Hanmi Financial moves to raise capital
Bolstering its cushion against losses in the face of the deep recession, the nation’s largest Korean American bank said Monday that it had arranged to raise as much as $11 million in new capital from a South Korean brokerage firm, and that it was negotiating with institutions in that country for an even larger investment.
Hanmi Financial Corp., the holding company for Koreatown-based Hanmi Bank, said Leading Investment & Securities Co. committed to buy about 5 million shares of newly issued common stock immediately for $1.37 a share, or $6.9 million.
After Hanmi obtains certain permissions from regulators, Leading Investment intends to buy an additional $4.1 million in stock, giving it 14.9% ownership of Hanmi -- the largest stake normally considered to be a passive investment. The investments should be completed by July 1, said Hanmi, a regional commercial lender with 27 full-service branches.
Jay S. Yoo, Hanmi’s president and chief executive, said in a statement that the deal “demonstrates a confidence in Hanmi’s ability to weather what is proving to be a severe and prolonged recession.”
Hanmi, the largest of more than a dozen Southern California banks whose core depositors are of Korean descent, has struggled with mounting loan losses more than most of those banks. In October state and federal regulators issued informal orders requiring Hanmi to maintain capital, restrict dividend payments and revise its standards for making loans and reserving funds to cover losses.
Hanmi shares, which traded as high as $6.77 in September, closed at $1.48 on Friday. They jumped 52 cents, more than 35%, to $2 on Monday.
Hanmi, with $3.9 billion in assets, posted losses of $84 million for 2008 and $9.6 million for the first quarter of 2009. The bank applied for funds from the Treasury Department’s bank bailout program but didn’t receive them, presumably because the government wanted Hanmi to show first that it was strong enough to raise capital privately, analysts said.
“Any approved capital is fantastic news,” W. Chris Stulpin, a D.A. Davidson & Co. analyst, said about the Hanmi deal. Stulpin follows eight large California-based Asian American banks, all of which he said were under stress to various degrees because of troubles with construction loans and commercial mortgages.
Nonetheless, Stulpin said, the $11 million is just “a step in the right direction.”
He said Hanmi would probably need to raise additional funds from the South Korean institutional investors to reach capital levels considered suitable by the Federal Reserve Bank of San Francisco and the California Department of Financial Institutions. That investment would require additional approval from U.S. and South Korean regulators and shareholders.
Stulpin maintains a “neutral” rating on seven Asian American banks: Hanmi, Nara Bancorp, Wilshire Bancorp and Center Financial Corp. in Koreatown; and the Chinese American banks Cathay General Corp. and Preferred Bank of Los Angeles and UCBH Holdings of San Francisco.
Only East West Bancorp of Pasadena, which has grown beyond its ethnic Chinese roots to become the second-largest commercial bank based in Los Angeles County, gets a “buy” from Stulpin.
He said East West had the strongest capital base, having begun to deal aggressively with its troubled land and construction loans in late 2007 and having raised $200 million in private capital in April 2008 and more than $300 million from the government program in December.
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