Saehan Bancorp Reports Third Quarter Results

Business Wire, Nov 11, 2008

LOS ANGELES -- Saehan Bancorp (OTCBB:SAEB) today reported results for its third quarter ended September 30, 2008 - reflecting increases in total assets, net loans and total deposits.

The company recorded a net loss of $765,000, or 0.06 per diluted share, for the third quarter of 2008, compared with a net income of $1.8 million, or $0.15 per diluted share a year ago. The return on average equity for the third quarter of 2008 was -4.96 percent and the return on average assets was -0.36 percent compared with 12.18 percent and 0.96 percent, respectively, for the third quarter a year earlier.

Other highlights for the third quarter of 2008 included:

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"We continue to see consistent growth in our loan and deposit portfolios. The adverse economic environment, however, required the bank to increase the level of allowance to total loan coverage - resulting in an increased loan loss provision for the third quarter of 2008," said Chung H. Youk, president and chief executive officer.

"We anticipate that the bank will regain the earnings momentum when our credit costs return to a more normalized level," Youk said.

Net interest income before provision for loan losses was $7.5 million in the third quarter of 2008 compared with $7.7 million in the same period a year ago. Net interest margin for the third quarter of 2008 was 3.89 percent compared with 4.27 percent in the third quarter a year earlier. Net interest margin was adversely affected by the Federal Reserve's decision to aggressively lower the Federal Funds Rate during the first half of the year and the increase in non-accrual loans during the year.

Noninterest income in the third quarter of 2008 totaled $1.3 million, compared with $1.9 million a year ago. The reduction was primarily attributable to a $341,000 decrease in gain on sale of loans. Gain on sale of loans declined substantially as a result of significantly lower SBA market activity and reduced sales premiums paid on SBA loans sold to the secondary market.

Noninterest expense for the third quarter of 2008 was $5.7 million, a decrease of $661,000 from the third quarter last year. The decrease in noninterest expense for the third quarter of 2008 was primarily attributable to lower employee compensation expense, partially offset by higher legal and other operating expenses. The efficiency ratio for the third quarter of 2008 was 65.5 percent compared with 66.6 percent in the third quarter of 2007.

Nonperforming loans were $27.4 million at September 30, 2008 up $21.6 million from $5.8 million at September 30, 2007. Nonperforming loans represented 3.08 percent of total assets at September, 2008. The provision for loan losses was $4.4 million for the third quarter of 2008 compared with $266,000 a year ago. The allowance for loan losses increased to $10.9 million at September 30, 2008, compared to $6.5 million at September 30, 2007.

Total assets increased 13.7 percent to $888.3 million as of September 30, 2008 from $781.5 million at September 30, 2007. Total deposits as of September 30, 2008 increased 15.7 percent to $687.3 million from $594.0 million a year earlier.

Shareholders' equity increased to $60.1 million at September 30, 2008 from $59.7 million at September 30, 2007. Capital ratios continue to be well above the "Well-Capitalized" guidelines established by the regulatory agencies. The Leverage Ratio was 9.30 percent, the Tier 1 Risk-based Capital Ratio was 9.80 percent and the Total Risk-based Capital Ratio was 11.06 percent.

On November 6, 2008, the Company's subsidiary, Saehan Bank, entered into a memorandum of understanding with the DFI and the FDIC to address certain weaknesses identified in Saehan Bank's operations. The memorandum of understanding requires, among other things, that Saehan Bank: (i) maintain management acceptable to the DFI and the FDIC; (ii) notify the DFI and the FDIC prior to adding any individual as a senior executive officer of the Bank; (iii) develop or revise, adopt and revise, adopt and implement written lending and collection policies to ensure adequate control of credit risk and lending functions; (iv) develop or revise, adopt and implement a comprehensive policy for determining the appropriateness of Saehan Bank's allowance for loan and lease losses; (v) develop and submit for regulatory approval, a three-year strategic plan to include a comprehensive discussion of capital, liquidity, and the growth and composition of the loan and deposit portfolios, including financial projections for 2008 to 2010; (vi) maintain a minimum Tier 1 leverage capital ratio and a minimum tangible shareholders' equity to total tangible assets ratio of not less than 8.5% while maintaining an appropriate allowance for loan and lease losses; and (vii) provide periodic progress reports to the DFI and the FDIC detailing the form and manner of any actions to secure compliance with the memorandum of understanding. Management and the Board of Directors are committed to addressing the issues raised in the memorandum of understanding. Management believes that compliance with the provisions of the memorandum of understanding will not have material impact on Saehan Bank's operating results or financial condition and that the memorandum of understanding will not constrain Saehan Bank's business. Management has already prepared and begun implementing a comprehensive action plan which is responsive to the majority of the issues set forth in the memorandum of understanding.