An attempt by SWNB Bancorp Inc. to increase deal pricing ultimately sank its acquisition by Hanmi Financial Corp.
At the Raymond James U.S. Bank Conference, Hanmi President and CEO C.G. Kum said Houston-based SWNB wanted to up the deal price, but Hanmi balked. Hanmi was adamant that the earnback period for tangible book value dilution not be altered from the original agreement.
Kum said SWNB is about 8% of $5.42 billion-asset Hanmi's size and generates return on average assets of about 80 basis points. "So not a highly profitable transaction, but it would have given us strategic benefits in Texas markets," he said.
When SWNB started making overtures about changing the pricing Hanmi explained what its limitations were, Kum said in a presentation. Kum was unavailable to clarify further after the presentation.
Kum said anyone familiar with the bank knows that it is a disciplined acquirer. "We walk the talk," he said. "So we've decided to move on from that."
Shareholders of SWNB in late August nixed the bank's planned merger with Los Angeles-based Hanmi, although more than a majority of SWNB Bancorp's outstanding shares voted in favor of transaction. The two sides announced the $76.7 million deal in May.
But that does not mean the bank is giving up on Texas markets, including Houston and Dallas, which Kum said are rich in deposits that come at a lower cost than those in California. He said Hanmi will try to find that growth organically and will open a branch in Houston's Chinatown neighborhood. He said that area is different from heavily Chinese populated areas in other cities such as San Francisco, Chicago or Los Angeles in that it is bisected by "modern" Bellaire Boulevard, which is an attractive area featuring retail and office space.
Hanmi will focus on recruiting Chinese-American bankers in the area too. "We think that ultimately ... that is going to more than make up for the EPS accretion that we're not getting as part of the [SWNB] transaction," Kum said.
Kum added that Hanmi is interested in expanding in the Southeast, too, but he said the problem is that potential Korean-American bank targets in that region are not especially attractive. "You wonder what you really get other than a couple of branches," he said. Those banks are often heavily into CRE and SBA lending, and Kum said he has concerns about the impact of rising rates on those two lending lines in coming quarters. "We're already starting to see some signs of asset quality stress," he said.
Hanmi COO Bonnie Lee said there are also markets on the East Coast where Hanmi believes it can make inroads organically. She said the bank last year opened a branch in Manhattan and will use it to penetrate the New Jersey market. She said Hanmi always plans to hit the break-even point in those organic growth efforts within the first year of operations.
A message left for SWNB Bancorp President and CEO Gary Owens was not immediately returned.