Photo: KeyBank Center is a multi-purpose, indoor sports arena in downtown Buffalo, New York. It's the home arena of the Buffalo Sabres NHL ice hockey team.
KeyBank is based in Cleveland,
Ohio, but traces its main lineage to two regional banks: the original KeyBank from Albany, New York and Society National Bank from Cleveland.
The 19th century
was a time of rapid growth for states around the Great Lakes region. The
opening of the 362-mile Erie Canal back in 1825 allowed people, grains, bulk
goods, mail and natural resources to bypass the Appalachian Mountains, sharply
reducing the time, costs and dangers involved in moving between the U.S. Eastern
Seaboard and the Midwest. In other words, the Erie Canal opened up migration,
communications, and the economy for a much vaster expanse of land.
It was under such an
economic and social environment that KeyBank’s predecessors were established in
the early- and mid-19th century.
The KeyBank (KeyCorp) lineage
The New York branch of KeyBank’s
lineage dates back to the 1825 establishment of the Commercial Bank of Albany
(Albany is the capital of New York state).
As mentioned elsewhere in this
collection of bank histories, the banking industry in the United States had
been one of fragmented regulation and instability during the 18th and
most of the 19th centuries. During that time, no nationwide regulation even existed, as each state had its own laws
governing that state’s banking system. It was only in 1863 and 1864 that
the U.S. Congress passed two National Banking Acts to formally establish a
single national currency, and to create a nationwide banking regulatory
framework to co-exist with the state regulations. As such, the National Banking
Acts were not meant to seize banking regulation from the individual states to
the federal government; rather, it aimed to provide a single superlative
oversight system to monitor federally-chartered banks, as an additional layer
of governance over state regulations. Banks back then, as they still do now,
are free to choose to obtain either a state or a federal charter.
In 1865,
following a conversion from a state charter to a national charter, the Commercial Bank of Albany adopted the name
National Commercial Bank of Albany.
In 1919, the
National Commercial Bank of Albany combined with the Union Trust Co. to become
the National Commercial Bank and Trust Co.
Like all
modern sizeable banks in the U.S., KeyBank grew out of many small local banks
of humble origins. Another predecessor of KeyBank was the Trust and Deposit Co.
of Onondaga in Syracuse in upstate New York, which was founded in 1869.
In 1919, the Trust and Deposit Co. of Onondaga amalgamated with its local rival
First National Bank of Syracuse to become First Trust & Deposit.
In 1971, the
National Commercial Bank and Trust Co. took over First Trust & Deposit and
became First Commercial Bank. Throughout the 1970s, First Commercial expanded
its presence by acquiring other banks in Western New York state. In 1979, First
Commercial adopted a new and less ubiquitous name: “Key”.
From 1956 until the
1980s, the Bank Holding Company Act prohibited inter-state banking in the U.S., meaning that banks from one state were prohibited from acquiring or chartering a bank in another state, though in some
states, inter-state bankinging was allowed but typically only for neighbouring states that
had a regional reciprocal agreement such that, for example, banks based in
Minnesota could establish branches in North Dakota, and vice versa.
In any case, when certain
states began to relax inter-state banking restrictions in the 1980s, KeyBank
bought a few banks in the Mountain States of Wyoming, Utah and Idaho, plus in
Alaska. Taking advantage of Alaska’s inter-state banking agreement with other
states, KeyBank used the Alaska subsidiary to acquire several small banks in
Oregon. By now, it was clear that unlike other banks seeking to enter the
“sexy” large urban centres such as Chicago or New York City, KeyBank was
content to expand into the rural, less known backwater markets.
For many years, KeyBank had
also wanted to expand into the New England region, but was forbidden from doing
so due to regulations aimed at preventing New York-based banks from dominating
in New England. The restriction was probably meant to bar the Manhattan
powerhouses, but still applied to regional players such as KeyBank from Albany,
New York.
By 1987, more and more of
the inter-state banking bans were being lifted, and Rhode Island-based Fleet
Financial merged with Albany’s Norstar Bancorp. To satisfy anti-trust
requirements, Fleet/ Norstar agreed to sell eight Maine branches and their
client accounts to KeyBank, marking Key’s first entry into the New England
region.
KeyBank continued its cautious
and steady approach to expansion in the 1990s, buying up banks in Idaho,
Washington state, Colorado as well as in its home state of New York.
However, managing such a far-flung network of bank subsidiaries was an
expensive business. Achieving synergy and sharing corporate functions was no
simple matter when the branches were far from each other and were subject
to various states’ regulations. Nevertheless, KeyBank undertook an efficiency
drive to reduce costs and improve competitiveness by integrating systems and
sharing cost centres wherever possible.
The Society
National Bank (Society Corp.) lineage
The Ohio branch
of KeyBank’s ancestry began with Cleveland-based Society National Bank, which
commenced business in 1849 as the “Society for Savings”, a mutual savings bank
(i.e. a co-op bank similar to a credit union).
As explained
earlier, the mid-19th century was generally a boom time for the
U.S. Midwest following the opening of the Erie Canal system in the 1820s. The
second half of the 19th century witnessed a flood of settlers
arriving from both the Eastern Seaboard and from overseas, who were chiefly
German, Irish, Scandinavian and Jewish displaced by econo-political or ethnic
turmoil in their homelands.
Society for
Savings grew rapidly along with Cleveland during the 19th century.
