Hanmi Financial Corporation

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Hanmi Financial Corporation

3660 Wilshire Boulevard, Penthouse S
Los Angeles, California 90010
Telephone: (213) 382-2200
Fax: (213) 384-0990
Web site: http://www.hanmi.com

Public Company
1982 as Hanmi Bank
Employees: 372 Total Assets: $1.78 billion (2003) Stock Exchanges: NASDAQ Ticker Symbol: HAFC
NAIC: 551111 Offices of Bank Holding Companies; 522110 Commercial Banking

Hanmi Financial Corporation is the largest Korean-American bank in the Los Angeles area, boasting assets of nearly $3 billion and 30 branch offices. The company operates as the holding company for Hanmi Bank, a community bank that conducts general business banking, offering commercial loans, U.S. Small Business Administration loans, commercial mortgage loans, real estate construction loans, and consumer lending and banking services. Hanmi Financial concentrates on serving the multi-ethnic population of Los Angeles, Orange, and San Diego counties, particularly those of Korean descent.


Hanmi Financial's operating entity, Hanmi Bank, was incorporated in August 1981, beginning what would be an impressive rise within Los Angeles's Korean-American business community. The bank officially began business more than a year later, receiving its license by the California Department of Financial Institutions in December 1982. Hanmi Bank opened on Olympic Boulevard, to the southeast of Koreatown, a Los Angeles community that served as the base for area's Korean-American community. By the end of the 20th century, Los Angeles's Korean-American community represented a substantial portion of the region's population, numbering 800,000 persons. Hanmi Bank was established to assist and to benefit from the growth of the large, yet closely-knit Korean enclave. Hanmi developed a reputation in commercial and small-business lending, but it would take years before its lending abilities were sufficient to attract widespread recognition.

Hanmi Bank began lending to and taking deposits from consumers at its original location on Olympic Boulevard, gradually gaining the clientele and financial resources to broaden its scope. The company grew by adding branches and by expanding the financial services it offered. Hanmi Bank opened its second branch on Olympic Boulevard, referred to as its Vermont branch, in the fall of 1985 and opened its third branch in the downtown section of Los Angeles the following spring. The company, like other Korean-American banks in the area, sought to cater to all of the financial needs of its community. The community, in turn, typically demonstrated a preference in dealing with banks run by those of Korean heritage, which provided a stable business base for a bank able to meet the various financial needs of its largely Korean clientele. Hanmi Bank took an important step toward developing a portfolio of services in the fall of 1988, when the company established a Small Business Administration department and began providing loans qualified by the U.S. Small Business Administration, an independent agency of the federal government. Before the end of the decade, the company added a fourth banking facility, opening a branch on Garden Grove Boulevard in the summer of 1989.

Hanmi Bank entered the 1990s set to experience a decade of profound growth. During this definitive era of development, the company was led by Benjamin Hong, a highly influential leader in southern California's Korean-American banking community. Before joining Hanmi as the bank's president and chief executive officer in 1988, Hong served as senior vice-president of First Interstate Bank and as the director of international finance at Northrup Corp., among various other executive banking positions. Hong, in his mid-50s when he arrived at Hanmi, spent six years at the bank, departing in 1994 to lead Nara Bancorp, one of Hanmi's chief rivals at the end of the decade. Although he only spent part of the 1990s at Hanmi, his influence over the company extended into the 21st century, as it did over much of Koreatown's banking community. Hong not only groomed Hanmi's future executives during his tenure at the bank but also trained the principal executives of the community's other leading banks, presiding as the patriarch of the cast of chief executive officers competing for the hotly contested business of Korean-Americans at the beginning of the 21st century.

Hanmi rose to prominence during the 1990s, becoming the bank of choice for many Korean-Americans living in the greater Los Angeles area. The company's growth was underpinned by favorable conditions, as the immigrant population increased 35 percent in the 1990s, triple the rate for the population as a whole. Further, according to a Small Business Administration report, Korean-Americans were the most entrepreneurial of U.S. ethnic groups, averaging one business for every eight people. Hanmi, intent on participating in the growth of its mainstay community, grew by strengthening its reputation and by evolving into a more comprehensive financial institution through the expansion of the services it offered. Physically, expansion was minimal during the 1990sonly one new branch was established, a unit opened in 1992 on Western Avenuebut the company's services were broadened, enabling it to assist in and to profit from its community. In 1995, the company opened an automobile loan center, the same year its downtown branch, which set the benchmark for all Hanmi branches, exceeded $100 million in deposits. In 1997, the bank reached a financial milestone when its assets reached $500 million. The following year, Hanmi achieved the ultimate distinction. In April 1998, the company edged ahead of its closest rival, Pacific Union Bank, which was founded by a South Korean company in 1974, to become the largest Korean-American bank in terms of assets. After 16 years of well-executed development, the bank reigned as the region's biggest contender, but in the years ahead the company would feel pressure from a handful of competitors, each vying to capture Hanmi's leadership position.

