For a small, niche bank, United Central Bank in Garland, Tex., has big plans.
The unit of Central Bancorp Inc. targets Asian-Americans, and in the last two years it has sprinkled loan production offices around Asian-American communities in eight states. Now, several of the business loan offices have matured, and the bank is converting some of them into full-service branches and looking to bulk up in Atlanta by acquiring a bank there.
United has more than doubled its asset size in the last three years, to $750 million, and president and chief executive officer Keith Ward said its goal is to have $1 billion of assets by the end of next year.
Mr. Ward said he believes the bank can reach this goal because its strategy is different from those of most other Asian-focused banks. Rather than catering to specific ethnic communities, such as Chinese or Korean immigrants, United Central targets business owners in a wide range of Asian communities. In all, its staff communicates with customers in 24 languages, including Urdu, Vietnamese, Korean, Hindi, and Chinese.
"There are some areas where banks are not catering to all the different segments of the population that we cater to because so many [Asian-American] banks are specific to one culture," he said.
Among community banks, United Central ranks as one of the nation's largest originators of Small Business Administration loans. It chooses its target markets by looking for areas where the Asian population is growing and its model could be implemented. The bank does not look for growth in one particular ethnic group; instead, it picks an area and then builds its business around the experienced bankers it hires.
For example, one experienced lender the bank hired in the Los Angeles area is familiar with the city's Persian community, which wasn't targeted when United decided to go to the area. But now the bank is also seeking business in this community.
"We've noticed a large Persian population that we think we can penetrate," Mr. Ward said. "It is based on the person who becomes in charge and their experience."
In Rockville, Md., the company saw a growing Chinese population and hired a Chinese-speaking banker to manage its new branch.
Mr. Ward said that 95% of the bank's customers can speak English so that language is not necessarily a barrier but that speaking customers' native language does make them feel more comfortable. "Our regional manager in Virginia is Pakistani, but we have Koreans and Afghans and different types of Chinese customers there," he said.
United Central, however, is not the only Asian bank that embraces a broad base of Asian ethnic groups. Industry watchers said some Korean-American banks have started to succeed in attracting other ethnic groups, and banks in markets where Asian populations are less dense than on the coasts have diversified beyond a single ethnic group.
But few banks United Central's size have operations as far-flung as it does.
The Texas bank already has a branch on each coast — one was opened in the Los Angeles suburb of Artesia in October, and one was opened in Springfield, Va., a year ago. The bank plans to add a branch in Maryland next quarter and two in California in the second quarter. It also has loan offices in North Carolina, Illinois, Arizona, Florida, and Georgia.
United Central's strategy seems to be working.
Though its aggressive geographic expansion has increased its costs of late, its performance numbers remain better than the average for its peer group. For the third quarter, United Central's return on assets was 1.58%, compared to an average of 1.16% for all commercial banks with $500 million to $1 billion in assets, according to Federal Deposit Insurance Corp. data.
"They are knocking the cover off the ball, relatively speaking," said William Michael Cunningham, a social investment adviser at Creative Investment Research Inc., a Washington company that tracks minority-owned banks. "The Asian banks have tended to do a little better than the other minority banks, but they are still in a tough environment."
Brett Rabatin, a senior research analyst at First Horizon National Corp.'s FTN Midwest Securities Corp. in Nashville, said United Central faces challenges to making the branches profitable.
"There is a cost difference between a [loan production office] and a branch, and that depends a lot on lease versus owning the land," he said. "That is one of the reasons you see banks pull back from building branches."
Still, United Central has one thing going for it.
"It's easier to move the deposits if you have the loan relationship," Mr. Rabatin said.
