For Hanmi Financial, a few years made a lot of difference.
The $2.8 billion-asset company that caters to Korean-Americans announced Wednesday that it had hired advisor DelMorgan & Co. to help it explore strategic alternatives. Hanmi (HAFC) is in "substantive discussions with certain strategic banks and bank holding companies regarding a possible business combination, merger-of-equals or sale transaction," it said.
It is the second time in nearly three years that the Los Angeles-based company has put out a for-sale sign. It hired Cappello Capital in 2010 to find a buyer, though ultimately it went another direction. This time is different: instead of seeking a savior, Hanmi is being opportunistic.
The turn of events underscores how Korean-American banks are in consolidation mode, following a pattern seen among other ethnic-niche players. Rivals may fight over Hanmi in an effort to join in or fight further consolidation, and that could spark a bidding war.
While Hanmi raised $120 million of capital at 62% of book value in 2010 to survive, analysts are expecting the company to go for a pretty healthy premium.
Timothy Coffey of FIG Partners said the company could fetch $18 per share, or 156% of tangible book value, while Scott Valentin, managing director for FBR Capital Markets & Co., said he is expecting $17 per share. Julianna Balicka, an analyst with KBW, said she is expecting $16 to $20 per share.
Alex Cappello, Hanmi's former advisor and a current shareholder, sees a bidding war brewing.
Coffey's estimate "sounds reasonable to me. I won't be surprised if they go for that premium or higher. It just takes two bidders to move the price up," Cappello says. "They are a gem of an asset and deserve a premium. In fact, I would be disappointed if it wasn't that high."
Cappello is not involved in the marketing this time. Hanmi declined to comment for this story.
Hanmi has been busy in recent months. It raised an additional $80 million in equity priced at 80 cents per share in November 2011. A month later, the company conducted a one-for-eight reverse stock split.
Hanmi and its banking unit were released from regulatory orders in 2012. With several quarters of profitability, the company had even reversed most of its valuation allowance against its deferred tax asset.
Valentin expected the company to use 2013 as a bit of a victory lap, perhaps returning capital to shareholders and buying back shares to get its stock price higher.
"I'm a little surprised by the timing," Valentin says. "I thought they would take some time to reap the rewards of all that they've done."
Korean-American banks have been busy on the M&A front. The $5.3 billion-asset BBCN (BBCN) formed last year from the merger of Nara Bancorp and the Center Financial. It agreed to buy Pacific National Bancorp for $8.2 million in October.
Late last month, Alvin Kang, president and chief executive of BBCN told American Banker he is looking for additional deals and wants to be the dominant player in the Korean-American market. BBCN declined to comment for this story.
Wilshire (WIBC) Bancorp, at $2.6 billion in assets, could have a vested interest in Hanmi as a defensive move. Through a merger of equals, similar to the deal that created BBCN, Wilshire and Hanmi could keep BBCN from dominating the Korean-American market.
"Hanmi can join BBCN in making the dominant Korean-American bank or they could go with Wilshire and create a similarly sized competitor," Balicka said.
Other possible bidders include South Korea-based Woori Financial, which tried a $240 million recapitalization of Hanmi in 2010 but ran into regulatory roadblocks, or Hana Bank, another South Korean lender that has been trying to expand in the United States.
The consolidation of the Korean-American banking market is following a similar path of the Chinese-American banking world, industry observers say. Before the economic downturn in 2008, that landscape was dominated by the Cathay General Bancorp (CATY), East West Bancorp (EWBC) and UCBH Holdings. UCBH failed and was acquired by East West, making that bank the dominant player.
BBCN is already considerably larger than both Wilshire and Hanmi, but Wilshire may jump at the chance to stop BBCN from gaining an even larger stake in the Korean-American segment.
"It is pretty much game over if BBCN buys it," Coffey says, meaning that BBCN would be the overwhelming leader.
Depending on the ultimate buyer of Hanmi, the Korean-American market could resemble the precrisis Chinese-American market, which had a few large players, or it could resemble the one today, which is dominated by one player.
Ethnic-focused banks often look to consolidate because of their branch overlaps, industry observers say. That consolidation leaves one or two large players to dominate the market, and over time smaller banks pop up again.
"There is always going to be a market for affinity banking. …," Cappello says. "They eventually merge or acquire each other to a point where there is one or two dominate players, though. Then slowly you see new, independent banks start up."
Similarly so, on Tuesday, the $626 million-asset Royal Business Bank, a 2008 startup bank serving the Chinese-American community, announced it would acquire the $192.1 million-asset Los Angeles National Bank.