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Installment Savings Account with High Rates at Hanmi Bank - CA Only

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Hanmi Bank
Hanmi Bank is offering some competitive rates on its Prime Installment Savings Account. The yields range from 4.34% APY for a 12-month term to 5.65% APY for a 60-month term. Below is the full list of rates as listed at the bank's Prime Installment Savings Page as of 5/05/09:
  • 4.34% APY 12-month
  • 4.34% APY 18-month
  • 4.86% APY 24-month
  • 4.86% APY 30-month
  • 5.13% APY 36-month
  • 5.39% APY 48-month
  • 5.65% APY 60-month
I was concerned that the rates may be out-of-date since there's an August effective date. I just called the bank, and I confirmed these rates are still available. I wasn't able to get additional details such as if there are higher rates with auto transfer. Update 5/9/09: Readers have reported that you get an extra 0.25% if you have auto transfer.

The installment savings account requires that you make monthly deposits during the term. The deposits earn a guaranteed interest rate, and you'll receive the contract amount at maturity if you maintain the monthly deposits.

Some important features of Hanmi's Prime Installment Savings account include:
  • The interest rate and APY in effect at account opening will be paid until maturity.
  • The minimum contract amount is $1,000. The contract amount may increase in multiples of $1,000 with a maximum of $100,000 (updated 10/08/09)
  • Interest will be compounded daily, and interest will be credited to your account quarterly.
  • If you withdraw before term, a penalty of three months interest on the amount of the withdrawal will be imposed.
  • If you do not withdraw after maturity, your account will be transferred to a Regular Savings Account.
Hanmi Bank's non-internet accounts require a branch visit. Branches are located in several California cities including Los Angeles, Irvine, San Diego, Rancho Cucamonga, San Francisco and Santa Clara.

Credit for this find goes to FW member krk77 who mentioned it in this FW thread.

Hanmi Bank's Internet CDs

Hanmi Bank had some excellent CD deals earlier this year. Currently, they have some fair deals on their internet CDs: 2.53% APY for 12 months and 2.28% APY for 9 months. These rates are listed in the bank's online accounts overview page as of 5/05/09. Even though you can apply online for these, you still must be a California resident.

Financial Overview

Hanmi Bank is having a tough time in this financial crisis. The bank's holding company issued 1st quarter results which showed continued troubles. The CEO stated that "we continued to experience higher delinquency rates and an increase in non-performing loans as a result of the prolonged economic slowdown." It's interesting to note in the results the bank mentioned an increase in the total cost of average interest-bearing deposits. It stated that this "was due in large part to an aggressive promotion (commenced in December 2008 and concluded in early March 2009) of flexible time deposits with attractive rates." In January they were offering a 4.20% 6-month CD which allowed unlimited deposits during the term. It appears this did attract a large amount of deposits.

As you might expect, Hanmi Bank's ratings for safety and soundness are weak: 1 star (lowest) at Bankrate and 3 stars (adequate) at BauerFinancial. Both are based on 12/31/08 data. As I recommend with any bank, it's best to stay under the FDIC limits. The bank has been FDIC insured since 1982 (Certificate # 24170).

Other Installment Savings Accounts

These installment savings accounts seem to be popular among Korean American banks. In the last couple of months, I've posted on several with high rates. Similar to NewBank, most are located around California and New York and require a branch visit. However, Wilshire State Bank is offering one that is available nationwide via an online application. It has rates up to 5.12% APY for a contract term of 3 years (see post). To find other installment savings accounts, refer to my Installment Savings Account Page.

Edit 10/08/09: Updated maximum contract amount to $100K. There used to be no limit.
  Tags: California, CD rates, Hanmi Bank

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Comments
22 comments.
Comment #1 by Anonymous posted on
Anonymous
extra 0.25% APR if you do auto transfer from a Hanmi bank account

1
Comment #2 by Anonymous posted on
Anonymous
Contract Amount
12 Months
18 Months
24 Months
30 Months
36 Months
48 Months
60 Months

Interest Rate (without / with auto transfer)
4.25%/4.50%
4.25%/4.50%
4.75%/5.00%
4.75%/5.00%
5.00%/5.25%
5.25%/5.50%
5.50%/5.75%

APY
4.34%/4.60%
4.34%/4.60%
4.86%/5.13%
4.86%/5.13%
5.13%/5.39%
5.39%/5.65%
5.65%/5.92%

1
Comment #3 by Anonymous posted on
Anonymous
If I had known that Hanmi bank offered these rates, I won't have opened accounts in Wilshire State Bank. It would have saved me a bunch of hassles. There is a local Hanmi bank in my area. Oh well, guess it is not too late, I still can open 48 and 60 months installments. The rates are appealing.

1
Comment #4 by Anonymous posted on
Anonymous
It sounds like 3 months early termination fee is attractive to open a 60 months account
We should know many things like
1) What happens if I am not able to pay one or more months? Can I pay for few months early or late?
2) If I terminate my account at the end of lets say 24th month, whats the interest rate that I need to pay? 3 months rate on the current balance at the time of closure OR on the amount of the 24th month's pay?
Lots of Questions, will visit tomorrow and ask them
Thanks banking guy for the info

1
Comment #5 by mk (anonymous) posted on
mk
Does this require a branch visit? or can this be opened online?

1
Comment #6 by Political news (anonymous) posted on
Political news
whats the latest from woori and wilshire regarding installment rates

1
Comment #7 by Banking in LA (anonymous) posted on
Banking in LA
I've read about what people claim the representatives had said about the 3-month penalty for early withdrawal from these installment accounts.

