East West Bancorp repays its debt to the Treasury
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Pasadena’s East West Bancorp, the Chinese-American powerhouse, has repaid its more than $300-million slice of bailout funds from the U.S. Treasury. Several Southern California banks are still struggling even to make dividend payments on their investments from Uncle Sam.
East West said Wednesday that it used available cash to pay back the $306.5 million in preferred stock that the Treasury had purchased at the height of the financial crisis, along with a final quarterly dividend of $1.8 million. Eliminating the Troubled Asset Relief Program payments will save the bank $15.3 million a year in dividend expense.
Unlike giant ‘too big to fail’ institutions, some of which were in dire need of a bailout, community and regional banks like East West were supposed to obtain money from the government only if they were fundamentally healthy. East West has appeared to have little need for taxpayer assistance since November 2009, when it raised $500 million in new private capital to support its takeover of San Francisco’s failed United Commercial Bank, its largest rival in the Asian-American banking niche.
East West, which has more than $20 billion in assets, also said that in the first quarter of 2011 it plans to repurchase a warrant allowing the Treasury to buy up to 1.5 million shares of the company’s common stock.
The moves are positive, since they will let East West free itself of certain government restrictions, said RBC Capital Markets analyst Joe Morford. He said the bank has capital well in excess of the levels that regulators deem ‘well capitalized.’
The TARP repayment announcement was issued after markets closed Wednesday. East West shares fell 18 cents to $19.57 before the news. The stock is up 24% this year.
Not all banks are doing so well after the harsh recession. A report by SNL Financial this month showed 123 banks and savings and loans had deferred making the quarterly dividend payments that came due in November on their TARP investments from the Treasury. Skipping these payments can mean that regulators consider a bank too weak for it to deplete its capital by making the payments.
Southern California banks that skipped their November TARP dividend payments include Saigon National Bank in Westminster, a Vietnamese-American institution that has missed all eight of its scheduled payments; Premier Service Bank, a Riverside commercial real estate lender that has missed six payments; Pacific City Financial Corp., a Koreatown bank that also has missed six payments; and CalWest Bancorp in Rancho Santa Margarita, parent of business lender South Coast Bank, which has missed only the latest payment.
Broadway Financial Corp. in Los Angeles, a savings and loan focused on the African American market, has missed two payments. Boston’s OneUnited Bancorp, a rival to Broadway Federal whose main focus is on African American customers in Southern California, has missed its last seven dividend payments.
Some banks miss payments and then improve: Commerce National Bank in Newport Beach repaid its TARP funds after missing three payments, and Commonwealth Business Bank in Los Angeles has made its last two dividend payments after missing five in a row.
Others must sell themselves or collapse: Pacific Coast National Bancorp in San Clemente failed after missing two dividend payments, and Pacific Capital Bancorp in Santa Barbara agreed to be acquired by private investors after missing six payments.
-- E. Scott Reckard
