With problem loans piling up, Saehan Bancorp Inc. in Los Angeles said it lost $765,000 in the third quarter, compared with a profit of $1.8 million a year earlier.
The $888 million-asset Saehan also disclosed late Monday that its Saehan Bank entered a memorandum of understanding with its regulators last week in which it agreed to beef up loan oversight and strengthen its management.
Saehan Bancorp, which caters to Korean-American consumers and business owners, attributed the loss to spikes in nonperforming loans and chargeoffs that required a significantly boost in its provision for loan losses. Nonperformers jumped 374% from a year earlier, to $27.4 million as of Sept. 30, and Saehan posted $4.5 million of chargeoffs a year after posting none.
It also said that noninterest income suffered as a result of weakening investor demand for Small Business Administration loans it had originated.
Saehan Bank signed the enforcement order Nov. 6 with the California Department of Financial Institutions and the Federal Deposit Insurance Corp.
Among other things, the order requires the bank to maintain management acceptable to regulators and notify them when making an executive appointment; revise lending and collection policies; maintain appropriate capital levels and allowances for loan losses; and submit a three-year strategic plan that includes financial projections through 2010.
As of Sept. 30 the holding company's total risk-based capital ratio was 11.07%, and the bank's ratio was 10.79%, according to the earnings release and a call report filed with the FDIC.
