Six Korean American banks in Southern California saw their second-quarter net income for this year fall by 27.2% compared to the same period last year.

The negative financial environment, such as the economic downturn and soaring benchmark interest rates since the COVID-19 pandemic, is believed to have significantly impacted the small and medium-sized banking industry overall.

On the 30th, six Korean American banks headquartered in Southern California��Bank of Hope, Hanmi Bank, PCB Bank, Open Bank, CBB Bank, and US Metro Bank��announced their earnings. Their combined net income for the second quarter was $59.1 million, a 27.2% decrease from $81.14 million in the second quarter of 2023. The decrease in net income compared to the same period last year has continued for six consecutive quarters, starting with a 20.3% decline in the first quarter of 2023, 21.3% in the second quarter, 34.2% in the third quarter, 39.8% in the fourth quarter, 34.9% in the first quarter of 2024, and 27.2% in the second quarter.

Among the six Korean American banks, all experienced a decline in net income in the second quarter compared to the same period last year. Bank of Hope saw the largest decrease at 33.5%, followed by CBB Bank (32.4%), Hanmi Bank (23.1%), US Metro Bank (17.9%), PCB Bank (16.0%), and Open Bank (10.8%). PCB Bank, despite having a larger asset size than Open Bank and CBB Bank, reported a smaller net income, which was a setback. Traditionally, even during periods of negative growth, Korean American banks showed growth in key management indicators such as assets, deposits, and loans compared to the previous year. However, in the second quarter of this year, all these indicators showed a decline compared to the previous year.

The combined net income of the six Korean American banks for the first half of this year was $117.84 million, a 31.8% decrease from $172.74 million in the same period last year. The total assets of the six banks were $33.191 billion, a 6.5% decrease from $35.39596 billion in the same period last year. It is analyzed that concerns about an economic slowdown led to a reduction in lending and a focus on de-risking, resulting in a decrease in assets. The increase in interest-related expenses due to high interest rates and the relative decrease in income led to a decline in the net interest margin (NIM), which is a core source of income, contributing to the decrease in net income.

Regarding deposits, which raised concerns in the Korean American banking sector following the bankruptcy of Silicon Valley Bank (SVB) last year, deposits amounted to $27.91024 billion, a 2.0% decrease from $28.05020 billion in the same period last year. Although the deposits of large banks also saw a slight decrease, the performance is considered commendable, but efforts will need to continue to secure deposits in the near term.

Loans also decreased compared to the same period last year as a result of risk management. The total amount of loans was $26.66744 billion, a 1.5% decrease from $27.07297 billion in the same period last year. While stricter screening criteria by banks amid concerns about an economic slowdown contributed to the decline in loan performance, the demand for loans itself is also sluggish.

Although there are expectations that the Federal Reserve (FRB) will lower interest rates in September, it will take time for this to be reflected in actual performance. Therefore, Korean American banks plan to focus all their efforts on minimizing management risks and maintaining capital soundness this year.

<Reporter : Hongyong Park>