November 5, 2010 – First Vietnamese American Bank, Westminster, California, was closed today by the California Department of Financial Institutions, which appointed the FDIC as receiver. The FDIC sold First Vietnamese to Grandpoint Bank, Los Angeles, California. Grandpoint will assume all deposits and purchase all assets of failed First Vietnamese.
First Vietnamese was a small bank with only one branch which will reopen on Saturday as a branch of Grandpoint Bank. Depositors of First Vietnamese will automatically become depositors of Grandpoint with no interruption in FDIC deposit insurance.
First Vietnamese Bank opened in 2005, operating as an independent community bank, focused on serving the diverse needs of ethic groups in Southern California, including those with Vietnamese, Korean, Chinese and Hispanic ethic ties. First Vietnamese was a public company whose stock price reflected the poor financial condition of the bank. As is the case with virtually every failed bank, public shareholders are facing a complete loss of their invested capital. The Bank’s stock last traded at $.49 cents per share, down from $10 in 2007.
First Vietnamese Bank had been issued a Cease and Desist Order by the FDIC in January 2009 for engaging in “unsafe and unsound banking practices”. The FDIC cited First Vietnamese for numerous regulatory violations including:
(a) operating with management whose policies and practices are detrimental to the Bank and jeopardize the safety of its deposits;
(b) operating with a board of directors which has failed to provide adequate supervision over and direction to the active management of the Bank;
(c) operating with inadequate capital in relation to the kind and quality of assets held by the Bank;
(d) operating with a large volume of poor quality loans;
(e) engaging in unsatisfactory lending and collection practices;
(f) operating in such a manner as to produce operating losses;
(g) operating with inadequate provisions for liquidity;
(h) operating with inadequate internal routine and controls policies;
(i) operating with inadequate policies and practices regarding sensitivity to market risk;
(j) operating in non-compliance with the FDIC’s October 20, 2004, Order granting approval for deposit insurance
Overwhelmed by nonperforming loans and unable to raise additional capital or comply with other regulatory orders, First Vietnamese Bank was closed by regulators.
As of September 30, 2010, First Vietnamese had a total of $48 million in assets and $47 million in deposits. Grandpoint did not pay the FDIC a premium for the assets assumed and did not enter into a loss-share transaction with the FDIC on the purchase of the failed bank’s assets.
Grandpoint Bank, owned by Grandpoint Capital, Inc., was launched in 2010 by a group of banking executives to build a banking franchise in Southern California through acquisitions and organic growth. Grandpoint Capital raised $335 million in capital of which $75 million was used to fund Grandpoint Bank. According to Don Griffith, Chairman and CEO of Grandpoint, “At our core, we’re building a strong middle market regional presence. We’ll supplement with selected community bank acquisitions, like our recent purchase of Santa Ana Business Bank, which are so well suited to meet the needs of smaller businesses.”
Since its inception, Grandpoint Capital has purchased First Commerce Bancorp and Santa Ana Business Bank.
The failure of numerous banking institutions has given well run and well capitalized private equity investors the opportunity to build new banking franchises with the help of FDIC assisted transactions. The FDIC, needing buyers for an increased number of failed banks, has gradually welcomed the presence of private equity investors.
The failure of First Vietnamese Bank will cost the FDIC Deposit Insurance Fund an estimated $9.6 million. First Vietnamese Bank is the 143rd banking failure of the year and the 12th in California.