Consolidation Begins in the Late 1990s

By the time Hanmi reached preeminence, the competition among the pack of Korean-American banks in southern California was beginning to intensify. Within several years, the banks would begin to consolidate, with the largest of the banks assuming a predatory posture, each poised to acquire its rivals. Hanmi joined the fray in September 1998 when it acquired First Global Bank. Based in Los Angeles, First Global owned three branches, controlled $44.9 million in loans, and held nearly $78 million in deposits.

At the time Hanmi turned to acquisitions as a means to achieve growth, the bank's former leader was guiding his company on an identical front. Benjamin Hong, in charge of Nara Bancorp Inc. for four years when Hanmi purchased First Global, was beginning his bid to surpass his former company. In 1998, Hong ordered the purchase of Korea First Bank in Flushing, New York, owned by Seoul-based Korea First Bank, the majority owner of Pacific Union Bank. The race to supremacy was just beginning in Los Angeles's Korean banking market as an era of coexistence among the banking firms gave way to a period of predation.

Hanmi pressed ahead with internal expansion before making its next move on the acquisition front. In 1999, the bank began offering mortgage loans after establishing a mortgage department in July. The following spring, Hanmi made the greatest geographic leap in its history by opening a branch in San Diego. Next, the bank's executives reorganized the company, giving it a corporate structure tailored for the period of consolidation that awaited. In March 2000, Hanmi Financial Corporation was incorporated as a holding company for Hanmi Bank. In June 2000, the reorganization was completed when Hanmi Financial Corporation became the holding company for Hanmi Bank.

Hanmi triggered a more aggressive acquisitive posture in the Korean-American banking community with an announcement in May 2001. The company announced it had agreed to purchase California Center Bank for $103 million, a deal that would give Hanmi $480 million in assets and make the company, with roughly $1.5 billion in assets, nearly twice as large as its closest competitor, Pacific Union Bank. In a June 11, 2001 article in the Los Angeles Business Journal, an unidentified industry source described the events leading up to the announcement, describing a bidding process that included Hong's Nara Bancorp. "Nara made several overtures to CCB (California Central Bank) for the purpose of acquiring it," said the industry source. "CCB contacted Hanmi, and Hanmi put in a bid that was driven by Nara's bid. In a lot of ways, that was a defensive move from Hanmi's standpoint. Both had courted CCB for quite a while, but Nara's overture forced CCB's hand."

The race to acquire was kindled by Hanmi's bid for California Central. Chung Hoon Youk, Hanmi's president and chief executive officer, realized the need to expand through acquisitions. In a June 11, 2001 interview with the Los Angeles Business Journal, Youk remarked, "Mainstream banks are coming into our market. To efficiently compete, we need to be bigger." Hong echoed the thought in a May 22, 2001 interview with American Banker, "Consolidation is the natural evolution to increase the competitiveness of larger banks. If there are any banks for sale, we would pursue them very aggressively." The leaders of several other Korean-American banks voiced similar strategies, creating a stir among industry observers who waited expectantly for the next big deal. The agreement to purchase California Central ended up falling througha Hanmi spokes-person said California Central "got cold feet and abruptly got out of the negotiation process," according to the July 30, 2001 issue of the Los Angeles Business Journal but the collapse of the deal only fueled bankers' interest in consolidation.

Company Perspectives:

The name "Hanmi" was formed by the combination of two Korean words meaning "Korean-American." From our inception, and to our very core, we are connected with the Korean-American community. We have grown with our community's support, and our community has grown with our help.

