After being written off as all but a lost cause by analysts, investors and even many of its peers, Saehan Bank managed to pull itself back from the brink last week.
The bank secured desperately needed capital, and it did so in an unorthodox manner that is being heralded by some analysts as a breakthrough for troubled banks struggling to raise money.
The subsidiary of Koreatown’s Saehan Bancorp completed a $60.6 million stock sale by privately approaching individual investors in the local Korean-American community without the help of investment bankers.
“Many institutions that have been in that distressed state have not been able to raise capital and therefore have gone out the hard way,” said Richard Levenson, president of Western Financial Corp., a San Diego investment banking firm that helps community banks raise capital. “I’m very encouraged by the fact that (Saehan was) able to raise the capital.”
The bank, L.A.’s 20th largest with $829 million in assets, recently reported that it lost $56 million in 2009 amid rising losses on souring construction and commercial real estate loans. The losses drained its capital reserves, leaving the bank “significantly undercapitalized,” according to regulatory guidelines.
Regulators had given the bank until March 8 to find new capital or face potentially severe consequences. Last week, one day after its regulatory deadline, the bank announced the consummation of the stock sale with “accredited investors.”
Two of L.A.’s largest depository institutions – California National Bank and First Federal Bank of California – missed similar regulatory deadlines in the past several months and were subsequently seized by regulators.
However, Saehan may not be out of the woods yet. Regulators have not lifted a consent order issued in December that also required the bank to retain qualified management and submit a capital maintenance plan to regulators.
And the bank admitted that additional capital could be needed. But investors clearly believe the latest move is promising.
News of Saehan’s unexpected capital raise sent its stock up sharply. Shares, which had been trading well under $1 recently, hit a high of $1.72 after the announcement, up nearly 500 percent from the previous week’s low. Shares closed March 11 at $1.25.
“Nobody thought we had a chance – (but) it’s all done,” said Daniel Kim, the bank’s chief financial officer.
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