Koreatown banks BBCN and Wilshire Bancorp to merge
A FedEx employee walks near the BBCN Bank in Los Angeles in July 2013.
The nation’s two largest Korean American banks, both with headquarters in Los Angeles, plan to merge in a deal that will create an ethnic banking powerhouse - and that stymies an effort by another local bank to stop the deal.
In a deal announced early Monday, BBCN Bancorp said it will acquire smaller rival Wilshire Bancorp for $1 billion in an all-stock deal. Both banks, with headquarters just blocks from each other on Wilshire Boulevard in Koreatown, specialize in lending to businesses owned by Korean immigrants.
Combined, the two banks would have branches in nine states and $12.3 billion in assets, according to an investor presentation on the deal, making it by far the country’s largest Korean American bank.
“The combination of BBCN and Wilshire will create an unrivaled organization with the only national platform providing full banking services in all of the major geographic markets in the United States with sizable Korean-American communities,” said Steven S. Koh, Wilshire’s chairman, in a statement.
The merged BBCN-Wilshire would be run by current BBCN Chief Executive Kevin Kim. Koh would be chairman of the new bank’s board.
The deal is subject to regulatory approval and is not expected to close until mid-2016.
Another local Korean American lender, third-ranked Hanmi Financial, had recently heard a BBCN-Wilshire deal was in the works and tried to stop the merger by making an offer of its own to acquire BBCN, a much larger bank.
Last month, Hanmi Chief Executive C.G. Kum said he had been approached over the summer by members of BBCN’s board who were interested in a BBCN-Hanmi combination. But Kum told The Times that BBCN’s board as a whole had rebuffed his attempts to discuss a deal.
“There’s a segment of BBCN’s board that believes Hanmi and its management team is better suited to run a combined organization -- obviously the group that was interested in exploring a combination with us was not in the majority,” he said last month.
In a statement Monday, Hanmi Chairman Joseph Rho called the BBCN-Wilshire deal a disappointment and “inferior” to what Hanmi offered last month.
“What is even more disappointing is that BBCN and its advisors did not engage us in any discussions before entering into an inferior agreement with Wilshire,” Rho said.
A combined BBCN-Wilshire would be nearly three times the size of Hanmi and have operations in more areas, which could put the smaller lender at a significant disadvantage.
Tim Coffey, an analyst at banking industry brokerage FIG Partners, said last month that a deal between BBCN and either Wilshire or Hanmi would be bad news for whichever bank was left out.
“Whoever isn’t bought is at a competitive disadvantage because of scale,” he said. “They don’t get the benefit of the economies of scale that a BBCN-plus bank would.”
By combining, Wilshire and BBCN expect to save $42 million a year in costs. Much of that will likely come from closing branches in Southern California, where both banks have dozens of locations.
There has long been talk of a merger among Koreatown’s largest banks, though lately BBCN, Wilshire and Hanmi have all focused on expanding outside California, buying smaller Korean American banks in other markets.
Hanmi last year bought United Central Bank, a Garland, Texas, lender with operations in Illinois, Virginia, New York and New Jersey. BBCN has acquired banks in Chicago and Seattle over the last few years, while Wilshire bought a New Jersey bank in 2013.
Koreatown’s banks have looked to expand outside of Southern California because the market is so saturated here. Los Angeles is home to six of the nation’s seven largest Korean American banks, leading to fierce local competition for customers and bankers.
Coffey speculated that one reason a BBCN-Hanmi merger wasn’t seriously discussed is that BBCN executives might hold a grudge against its smaller rival for hiring away many of its bankers.
“There are a lot of high-level BBCN people working at Hanmi now,” Coffey said.
Wilshire shares are up more than 5% in early trading; BBCN shares are down about 2%.
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