First Vietnamese American Bank in Westminster set to be sold to Philippines company

According to a report in the Orange County Business Journal on August 12, 2010 by Chris Casacchia ...
First Vietnamese American Bank in Westminster, which has been struggling with bad loans and regulatory scrutiny, is on the verge of being acquired by a large Philippines company.

The California Department of Financial Institutions late last month approved the sale of First Vietnamese to Charles and Michael Lhuillier, brothers who run one of the largest pawn shop and jewelry operations in the Philippines.

The brothers head MLhuillier Inc., a group of financial services, retail and real estate businesses throughout the Philippines.

The Federal Deposit Insurance Corp. still needs to approve the acquisition, First Vietnamese chief executive Benjamin P. Palma-Gil wrote in e-mail to the Business Journal from Asia. He had no further comment on the deal or the bank’s status.

The application is pending, according to FDIC sources with knowledge of the situation. The agency asks for many documents and supporting materials before making a decision.

The case manager received some of that information today, sources said.

An analysis of second-quarter data First Vietnamese submitted to the FDIC sheds light on the community bank’s problems.

First Vietnamese was one of only six homegrown banks and thrifts in the county that decreased their ratio of capital to credit-risk assets, a key metric for regulators. Banks considered well capitalized have a Tier 1 risk-based ratio of 6% or higher.

First Vietnamese was the only bank of the county’s 27 to fall below the 6% benchmark with a ratio just more than 3%.

First Vietnamese opened with fanfare in 2005 as the first bank to specifically target Vietnamese-Americans and their businesses in Little Saigon, which spans Westminster, Fountain Valley, Huntington Beach, Garden Grove and Santa Ana. The area is home to an estimated 200,000 Vietnamese.

First Vietnamese lost $1.1 million in the second quarter and hasn’t posted a profit since it opened. In May, it was issued a cease and desist order from the FDIC to improve compliance and fair lending practices.

First Vietnamese was among 13 banks and thrifts out of 27 based in the county that lost money in the second quarter.

The bank also scored poorly in a test of its bad loans and real estate verse cash reserves, according to an analysis for the Business Journal by Anaheim-based Findley Reports Inc.

First Vietnamese scored 317% on what’s known as the Texas ratio, a measurement of bank health that compares bad loans to how much shareholders would be owed if the bank failed.

The lower the score, the better.

Any rating more than 100% is considered teetering on failure. Any score at or above the 50% mark is when regulators take notice.

First Vietnamese had the highest Texas ratio in the county. A year earlier it was 47%, but that shot up to 234% at the beginning of this year.

First Vietnamese American Bank suffers another setback at the hands of the FDIC

First Vietnamese American Bank suffers another setback at the hands of the FDIC when the case it had brought against First Data, STAR, Innovative Bank, Amerinet, OPUS, Masih Madani, David Kerlin and others back in 2008 was stayed till January 2011. The stay is as a result of the failure of Innovative Bank on April 16, 2010 naming the FDIC as receiver.


With First Vietnamese American Banks recent reporting losses of more than $1.1 million in the first half of 2010, only $1.4 million in Tier 1 capital left, and an anticipated loss of at least $1 million in the 2nd half of 2010 the bank will run out of cash by the end of 2010.

First Vietnamese American Bank lost over $1.1 million in the first half of 2010, according to FDIC

Go to http://www.fdic.gov/ click on “Bank Find” on the lower right menu. Click on “Institution Directory Home” on the top right of the page. Click on “Fall All Institutions” in the menu. You will be presented with a form. Enter “First Vietnamese American Bank” and click “Find”. You will see First Vietnamese American Bank listed. Select “All Summary Information” from the ID Report Selections drop down menu and “click generate report”.


What you will find is amazing. The bank opened for business in early 2005 to great fanfare. It is typical for a new bank to loose money in its first few years, but nothing like this. Here are its losses so far.

2005 $2.587 million
2006 $2.263 million
2007 $1.533 million
2008 $3.432 million
2009 $2.874 million
2010 $1.112 million in the first 6 months alone

As of June 30, 2010, First Vietnamese American Bank had less than $1.47 million in capital left. At the current loss rate of over half a million dollars per quarter, the bank will run out of capital before the end of this year.

As of March 31, 2010, 16.2% of First Vietnamese American Bank loans were not current. Its net interest margin (the difference between what it collects on loans and what it pays on interest) was down to 2.26%. Its equity capital to asset ratio was down to 3.77%.

As of June 30, 2010, First Vietnamese American Bank Tier 1 leverage ratio was down to 2.48%

According to http://en.wikipedia.org/wiki/Capital_requirement Depository institutions are subject to risk-based capital guidelines issued by the Board of Governors of the Federal Reserve System (FRB). These guidelines are used to evaluate capital adequacy based primarily on the perceived credit risk associated with balance sheet assets, as well as certain off-balance sheet exposures such as unfunded loan commitments, letters of credit, and derivatives and foreign exchange contracts. The risk-based capital guidelines are supplemented by a leverage ratio requirement. To be adequately capitalized under federal bank regulatory agency definitions, a bank holding company must have a Tier 1 capital ratio of at least 4%, a combined Tier 1 and Tier 2 capital ratio of at least 8%, and a leverage ratio of at least 4%, and not be subject to a directive, order, or written agreement to meet and maintain specific capital levels. To be well-capitalized under federal bank regulatory agency definitions, a bank holding company must have a Tier 1 capital ratio of at least 6%, a combined Tier 1 and Tier 2 capital ratio of at least 10%, and a leverage ratio of at least 5%, and not be subject to a directive, order, or written agreement to meet and maintain specific capital levels. These capital ratios are reported quarterly on the Call Report or Thrift Financial Report. The report is usually available about one month after the close of each quarter.
With an equity capital to asset ratio of 2.48% as of June 30, 2010 and a Tier 1 capital ratio of 3.08% as of down from 5.72% on December 31, 2009, it seems only a matter of a few more months before the bank will fail?