When Mirae Bank was closed by regulators June 26, it registered as little more than a blip on the national radar.

Yet the fall of the tiny Koreatown bank has shaken the tight-knit Korean-American community and now threatens to fundamentally alter the dynamics of its banking industry.

Mirae is the first local Korean-American bank to fail, upending a long-held belief in the Mid-Wilshire neighborhood that the institutions, buoyed by overseas investment, could weather any storm.

"People are freaked out that a Korean bank could fail," said Dan Park, an attorney hired by Mirae to investigate the causes of its collapse. "It's the first Korean bank to have failed in Southern California. It's almost like a soap opera unfolding."

Now, some local bankers are predicting that Mirae's disappearance could herald a long-overdue shakeout of the Korean-American banking industry. A surge in the number of local Korean banks over the last decade has hurt even the long-established institutions, bankers said.

"There needs to be consolidation," said Alex Ko, chief financial officer of Wilshire Bancorp Inc., the holding company for Wilshire State Bank, a Korean bank that acquired most of Mirae's assets in a deal with the Federal Deposit Insurance Corp. "In terms of the numbers, there are too many. The stronger banks need to acquire weaker banks."

Currently, about a dozen Korean banks are competing for a limited amount of business in the 5 square miles of Koreatown, home to an estimated 350,000 Korean-Americans. The fierce competition has sometimes led to relaxed lending standards and aggressive pricing on such instruments as certificates of deposit, according to experts.

Already, the banks, most of which have exceedingly large commercial real estate loan portfolios, have seen delinquencies rise and have collectively set aside almost $300 million to cover expected future loan losses.

Koreatown's largest institutions, including Hanmi Financial Corp., Wilshire and Nara Bancorp Inc., each have more than two-thirds of their loan portfolios tied up in commercial real estate, which can be particularly risky in a down economy. Hanmi lost more than $100 million alone in 2008.

Mirae, which had $456 million in assets when it was seized late last month, was one of the most aggressive of the new institutions, bankers said. It was brought down by losses on bad loans, and its fall will likely serve as a wake-up call to competitors, according to Joseph Gladue, an analyst with B. Riley & Co. who follows several Korean-American banks.

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