However, I haven't seen the actual T&C. I can't imagine that it says they'd still pay the full interest (5.75%) less a 3-month penalty if you withdraw early. I suspect it says something along the lines of that if you withdraw early you will get the same rate as if you defaulted on your contract (like 1.5% APY) and then be subject to the 3-mo interest penalty.

It just seems too good to be true. I realize that you are only getting 5.75% on the amount deposited and it has to build over time, but it still seems like a no-lose situation because after 6 months, you are already ahead of anything else out there.

If someone has the actual T&C and can confirm that you get the 5.75% rate less the last 3 months for early withdrawal, I'll (happily) eat crow!

1
Comment #8 by Anonymous posted on
Anonymous
Assuming I open a $1000.00 one year Installment Savings Account requiring a monthly deposit of $81.43 I would receive/earned on each deposit approximately

Month Deposit Amount
1 $81.43 $84.96
2 $81.43 $84.62
3 $81.43 $84.32
4 $81.43 $84.03
5 $81.43 $83.74
6 $81.43 $83.44
7 $81.43 $83.16
8 $81.43 $82.87
9 $81.43 $82.58
10 $81.43 $82.29
11 $81.43 $82.00
12 $81.43 $81.43

Amount Deposited: $977.16

Amount Returned: $999.44

Interest Earned = 2.23%

1
Comment #9 by Banking Guy (anonymous) posted on
Banking Guy
Remember that the deposits don't earn a full year of interest. A quick estimation is to cut in half the total deposit and use that amount for one year of interest. Then you'll get an annualized interest rate.

1
Comment #10 by Anonymous posted on
Anonymous
To Anon @ 4:14

The stated APY is correct. In your example if you look at your deposit in month 1 and it's value at the end of 1 year, you will see that that is a 4.34% return. Ditto for month #2 when it is annualized.

Do you really expect them to pay you interest on your yet to be deposited amounts before you have even deposited them? really?

1
Comment #11 by Anonymous posted on
Anonymous
Too bad the APY for 12 months (stated as 4.34%) is only about half of this.

Unless, of course, they allow the full contract amount to be deposited 'up front'.

1
Comment #12 by Anonymous posted on
Anonymous
The stated APY is correct. Remember, the entire contract amount isn't there for the entire year.

I just opened a couple of accounts there. Excellent service. Of course, given their * rating - stay under the FDIC limits.

Penalties - because of the instalment nature of the account - with the balance increasing each month the last three months interest can be significant.

1
Comment #13 by Anonymous posted on
Anonymous
How are their interest rates any better than their 'competitors'? Their effective interest rates are still in the in the 2% range.

1
Comment #14 by Anonymous posted on
Anonymous
All of you who think the "effective rate" is around 2% don't understand discount cash flow.

The APY is correct. It is an "annualized" rate. In other words, if you were pulling your money out of another place that paid the same APY into this account, your "effective rate" would be what the APY is.

Please stop saying "but the annual rate is only 2.5%". It simply isn't. You are able to use your money and earn interest on it BEFORE you deposit it on installment.

Would you rather pay $12000 up front for a year or $1000/mo in rent? Obviously the latter. Why? Because you can "invest" the remaining money until it's due.

If I open a 6-mo CD that pays 5% APY, I'm only going to make about 2.5% over those 6 months. That a 5% APY.

1
Comment #15 by Makena (anonymous) posted on
Makena
Suppose I say I want to open an account with $100K per month deposit, and I deposit $100K at the start. Then I fail to make any subsequent month's installment. There does not seem to be a penalty for not making the installment.

Suppose it is a 1 year maturity. Instead of my "planned" $1.2MM+interest in the account, I would have only $100K plus interest. What would be my effective interest rate?

Has anyone seen the T&C to answer this? I'm very interested in the account.

1
Comment #16 by Anonymous posted on
Anonymous
If they allow a one time deposit (from the example above) say $100,000 and never follow-up with subsequent monthly installments, you effectively have a $100,000 full term CD.

Although I would think they would discourage this practice.

1
Comment #17 by Anonymous posted on
Anonymous
Just checked with Hanmi Bank regarding a one-time deposit for the 1st month.


They will not allow this practice.

1
Comment #18 by Anonymous posted on
Anonymous
I realized that the 3 month early withdrawl penalty is on the entire amount withdrawn. Since during the term, the average amount would be close to half the balance at any time, this really works like a 6+ month penalty. The penalty would also applies to the interest earned thus far, not just on the sum of the monthly contributions. That is why it should be estimated at more than 6 months penalty for early withdrawel.

1
Comment #19 by Anonymous posted on
Anonymous
I just opened this prime installment saving account.

The rates are still the same as posted.

One thing different from the original post is the maximum of the contract was $100,000 per person.
I wanted to make 250K, though.
Maybe my husband will make one more 100K account.

1
Comment #20 by Banking Guy (anonymous) posted on
Banking Guy
Thanks for the info. I've updated the post with the correct maximum. Glad to see they're still offering the same rates.

1