Warring banks skirmish over image
By Andrew Gomes
Advertiser Staff Writer
In the battle to control City Bank parent CB Bancshares, one consideration before state and federal banking regulators will be how service to communities could be affected if City Bank is acquired by Central Pacific Financial Corp.
Through statewide daily newspaper ads last week, City Bank took its argument over community reinvestment directly to consumers, and criticized parts of Central Pacific's record on community service.
It was the latest jockeying for public image by the companies, and another example of how positions in the hostile takeover attempt are turning into negative campaigns to influence customers and shareholders who have a say in the proposed combination of the rival Hawai'i banks.
In its ads, City Bank said that federal Community Reinvestment Act ratings show it has one of the best records for small-business lending while Central Pacific has one of the worst records for lending in disadvantaged communities.
Overall though, Central Pacific has a higher total community reinvestment rating, according to the most recent examinations the Federal Deposit Insurance Corp. made of Central Pacific in August 2002 and City Bank in September 2001.
Both banks received an overall "satisfactory" FDIC rating, though Central Pacific had 18 total points, compared with 16 for City Bank.
By further comparison of most recent ratings, Finance Factors Ltd. scored "satisfactory" with 16 points, and First Hawaiian Bank had an "outstanding" score of 24. Bank of Hawaii and American Savings Bank, which are ranked by another regulatory body, also received "outstanding" scores.
In three major test areas, the FDIC rated Central Pacific "low satisfactory" for lending, "outstanding" for investing and "outstanding" for service.
City Bank received ratings of "high satisfactory" for lending, "low satisfactory" for investing and "high satisfactory" for service.
Neither bank received ratings of "needs to improve" or "substantial noncompliance" and neither bank had any complaints about its community reinvestment performance.
In comments filed with state banking regulators, City Bank argued that because the FDIC's lending test is the most heavily weighted part of the evaluation, state regulators should consider whether a bank with an inferior lending record should be allowed to acquire a bank with better lending record.
City Bank also argued that the state should be skeptical about claims by Central Pacific that a merger of the two banks would benefit consumers and communities.
Central Pacific, in its filing with state regulators, acknowledged the mixed community reinvestment records of both banks and suggested that the stronger practices of each bank could help a combined bank achieve an "outstanding" score in lending, investing and overall scores.
Central Pacific also noted that it would maintain current levels of charitable contributions at both banks and committed to spending $1 million for community causes if the merger succeeds.
Lynne Himeda, acting commissioner of financial institutions for the state Department of Commerce & Consumer Affairs, said the state is continuing to receive information from both banks and is reviewing what it has. After submissions from both banks are complete, the public will be invited to comment.
Central Pacific also is required to file a Community Reinvestment Act merger application with the FDIC, which would review community reinvestment performance and could prohibit a merger if performance is below "satisfactory", though City Bank and Central Pacific have satisfactory scores.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
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