Koreatown’s Hanmi Bank halts dividend to conserve capital

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From Times staff writer E. Scott Reckard:

More stress in the Southland banking industry: L.A.-based Hanmi Financial Corp. today said it would quit paying dividends to shareholders in order to conserve cash at its operating unit, Hanmi Bank.

The Koreatown bank lost $105.5 million in the second quarter, which was largely the result of a non-cash accounting charge but also reflected more weakness in its loan portfolio. Because of the red ink, the bank said, state and federal regulators have imposed restrictions that require suspending the quarterly dividend of 3 cents a share, last paid in July.

Hanmi already had cut the dividend in half just a month earlier.

‘The board’s decision points to a challenging economic environment that is affecting the entire financial sector,’ Hanmi Chairman Won R. Yoon said in a statement. ‘Although the bank remains well capitalized, it is important that we maintain liquidity and conserve capital.’

Analysts had figured the dividend was a goner, so the market reaction today was modest. Hanmi’s shares slipped 13 cents, or 2.5%, to $5.11. The stock hit a seven-year low of $4.75 on July 7. The price has plunged from a peak of $22.88 in January 2007.

In suspending its dividend, Hanmi joins a host of banks nationwide that have made similar cuts to preserve capital as loan troubles mount.

Hanmi, with assets of $3.8 billion, is the largest of more than a dozen banks that focus on the ethnic Korean community in Southern California. Many of them have been struggling with a rising volume of loan defaults, in part because of the Southland’s real estate woes.

Hanmi last quarter also had to take a non-cash write-down related to its acquisition of Pacific Union Bank in 2004. The charge-off of so-called goodwill was required by accounting rules because of the steep decline in the company’s stock.