In the wake of the abandoned California Central acquisition, Youk and his management team expanded internally while they weighed their options on the acquisition front. In 2001, the year the company registered on the NASDAQ, Hanmi opened a branch on West Olympic Boulevard in Koreatown and an office in Irvine. Another branch, the company's Fashion District branch, was established in December 2003, but before the opening there were sweeping changes in the leadership of Los Angeles's Korean-American banking community. In little more than a week, three chief executive officers, all of whom had offices within three blocks of each other, resigned, vacating their posts in the midst of the market's consolidation. On April 21, 2003, the president and chief executive officer of Pacific Union Bank, Woon Seok Hyun, announced his resignation, effective May 22, 2003. Later that week, Hong announced he would resign from Nara Bancorp by the end of the year. On April 30, 2003, Chung Hoon Youk announced he was leaving Hanmi at the end of the week, resigning to fulfill his dream of becoming a professor.

While the other leading banks turned to the task of replacing their chief executive officers, Hanmi searched to fill its own leadership void. The company, in July 2003, selected Jae Whan Yoo, whose banking career encompassed nearly three decades of service, beginning in 1976 when Yoo began working for Bank of America in Seoul. During the 1990s, Yoo served in several senior management positions at the $22-billion KorAm Bank. Immediately before joining Hanmi, Yoo served as a director and board member of the $57-billion Industrial Bank of Korea.

New Directions in 2003

Not long after Yoo's appointment, Hanmi made an announcement that significantly altered the dynamics of Los Angeles's Korean-American banking community. On December 23, 2003, the company announced it had struck a deal to buy Pacific Union Bank, the second-largest Korean bank in the Los Angeles area. Pacific Union was put up for sale by its majority owner, Seoul-based Korea Exchange Bank, the previous month, whetting the acquisitive appetites of the Korean banks in the Los Angeles area. Hanmi entered into a bidding war with three other banks and emerged victorious, sealing an agreement to acquire Pacific Union's $1.1 billion in assets for $295 million in cash and stock. The effect of the Pacific Union acquisition outstripped the deal to acquire California Central by more than a factor of two, giving Hanmi assets of nearly $3 billion and significantly widening the gulf separating it from its competitors. The largest and second-largest banks had agreed to merge, promising a dominance that had to dishearten the other banks jockeying as consolidators. Hanmi stood to be the largest Korean bank in the Los Angeles area by far.

A little more than 20 years after first beginning business on Olympic Boulevard, Hanmi held sway as the premier Korean bank in the Los Angeles area. The acquisition of Pacific Union was completed in April 2004, giving Hanmi a tremendous boost to its stature and presenting its executives with the difficult challenge of integrating Pacific Union into its operation. The company announced it intended to close as many as seven branches that geographically overlapped with existing Hanmi branches. Hanmi, in a bid to further achieve efficiencies from the integration of Pacific Union, announced it would lay off between 100 and 150 employees and consolidate certain functions such as data processing. As the company addressed itself to embracing Pacific Union, its executives could look forward to steering the area's preeminent financial institution toward a promising future.

Principal Subsidiaries

Hanmi Bank.

Principal Competitors

Nara Bancorp Inc.; Saehan Bank; Wilshire State Bank; Center Financial Corporation.

Key Dates:

Hanmi Bank is incorporated.
Hanmi Bank opens for business in December.
Hanmi Bank begins providing Small Business Administration loans.
Hanmi Bank establishes an automobile loan center.
Hanmi Bank acquires First Global Bank.
Hanmi Financial Corp. is formed as the holding company for Hanmi Bank.
Hanmi Financial acquires Pacific Union Bank, its closest competitor.

Further Reading

Berry, Kate, "Korean Bank Bucks Tradition," San Diego Business Journal, March 22, 2004, p. 22.

Dougherty, Conor, "In Close-Knit Koreatown, Aborted Deal Creates Stir," Los Angeles Business Journal, July 30, 2001, p. 3.

, "Korean Banks Seeks Strength with Mergers," Los Angeles Business Journal, June 11, 2001, p. 3.

"Hanmi Bank Acquisition," Los Angeles Business Journal, May 14, 2001, p. 38.

"Hanmi Financial Corporation Announces Selection of Jae Whan Yoo as CEO & President," Internet Wire, June 27, 2003.

Kuehner-Hebert, Katie, "L.A.'s Biggest Korean Bank Extends Lead," American Banker, December 24, 2003, p. 1.

, "L.A.'s Korean Banks Facing Consolidation," American Banker, May 22, 2001, p. 1.

, "Spare Change: L.A.'s Koreatown Is Splitsville for CEOs," American Banker, May 12, 2003, p. 5.

Jeffrey L. Covell