East West Bancorp stock rises on latest takeover of failed bank
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The latest takeover of a failed Chinese-American bank by Pasadena’s East West Bancorp triples its presence in the Seattle area -- and has investors applauding.
In a statement late Friday, East West said that it had acquired Washington First International Bank, the main subsidiary of Washington First Financial Group. It said it would take on all of Washington First’s $415 million of deposits, including deposits brought in by brokers, and $504 million of the bank’s roughly $520 million in loans and other assets.
The Federal Deposit Insurance Corp. will share in losses on $419 million of the assets. Among its statements in English and Chinese on the transaction, the FDIC said Washington First’s failure, the 82nd of a U.S. bank this year, will cost the deposit insurance fund an estimated $158 million.
Investors reacted favorably on Monday, bidding up East West shares by $1.28, or 8.2%, to $16.89 at midday. The takeover is East West’s second FDIC-assisted deal, following its acquisition of major rival United Commercial Bank of San Francisco last October. East West is now by far the largest bank with a core clientele of Chinese Americans, with more than $20 billion in assets, compared with Cathay Bank of Los Angeles, which had $11.8 billion in assets at March 31.
East West already had a branch in Seattle and another in Bellevue, Wash.
The Washington First deal deepens East West’s penetration of the Asian-American community in the Puget Sound region and should immediately provide a slight increase in earnings, RBC Capital bank analyst Joe Morford said in a note to investors Monday.
Morford noted that like many of its peer community banks, Washington First was overextended in commercial real estate and construction lending, leading to its downfall.
East West now operates more than 130 branches worldwide, with a presence 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.
-- E. Scott Reckard
