Korean Bank in California Battles Back from the Brink

When Benjamin Hong took over Nara Bank in 1994, the small institution that caters to the Korean community in California was drowning in debt and battling to stay afloat.

Today, $161 million-asset Nara Bank ranks among the state's most profitable community banks, with a 22% return on equity and a return on assets above 2%. It recently opened its first branch outside Los Angeles-in fast-growing San Jose-and, within weeks, Nara is expected to be listed on the Nasdaq exchange.

Industry observers said the turnaround is nothing short of miraculous. And though some of the bank's success can be attributed to the booming Southern California economy, most of the credit is being given to Mr. Hong, Nara's president and chief executive officer.

"In my opinion, he's the Vince Lombardi of banks in the Korean community," said Troy K. Norlander, senior vice president at Sutro & Co., Great Bear Lake, Calif.

A longtime Los Angeles banker, Mr. Hong left a secure job heading the city's largest Korean-oriented bank for the challenge of rescuing Nara, then five years old.

At the time, Nara had $55 million of assets but only $369,000 in capital. Worse, it was coming off a year in which it had lost $3.1 million.

"That's about as close to the edge as you can get," Mr. Norlander said, noting that the bank was just three weeks short of being closed by the Federal Deposit Insurance Corp.

Mr. Hong's first mission was to raise capital. Without using an underwriter-"too expensive," he said-Nara sold stock to members of the Korean community at $3 per share. Within two weeks, it had raised $2 million, more than enough to satisfy regulators.

"My catch phrase was, 'For $1,200'"-the minimum investment-"'you can be the owner of a bank,'" Mr. Hong said. He raised an additional $1 million by the end of 1994 and another $3.5 million in a similar offering in 1995.

While raising money, Mr. Hong and his staff also aggressively courted new customers. Their targets: dry cleaners, grocers, liquor merchants, and other small-business owners in Los Angeles' vast Korean community.

"Very few people in this business have the relationship skills that Ben has," said Robert J. Gallivan Jr., principal at Bank Compensation Strategies in San Diego. Mr. Hong is especially loyal to his employees, Mr. Gallivan added, noting that many workers followed Mr. Hong from Hanmi Bank.

"Everybody that worked for him wanted to go and work for him" at Nara Bank, Mr. Gallivan said. "Even the janitors."

By the end of 1995, it was clear that Mr. Hong's strategy for reshaping Nara Bank was working. The bank's assets had increased to $86 million, and net income had soared to $1.5 million. By the end of 1996, profits had reached $2.6 million, and assets, $122 million.

But Mr. Hong's work is hardly done. To help finance its expansion into Northern California, Nara Bank issued more stock in November, this time at $7 per share. Within a week, the bank had raised $7 million.

"There were people camped outside the doors of one of the branches at quarter of five in the morning so they could buy stock in the bank," Mr. Gallivan said. "People drove from as far as 75 miles away."

This time around, for larger buyers, Mr. Hong reserved some shares that were marketed by Sutro & Co. However, the bulk of the stock was sold to members of the Korean community in blocks of $1,200 or more.

"I did it this way before, I knew I could do it again," Mr. Hong said.

Besides, he added, selling shares to individuals rather than to large institutions is one way to keep decision-making powers in his hands. Small groups of large owners, Mr. Hong said, "have so much influence on management. If the bank isn't doing well, they eventually want to run the bank themselves."

Mr. Hong, 65, plans to remain at Nara Bank until he turns 71. His three- year goal is to build Nara's assets to $500 million. Long-term, he has even loftier ambitions-to open Nara offices in other cities with large Korean populations, namely, Seattle, Chicago, New York, and Atlanta.

"For the last three years I've been busy raising money," Mr. Hong said. "I'm just getting started."

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