The former Saigon National Bank in Westminster appears to have made strides toward untangling its operations with a new owner and a new name.
The bank received a $4.5 million capital infusion from an investor indentified as Hien Quang Do, who now owns the institution outright and has assumed the role of chairman. Do could provide another $4.5 million in capital as early as next year if certain milestones are met, according to the bank.
Do bought all of the shares of Saigon National last year, and the bank changed its name to California International Bank NA in February, hiring Benjamin Lin as chief executive at about the same time.
Neither Do nor Lin returned calls seeking comment last week.
The bank—which has focused on serving the Vietnamese-American community in Westminster and Garden Grove since it opened in November 2005—filed in April to relocate its headquarters to the Los Angeles County city of Rosemead, according to the federal Office of the Comptroller of the Currency, which approved its new name.
California International is the smallest of the 20 or so banks based in Orange County, according to Business Journal research, with about $52 million in assets.
That’s down 20% from a high mark of nearly $65 million in 2009.
California International reported total capital of about $10.4 million for the recent quarter, almost three times the capital reported about six years ago.
The bank still has a negative return on equity of 10.3%. That remains an area of concern for the regulator, but it’s much improved from the negative 101.6% reported in 2009.
California International still “rejects” the Treasury Department’s request for an independent observer to attend bank board meetings, according to a report by the Treasury Department’s Office of the Special Inspector General for the Troubled Asset Relief Program.
There’s no word whether California International has made enough improvements to satisfy the OCC and end its formal agreement for extra supervision by the regulator.
Calls to the bureau and the Treasury Department were not returned last week.
TARP
The U.S. Treasury created TARP and its related Capital Purchase Program to provide $205 billion in liquidity to 707 qualifying financial institutions to help them build capital reserves and assets.
The institutions agreed to provide 5% annual dividends, in addition to principal payments on funds for the first five years of the repayment schedule and 9% in successive years until the capital was paid in full.
Saigon National received $1.55 million from the program in 2008 but has never made a payment, according to an April 15 report issued by the Special Inspector General for TARP.
It missed 29 dividend payments totaling about $727,000, the report said.
The holdup on TARP payments stems from other problems at the bank, which has been under a formal supervisory agreement with the OCC.
Saigon National had only one profitable quarter—about $3 million in the quarter ended Dec. 31, 2013—according to information from the Federal Deposit Insurance Corporation.
The bank reported quarterly losses as high as $6.9 million when it had $65 million in assets for the quarter ended Dec. 31, 2009.
Buried Problems
The OCC oversees the bank and delved into its operations after it missed a year of TARP dividend payments.
The investigation revealed that the bank had “engaged in unsafe and unsound banking practices” in management oversight, credit risk management, liquidity management, and audits of its loan portfolio.
The bank’s ratio of bad loans and real estate versus its cash reserves in 2010 indicated that Saigon National had a high risk of failing.
Saigon National’s Texas Ratio—so named by Royal Bank of Canada’s RBC Capital Markets analysts who evaluated Texas banks during the 1980s—was 117%, according to a report in 2010 for the Business Journal by Irvine-based bank consultant and investor Carpenter & Co.
Banks with Texas Ratios higher than 100% were considered problem banks, said Grace Wickersham, a senior vice president at Carpenter in 2010.
Banks with lower Texas ratios are considered more stable and well-managed institutions.
The OCC and Saigon put in place a formal agreement in May 2010 to develop a three-year plan to strengthen its risk management, boost capital ratios, and rid itself of poorly performing loans. The agreement prevented the bank from paying dividends—including payments to the TARP program—until it met those objectives.
Federal Charges?
The bank faced additional challenges when the Department of Justice filed international money laundering and narcotics trafficking charges against former Saigon National President and Chief Executive Tu Chau “Bill” Lu in December.
The charges against Lu, who led the bank from 2009 until January, are pending. A trial is expected to begin next January.
The bank reported a $271,000 loss for the quarter ended March 31, the first under its new name.
The institution seems to be taking steps toward profitability and could begin making its TARP dividends.
