Downtown L.A.’s Preferred Bank had never made an acquisition in its nearly 24-year history. But in a New York minute, that all changed.
Late last month, Preferred announced that it had agreed to buy all the outstanding stock of Flushing, N.Y., lender United International Bank, an institution – like Preferred – that primarily caters to the Chinese-American market. Specific terms were not disclosed, but the purchase price will be based on United International’s total shareholder equity as of five days prior to close, plus $1.2 million. The bank’s shareholder equity was $20.2 million as of March 31, according to Federal Deposit Insurance Corp. filings.
Edward Czajka, Preferred’s chief financial officer, said the bank had been familiar with United International as a potential acquisition for some time. United International had run into some regulatory problems in recent years, agreeing to a 2013 consent order with regulators over banking practices deemed unsafe and unsound. However, Czajka said when Preferred did its due diligence, it found a solid bank that had adequately dealt with those issues.
“We saw that this is actually a very good, well-run institution at this point with a very clean credit profile,” he said.
Czajka said that while the opportunity to tap into the rich New York state market was appealing, the acquisition was driven much more by the particular bank being targeted than geography.
“The way we like to operate is in a very opportunistic fashion,” he said. “We don’t usually target specific areas, with the exception of our move to San Francisco in 2013.”
United International, with $179 million in assets, is tiny compared with $2.1 billion Preferred. But the deal gives Preferred a brick-and-mortar branch – its first outside of California – in the heavily Chinese suburb of Flushing and a new roster of customers to whom the bank can offer bigger loans than those United International could offer, given its smaller balance sheet.
While Preferred began as an institution that targeted L.A.’s Chinese community – and its acquisition is certainly in that niche – Czajka said Preferred is focused on growing its general business as well.
“Roughly three-fourths of our business is from the mainstream side, not Chinese,” he said.
In any event, Czajka said Preferred would be an active suitor in the marketplace.
“We’re continuing to look for other opportunities to deploy our excess capital,” he said. “It won’t stop with this one.”
McMortgage
Skyrocketing prices in L.A.’s already pricey real estate market are making it harder on prospective homebuyers who want to lock in a mortgage while rates are at historically low levels. But one big bank, perhaps sensing an opportunity, is looking to step in.
New York finance giant JP Morgan Chase Inc. has relaxed its standards on “jumbo” loans, those exceeding the limits on mortgages that can be bought by government-sponsored enterprises such as Fannie Mae and Freddie Mac. In buying pools of loans conforming to their standards, those agencies provide valuable liquidity for the mortgage finance industry. The limit where a conforming loan becomes a jumbo loan varies by county. In Los Angeles, it’s $625,500, enough to buy a small house in many suburbs or a pretty nice condo on the Westside.
Lawrence Bailey, a senior vice president at Chase in Beverly Hills who manages the bank’s mortgage finance for California, said the bank wanted to extend credit to viable borrowers who might have taken a credit ding during the recession and want to buy a home in high-cost Los Angeles County, where about 20 percent of all mortgages fall into the jumbo category.
“A lot of folks had a hiccup and they’ve recovered and they want to buy a house,” he said. “This really is going to allow a lot more access to credit.”
As part of the new standards, a buyer with a 680 FICO score can now get a loan for a primary, single-family residence for up to $3 million and put as little as 15 percent down. Previously, a FICO score of 740 was required, and the buyer had to come up with a 20 percent down payment.
Bailey said Chase looks at factors such as a borrower’s other assets and mortgage payment history to help reduce the risk.
And, he said, while today’s market is certainly buzzing he’d be wary about comparing it with the loose loan-a-palooza of 2007.
“It’s a really competitive market, but it’s not an irresponsible market,” he said.
C-Suite News
Bank of America Merrill Lynch has promoted Raul Anaya to head of the Pacific southwest region for commercial banking. Anaya, who will continue in his role as president of the bank’s greater L.A. region, will oversee its commercial banking business in California, Arizona, Nevada and Utah.
Staff reporter Matt Pressberg can be reached at [email protected] or (323) 549-5225, ext. 230.
