KeyBank
KeyBank is an American regional bank headquartered in Cleveland, Ohio, and the 27th largest bank in the United States. Organized under the publicly traded KeyCorp, KeyBank was formed from the 1994 merger of the Cleveland-based Society Corporation, which operated Society National Bank, and the Albany-headquartered KeyCorp. The company today operates nearly 1,000 branches and over 1,200 ATMs, mostly concentrated in the Midwest and Northeast United States, though also operates in the Pacific Northwest as well as in Alaska, Colorado, Texas and Utah.
History
KeyBank is the primary subsidiary of KeyCorp, which was formed in 1994 through the merger of Society Corporation of Cleveland, Ohio and KeyCorp of Albany, New York. The merger briefly made Key the 10th largest US bank. Its roots trace back to the Commercial Bank of Albany in 1825 and Cleveland's Society for Savings, founded in 1849.Society Corporation (Society National Bank)
Society For Savings originated in 1849 as a mutual savings bank, founded by Samuel H. Mather. In 1867, the modest but growing bank built Cleveland's first skyscraper, the 10-story Society for Savings Building on Public Square. Despite erecting the tallest structure between New York and Chicago at the time, the bank largely eschewed expansion. That aspect is highlighted by the fact that when it celebrated its 100th anniversary in 1949, it still only had one office although it had over $200 million in deposits. This conservatism helped the bank sidestep many depressions and financial panics. In 1958, Society converted from a mutual to a public company, which enabled it to grow quickly by acquiring 12 community banks between 1958 and 1978 under the banner Society National Bank. It went through another growth spurt from 1979 to 1989, as it acquired dozens of small banks and completed four mergers worth one billion dollars, most notably Cleveland-based Central National Bank in 1986. In 1987, Society CEO Gordon E. Heffern retired and was succeeded by Robert W. Gillespie, who, although just 42, was a major figure and part of the office of the chairman for more than 5 years. Gillespie was also named chairman. Gillespie started as a teller with Society to earn money while he was finishing his graduate studies.Society Corporation acquired Toledo, Ohio-based Trustcorp in 1990 and holding company AmeriTrust Corporation, in September 1991. Ameritrust was the successor to Cleveland Trust Company, which was Ohio's largest bank during the 1940s through the late 1970s. The AmeriTrust deal established Society as a large regional bank. However, its footing became unsteady due to bad real estate loans, forcing the resignation of AmeriTrust chairman Jerry V. Jarrett in 1990. Moreover, Gillespie was able to outbid Society's larger rival, National City Corp., which also bid for Cleveland Trust.
KeyCorp (KeyBank)
In 1825, New York Governor DeWitt Clinton signed a bill chartering the Commercial Bank of Albany. In 1865, Commercial Bank was reorganized under the National Banking Act of 1864, and changed its name to National Commercial Bank of Albany. Over a hundred years passed before National Commercial merged with First Trust and Deposit of Syracuse to become First Commercial Banks in 1971, still a modest New York State bank with 89 offices. Victor J. Riley Jr. became president and CEO in 1973, and changed First Commercial's name to Key Bank Inc. in 1979.Riley embarked on a plan to grow Key through acquisitions. From the mid-1970s to the early 1980s, it made numerous acquisitions throughout upstate New York. Beginning in the 1980s, Riley looked outside New York, expanding Key's footprint with an acquisition in Maine, and eventually adding branches in Massachusetts and Vermont. However, by the mid-1980s, banking regulators in New England began looking askance at New York-based banks controlling the region's capital. That, coupled with increasing competition for acquisition targets, caused Riley to essentially abandon the Northeast. Instead, he began searching for prey in the Pacific Northwest. Riley found a target-rich environment in rural and underserved areas. He snapped up small banks in Wyoming, Idaho, Utah, Washington and Oregon. He even went so far as to buy two banks in Alaska, for which he was flogged in the media and in banking circles. Unorthodox strategy aside, Riley quintupled Key's assets from $3 billion to $15 billion in just four years between 1985 and 1990.
While the early 1990s recession rocked many banks, Key had ample capital. It bought the assets of two failed thrifts from the government: Empire Federal Savings and Loan and Goldome Savings Bank. In March 1992, it acquired Tacoma-based Puget Sound Bancorp for $807.2 million to bolster its presence in Washington. Also in 1992, Key acquired Home Federal Savings of Fort Collins, its first move into Colorado. Key soon amassed nearly 700 banking offices.
