The results Saehan Bancorp announced Jan. 30 were its best in years: record 2005 net income, a huge jump in assets, and return on equity well above the industry average.
Yet the next day the $513 million-asset Los Angeles company announced it had fired its chief executive, Joohak Kim, and replaced him with Benjamin Hong, the onetime CEO of a rival of Saehan's, Nara Bancorp Inc.
Why? It was too good an opportunity to pass up, said Saehan's chairman, Il Young Kim.
Mr. Hong, who retired from Nara last year, is a 30-year veteran of Los Angeles' Korean-American banking community and is widely credited with rescuing Nara from the brink of bankruptcy a decade ago and turning it into one of the nation's best-performing banks.
"Benjamin Hong is a legend in Koreatown banking, and his achievement at Nara is especially unbelievable," Il Young Kim said. "We expect something similar at Saehan Bank."
Still, it was a surprising move given Saehan's recent performance as well as Mr. Hong's age (73) and slightly tarnished reputation. Within weeks after he retired as Nara's CEO last year he was caught up in an ethics scandal involving his compensation package and was forced to resign from its board.
In an interview with American Banker, Mr. Hong called his return to banking "an opportunity to write my own epilogue" and to make up for "past regrets" about his 11-year tenure at Nara.
"Not about the compensation, but the way I managed staff," he said. "I was very hard-driving, which was good, but in the process I neglected the human factor. I'm much more humble now, and I think it is very important to really develop the people that I work with - including someone who could eventually become the CEO."
It is difficult to overstate Mr. Hong's celebrity in Koreatown.
Before joining Nara, Mr. Hong was the president and CEO of Koreatown's largest bank, Hanmi Financial Corp. He achieved hero status there in 1992 for helping Hanmi's business customers - mostly mom-and-pop merchants - rebuild after their shops were ransacked by rioters angry with the not-guilty verdicts in the Rodney King case.
Mr. Hong left a secure job with Hanmi for the challenge of saving Nara, which observers said was three weeks from being shut down by regulators. He raised capital not by going to institutional investors, but by selling stock to members of the Korean community at $3 per share. Twelve years later the stock is worth many times that.
And though Mr. Hong called himself hard-driving, observers have said that employees revered him. In a 1997 profile of Mr. Hong in American Banker, a consultant said that many Hanmi employees followed Mr. Hong to Nara.
"Everybody that worked for him wanted to go and work for him" at Nara Bank, the consultant said. "Even the janitors."
Mr. Hong first retired from Nara in 2003 but returned a few months later after his successor, Seong-Hoon Hong, abruptly resigned.
He retired a second time in February 2005 but retained his seat on the board.
In March he was forced to quit the board after outside counsel hired by the board's audit committee found the company had improperly accounted for a 2002 arrangement in which Mr. Hong agreed to give up some of his profit-sharing rights for 2003 and 2004 in exchange for reimbursement of country club and car expenses.
The accounting errors forced the $1.8 billion-asset Nara to restate its 2002 and 2003 earnings and delay the release of its results for 2004 and the first quarter of 2005.
Lana Chan, an analyst at Bank of Montreal's Harris Nesbitt, said Mr. Hong's very public dismissal from the board last year "kind of diminished his track record at Nara."
Still, she said, "I think he's a great banker. He's going to be a great leader for Saehan as well."
Investors apparently agree. Since the Jan. 31 announcement, Saehan's stock, though thinly traded, is up nearly 28%. It was trading at $25.50 late Thursday.
The fired CEO was out of the country and could not be reached for comment.
The company Mr. Hong joined Feb. 1 already seems to be headed in the right direction. After three years of limited growth while under an enforcement order related to the Bank Secrecy Act, Saehan rebounded with a strong 2005. Its net income rose 50%, to $7.2 million, and assets rose 40%.
But the board apparently believes the company can do even better under Mr. Hong, said Brett Rabatin, an analyst at First Horizon National Corp.'s FTN Midwest Securities Corp. in Nashville.
"Saehan is the smallest of the publicly traded banks in that sector, and the board is counting on Mr. Hong's aggressive style to grow the franchise much more rapidly," Mr. Rabatin said.
Ms. Chan said Mr. Hong might raid his former employer for talent - Nara and Saehan are two of seven Korean-American bank holding companies that have headquarters within a few blocks of one another - but Mr. Hong said that for now he will "make the greatest use out of existing people" at Saehan.
He said he plans to open more branches in Los Angeles and Orange counties and possibly buy other banks.
The company will also pump up loan production by offering better deals than its Korean-American rivals in what is already a fiercely competitive market, he said.
Another plan is to develop new products, though Mr. Hong did not say what they would be. (Commercial real estate loans are Saehan's and other Korean-American banks' signature product.)
Mr. Hong has a three-year term as Saehan's president and CEO. Il Young Kim said that this was the standard management contract term Saehan offers and that Mr. Hong's age was not a factor during negotiations. "He seems to be in very good health, so that was not a consideration."
