Hawaii's smallest bank has won its legislative struggle against the state's Goliath, Pacific Century Financial Corp.
A bill that would have removed restrictions on interstate branching in 2001 died in a state legislative committee after lawmakers ran out of time- and the will-to push it through.
The bill had the support of $14 billion-asset Pacific Century-known until April 25 as Bancorp Hawaii-and most of the state's banks. But it was vehemently opposed by tiny, $100 million-asset Bank of Honolulu, which wanted the restrictions to last an indefinitely longer period.
The industry split left lawmakers concerned, divided, and unwilling to take decisive action, said Terrill S.W. Chock, executive vice president of Bank of Honolulu.
The measure would have ended several restrictive provisions of the state's 1996 interstate branching law. The constraints were imposed as part of a compromise among Hawaiian banks.
Under the law, which took effect Sunday, out-of-state banks are barred from branching into Hawaii by simply opening or buying a single branch. Instead, they must buy an entire bank that is at least five years old or charter a new bank as an entry vehicle.
But while Mr. Chock said he was pleased that the bill had not passed with a four-year sunset provision, he said he was "somewhat disappointed about the way it died."
"I wanted the thing to be resolved this year," he said.
Pacific Century spokeswoman Linda Chinn said the state's largest bank will try again next year.
"We hope to continue to work with the dissident banks and to offer additional information to legislators with the aim of creating a bill that will be satisfactory to all," she said. "There is certainly a difference of opinion, and we are looking to bridge that."
But Pacific Century said that full interstate branching would attract new business and capital to the state's sluggish economy.
"We believe it will provide a better business atmosphere by opening up competition from out-of-state banks," Ms. Chinn said. "We believe it will give us opportunities as well."
Removal of the law's restrictions would free up growth opportunities for Pacific Century and $6 billion-asset First Hawaiian Inc., the state's second-largest bank, in other states and territories.
Many western states have adopted liberal branching laws but require reciprocal freedoms from Hawaii. Pacific Century has a subsidiary in Arizona and is buying CU Bancorp in Encino, Calif., while First Hawaiian has operations in the Pacific Northwest.
But Mr. Chock argued that passage of the amendment "would be negative for consumers and small businesses" and would "limit the source of funds that could be made available to them" by harming small locally owned banks.
