Fierce competition in Los Angeles has prompted another Korean-American banking company there to search well outside its market for growth.
The $1.9 billion-asset Center Financial Corp. has a deal to buy the $232 million-asset First Intercontinental Bank in Doraville, Ga., for $65.2 million in cash and stock. Doraville, a suburb of Atlanta, is home to one of the country's fastest-growing Korean-American communities, Jae Whan Yoo, Center's chief executive, said in an interview after the deal was announced Tuesday.
"Atlanta is also one of the fastest-growing markets in the U.S., which gives us a great opportunity for our future," Mr. Yoo said. "Also, there are Korean-American businesses in Atlanta who have immigrated from California, because it is very expensive to do business here." The purchase would make his company "a much larger institution that can provide quality service to these customers."
Center is one of roughly a dozen Los Angeles banking companies targeting Korean-Americans. In striking the first deal in its 21-year history, Center is following in the footsteps of others that have pursued acquisitions in other parts of country with similar ethnic communities. In the last few years the $2.2 billion-asset Nara Bancorp and the $2 billion-asset Wilshire Bancorp Inc. have bought banks in New York, and Nara has bought a branch in New Jersey. The $3.9 billion-asset Hanmi Financial Corp. has said entering the New York market is one of its top possibilities.
"In other markets there are not as many players, so these banks can go into a different area and not have to compete as fiercely as they do in California," said Brett Rabatin, an analyst at First Horizon National Corp.'s FTN Midwest Securities Research Corp. in Nashville.
Mr. Yoo, the former CEO at Hanmi, joined Center in January, succeeding Paul Kim, who retired. The deal for First Intercontinental was announced four months after regulators lifted a two-year-old enforcement order that required Center to improve its Bank Secrecy Act compliance.
At three times book value, the deal price is expensive, according to Manuel Ramirez, an analyst at KBW Inc.'s Keefe, Bruyette & Woods Inc. in San Francisco. After adjusting for anticipated savings of $2 million over a year, the deal works out to about 21 times earnings, he said.
"They're paying for a couple of things," Mr. Ramirez said. "They were trying to keep the other Korean-American banks out of the market, as both Hanmi and Nara have expressed an interest in expanding into Atlanta. They're also paying up for growth."
First Intercontinental shareholders could elect to receive cash, Center stock, or a combination of both. Center would pay 60% of the price in cash and 40% in stock. The price includes a $3.6 million payment to cash out First Intercontinental's outstanding stock options.
The deal is expected to close in the first quarter. First Intercontinental would be merged into a newly formed Georgia state-chartered bank to be named First Intercontinental Bank. Center would become a multibank holding company with two subsidiaries: Center Bank and First Intercontinental Bank.
The acquisition would be neutral to next year's earnings and accretive in 2009, Center said.
