L.A.’s oldest Chinese bank is heading east, buying a small New York lender to expand its East Coast presence.
Cathay General Bancorp in Chinatown announced Jan. 21 that it has agreed to purchase fellow Chinese-American bank Asia Bancshares Inc. in Queens, operator of Asia Bank, for about $126 million in cash and stock. The deal gives Cathay three new branches in heavily Chinese neighborhoods in New York and one in suburban Washington, D.C.
With $11.5 billion in assets, Cathay – the fifth-largest bank headquartered in Los Angeles County – is more than 23 times the size of Asia Bank. But with the deal, Cathay expands its presence in the Big Apple to 12 storefronts, including the only Chinese-American bank in the rapidly growing Chinatown district of Elmhurst, Queens.
Cathay Chief Financial Officer Heng Chen said the acquisition is a good match for its business model.
“More than anything else, we look at the fit,” he said. “They target the same customer base that we do, which is Asian borrowers.”
While the opportunity to increase its New York presence was the key to Cathay making this deal, Chen said the branch in Rockville, Md., outside of Washington, gives his bank an entrée into a new market it would not have otherwise entered.
“That’s a new market for us,” he said. “We would not go to Maryland except for the fact that Asia Bank is there. In the first couple years, if you go into a new market you’re going to lose money. They now have $54 million in deposits, so they’re making money.”
Although there has been a flurry of mergers in recent years involving L.A.-area banks, the region’s 20 Chinese-American institutions have mostly stayed out of the fray. Pasadena’s East West Bancorp Inc. bought fellow Chinese-American bank MetroCorp Bancshares Inc. in Houston last January, but the region’s other recent mergers have involved mostly Korean-American and nonethnic banks.
However, Chen said Cathay is always on the lookout for potential acquisitions, provided they are a cultural fit.
Cathay also released its fourth-quarter earnings Jan. 21. The bank reported net income of $35.6 million (44 cents a share) for the three months ended Dec. 31, compared with earnings that equaled 40 cents a share for the same period a year earlier. Analysts had expected earnings of 45 cents a share.
The acquisition deal is expected to boost Cathay’s profitability, as management expects it to be 2 percent to 3 percent accretive to the L.A. bank’s annual earnings.
“For someone that’s 5 percent of our size, getting accretion like that is decent,” Chen said.
Shares of Cathay closed at $23.53 on Jan. 21, up 15 cents or less than one percent, following the deal and earnings announcements.
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