It's in talks to trade a large
chunk of shares for California's
fifth-largest bank, a report says

From staff & wire reports

First Hawaiian Inc. is negotiating to acquire the 104-branch Bank of the West, California's fifth largest bank, according to a report citing two people close to the talks.

Both banks declined to comment on a Bloomberg News report today that said talks are under way to combine the two banks.

The sources told Bloomberg that First Hawaiian Inc. would give a large chunk of its shares to Banque Nationale de Paris, the French company that acquired Bank of the West in 1980. The French company would end up with a 40 to 50 percent share of the ownership of the combined banks, Bloomberg reported.

One portfolio manager said he is concerned that the French company might get too big of share of the ownership. James Schmidt of John Hancock Advisors Inc., which holds 900,000 First Hawaiian shares, told Bloomberg that investors are concerned "that control is in essence being sold without First Hawaiian being paid a premium."

First Hawaiian's shares fell 6 percent, a dip of $2.34, to close at $36.75 today.

But stock market analysts said acquiring more branches on the mainland would make sense for First Hawaiian, which needs to expand more outside Hawaii and already owns banks in the Pacific Northwest.

Bank of the West has assets of $5.7 billion and First Hawaiian's assets were $8.1 billion as of the end of March. A combination would result in total assets close to the $14.8 billion of Hawaii's biggest financial company, Pacific Century Financial Corp., parent of Bank of Hawaii.

Walter Dods, First Hawaiian chairman, was unavailable for comment and Gerry Keir, the bank's spokesman, said First Hawaiian does not comment on rumors and speculation.

First Hawaiian Inc., through its subsidiaries, has more than 100 branches. It expanded to Idaho, Washington and Oregon two years ago by buying branches from U.S. Bancorp, which it renamed Pacific One Bank.

Like many local companies, First Hawaiian Inc. has been suffering from the stagnant local economy. Last month it will cut 50 jobs through attrition by merging its 13-branch First Hawaiian Creditcorp subsidiary into First Hawaiian Bank. That was on top of the the roughly 300 jobs it has eliminated -- or targeted for elimination -- in the past two years.

Still, the company recorded a first-quarter profit of $21.2 million this year, up 3.5 percent from the year-earlier quarter.

San Francisco securities analyst Jeff Rundfeldt, whose firm Van Kasper & Co. recently began monitoring First Hawaiian Inc., said he had not heard of a proposed merger. But, he said, First Hawaiian has been working to diversify its income base and another mainland acquisition could make sense. "It would definitely help them achieve that goal," he said.

David Winton, an analyst at the New York firm of Keefe Bruyette & Woods, agreed.

"This would grow the proportion of revenue they get from the mainland," he said. "Their mainland operation is one of the few bright spots for them right now."

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Bloomberg News and Star-Bulletin reporter
Russ Lynch contributed to this report.