KeyCorp is paying a hefty premium to acquire bank operator U.S.B. Holding, even as concerns mount that the deal-making flood is drying up.

KeyCorp announced Friday that it will pay .455 shares of its own stock and $8.925 in cash for each share U.S.B. share. At KeyCorp's Friday trading price, the value of the offer is $24.97. Including the assumption of long-term debt, the total value of the offer is $608.7 million.

Shares of KeyCorp traded up 6 cents, or 0.2%, to $35.27. Shares of U.S.B. Holding jumped $8.66, or 56.6%, to $23.95.

KeyCorp is offering a 56.6% premium on U.S.B.'s Thursday closing price. KeyCorp's is paying top dollar to grow its exposure in New York. U.S.B. Holding operates the Union State Bank which has retail branches in southern New York.

"This is an important strategic acquisition that will significantly enhance our presence in attractive markets within and contiguous to our current operations," said KeyCorp Vice Chair Beth Mooney.

KeyCorp, which is headquartered in Cleveland, OH, is a financial services company. It provides investment management and investment banking products and operates 950 retail banking branches.

Boards of directors at both companies have approved the deal. The acquisition must now be approved by U.S.B. shareholders and banking regulators. The companies expect the deal to close in the next six months.

The KeyCorp acquisition comes as concerns mount that deal-making activity could be slowing. Acquisition activity has been brisk over the past year, led by private equity firms taking advantage of cheap financing. However, banks are having trouble finding investors to take debt from such deals. That means financing will likely get more expensive and slow leveraged buyouts.

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