Open Bank (Los Angeles CA) (OPBK-OTCBB)
May 28, 2012 Issue
The Most Powerful Name In Corporate News and Information
With an Improved Net Interest Margin from 3% to a High 4% and a Strong Capital Position with Additional New Capital of $11 Million, Open Bank’s Management Team has Successfully Repositioned the Bank
Our Company ~ Open Bank is OPEN to serve your financial needs.
Our story began on June 10,
2005, as we opened our doors as First Standard Bank, a California
state-chartered bank headquartered in Los Angeles, California.
Our executives and officers
have many years in the banking profession with a significant part of their
experience concentrated in our unique market areas. The diversity of their
experiences and management styles helps to make our company strong and
create a good foundation for our new vision and future growth. We recognize
and utilize our individual strengths and together we create a synergy that
drives our bank. Our banking philosophy, work ethics, client service focus,
and local community involvement are perfectly meshed with the priorities of
our new Open Bank and we
will strive to continually improve products and delivery systems to meet our
business partners’ needs.
President & Chief Executive Officer
Ms. Kim, 52, is the President and Chief Executive Officer of Open Bank and also serves as a member of the Board of Directors of Open Bank since April of 2010. Prior to this appointment, she served as a CEO of Nara Bank and Nara Bancorp from November of 2006 to January of 2010. Through her leadership and her efforts to provide stability during a challenging period for the Bank, Nara Bancorp maintained a sound financial condition. In October of 2007, US Banker recognized her as one of the “Most Powerful Women in Banking”.
Ms. Kim started her career in banking upon graduating from the University of Southern California in 1982 with a degree in Business Administration. With over 30 years of banking experience, Ms. Kim has held a number of senior positions prior to joining Open Bank in 2010, which include Chief Executive Officer, Chief Operating Officer, Chief Credit Officer and Chief Credit Administrator among others.
Through her careers, Ms. Kim has held strong ties to the local community, working with a number of non-profit organizations to benefit those in need. She currently serves as a member of the board for Koreatown Youth and Community Center and for Open Stewardship Foundation and works with various local media/organization to help the local community affairs.
Interview conducted by: Lynn Fosse, Senior Editor, CEOCFO Magazine, Published - May 28, 2012
Ms. Kim: Open Bank was established about seven years ago. From the beginning, the bank had many difficult issues in terms of regulatory requirements. They were not able to make any profit for the first four to five years due to credit, operation, and compliance issues; in fact, they had depleted the capital. Therefore, they did not have a very successful story to tell. They were heading towards closure about two years ago with many years of heavy scrutiny from both the FDIC and DFI. Finally, the board decided to change the management team in 2010 and actively looked for a new CEO. I happened to be available at that time. My background in the banking industry extends over thirty years and I had recently resigned as the CEO of Nara Bank and Nara Bancorp, when the bank directors approached me to take the leadership for First Standard Bank (now Open Bank). The bank had many difficult issues. However, as I saw the issues on a more personal level, I thought that there was a great deal of room for improvement. I envisioned being able to turn the bank around with some major execution of new strategies and strong leadership. I took the assignment of CEO on April 1, 2010. At that time, we had three priorities that needed immediate attention. The first and biggest priority was that the bank had to raise capital to meet the minimum capital ratio requirements required by the regulatory agency. I raised about $11 million of new capital from the community. Another issue was that I had to re-staff and reestablish the management team. The bank did not have a CFO or CCO, as well as a strong management team. I reestablished the management team within the first six months. The third issue was that the bank did not have the business model to make us profitable going forward.
Ms. Kim: First, I had to reposition the balance sheet. I had to restructure the deposit mix because this bank was relying heavily on broker CDs (Certificates of Deposit) and paying over two percent above the prevailing market rate. They had less than ten percent of demand deposit accounts (DDAs) with core deposits less than thirty percent. Seventy percent of the deposits were from broker deposits, which are more costly. The bank’s cost of funds was very high with a very thin net interest margin compared to the peer banks. Initially, I wanted to restructure the deposit mix by running off the maturing CDs and replace them with core deposits, such as DDA and money market accounts through the hiring of relationship officers. Their responsibility is to bring in the deposits, loans, and new relationships to the bank. We are located in downtown Los Angeles and because of the location and the visibility, we do not have many walk-in clients, and have to go out and solicit new clients. In the past, this bank did not have a marketing team or a marketing business plan. They were just waiting for the clients to come and therefore, relying heavily on broker deposits to attract new accounts. I hired many relationship officers to bring in new clients and this created a major change in our culture. I asked them to build relationships and bring in new commercial and property loan deals. In order to be profitable, we have to grow to a certain asset size to cover overhead expenses. This bank did not have sizeable earning assets to cover fixed overhead expenses. Therefore, I had to look for new ways to increase fee income. We did not have many transaction accounts or much operational fee income. That is why we increased staffing in the SBA department, which could generate premium income for the bank in terms of gains on sale of loans. I established an SBA team in 2011 and we ranked among the top ten SBA lenders in the LA district. I established a fee income source to be able to cover our overhead expenses and the loan loss reserve requirements that we have to continue to address. Another challenge that I had to address immediately was to solve the sizeable classified loan problem. I have a very experienced chief credit officer who was able to handle problem loans to manage and monitor on a daily basis. During the first year it was more of restructuring our business model, deposit mix, loan mix and changing our bank image. We also changed our bank name to a more welcoming and shorter name, which also reflects our new culture of being a relationship bank and OPEN to serve our clients with their success. I changed the name from First Standard Bank to Open Bank in October of 2010. We published and marketed heavily our new brand and business model to the community and continued to address our problem assets. 2010 was the year for restructuring and reestablishing our position internally. 2011 was for building the balance sheet and making a profitable operation. With all that effort, as a result, by the end of 2011 we improved our net interest margin from three percent to a high four percent. Our capital position is very strong with additional new capital of $11 million and last year we had earnings of about $1.5 million net income.
