Local bank aims to expand beyond Korean niche
Korean-speaking customers can still find a teller who speaks their language at Pacific International Bank, but nowadays, so can everybody else.
Seattle Times staff reporter
Pacific International Bank
History: Founded in 2001, the first state-chartered bank started by Korean immigrants to serve the local Korean-American community.
CEO: Woosung "Edward" Park.
Branches: Seattle, Federal Way, Lakewood and Lynnwood (2 branches).
Assets: $292.2 million
Deposits: $198.9 million.
Source: Company, FDIC data as of June 30
-compiled by Sanjay Bhatt
Korean-speaking customers can still find a teller who speaks their language at Pacific International Bank, but nowadays so can everybody else.
Nearly a decade after the bank opened in a mundane office building in North Seattle to serve the local Korean-American community, PI Bank leads that local niche market with about $200 million in deposits. The bank is embarking on a campaign to attract more deposits from the general public and expand lending to non-Korean small businesses.
"We think it's a great time to make that transition," said Woosung "Edward" Park, the bank's president and CEO. "Increase investment when the economy is bad: That is the Asian way of looking at it."
Some changes are obvious: New signs at branch offices are in English. The bank is hiring more tellers and managers who aren't Korean American.
The bank is upgrading its services too: It recently joined a national 16,000-ATM network, and it plans to offer mobile banking within six months.
"What we're looking at is becoming more like any other community bank," said Paul Sabado, chief credit officer and executive vice president.
The bank's executives say they're also considering renaming the bank to give it mass appeal, but say they're aware the transition must be handled in a way that doesn't alienate its base of Korean-American depositors and business owners.
Financially, PI Bank is relatively healthy: Its assets grew 5.2 percent in the 12 months ending June 30 to $292.2 million. After posting a $1.1 million annual loss last year, the bank reported a $477,000 profit for the first half of 2010.
Already, an estimated 40 percent of PI Bank's depositors are non-Korean, such as retirees seeking higher CD rates, Park said. And 20 percent of the bank's small-business loans are to East Indian immigrants, and 10 percent to others outside the Korean community, he said.
Pursuing other immigrant groups and nonethnic customers has been a natural strategy for Korean-American banks in California, and has not alienated their base of first-generation Korean customers, said Julianna Balicka, a San Francisco analyst with investment bank Keefe, Bruyette & Woods.
But breaking out of their niche has its hurdles: For example, two of PI Bank's five branches are inside Asian grocery stores, and it has no plans to add new branches in the immediate future.
And it's hard for the Korean-American banks to achieve their goal of becoming pan-Asian because Chinese immigrant customers typically prefer Chinese banks, Balicka said.
The ethnic banks' ability to lend also is limited because most were concentrated in commercial real estate and small businesses, both hit hard in the Great Recession.
"The bread and butter of these banks is under stress right now," Balicka said.
Park's inspiration is Bank of America. The nation's largest bank-holding company harks back to Bank of Italy in San Francisco, founded by Amadeo Giannini in 1904 to cater to immigrants ignored by other banks.
Park, an immigrant himself, was working for Wells Fargo in South Korea in 1988 when he moved to the U.S.
A decade later he got his MBA from the University of Washington after writing, as his final project, a business plan for a Korean community bank in Seattle. In 2001, with 224 investors, Park launched PI Bank, the first community bank concentrating on the Seattle area's Korean-speaking community.
Today, that population has grown to an estimated 150,000 in Washington state, and Park estimates the bank has about 15 percent of that market for deposits.
Dr. Jong Il Lee chose PI Bank because he feels like he's dealing with family: He and Park both graduated from Yonsei University in South Korea.
Lee also credits PI Bank with giving him a break last year when he launched his Yonsei Chiropractic Clinic in Mill Creek. For six months the bank waived fees, Lee said, as he was getting his business off the ground.
"They're very kind and they're helpful," he said.
PI Bank competes for the Korean-American niche with Lynnwood-based UniBank, which has two branches and Center Bank in Los Angeles, which has two branches and a loan office in the area.
And ethnic banks hardly have the market to themselves.
Fewer than one in five of the 1,000 Asian small businesses in the state served by CCPC, a credit-card-processing services company, have their commercial accounts with Asian banks, said CCPC's Everett manager Hanji Im.
The majority of her clients — many of whom do not speak English — prefer to use mainstream banks such as Bank of America, saying they get lower fees, better customer service, she said.
The bank's loan portfolio is mostly in commercial real estate, but only a fraction of those are to developers. The majority of its $196 million in real-estate loans is to businesses buying existing buildings, such as motels, shopping centers and gas stations to own or lease.
PI Bank also had $35.3 million in business loans, which borrowers use for equipment, inventory or other operating needs.
The bank last year made some $20 million in loans backed by the federal Small Business Administration. In a letter to shareholders, Park boasted that PI Bank had underwritten a higher dollar volume of SBA loans over a six-month period than Bank of America, Wells Fargo or KeyBank.
"We think what will differentiate us is this great solid niche of small-business lending and our hands-on service," Sabado said.
Even before the financial crisis, the Korean-American niche on the West Coast was saturated with at least 16 players, and ripe for consolidation, Balicka said. Los Angeles-based Wilshire State Bank became the largest Korean-American bank in the nation after it took over the failed Mirae Bank in 2009.
One local ethnically oriented bank also has failed: Seattle-based Washington First International Bank was seized by regulators in June and sold to East West Bank of Pasadena, Calif.
Park is betting PI Bank can triple in size in five years by growing its customer base and merging with one or two weaker banks.
But Balicka, the analyst, says the FDIC-assisted merger opportunity has passed. Many weaker ethnic banks in California have received strong community support for recapitalizing and avoiding FDIC action.
As part of PI Bank's makeover, the board recently named a new chairman, Steve Faust, who was an executive in charge of international banking at Seattle-First National Bank, which Bank of America acquired.
And the bank has recruited new executives: Sabado helped start up UniBank and two other community banks in the Seattle area — The Commerce Bank of Washington, bought in 2008 by Zions Bancorporation, and Towne Bank, which was acquired by Banner Bank.
PI Bank also hired Kevin Hogan as senior vice president of operations. Previously Hogan was the chief operations officer for Lynnwood's City Bank, which became the state's fifth bank to fail when it was seized in April.
While PI Bank is in transition, the Korean-made instant coffee machine in the lobby will stay for now. It's a familiar comfort for first-generation Koreans.
"Some people still like it," Park said. "It's a gradual change."
Sanjay Bhatt: 206-464-3103 or firstname.lastname@example.org