Hawaii's CB, Bancshares is about to make a deal that will hand its City Bank subsidiary a strong position in a very important market.
International Holding Capital Corp. on June 24 agreed to a buyout offer of $51.7 million in cash and stock from the $750 million-asset banking company - which, like International, is based in Honolulu on the island of Oahu.
International, the $450 million-asset parent of International Savings and Loan Association, will significantly expand CB's mortgage business. More important, it will make CB a very strong presence in Oahu's Filipino community, where International has many of its branches.
With 1.1 million residents, Oahu is by far the state's most populous island, and the Filipino market is Hawaii's fastest growing market, said Richard Kelly, director of investment banking for M.A. Schapiro.
The New York firm handled both the stock offering and the acquisition for CB, whose president and chief executive officer, James M. Morita, wanted to move fast.
"Unless we made an effort promptly, we would have been in a situation where there were no more thrifts left to buy," Mr. Morita said, explaining that both Hawaii and mainland banks have been feasting on the institutions.
Thrifts Stayed Afloat
The Bank of Hawaii, First Hawaiian Bank, and the Bank of America are among the institutions buying the state's thrifts, which all stayed afloat during the stateside shakeout.
"We've had no thrift or bank failures in Hawaii, and we have a climate for business that's much stronger than what you generally find on the mainland," Mr. Morita said.
And not just in this country. CB maintains strong relationships with Japanese correspondents that serve as, among other things, funnels for tourist, retiree and investment business. But it's Oahu's Filipino business where CB will benefit most over the near term.
"They're the fastest growing population group in Hawaii, and they're very big savers," said M.A. Schapiro's Mr. Kelly. "Most of International's 12 branches are west of Honolulu, where the Filipinos tend to live, and International has the best standing in that community."
He noted that CB has "staff who speak five Filipino dialects, so they communicate with them, but they also relate to these people. That's why CB will keep the International name."
By gaining Filipino market share, and International's mortgage business, CB has "maintained its competitive balance with the big players on the island," Mr. Kelly added.
Maintaining Profit Levels
CB last year posted a 1.18% return on assets, and a 14.13% return on equity. Mr. Morita says his goal is for CB to operate at those levels for several years, and to increase its market share to 8%. The International deal, which still must be approved by regulators, would give CB a 7% share. But Mr. Morita is concerned about the arrival of Bank of America.
"Now that they're here, it means we'll have to cultivate more business in the Orient and the mainland, and it means we'll have to try to keep our best customers - the ones we've had for the last 30 years."