East West Bancorp to Buy Rival
Continuing its careful strategy of buying small banks, East West Bancorp Inc. of San Marino said Thursday that it would acquire four-branch Trust Bancorp of Monterey Park for about $33 million in stock.
Buying the privately held parent of Trust Bank would expand East West’s core franchise in the ethnic Chinese community.
Since 1999, East West has acquired First Central Bank, American International Bank, Prime Bank and Pacific Business Bank, all small Southern California-based institutions focused on Asian customers. East West now has 40 California locations and an office in Beijing.
Dominic Ng, East West’s chairman, president and chief executive, said he anticipated saving money by eliminating duplicate support functions, but he promised to retain all the branch workers at Trust’s offices in Monterey Park, Rowland Heights, West Covina and Arcadia.
East West had assets of about $4.6 billion as of March 31, compared with Trust’s $235 million. East West said the deal should add 2 cents a share to its 2004 earnings, which Wall Street analysts had forecast to be about $2.81 a share.
Two other California banks also focused on the ethnic Chinese market have grown faster than East West. UCBH Holdings Inc. of San Francisco, the parent of United Commercial Bank, and Cathay General Bancorp of Los Angeles each had about $5.6 billion in assets as of March 31, according to Federal Deposit Insurance Corp. statistics.
Although Ng has said he wants to avoid the potential culture clashes involved in buying a larger bank, one analyst predicted that the East West chairman ultimately would have to make larger acquisitions or sell the bank to another institution to gain economies of scale.
“Sooner or later he’s going to reach a size -- a critical mass -- where’s he’s going to have to do something meaningful,” said Richard A. Eckert, who follows East West for Roth Capital Partners in Newport Beach.
The Trust Bancorp transaction, expected to close in the middle of the third quarter, was announced after the close of trading. East West shares had traded as high as $62.25 on Thursday on Nasdaq, a 52-week high, but closed down $1.08 at $61.02.
