Korean-American banks have spent most of this year playing musical chairs.
A growing need for talented employees has played a major role in the torrent of activity among a handful of banks that focus on Korean-Americans. In addition to typical hiring challenges, those banks must recruit from a much smaller talent pool. That trend makes top managers more valuable.
The solution for a Korean-American bank with a vacancy involves stealing a competitor's executive. And when the spurned bank looks to fill its opening, it tends to pilfer from another Korean-American bank.
"If you're a community bank wanting to grow and expand in an existing or adjacent market, you have to recruit an executive from a bank that is in your same niche and geographic area," says Rod Taylor, president of Taylor & Co., an executive recruiting firm in Atlanta.
"You want an executive that already knows the market and has an established relationship network who can attract and retain customers," Taylor says.
Korean-American banks, like most banks, want leaders and lenders who can relate to their customers. But those banks often need employees who are fluent in Korean, creating a limited talent pool, says Joanne Kim, president and chief executive of Commonwealth Business Bank (CWBB) in Los Angeles.
Kim joined Commonwealth after serving as president and CEO of Wilshire State Bank. Wilshire Bancorp (WIBC) last week changed the name of the Los Angeles institution to Wilshire Bank.
"This is definitely a small community," Kim says. "I wish I could go out and bring in different talent but sometimes that doesn't work out. People really move around within the same few Korean-American banks."
Korean-American banks tend to have very involved boards, which sometimes causes conflict and results in management changes, says Julianna Balicka, an analyst at Keefe, Bruyette & Woods. At times, "executives get to the point where they need a fresh start," she says.
At Wilshire, the board meets monthly, and some directors gather weekly to "talk and brainstorm," says Alex Ko, the $2.8 billion-asset company's chief financial officer. The Los Angeles company recently hired a former chief credit officer from Hanmi Financial's (HAFC) bank as its chief marketing officer.
"The board and management relationship is based on trust," Ko says. "If there is no trust and someone feels like they haven't been treated fairly there are other opportunities next door."
Boards tend to be very involved, but management must decide "how to deal with it," Kim says. "If management isn't strong enough to stand for its own plan, then the board might try to micromanage."
More frequent management changes can be a positive at smaller banks, says Alexander Cappello, chairman and CEO at Cappello Capital. Boards are often reluctant to make a change, even if one is needed, because they are afraid of how regulators, shareholders and the community might react.
Still, management changes can have unintended consequences, especially with mergers. Deals often coalesce around personalities, and bad blood between a banker and former employer can prevent deals from taking shape.
"Social issues matter," says Aaron Deer, an analyst at Sandler O'Neill. "It can work both ways. Some of the familiarity and friendships can cross over institutional barriers. But in some cases there is a less accommodating relationship."
In the past, there have been dozens of efforts to combine the biggest Korean-American banks, though talks often collapsed because of social issues, industry experts say. The climate changed somewhat in 2011, when Nara Bancorp and Center Financial merged to form the $5.9 billion BBCN Bancorp (BBCN) in Los Angeles,
BBCN representatives would not comment for this article.
A number of deals have taken place since the creation of BBCN. Wilshire, which announced a pair of acquisitions this year, plans to keep expanding, through acquisitions or organic growth, Ko says.
As the number of potential Korean-American targets dwindles, the remaining banks may start looking at other opportunities. Commonwealth has started looking to target other ethnic groups that are underserved by the banking industry, Kim says. Commonwealth recruited Alvin Kang, a former CEO and president of BBCN, to its board earlier this year.
Serving other immigrant populations requires certain expertise, such as how to make a loan if a borrower lacks a long work history in the United States, Balicka says. Korean-American banks already have these skills.
"No matter the ethnic group, we all want similar things," Kim says. "We're all looking for special attention. We all want speedy decisions. They want their bankers to understand their needs and to take their time with them."
This may prompt more Korean-American banks to hire from mainstream institutions. The $2.8 billion-asset Hanmi hired Chong Guk "C.G." Kum as its CEO not only because he spoke Korean, but also due to his experience running First California Financial.
Kum's background in more typical banking means he brings a different set of skills to Hanmi, says Becky Reid, an investor relations consultant for the Los Angeles company.
Kum "has that mainstream bank experience that was a very important component to Hanmi's goal of expanding into new markets," Reid says. "It signals Hanmi is moving beyond the traditional space they've [had] in the past."