Flush with cash, Asian investors are increasingly setting their sites on California's community banks.
"A lot of the people who are serious about buying community banks here are Asian," said A. Wade Francis, president of Unicon Financial Services Inc. in Long Beach, Calif., a firm that has paired several Asian investors with California community banks.
"And they're not just interested in putting $2 million or $3 million down. Most have $10 million or more to invest in an institution."
In the last month, Taiwanese and Korean interests bought two recovering Orange County banks south of Los Angeles, and other Pacific Rim investors are increasing their stakes in or considering buying outright several small community banks in Northern California, according to investment banking sources.
"There is Asian money interested in either forming banks or buying existing ones," said Richard Levenson of the San Diego broker-dealer Western Financial Corp. "Whether they do one or the other is a matter of cost, not ability."
The new money, which Mr. Francis said comes mostly from the wealth created during the Pacific Rim's recent years of high growth, is another shot in the arm to some of the state's capital-strapped community banks. Those that weathered the state's recession are finding the going tough because of their size and the competition, and they need capital to grow through acquisition, he added.
Asian investors "aren't sure they want to invest in their own territory," Mr. Francis said. "They want to diversify. A few years ago, they put it in hotels, but that market's dead."
Gregory Madding, an investment banker with Hoefer & Arnett, said that Pacific Rim interest is not surprising, given the specialty many community banks have developed in trade financing.
"Trade financing has a lot to do with service and relationships and less to do with pricing," he said. "And here it almost always involves Asian clients."
But he added that, while he's aware of increased interest by Pacific Rim investors in California community banks, he wouldn't count on boards of directors being flooded with query letters from the Far East.
"It makes a lot of sense, but it's too early to call it a trend," he said.
