East West Bancorp’s stock jumps after latest takeover of a failed bank
Shares of Pasadena’s East West Bancorp surged Monday after it acquired a failed bank in Seattle from the Federal Deposit Insurance Corp.
In taking over Washington First International Bank late Friday, East West agreed to assume all of the $415 million in deposits held by the smaller bank.
East West also took ownership of $504 million of the $520 million in loans and other assets on the books at Washington First, which like East West focused on the Chinese American market.
The FDIC, which issued statements on the deal in English and Chinese, agreed to absorb some of the losses on $419 million of the assets.
Washington First’s four locations triple the number of East West branches in the Seattle area.
The deal is likely to immediately boost East West’s per-share earnings, Joe Morford, a bank analyst at RBC Capital, said in a note to investors Monday.
East West shares jumped $1.06, or 6.8%, to $16.67.
The stock has more than doubled in the last year, with a big chunk of that increase coming after East West took over major rival United Commercial Bank of San Francisco in October. That transaction, also subsidized by the FDIC, gave East West about $20 billion in assets and made it by far the largest bank with a core clientele of Chinese Americans.
The niche’s second-largest player is Cathay Bank of Los Angeles, with $11.8 billion in assets at the end of March.
Like many community banks, Washington First was overextended in commercial real estate and construction lending, Morford said.
Its failure, the 82nd of a U.S. bank this year, will cost the deposit insurance fund an estimated $158 million, the FDIC said.
East West now operates more than 130 branches worldwide, with locations in New York, Atlanta, Boston and Houston as well as Washington and California. It also has full-service branches in Hong Kong, Shanghai and Shantou, China.
