SOUTHERN CALIFORNIA ENTERPRISE : Banking on Asian American Community

The founders of Grand National Bank wanted to serve the Chinese community when they opened for business in Santa Ana 11 years ago.

Trouble was, there was no cohesive Chinese community in the area. Their potential customers, about 50,000 Chinese Americans, were scattered from Fullerton to San Clemente, and the bank found it difficult to meet their needs. It had lackluster profits through much of the 1980s, then began losing money and shrinking as it slid slowly toward oblivion.

Then a group of investors assembled by former Security Pacific Corp. executive Cary Ching stepped in to buy the bank in July, 1990. Ching took over as president a year later, and the new owners have never looked back.

Grand National has since become a community banking dynamo by providing international trade financing to small companies that big banks ignore or can’t serve. It’s a field the bank has almost entirely to itself, and the business has helped to triple its loans and other assets in the last four years.

Grand National earned nearly as much last year--$1.3 million--as many banks twice its size. It has developed a branch in Alhambra and is seeking regulatory approval to open another in City of Industry.

“This is a very good bank--and very atypical of most community banks,” said banking consultant Edward J. Carpenter in Irvine. “In the last few years, it has consistently outperformed every bank in Orange County and in most of the rest of Southern California.”

Now Grand National is testing its mettle against a host of competitors as it embarks on a second three-year plan: branching out to serve small business. Numerous banks fight to serve doctors, lawyers and other professionals as well as small manufacturing companies and mom-and-pop businesses.

“The second stage will be more challenging,” Ching said. “We’re certainly looking at more competition. But we feel obligated to do it because we operate here and now have the ability to give back to the community.”

Bank rating agencies give Grand National top grades among banks of comparable size, and no wonder.

Last year, it had no bad loans and held no real estate seized through foreclosure. It had nearly twice as much capital--investor funds--as it needed, and stashed so much money in reserves that regulators demanded an explanation.

When Ching’s investor group took over, the bank was losing $50,000 a month and its loans, securities and other assets had slid to $27 million. By the end of last year assets had climbed to $97.9 million--for an average growth rate higher than 50% a year.

“We had a simple strategy at the beginning,” Ching said. “We had a niche product and a niche market.”

That product is foreign letters of credit--the financial arrangements small companies need to import and export goods. They are typically the realm of large banks, but Ching is an expert at trade finance. He had headed the Southern California operations of Security Pacific Asian Bank, the foreign trade finance arm of Security Pacific National Bank. Security Pacific was sold to BankAmerica Corp. in 1992.

Big banks shy away from helping the small entrepreneur engaged in foreign trade because they can make more money on bigger deals, said Kenneth Slezak, a marketing consultant at Vista Marketing Services in Irvine.

Few small banks have the expertise or the contacts with foreign banks to arrange trade financing, so a small bank like Grand National “could carve out a pretty sweet niche for itself,” he said.

The market is mostly Asians and Asian Americans operating companies with annual sales of up to $10 million who need letters of credit to buy or sell overseas. That market is more concentrated in Alhambra, where the bank long has had a branch and where Ching focused his attention.

With a Swiss American investor on the board, Grand National also has provided some trade finance for deals with companies in Europe and the Middle East.

The bank’s original target market--Chinese Americans--was simply too limited, he said. The investors, including a second group of three that added $5.4 million to the bank’s capital base in 1991, mostly come from Hong Kong, Indonesia, Taiwan, Japan and Korea.

“It was natural, with most of the directors being Asian, to be closer to that market and support that market,” Ching said. “But we’ll pursue all business related to export-import and anything to do with the Pacific Rim.”

Ching said the bank now will try to expand beyond the Asian community as it seeks new business in Orange County and in the City of Industry, where it plans to open its third branch.

Grand National Bank

* Location: Based in Santa Ana; branch in Alhambra; third branch planned for City of Industry.

* Owner: A group of 13 investors.

* Business: Principally involved in foreign trade financing for small companies.

* Management: Cary Ching, president and chief executive, was once the top executive at Security Pacific Asian Bank, the foreign trade finance arm of former Security Pacific National Bank.

* Founded: Doors opened in February, 1983. New investors bought it in mid-1990, changed management in mid-1991.

Source: company reports; researched by JAMES S. GRANELLI / Los Angeles Times