By acquiring United National Bank, East West Bancorp of San Marino, Calif., would overtake longtime rival Cathay General Bancorp as the nation's largest Asian-American banking company.
East West announced its $164.7 million deal for United, also of San Marino, on Thursday.
It would gain eight branches and roughly $757 million of deposits in the Los Angeles metropolitan area - significantly boosting its market share in the highly competitive market.
"The deal adds $1 billion to our size and substantially helps us in terms of market presence," said Dominic Ng, East West's chairman and chief executive officer. "We are clearly the biggest Asian-American bank in the country now."
East West would also gain two branches in northern California and one in Houston - its first outside of California.
Mr. Ng said that his company was not specifically looking to acquire something out of state but that he is excited about opportunities in Houston, which has a large Chinese-American population. However, he made clear that growth would be slow at first while East West becomes better acquainted with the market.
"With this base we can look into other opportunities to expand there, but I think it's going to take a little time," Mr. Ng said.
According to Federal Deposit Insurance Corp. statistics, the $6.1 billion-asset Cathay General is No. 15 in deposit share in Los Angeles, one spot ahead of East West. The $6.7 billion-asset East West would be No. 14 with the United acquisition, going from 1.41% of the market's deposits to 1.72%.
Half of United's 10 branches are in the same cities as East West branches, including two that are a few blocks away.
Mr. Ng said East West does not expect to close any branches but that it would use United's to deepen its relationships with Chinese-American businesses.
Because of heavier competition for Asian-American businesses in California - particularly from large, mainstream banks - East West has been courting non-Asian businesses in recent years. Today those businesses account for about 60% of its commercial deposits.
The $970 million-asset United, on the other hand, still focuses almost exclusively on Chinese-Americans, said Lana Chan, an analyst with Bank of Montreal's Harris Nesbitt Inc. in New York.
"It is a very nice transaction for East West and will clearly help them build their niche focus on Chinese-Americans," Ms. Chan said.
Investors seem to agree that the deal is a good one for East West. Its stock closed Friday at $35.89, up 6.85%. The deal is expected to close in the fourth quarter.
James Abbott, an analyst with Friedman, Billings, Ramsey & Co. in Arlington, Va., said that East West is getting a solid bank at a good price - roughly 2.3 times United's book value.
He said that along with more immediate benefits in its home market, East West would get a leg up on other Asian-American banks in California, such as UCBH Holding Inc. in San Francisco, that have been eyeing Houston.
According to the Office of Immigration Statistics, only New York and California have more naturalized Chinese residents than Texas.
East West "will now have a toehold in Texas, and that's definitely a strategic positive for them," Mr. Abbott said.
