CU Bancorp Won’t Lose Its Identity in Merger
The calls came in quickly to the top man’s office last week when CU Bancorp announced that it planned to sell the local bank chain to Bancorp Hawaii Inc. for $183 million.
Clients peppered CU Bancorp’s chief executive, Stephen Carpenter, with the same questions: Is CU’s management staying? Are loan decisions going be made out of state? Is the bank’s name changing?
Yes, local management is staying on the job. No, loan decisions will be made here. And no, the bank’s name stays the same. “And that put our customers at ease within 30 seconds,” Carpenter said.
This is a time of massive consolidation in the banking industry, and for tiny California United Bank, with a mere $844 million in assets and 21 offices in Southern California, staying independent was going to be a tough road.
Carpenter had fielded other takeover queries in the past couple of years, but in those deals CU’s operations would have disappeared within a larger empire. So when Bancorp Hawaii said they wanted to buy CU, but that they “had no management to export” from Hawaii and would rely on the local team, “that got my attention,” he said.
The sale price is $15.34 per share of CU Bancorp’s common stock, payable in a combination of Bancorp Hawaii stock and cash. The stock portion will be between 60% and 80% of the purchase price.
In the past year CU’s stock has traded as low as $9.75 a share. Since most of Bancorp Hawaii’s purchase will be in stock, CU’s shareholders will see their dividends jump about 40% in value, Carpenter said.
The deal is subject to approval by CU’s shareholders and various regulatory agencies. CU expects the deal to close by the third quarter of this year.
CU Bancorp will then fold into Bancorp Hawaii, the parent of Bank of Hawaii, which has $14 billion in assets and is the largest Hawaii-based banking organization.
Bank of Hawaii, which does business throughout the Pacific Rim, said it wants to expand its geographic diversification. The CU deal marks its first acquisition in California.
Carpenter says his marching orders are to keep snapping up smaller California banks to broaden its base.
Carpenter, 57, served stints at Security Pacific and Wells Fargo before being hired to turn around CU Bancorp in 1992. CU mostly serves the so-called middle market, making loans to medium-sized businesses that take in between $8 million and $25 million a year.
When Carpenter arrived, CU was ailing from the local recession of the early ‘90s, and its losses were mounting. In recent years, though, CU has been steadily profitable.
Last year the bank earned $709,000 for the full year, compared to a $6.7-million profit in 1995. But Carpenter has been on a shopping spree, and in last year’s third quarter, CU Bancorp took over Home Interstate Bancorp. That deal cut its after-tax profit for 1996 by $7.5 million.
One plus for his customers, Carpenter says, is that with a bigger bank behind it, CU can boost the size of its loans. Most of its loans are now in the range of $1 million to $4 million.
Although CU Bancorp will join a much larger bank, given the current takeover frenzy--Great Western Bank, with $43 billion in assets, is a takeover target of H.F. Ahmanson & Co. and seems destined to lose its independence--Carpenter concedes there is no guarantee that Bancorp Hawaii will not become a takeover target one day as well.
“If I was bright enough to know that, I’d be in Las Vegas,” Carpenter said.
