Sohn Won Sung doesn't have anything against community banks. He just doesn't want to head one anymore.
The president and CEO of $3.2 billion-asset Hanmi Bank, the largest of the 14 Korean-American banks in the U.S., is determined to grow larger, either organically or through another merger or acquisition. "My vision is to graduate from a community-bank status to become more of a regional bank," he says. "I suspect in the next five years, there will be some M&As [in the Korean-American banking community]." Sung notes that his bank has "no plans right now" to acquire any competitors. "But who knows?" he says, playing coy when asked if he would be willing to have Hanmi be acquired. "In the long run, I believe M&A is the way for us to grow," he counters. "That would include not only Korean banks, but mainstream banks. ...But I didn't come here to be acquired." No, but he wants to grow: In five years, he aims to increase the bank's assets to between $5 billion and $6 billion.
Los Angeles-based Hanmi Financial Corp., the parent corporation of state-chartered Hanmi Bank, already has shown its acquisitive nature: In April 2004, it purchased one of its largest competitors, Pacific Union Bank, for $312 million. The purchase nearly doubled Hanmi's assets to $3.1 billion. The growth strategy seems to be paying off, given that HAFC reported a record $15 million in net income in the second quarter of this year, up 99.3 percent over the same quarter in 2004. Net income for the first two quarters of the year was $28.4 million, up 103.6 percent over the period in 2004. In fact, the bank, created in 1982 with just $5,000 in seed money, has outperformed most of its peer group for many of the years in its first two decades, according to investment bank Friedman Billings Ramsey. "We believe the Hanmi, through its adoption of industry best practices and with its strong ability to attract talent, will experience above-average revenue and EPS [earnings per-share] growth," the firm's analyst James Abbott said in a recent research note.
Hanmi Bank specializes in commercial and consumer lending, small-business loans and trade finance. The bank has 22 branches in Los Angeles, Orange, San Francisco, Santa Clara and San Diego counties. It boasts an estimated 50 percent market share of the Korean-American community in Southern California, a base responsible for 90 percent of its deposits and 50 percent of its loans. The bank also serves a number of other ethnic groups, including Indian-Americans and Chinese-Americans. "I don't want to stray too far away from our ethnic concentration in the process of becoming a regional bank," says Sung. Forty percent of the nation's 2.1 million Korean-American's live in California and, with one business for every eight people, the ethnic group has one of the highest rates of business ownership. Moreover, the group's population surged 54 percent during the 1990s, versus 13 percent for the general U.S. population, making it one of the country's fastest growing ethnic groups.
"There is intense competition right now," Sung says. "In fact, I think there's overcompetition." That means interest rates for loans and deposits have risen in the community. Even personnel costs are higher, given the need for experience in the community. On September 1, the bank opened two loan-production offices in Chicago and in Annandale, VA, designed to expand its geographic coverage by providing SBA, real estate, commercial and industrial loans.
Like most banks in the Korean-American community, Hamni is heavily dependent on deposit and real-estate-loan income, so Sung is focused on collecting more fee income, with a big push this year into asset-based lending, cash-flow lending, private banking and wealth management. "I want to, not so much de-emphasize, but increase, the importance of non-real-estate loans and fee income," he says. "We hope to gather more non-interest-earning demand deposits. We're trying to keep the cost of deposits low, so I don't have to take a lot of risks on the asset side." He's also launching cash management for small business, which was non-existent when he arrived.
Sung still worries about the other Korean-American banks in California, which are at his heels. "Many have grown so rapidly in the last dozen years," he muses. "It's like your body has grown, but your clothes have not. You're body's bigger, but you're an adult in teenager's clothes and you can't move around very well." And wealth management is a must-have. "In the Korean community, there's a lot of money out there, but there's no [Korean-American] bank managing their assets. I want to be in that business. To do that, we will have to develop the expertise and staff or buy a company with it. We haven't decided which way to go." More hires are expected as well in marketing, sales and services, and human resources, particularly specialists in training and compensation. "There are a lot of ideas I am going to implement and am implementing, but there is a speed limit," says Sung. "You can move and change your organization and customer base only so fast. I am doing it all at a gradual pace, rather than a rapid one."
Sung's strategy is"80 percent defense, 20 percent offense, like football. I emphasis defense because as our Korean customers' needs become more sophisticated, they go on to mainstream banks," he observes. "We need to make sure we hang onto them. How do we do that? We need better services and more products."
After joining the bank in January, his first task was to spend five months handpicking his colleagues. He raided the personnel coffers of Wells Fargo, Bank of the West, Comerica-as well as two key Korean-American competitors, Nara Bancorp and Wilshire Bankcorp-to create his dream team. It includes Kurt M. Wegleitner, evp and CCO; Michael J. Winiarski, svp & CFO; Eunice Lim, svp and deputy CCO; Hassan Bouayad, svp and chief lending officer; David Song, svp & chief lending officer; Suki H. Murayama, svp and branch administrator; Dong Wook Kim, svp and chief of capital market group; Steve Choe, svp and chief of banking services; Greg Kim, svp and chief of operations; and J. Han Park, svp and chief planning and marketing officer. "We tried to people with experience in both the Korean banks and mainstream banks," he says. "And we're borrowing Wells Fargo's sales and service culture." There's a reason he's a Wells booster: Sohn spent 30 years at Wells, where he was most recently evp and chief economic officer-and learned the intricacies of customer service, product development and cross-selling. "They've brought in a great team, which is driven by Sung," observes Abbott. "Banking is a lot like manufacturing. It's about having the right people." He also cited the firm's strong bank network in California, its effective cross-selling culture and its high-quality balance sheet.
His biggest challenge this year? "Convincing employees and customers that change is good for them," he says.
