A week after striking a deal to sell 37 branches to KeyCorp, First Niagara Financial Group Inc. in Buffalo announced Friday that it is selling an additional 27 branches to two more upstate New York rivals.
The $31 billion-asset First Niagara is divesting branches as part of its planned acquisition of 195 New York and Connecticut branches from HSBC Bank USA. The Justice Department ordered it to sell 26 branches of the HSBC branches and First Niagara is selling dozens more on its own in markets where branches would overlap.
In the larger of the two deals announced Friday, First Niagara said it is selling 19 branches and $955 million of deposits to Community Bank System Inc. in Syracuse at a deposit premium of 3.22%. Sixteen of the branches are currently operated by HSBC and the other three are First Niagara offices.
First Niagara is also selling eight branches — four of its own and four now owned by HSBC — and $376 million of deposits to Financial Institutions Inc. in Warsaw, N.Y., the parent of Five Star Bank.
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"Now having the targeted level of divestitures under contract, in addition to last month's capital raise of $1.1 billion, we are able to move forward to complete the conversion of the HSBC branches with even more pace and a sharper focus," First Niagara President and Chief Executive Officer John R. Koelmel said in Friday's news release.
Like KeyCorp, the $6.5 billion-asset Community Bank System and the $2.3 billion-asset Financial Institutions Inc. compete with First Niagara in a number of markets. Community Bank operates 175 branches in upstate New York and Pennsylvania while Financial Institutions has 50 branches in western and central New York.
In a news release Friday, Community Bank System President and CEO Mark E. Tryniski said the acquisition of the 19 branches, which includes $281 million of loans, is consistent with the company's strategy of building density in upstate New York through acquisitions. Last year it added nearly two-dozen branches and $900 million of assets with its deal for Wilber National Bank in Oneonta and in 2008 it acquired 18 former Citizens Bank branches in upstate New York from Citizens' parent, the Royal Bank of Scotland.
Community Bank System said it will need an additional $50 million to $60 million of capital to complete its deal with First Niagara. Some of that money will come from existing liquidity, though the company did not rule out raising more capital.
The branch sales are expected to close in the third quarter.
