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East West Bancorp (EWBC) in Pasadena, Calif., has agreed to pay $273 million in stock and cash for MetroCorp Bancshares (MCBI) in Houston.
September 18 -
Too few of the small banks willing to sell have businesses worth buying, bank CEOs said during the recent round of earnings calls.
April 30 -
The Office of the Comptroller of the Currency has lifted a regulatory order that had been imposed on a unit of MetroCorp Bancshares in Houston.
June 13 -
Trade finance involving U.S. and Chinese companies is growing, and MetroCorp could be free to make more loans now that it is free of a regulatory order.
June 25 -
Wilshire Bancorp is projecting cost savings of 60% for its deal with a Los Angeles rival, Saehan Bancorp. If it can pull that off, more intra-market deals among Korean-American banks could follow.
July 22
The way Dominic Ng tells it, a decision to
"There is always a right time, place and moment," says Ng, chairman and chief executive of East West Bancorp (EWBC) in Pasadena, Calif. "From the minute they called, it didn't take long. It took a few weeks to put the deal together. It came together very quickly."
Ironically, Ng was
Certainly, from the perspective of the $23 billion-asset East West, it is easy to see why $1.6 billion-asset MetroCorp is so attractive. The company's nine Houston and three Dallas branches offices will give East West a presence in Texas that would have taken Ng years to build organically. Currently, East West operates a single branch in Houston.
"This is easier than adding one branch at a time," Ng says. "We can't wait five years to expand in Texas."
East West expects to complete the acquisition in the first quarter. The deal will raise the company's profile in Texas and permit senior management to focus more attention on the state's business opportunities.
"This is a good start," Ng says. "With this base, it makes sense for us to pay attention to Texas. With one branch, it was hard" to justify committing a lot of resources.
Created in 1972, East West has been an active acquirer since the late 1990s, but all of its whole bank deals eight since 1999 involved banks in California. In June 2010, East West bought the assets and deposits of the failed Washington First International Bank in Seattle.
MetroCorp's history has been more uneven. Like many banks, it struggled with bad loans during the recession and, while its ratio of nonperforming assets to total assets has steadily improved since 2011, it still hovers near 2%.
MetroCorp entered Southern California in 2005 by purchasing a small San Diego bank. MetroCorp pursued other opportunities, but none materialized. In 2009, the company entered into a formal agreement with the Office of the Comptroller of the Currency requiring it to form a compliance committee and improve lending practices.
East West is a "bridge bank" that serves entrepreneurs and businesses in the United States and China, Ng says. Thus, an increasing current of trade and investment flowing between China and Texas has not escaped his attention. Houston and Dallas are home to growing Chinese communities, and Chinese investment in Texas is also growing, Ng says.
Chinese firms have invested nearly $5 billion in Texas over the past 13 years, mainly in energy, according to Rhodium Group, a New York research firm. On the flip side, annual exports from Texas to China more than tripled over the past decade, growing from $3.1 billion in 2003 to $10.1 billion last year, based on research from the US-China Business Council in Washington.
"Texas has been a gateway between the United States and China and it is a huge recipient of Chinese investment," says Marc Ross, a spokesman for the US-China Business Council.
MetroCorp, the parent of MetroBank, was also working to
George Lee, MetroCorp's chairman, president and CEO, did not return phone calls seeking comment. In a press release issued late Wednesday, Lee said MetroCorp's customers would benefit from the "balance sheet, scale and expertise" of merging with East West.
East West is the latest Asian-American bank to cross the country
In recent months, BBCN Bancorp (BBCN) has
Royal Business Bank in Los Angeles has also expressed an interest in
Two-thirds of East West's consideration for MetroCorp will involve stock. The price tag works out to about $14.60 for each MetroCorp share, and 1.72 times the seller's tangible equity.
The fact that most MetroCorp shareholders want stock, rather than cash demonstrates they have "strong confidence in East West's future," Ng says.