Banking culture

South Bay banks cater to growing Asian immigrant population

As the makeup of the South Bay population continues to change, some banks are taking advantage of emerging niche markets by serving the area’s Asian immigrants.

In recent years, smaller banks focused primarily on immigrant populations have either started or opened branches in the area, including Asiana bank in Sunnyvale, Summit National Bank in San Jose and Far East National Bank in San Jose.

Even traditional business lender Bridge Bank N.A. of Santa Clara included outreach to the region’s burgeoning Asian population when it was founded in 2001.

“We expected that somewhere in the neighborhood of 5 percent of our business might be focused in that kind of a niche,” says Thomas Sa, Bridge Bank’s CFO. “At this point, I believe we accomplished it.”

While Bridge, Wells Fargo & Co. of San Francisco and Bank of America Corp. of Charlotte, N.C., have local outreach programs to Asian immigrant business owners, who comprise less than 10 percent of their business, banks such as Summit, Far East and Asiana see that market as their primary business.

Sa says a major part of Bridge’s outreach program was import-export funding, which was hit hard by the recession.

“The export business, and technology business specifically, have been one of the more impacted areas of the economy,” Sa says. “I think it’s probably less of a focus today than we anticipated. But we expect that when the economy comes back, we’ll find ourselves refocusing.”

Another South Bay lender isn’t waiting for a recovery.

“Of course the economy out there is not great for expanding, but we believe the opportunity is ripe now for us,” says Gary McClung, CFO of Atlanta-based Summit Bank Corp., which has four branches in Atlanta and one on Tully Road in San Jose.

By July, Summit plans to open a branch in Fremont at the intersection of Mission and Warm Springs boulevards.

“It’s a vibrant area for small business,” says McClung. “It’s a major crossroads with a very large Asian population in a
3- to 5-mile radius.”

So far the strategy of attracting a largely Asian business clientele has been paying off for Summit (Nasdaq: SBGA) as the company reported a per-share profit of 30 cents in its fourth quarter ended Dec. 31 — up from 17 cents per share in the fourth quarter of 2001.

In Atlanta, Summit focuses on Chinese, Indian and German immigrants. The South Bay operations started with the 1998 acquisition California Security Bank, which catered to San Jose’s large Vietnamese population. But since the Summit buyout, the bank has been expanding its focus to other Asian ethnicities as well.

Craig Woker, banking analyst for Morningstar Inc., says niche banking to non-English speaking clients can pay off.

“It’s a business model that certainly happens with small banks located in a community where there is a large immigrant population,” says Woker from his Chicago office. “But it is mimicked to some degree by large banks when they do operate a branch in a neighborhood that is dominated by immigrants. Obviously any bank is going to try to appeal to and serve its local customers.”

McClung says Summit is interested in possible expansion to Milpitas and Cupertino, cities with a large population of Chinese, Korean and Indian entrepreneurs.

“We went to Summit Bank because we were new to business and after we’d been turned down by other banks, we heard they help Asians like us,” says Tanh Ngo, who opened the Euro Delights bakery in San Jose last year. “They were friendly. When they were talking about something we didn’t understand, they took time to explain it to us.”

Summit says its customers should not be denied a livelihood due to ignorance of American culture or standardized financial practices.

“Service is not about reaching goals or selling so many checking accounts,” says Trinh Diep, senior vice president and manager of the California division of Summit. “It’s about caring for the customer, feeling for the customer, going out of your way. For me, that’s service.”

He says many bank employees and management at banks like his share the same history as their potential clients.

“To give you an example, a lot of people came here after the fall of Saigon in 1975,” Diep says. “A lot of them came here with just the clothes on their back, but they work very hard for a better life.”

He says it was common for a Vietnamese immigrant to start as a business owner with a mobile lunch truck.

“From that, they move to a restaurant; from a restaurant, they move to a supermarket,” Diep says.

But despite an ability to succeed, Diep says circumstances can stand in the way of raising money to start a business.

“If you go to a typical bank, they look at a leverage ratio, which is your debt to capital,” Diep says. “It is very hard to get a loan.”

He says many successful immigrant-owned businesses Summit funded would never have started if traditional risk assessments were used.

“They don’t fit into the typical cut-throat environment of, say, a bigger bank,” Diep says. “They may not qualify if their financial numbers are typed into a computer and they have to wait for it to spit out a ‘yes’ or ‘no’ on a loan.”

Diep says banks can’t forget to look at the non-tangible assets with small businesses.

“We don’t look at leverage ratios, we look at the skill of the person,” Diep says. “Look at it this way: A guy opens a business. Everything he has is in that business. This is the livelihood of his spouse and the future of his children. Will he ever walk away from that business? No. And that’s what we understand.”

Specialty lenders hope cultural values shared by banker and client will continue give them a competitive edge in the local market.