Encouraged by some of California's leading financial executives, 16 community banks have invested $6.3 million into Pan American Bank in East Los Angeles to ward off regulators and keep open California's oldest Latino bank.
Organizers of the funding said Wednesday that they assured regulators and the new investors that the private sector bailout would be accompanied by a shake-up of the board of directors and management at the tiny bank.
With its rich history and community involvement, Pan American has an importance far greater than its $41 million in assets and single branch might indicate.
"You go back through all of its history, and it doesn't take long to get to a point where you say, if there's a way to save this bank, it ought to happen," said John Eggemeyer, chairman of Pacific Western Bank parent firm, PacWest Bancorp.
Unprofitable since 2005, Pan American had seen its capital dwindle to the point where it was no longer in a position to make loans and was spending "every minute of the day" dealing with pressure from regulators, said former California Bankers Assn. President Robb Evans, a turnaround expert installed this week as interim chief executive.
"The immediate objective is to get the bank operating efficiently so it's in a position to provide services to local merchants," Evans said Wednesday. "We'll have to retool the bank to do that."
Minority banks have had mixed results in Southern California, where Asian banks have boomed but the region's enormous Latino population has had few homegrown financial institutions.
Industry analysts and Latino entrepreneurs cite several reasons for the lack of banks catering to the ethnic group, including the small size of many Latino businesses and widespread distrust of banks by immigrants from Mexico and Central America.
Before the Great Recession, interest surged in banks for Latinos. Popular boxer Oscar De La Hoya was among those talking of opening a bank to serve the market.
But De La Hoya abandoned the plan when the economy soured, and two Latino banks that opened in 2006, ProAmerica in downtown Los Angeles and Americas United in Glendale, struggled through the Great Recession and have remained among the region's smallest banks.
What's more, one of the few retail banks to focus on Spanish-speaking customers, Puerto Rico's Banco Popular, announced recently that it was selling its 20 Southland branches to a mainstream lender as part of a retrenchment campaign.
Against that backdrop, the potential loss of an East L.A. fixture was grim news. Pan American was founded in 1964 by Romana Acosta Bañuelos, who later served as U.S. treasurer during the Nixon presidency.
Through the years, the bank had been a strong advocate for financial education in the Latino community, giving youngsters, for instance, free piggy banks along with advice on saving. It also made $1,000 loans to immigrants to cover the costs of applying for U.S. citizenship.
Eggemeyer, a longtime bank deal maker, said he had never heard of the bank until about a month ago. That's when Timothy R. Chrisman, founder of a Los Angeles executive search firm for the financial industry, told him the Federal Deposit Insurance Corp. was preparing to shut down Pan American.
Eggemeyer said he was stunned as he learned of the bank's history. "This was one of the oldest Latino charters in the country," he said. Chrisman and Eggemeyer began calling Southern California bankers who agreed that Pan American should be rescued — as long as it was a collective effort.
In the end, the hastily devised deal was designed so that voting control of the bank will remain with Latino shareholders, with the greatest stake owned by the Bañuelos family.
"My mother founded this bank with the dream of providing vital services to our under-served communities," said Mona Bañuelos, the founder's daughter. "It is heartwarming to see major regional banks coming together to help restore our bank's financial strength."
The 16 banks contributing funds to recapitalize Pan American will each become minor shareholders. They include Cathay Bank in L.A.'s Chinatown, several banks in Koreatown and expanding mainstream banks such as Grandpoint in downtown Los Angeles and Eggemeyer's Pacific Western in Century City.
Eggemeyer said the banks can't legally team up to determine strategies for Pan American, though individually they can offer support. That makes it a crucial task to find new operators who can make the strengthened bank an active player in the economic life of the community, he said.
"Raising money was the easy part," he said.
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