Academic journal article Federal Reserve Bulletin

Cathay General Bancorp Los Angeles, California

Academic journal article Federal Reserve Bulletin

Cathay General Bancorp Los Angeles, California

Article excerpt

Order Approving the Acquisition of a Bank Holding Company FRB Order No. 2017-09 (March 20, 2017)

Cathay General Bancorp ("Cathay"), Los Angeles, California, a bank holding company within the meaning of the Bank Holding Company Act of 1956 ("BHC Act"), (1) has requested the Board's approval under section 3 of the BHC Act (2) to acquire SinoPac Bancorp ("SinoPac") and thereby indirectly acquire Far East National Bank ("Far East Bank"), both of Los Angeles, California. (3)

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published in accordance with the Board's rules (81 Federal Register 70682 (October 13, 2016)). (4) The time for submitting comments has expired, and the Board has considered the proposal and all comments received in light of the factors set forth in section 3 of the BHC Act.

Cathay, with consolidated assets of approximately $14.1 billion, is the 102nd largest insured depository organization in the United States. Cathay controls approximately $10.9 billion in consolidated deposits, which represent less than 1 percent of the total amount of deposits of insured depository institutions in the United States. (5) Cathay controls Cathay Bank, which operates in California, Illinois, Nevada, New York, New Jersey, Maryland, Massachusetts, Texas, Washington, Hong Kong, Shanghai, and Taipei. Cathay Bank is the 18th largest insured depository institution in California, controlling deposits of approximately $7.4 billion in California, which represent less than 1 percent of the total deposits of insured depository institutions in that state. (6)

SinoPac, with consolidated assets of approximately $1.3 billion, is the 571st largest insured depository organization in the United States. SinoPac controls approximately $981.8 million in consolidated deposits, which represent less than 1 percent of the total amount of deposits of insured depository institutions in the United States. SinoPac controls Far East Bank, which operates in California and controls less than 1 percent of the total deposits of insured depository institutions in that state.

On consummation of this proposal, Cathay would become the 94th largest depository organization in the United States, with consolidated assets of approximately $15.4 billion, which represent less than 1 percent of the total assets of insured depository organizations in the United States. Cathay would control consolidated deposits of approximately $11.9 billion, which represent less than 1 percent of the total amount of deposits of insured depository organizations in the United States. In California, Cathay would remain the 18th largest depository institution, controlling deposits of approximately $8.2 billion, which represent less than 1 percent of the total deposits of insured depository institutions in that state.

Competitive Considerations

Section 3 of the BHC Act prohibits the Board from approving a proposal that would result in a monopoly or would be in furtherance of an attempt to monopolize the business of banking in any relevant market. (7) The BHC Act also prohibits the Board from approving a proposal that would substantially lessen competition or tend to create a monopoly in any banking market, unless the anticompetitive effects of the proposal are clearly outweighed in the public interest by the probable effect of the proposal in meeting the convenience and needs of the community to be served. (8)

Cathay and SinoPac have subsidiary depository institutions that compete directly in the Los Angeles, California, banking market ("Los Angeles market") (9) and the San Francisco-Oakland-San Jose, California, banking market ("San Francisco market"). (10) The Board has considered the competitive effects of the proposal in these banking markets. In particular, the Board has considered the number of competitors that would remain in the banking market; the relative share of total deposits in insured depository institutions in the market ("market deposits") that Cathay would control; (11) the concentration levels of market deposits and the increase in these levels, as measured by the Herfindahl-Hirschman Index ("HHI") under the Department of Justice Bank Merger Competitive Review guidelines ("DOJ Bank Merger Guidelines"); (12) and other characteristics of the market. …

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