In 1890, the savings bank moved into a new 10-story head office building on
Public Square in downtown Cleveland, which was the tallest building in the city at the
time. This Romanesque Revival building still stands prominently and is today a
designated National Landmark.
Despite having
just one single office, Society for Savings was so trusted that it was one of
the four largest banks in Cleveland when it celebrated its centenary in 1949. It
was only in 1953 that Society for Savings opened its first branch office in a
Cleveland suburb.
However, as a mutual savings
bank, Society for Savings was restricted to offering only personal banking, so
in 1956 it created a separate subsidiary called Society National Bank to
provide commercial banking and other lending and investing activities not
allowed to mutual savings societies. Just two years later, the decision was
made to re-organize the entire Society group: first, Society Corporation was
created as a joint-stock parent company for Society National Bank, which then took
over the assets, liabilities, reserves and operations of the mutually-owned
Society for Savings. The conversion from a co-op bank to a public joint-stock
business (a process known as “demutualization”) gave Society National much
greater and easier access to raise new capital, and to escape from the many
operation restrictions that co-op banks were subject to. Members of the former banking
co-op received stock certificates of the new entity based on the amount of
their deposits, hence becoming shareholders of the newly-formed joint-stock
bank.
By the end of
the 1970s, Society Corp. had used this new freedom to acquire over a dozen
banks inside Ohio, such as the 1979 acquisition of Canton-based (Ohio) Harter
BanCorp. This expansion continued throughout the 1980s, including the 1983
acquisition of Interstate Financial Corp. for USD $80-million. Interstate
Financial was the parent company of the Third National Bank & Trust of
Dayton, and had subsidiaries in Virginia, Maryland, Florida and Indiana.
The following year, Society acquired a credit- and bank-card processing company
called BancSystems Association, which began as a joint-venture between Society
Corp., National City Bank and Central National Bank in 1969.
Then later in 1984, Society
Corp. took over Cleveland-based Central National Bank’s parent Centran Corp.
for USD $220-million, making Society the fifth largest bank in Ohio. The
banking holding company spent the next several years re-organizing the many
acquisitions under nine regional districts, and shutting branches that were
deemed overlapping.
Due to complex
state and federal banking regulations at the time, the subsidiary banks under
the Society Corp. umbrella were organized as separate legal entities and
not as a single integral network.
Towards the closing of the 1980s, bans on inter-state banking
finally began to be relaxed, or dismantled altogether, which unleashed a wave
of consolidations as smaller banks merged to form larger, more powerful banks,
and stronger, larger banks bought smaller rivals to gain market share. In
anticipation of this rapidly changing operating environment, Society Corp. sold
BancSystems Association Inc. to Electronic Data Systems Corp. (EDS) in 1989 to strengthen its capital base.
In 1988,
Society Corp. signed an agreement to be the anchor tenant of a new, 57-storey,
948-foot tall skyscraper in downtown Cleveland, which was completed in 1991.
In 1990,
Society Corp. bought Toledo’s financially-troubled Trustcorp Inc. for USD
$495-million, whose Trustcorp Bank subsidiary operated in northwest Ohio and
neighbouring communities in Indiana and Michigan. Then in 1991, Society Corp.
made its largest ever acquisition up to that time by taking over Cleveland’s
Ameritrust Corp. for USD $1.2-billion. Ameritrust had bank and trust operations
in Ohio, Michigan, Indiana, Connecticut, New York, Florida, Texas, Missouri and
Colorado.
Recent
transactions:
- In 1994, KeyCorp of Albany, New York and Society Corp. of Cleveland agreed to merge in a deal valued at USD $7.8-billion. The combination was seen as a merger of equals. Post-merger, the Society name was dropped, but KeyCorp relocated its headquarters from Albany into the 57-storey Society Center (now Key Tower) in downtown Cleveland.
- In 1998, KeyCorp bought Cleveland brokerage firm McDonald & Co. for USD $653-million. McDonald & Co. managed USD $5-billion of assets through 44 offices in 11 states. However, KeyCorp sold McDonald & Co.’s branch network to UBS in 2007 for USD $280-million, while retaining its former institutional businesses, including investment banking, debt and equity capital markets, public finance and research.
- In 2002, KeyCorp bought Union Bankshares Ltd. of Denver, Colorado, for USD $54-million. Its subsidiary Union Bank & Trust had seven branches in Denver.
- In 2004, KeyCorp bought EverTrust Financial of Everett, Washington for USD $195-million. Its subsidiary EverTrust Bank operated 12 branches in Washington state.
- In 2007, KeyCorp bought U.S.B. Holding of Nanuet, New York, for USD $575-million. Its subsidiary Union State Bank had 31 branches mainly in New York state’s Hudson Valley just north of New York City.
- In January 2012, KeyCorp agreed to buy 37 branches and their client accounts in the Buffalo region from First Niagara Bank for USD $110-million. First Niagara had in 2011 acquired 195 former HSBC branches and their client accounts in upstate New York, New York City and Connecticut for USD $1-billion from Britain’s HSBC Holdings.
- In 2015, KeyCorp acquired First Niagara Financial Group (based in Buffalo, New York) for USD $3.7-billion. First Niagara’s 300 branches in New York, Pennsylvania, Connecticut and Massachusetts joined Key’s over 900-branch network.
- In April 2016, KeyCorp agreed to sell 18 branches and their client accounts in the Buffalo area to Northwest Bank to satisfy the U.S. Department of Justice and Federal Reserve’s anti-trust concerns.
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