Ms. Kim: Of course. That was their primary concern. We explained that the DDA, non-interest bearing account had unlimited FDIC insurance and interest-bearing accounts had up to $250,000 of FDIC insurance. This was a great deal of comfort to the new clients. I have been in the banking industry in our community for close to thirty years. I have established good credentials with our clients. They know me well from our previous relationship and they had confidence in me; that I would turn the bank around. They had a lot of trust in our new management team. It was very helpful to bring in new clients because of the reputation that we have established in our community.
Ms. Kim: We are mostly focused on commercial lending. Small to medium size manufacturers, wholesalers and service related businesses are the typical clients, as well as high net worth individuals. Because we are located in downtown Los Angeles, we are very close to the garment manufacturing industry. Therefore, many of our clients are engaged in the manufacturing of clothing and are in the freight forwarding business. Also, there are a couple of finance traders, importers, and exporters. Those are the typical lines of business that we specialize in.
Ms. Kim: Because of the service. We have many relationship officers who are assigned to each account. Each officer manages anywhere from thirty to fifty accounts. They provide all types of banking related services to each of their clients on a day-to-day basis. It is one person assigned to the client who becomes very comfortable with the client and it becomes convenient for them to bank with us. Since we have only one branch, we request our relationship officers to be a moving branch. When the client needs to have any service, the relationship officers go out and provide it for them. Services, such as picking up documents so that the client does not have to drive to the bank. We also provide remote capture deposit service to many of our business clients. They can make their deposits at their office. We provide online banking and ACH services, which are convenient online banking services. Since we are a small bank, even though they may be considered non-existent customers at other big banks, they get all the attention and service that they need from our employees. I, as CEO, also take care of them periodically for their needs. We listen to their comments and their business stories. Therefore, they feel comfortable and they feel that they have been taken care of and that they are VIP clients at our bank. Because of the relationship that the clients have established with the relationship officers and our senior management team, they feel like they are served with respect and with importance.
Ms. Kim: The Open Stewardship Foundation was established last year. As I joined the bank, the board and I shared the same vision, which was as a community bank. As we make a profit, we would like to share our profits with our community because they are the ones who support the bank. Our clients are our communities. We would like to give back to our community a better place to live in and a better environment. We made a commitment to ourselves that every year we will allocate ten percent of our gross income to our foundation. The funds will be used for better living for our community. That was the commitment that the board has made.
Ms. Kim: We are very sound and stable. We do not have any regulatory enforcement action. We would like to grow organically; with the plan to open new branches. To date we are about $150 million in assets. However, we expect to have twenty to thirty percent of asset growth in the next few years. Our plan is to grow organically through the opening of new branches in our community.
Ms. Kim: They have to look at the management team, what we can do, and what kind of management ability and experience and credentials we have and how we can make this bank profitable going forward. Historically, this bank did not make any profit. However, last year we made a profitable $1.5 million for the first time. This year it is going to be another strong year and we will continue to make a profit. Our financial target goals are to have stable consistent profits and growth. Our earnings per share continue to grow and our book value has continued to increase. Over the next three to five years, our investors will be very happy that they made investments at Open Bank. I came from a large publicly traded bank. I have a lot of experience in terms of making the bank profitable and sizable to increase the shareholders value. I know what I need to do and what I have to do in order to make the bank better and to meet the shareholders expectations.
Yes. This is very satisfying. The first eighteen months was a very
challenging assignment in which I had to turn the bank around from failing
to reestablishing it. It was not an easy job but now we have turned the
corner. We are out of the tunnel and I can see a bright future for us as we
During the first year it was more of restructuring our business model, deposit mix, loan mix and changing our bank image. We also changed our bank name to a more welcoming and shorter name, which also reflects our new culture of being a relationship bank and OPEN to serve our clients with their success. I changed the name from First Standard Bank to Open Bank in October of 2010. We published and marketed heavily our new brand and business model to the community and continued to address our problem assets. 2010 was the year for restructuring and reestablishing our position internally. 2011 was for building the balance sheet and making a profitable operation. With all that effort, as a result, by the end of 2011 we improved our net interest margin from three percent to a high four percent. Our capital position is very strong with additional new capital of $11 million and last year we had earnings of about $1.5 million net income. - Ms. Min J. Kim
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