MetroCorp Bancshares Inc. of Houston said Wednesday that it is buying a two-branch Asian-American bank in San Diego for $37.4 million in cash.
The deal - MetroCorp's first-ever - is part of the $890 million-asset company's strategy to shift its emphasis to midsize Asian markets. The target, the $164 million-asset First United Bank, has one branch in San Diego and one in Los Angeles.
"MetroCorp's business strategy is to focus on the smaller of the largest Asian markets in the United States," George Lee, MetroCorp's president and chief executive, said in a press release. "We want to be the dominant Asian-American bank in these high-growth metropolitan areas and at the same time participate in markets such as Los Angeles."
According to MetroCorp, San Diego has the country's eighth-largest Asian population, while its current markets of Houston and Dallas rank ninth and 11th, respectively.
A MetroCorp spokeswoman said Wednesday that Mr. Lee was traveling and unavailable for comment.
The deal for First United, which is expected to close in the fourth quarter, also continues a trend of geographic expansion by Asian-American banking companies.
Last week the $1.4 billion-asset Wilshire Bancorp Inc. of Los Angeles said it had opened a full-service branch in Dallas; last month the $6.5 billion-asset UCBH Holdings Inc. of San Francisco said it was buying the $164 million-asset, two-branch Pacifica Bank in Seattle.
The amount MetroCorp is paying for the 14-year-old First United works out to 2.57 times its book value. That multiple is slightly higher than the average other acquirers have paid for similar-size banks this year (2.20), but Mr. Lee said First United's solid asset quality and above-average profitability make it a good value.
First United reported no noncurrent loans as of March 31; it had profits of $1.5 million in 2004, giving it a return on equity of 13%, according to the Federal Deposit Insurance Corp. In that respect, First United performed better than MetroCorp, which reported earnings of $8.6 million and a return on equity of 10.6% last year.
Investors reacted positively to the deal. In midday trading, MetroCorp shares were up 2.67%, to $20.53.
MetroCorp said First United would retain its name and management team and would operate as a subsidiary.
Andrew Yip, First United's president, has already signed an employment agreement and would remain its president, MetroCorp said.
A spokeswoman for First United said Wednesday, "Everyone is staying. This is good news for the bank, its customers, and the community. We're very excited."
