice, and so we continue to work constructively with them.”