Japanese American Group Opens Bank in Little Tokyo

Hoping to fill a void created by the pullback of Japanese banks from the California market, a group of Japanese American investors have set up their own bank in Los Angeles.

Tucked away in a mini-mall at the edge of Little Tokyo, Pacific Commerce Bank is believed to be the only Japanese American-owned bank operating outside of Hawaii. Backed by 160 investors and $7.6 million in capital, the small bank is hoping to build its base around the Japanese American and Japanese expatriate communities.

The lack of a Japanese American bank is striking, given the success of ethnic banks in other Asian communities. San Marino-based East West Bank, one of several dozen banks serving Southern California’s Chinese community, is the third-largest commercial bank based in Los Angeles, with $3.2 billion in assets. Hanmi Bank, which has $1.4 billion in assets and is headquartered in Los Angeles’ Koreatown, is the largest of 10 community banks serving the region’s Korean community.

“We need to have a bank for our community that provided the services we are used to,” said Ken Kasamatsu, 56, president and chief executive of Pacific Commerce Bank, which opened its doors last month.

Though they are launching in difficult times, Pacific Commerce executives believe they can succeed by providing the personal service they say is disappearing as Japanese banks such as Sumitomo Bank, Sanwa Bank and Asahi Bank pull out of California or are swallowed up by U.S. financial institutions. They said their bank would offer bilingual staff with a knowledge of the Southland Japanese community and expertise in Japanese culture and business practices.

At Pacific Commerce Bank, Kasamatsu and his staff of nine pride themselves on knowing customers’ names and hand out business cards with a direct telephone line. The bank, which offers retail and commercial services, has 130 customers.

Martin Ogino, a 52-year-old insurance agent from Arcadia, is an investor in the bank and also has opened a checking account. He said he felt he would get better service from a smaller bank.

“I kind of like the idea of not being just a number,” said Ogino, who has known Kasamatsu’s family for 30 years.

Kasamatsu was with Sumitomo Bank’s California subsidiary for 31 years until it was sold to Zions Bancorporation in 1998 and became the backbone of Zions’ California Bank & Trust unit. In September, United California Bank, the result of a merger between the California subsidiaries of Japan’s Sanwa Bank and Tokai Bank, was sold to San Francisco-based Bank of the West for $2.4 billion.

He said those banks have not only cut back on their bilingual staff and other services but also have reduced their involvement in community activities such as Nisei Week, which is held each August in Little Tokyo and is the nation’s longest-running Japanese American festival.

Competition Remains

But Pacific Commerce’s bigger and better-financed competitors aren’t about to give up without a fight. Little Tokyo’s businesses have been struggling with the decline in Japanese tourism after last year’s terrorist attacks. But since the Office Depot retailing complex on 2nd Street and Alameda Avenue opened more than a year ago, traffic in the neighborhood has increased and there are new projects in the works, including a 127-unit condominium project. The Japanese American community is known for its good savers and reliable borrowers, according to bankers.

California Bank & Trust spokesman Steven Borg said his bank has maintained a bilingual staff at its Little Tokyo branch and offers a variety of services aimed at that community, including automated teller machine services in Japanese.

“Our focus hasn’t changed and we remain committed to that market,” he said.

Ronald Kendrick, an executive vice president at Union Bank of California, which is majority-owned by Bank of Tokyo-Mitsubishi Ltd., said his bank also offers similar services for the Japanese community. But he said even a small player in today’s competitive banking environment needs to look beyond a narrow ethnic base to survive.

“All of the communities that at one time were very dominated by Japanese American people and immigrants have now very much diversified,” he said. “There’s a strong Hispanic influence moving into the Little Tokyo area. You no longer have the purity of that micro-market that you did 30 to 40 years ago.”

The backers of Pacific Commerce Bank hope the bank can help revitalize a Japanese American community struggling to maintain its relevancy in an increasingly multiethnic world. The bank’s investors include Japanese American community leaders such as George Aratani, founder of tableware maker Mikasa Inc. and stereo company Kenwood Corp.; Frances Hashimoto, president of the Mikawaya bakery in Little Tokyo; Dale Okuno, founder of E-Z Data Inc., a Pasadena technology firm; and Tom Iino, a partner at Deloitte & Touche.

“I’m very big on cultural preservation, particularly with the generations going forward, the sansei [third generation] and yonsei [fourth generation],” said Iino, whose father, Sho Iino, was the first Japanese American accountant certified in California. “If this bank is successful, it will be an entity the community feels good about and perhaps will stimulate some thinking about the future of Little Tokyo.”

The Japanese American community’s challenge can be seen in the numbers. Though Asian Americans are the fastest-growing minority group in this country, there are few newcomers coming to the United States from Japan. Many of the first- and second-generation Japanese American immigrants have passed away, and their children and grandchildren have assimilated into mainstream society.

Nationwide, Japanese dropped from the third-most-represented Asian ethnicity in 1990 to the sixth in the 2000 census. About 250,000 Japanese Americans and 54,500 Japanese citizens live in Southern California, according to the Japanese Consulate in Los Angeles.

“The Japanese American community is dispersed and shrinking,” said Henry Ota, a prominent Los Angeles attorney who helped Kasamatsu launch the bank. “The challenge for the Japanese American National Museum, the Japanese American Cultural and Community Center and the bank is to build a strong enough foundation today to allow us to be successful in the broader community tomorrow.”

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Wartime Loss

The Japanese American community lost much of its wealth during World War II, when 120,000 men, women and children -- most of them U.S. citizens -- were uprooted from the West Coast and sent to internment camps. When the internees returned to California after the war, there were no Japanese American businesses to serve them, so they banked at the Japanese-owned banks that had branches in major U.S. cities.

Over the years, several small financial institutions were started by Japanese Americans. The best-known was Merit Savings Bank, which was launched in 1962 and nearly sank under bad real estate loans before it was acquired by the now-defunct Charter Savings Bank in 1988. In 1995, state regulators closed Torrance-based Pacific Heritage Bank, a 15-year-old institution serving primarily Japanese American customers, after it ran into debt problems.

Bank mergers or acquisitions often create specialized niches that small community banks can capitalize on, according to James Jones, an executive vice president at Carpenter & Co., an Irvine investment bank specializing in financial services. Jones, who served as an advisor to Pacific Commerce, said the bank’s biggest challenges will be reaching Japanese American customers scattered across Southern California and expanding to other communities downtown.

“The issue for the bank will be to generate the loan demand that will allow them to grow and develop the deposit relationships to balance that loan growth,” Jones said.

The bank’s goal is to have $40 million in assets and $35 million in deposits in its first year of operation.

Pacific Bank’s top priority is Little Tokyo, which was a thriving commercial center for the nation’s largest Japanese community in the 1920s. As the community began to disperse, the neighborhood became a retail center aimed at Japanese tourists and a home for the major Japanese American cultural establishments. Spillover from the Toy District and Chinatown has brought more ethnic diversity to the area, which is why Kasamatsu hopes to add a Spanish-speaking staffer.

To give Little Tokyo’s small-business owners a better shot at financing, Kasamatsu said, he will evaluate credit applications individually rather than using the credit scoring system commonly used by large banks.

“There is $800 million in deposits in this area,” he said, referring to Little Tokyo. “If we can get 10% of that, we will be successful.”