City Holding Co. in Charleston, W.Va., is abandoning a California expansion plan in order to concentrate on its core banking business in its home state.
The $2.8 billion-asset company said this week that it has hired an investment banker, which it would not name, to help find buyers for its two banks in the Golden State, $127 million-asset Del Amo Savings Bank in Torrance and $81 million-asset Frontier State Bank in Redondo Beach. The company also said it has retained the investment bank Keefe, Bruyette & Woods Inc. to explore a sale of its mortgage origination unit, which recently was moved to Reston, Va., from California.
In an interview Tuesday, City Holding chairman Philip L. McLaughlin said the company is shedding the California banks because they consume too much of management's energy. Though the banks are modestly profitable, "it's pretty hard to manage banks that are 3,000 miles away,'' he said. "Our focus now is on reestablishing ourselves as the best community banking franchise in West Virginia."
City Holding entered California in 1997 when it bought Del Amo Savings; it expanded in July 1999 with the purchase of Frontier. Last September, after City Holding announced plans to buy Summit State Bank in Rohnert Park, Calif., then-chief executive officer Stephen J. Day told American Banker that the company would continue to buy banks in the state and planned to have about 25% of its assets there.
The plan was short-lived. City Holding ran into credit-quality problems in late 1999 and lost more than $8 million in the fourth quarter. Since then, it has boosted its loan-loss provision by $6 million, terminated the Summit deal, and agreed with the Office of the Comptroller of the Currency to clean up its loan portfolio.
As part of its promise to focus on banking, City Holding will consider unloading its nonbank subsidiaries, Mr. McLaughlin said. It owns a local Internet service provider in Charleston, as well as a direct marketing company and an insurance firm. Combined, the nonbank subsidiaries lost $92,000 last quarter.
"They will have to carry their own weight if they are going to stay part of our company," he said.