Community bank earnings, generally strong across the country, have been climbing off the charts at some Asian-American banks in California.
Nara Bank in Los Angeles, for example, reported a preliminary figure of $2.6 million for the third quarter, up a whopping 166% from the same period a year ago. Its Koreatown neighbor Wilshire State Bank said earnings were up 147%, to $1.4 million.
Both attributed the gains to soaring loan demand from their small-business customers in the growing Korean-American community.
Korean-Americans are very loyal to the mom-and-pop businesses that make up the banks customer base, said Bon Goo, chief financial officer at $529 million-asset Nara Bank. More of our customers tend to own their own business, mostly markets, laundries, and other small businesses, so loan demand is a little bit higher, he said.
Korean business owners are generally entrepreneurial-types that want to continue to grow, said Joel Ziskind, vice chairman and chief operating officer at $399 million-asset Wilshire State Bank. They also tend to acquire the real estate on which their business is located, so we have more activity in terms of real estate.
Three other Asian-American banks in California UCBH Holdings Inc. in San Francisco, East West Bancorp in San Marino, and GBC Bancorp in Los Angeles all posted record earnings for the quarter. The trend is likely to continue, observers say.
Besides being the fastest-growing ethnic niche in California percentagewise, Asian-Americans are also more educated, have a higher net income, and have a higher net propensity to own a business, said Derek Derman, an analyst at Wedbush Morgan Securities in Los Angeles. Other banks cant compete, because they just dont understand the culture as well.
East West recently demonstrated its commitment to the Chinese community by becoming the first U.S. bank to offer online banking in Chinese. UCBH offers telephone service in Mandarin, Cantonese, or English.
Their customers just cant get that level of service anywhere else, Mr. Derman said.
UCBH, the $2.4 billion-asset holding company for United Commercial Bank, credited deposit growth from Chinese immigrants for its 22% increase in net income. Thomas S. Wu, president and chief executive officer, said the company specifically targets the fastest-growing Chinese communities in California. The result: While many community banks are struggling to attract deposits, UCBHs deposits have increased 30%, to $1.89 billion, since the beginning of the year.
Every year 60,000 new immigrants come to the U.S. from Hong, Kong, Taiwan, and mainland China, Mr. Wu said. A higher percentage of these new immigrants tend to settle down in California because of the proximity to the Pacific Rim.
Moreover, people from this ethnic sector tend to keep more money than average in their bank accounts.
The Chinese culture has a higher propensity to save money, Mr. Wu said. The average household savings deposit balance is about $10,000, while the average Chinese household balance is $17,000.
East West Bancorp reported record earnings of $8.8 million, or 38 cents a share, for the third quarter, up 25% a year earlier. The $2.3 billion-asset company caters mainly to Chinese-American businesses, many of which trade overseas.
Were doing well because were pretty much focused on small and middle-market businesses, which are pretty much driving the economy right now in California, said Dominic Ng, East West chairman and chief executive officer.
Both UCBH and East West said their bottom lines were helped by improved efficiency and credit quality ratios.
UCBH lowered its efficiency ratio from 48.24% to 45.42%. The company also recorded a 23% increase in its commercial loan portfolio, to $1.24 billion, while its nonperforming asset ratio remained below 0.25% for the sixth straight quarter.
East Wests efficiency ratio for the quarter was 39.9%.
Mr. Derman said East West and UCBH have been able to successfully trim fat because in both cases, management bought the companies from foreign owners and took the companies public.
Now theyve streamlined costs and moved into higher commercial loans, Mr. Derman said. Theyve also improved their funding base by getting more demand deposit accounts instead of relying on wholesale borrowing.
Few banks were as efficient in the third quarter as GBC Bancorp in Los Angeles, however. Boasting strong gains in fee income, the $2.1 billion-asset company reported a 30.39% efficiency ratio, and its 2.04% return on assets and 25.22% return on equity were both well above the industry average.
GBCs earnings were up 34%, to $10.1 million for the quarter. Li-Pei Wu, GBCs chairman and CEO, said the company made much of its money financing transactions for customers doing business in the Pacific Rim.
There is a continuous influx of immigrants from Asian countries who do business within their home countries, particularly in textile and computer component imports, said Mr. Wu. People here buy more, including products from foreign countries.
GBC also stands to gain up to $28.8 million in future quarters from the sale of warrants. As of Sept. 30, GBC had investments in 26 technology start-up companies, many of which are outside its Chinese-American customer base.
I think well continue to do well, because were expanding to other immigrant communities who also do business within their home countries, Mr. Wu said.