The result was two separate banking networks united under a single corporate umbrella. However, this strategy actually worked well for Key. Not only was it insulated from regional economic downturns, but it avoided bad loans by lending primarily to customers in the areas it served. When Key acquired a bank, it retained most of the bank's personnel. Riley argued that a bank that entered new territory and "start shuffling people around" could not brand itself as a community bank.
By 1993, the rural strategy with local management and minimal technology made Key a very profitable bank. However, it was getting tougher for Riley and CFO William Dougherty to maintain their 15% return on equity target and investors were cooling on Key stock after many high growth years. Key began testing a Vision 2001 computer system, which sped up and enhanced the loan process through faster credit scoring, loan servicing, and collection capabilities.
Society National Bank and KeyBank merger (1994)
Although Gillespie had built Society into a regional powerhouse in the Midwest, he wanted to vault the bank into the big leagues. He concluded Key, a bank with similar ambitions, was a suitable partner. Society and Key held talks in 1990 at Gillespie's prompting, but Riley decided to stay the course of smaller, more lucrative acquisitions with obvious synergies. Yet, news reports swirled that a possible merger was in the works in the fall of 1993. Key was the 29th largest U.S. bank with $26 billion in assets, while Society was the 25th largest with $32 billion in assets. Both needed a merger to improve their prospects. For its part, Key needed a succession plan due to the lack of an obvious successor to the 62-year-old Riley. In one week in June 1993, the bench had become barren - Chief Banking Officer James Waterston, hired the year before, quit and publicly stated that he was frustrated with the pace of achieving his goal of running a large bank. The head of KeyBank of Washington, Hans Harjo, was pushed out over an apparent dispute to move its headquarters from Seattle to Tacoma. It also became clear that Key had to undertake a technology infrastructure upgrade to connect its far-flung offices. Meanwhile, Society was in search of higher growth and longed to expand its presence outside of the so-called rust belt states of Ohio, Michigan, and Indiana.The merger was announced in early October 1993. This time it was Riley who made the first move; he called Gillespie while recuperating at his Albany home after breaking his hip in a horse-riding accident in Wyoming. The two quickly sketched out the deal. The banks were roughly the same size in assets and had very little geographic overlap, so it was touted as an out-of-market merger in which few branches needed to be sold off. It created a $58 billion banking behemoth with a footprint that literally stretched from Portland, Maine to Portland, Oregon. Furthermore, the deal plugged many of the perceived holes for both partners. The soft-spoken Gillespie was just 49 and Society had cultivated a deep bench of lieutenants. More importantly, Society had the computer systems and technology expertise to combine the two banks, along with Chief Information Officer Allen J. Gula. Riley also lamented the modest Albany International Airport, which lost service from several major airlines in the 1980's and complicated air travel for Key executives. Ohio also had lower state taxes than New York. Lastly, Society had recently built Society Center, a 947-foot skyscraper that was more commensurate with a major bank headquarters than the modest buildings used in Albany. These issues made Cleveland the preferable location for the merged bank's headquarters. Conversely, Key's brand was more recognizable.
The deal was structured as a merger of equals. The merged bank took the KeyCorp name, and operates under the charter of the old KeyCorp. However, Society was the nominal survivor; the merged bank was headquartered in Cleveland and retains Society's pre-1994 stock price history. The Society name continued to be used in Society's former footprint for an additional two more years before it was retired in June 1996 and the charters were merged.
Riley became chairman and CEO of the "new" KeyCorp, with Gillespie as president and chief operating officer. Despite assurances from both Riley and Gillespie, the city of Albany and then-Governor Mario Cuomo openly fretted that the merger would be bad for the state capital since Key and its subsidiaries owned or leased more than 10% of Albany's commercial office space. By 2014, only about 225 non-branch employees were still based in Albany at the former KeyCorp Tower.
Society and Key completed the merger on March 1, 1994, after regulatory approval. Although it was touted as a merger of equals, Key and Society were an odd couple. As mentioned above, Key was a decentralized community bank combining two banking networks—an eastern network in New England and upstate New York and a western one in the Rockies and Pacific Northwest—within a single corporate structure. Society, in contrast, was a classic big-city commercial bank with a centralized structure largely concentrated in three states.
Riley planned to retire as CEO at the end of 1995. He decided to accelerate it by four months, however, instead stepping down on September 1, 1995. Gillespie took the helm as CEO and later chairman, allowing his protege Henry Meyer to become COO and later president.