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Hanmi Financial posts hefty loss, is ordered to raise $100 million

The Los Angeles-based parent of the largest bank focused on the Korean American market loses $59.7 million in the third quarter. Regulators give it till July 31 to raise the needed capital.

November 06, 2009|E. Scott Reckard

Hanmi Financial Corp., which owns the largest bank focused on the Korean American market, reported another large quarterly loss Thursday and said regulators had ordered it to raise $100 million in capital by July or face seizure.

The parent of Hanmi Bank wants to raise the new capital from private investors in South Korea, giving them a controlling stake, said Jay S. Yoo, the company's chief executive.

But some analysts said the Los Angeles company would struggle to raise the needed money, mainly because regulators have permitted few purchases by industry outsiders.

W. Chris Stulpin, an analyst who follows Asian American banks for D.A. Davidson & Co., described Hanmi's chances of getting consent to sell to foreigners as "slight to nil."

Hanmi lost $59.7 million, or $1.26 a share, in the third quarter after adding $49.5 million to its provisions for possible loan losses. A year earlier, the company earned $4.3 million, or 9 cents a share.

During a conference call, Yoo blamed the "disappointing" results on the "ever-worsening credit market," especially for mortgages on commercial real estate.

Hanmi shares fell 9 cents, or 6%, on Thursday to $1.40, reducing its stock market value to about $60 million.

The disclosure of the losses and the mandate to raise capital demonstrate how problems of loans backed by commercial property are squeezing community and regional banks that have specialized in such mortgages, including California's many sizable Asian American banks.

Hanmi, with $3.5 billion in assets, has expanded far beyond its Koreatown roots, operating 27 full-service offices in Southern California and the San Francisco Bay Area and loan-production offices in Virginia and Washington state.

Efforts to raise capital and stabilize the bank have seesawed since October 2008 when the California Department of Financial Institutions and the Federal Reserve Bank of San Francisco informally ordered it to improve its senior management and board, tighten its lending practices and keep up its capital cushion against losses.

Since then, it has reconstituted its board, tried unsuccessfully to obtain $105 million in federal bank bailout funds from the U.S. Treasury, and embarked on a campaign to shed riskier loans and high-cost deposits in a bid to make the company more stable.

In September, Hanmi obtained a $6.9-million investment from a South Korean brokerage, Leading Investment & Securities Co. Yoo said an additional $4.1 million that Leading Investments was to provide this month might be delayed while the bank works to gain regulators' approval for private investors in Korea to buy a controlling stake in the bank.

Bank officials said they were encouraged that the Fed had given them until July 31 to raise the required $100 million, but conceded it was far from certain they would be able to put together an acceptable deal.

Analysts have predicted that the number of banks focused on Korean Americans -- there are more than a dozen in the Southland -- will decline as weaker banks are taken over.

Regulators arranged one such deal in June, a takeover of Mirae Bank, a five-branch Los Angeles-based institution, by Wilshire State Bank, also of L.A. It won't be the last combination, said BMO Capital Markets analyst Lana Chan.

"There definitely should be some consolidation in the Korean American sector coming," she said.


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