Fueling the Koreatown Boom.

ESSENTIAL ingredients in the flurry of Mid-Wilshire investment activity are ethnic Korean banks, a fiercely competitive group that supplies a steady stream of capital to real estate investors and entrepreneurs in Koreatown.

Fueling the rapid growth of these institutions is the combination of Southern California's red-hot real estate market and a steady influx of capital from South Korean investors.

More than 60 percent of the loans generated by Hanmi Financial Corp., the largest ethnic Korean bank in Los Angeles, are in commercial real estate or owner-occupied business loans. That growth helped catapult Hanmi to $1.7 billion in assets in 2003, more than triple its $505 million in assets in 1997.

"Koreans have invested heavily in real estate in Southern California and the market has been really good, so they have exponentially grown their wealth," said Stephanie Yoon, Hanmi's manager of investor relations.

Hanmi, which opened in 1982, recently gobbled up its chief rival, Pacific Union Bank, to become the biggest Korean-American bank in the United States, now with $3 billion in assets.

With the field of publicly traded Korean-American banks winnowed down to just four, all of them with assets over $1 billion, local businessmen have opened new banks to compete.

In the past two years, three new Korean-American banks have cropped up to serve the local community: two-branch Mirae Bank in Koreatown; one-branch Pacific City Bank, also in Koreatown, and Buena Park's one-branch Uniti Bank.

On average, Korean-American banks have grown their assets 20 percent annually over the past 10 years. The tight-knit community of 350,000 Korean-Americans in Los Angeles relies heavily on personal relationships and family ties that are often the foundation on which business deals are built.

"Our president and our chairman are key drivers of growth because they basically know every rich man in town and every investor from Korea," said Brian Cho, chief financial officer and senior vice president at Wilshire State Bank. "So we can become the first choice of contact even if we offer the same pricing as our competitors."

One of the reasons Koreans have been able to secure a financial foothold in the U.S. compared with other immigrant groups is their relatively easier access to capital and strong ties to South Korea.

When the first flood of immigrants carne to the U.S. after visa barriers were lifted in 1965, few spoke English and even fewer understood local business or banking rules.

"You take an entrepreneur who comes from Korea and he starts a business and needs growth capital, he really has no ability to get a loan from Wells Fargo or any other big bank here," said Stewart Kim, an investment banker at PCP Capital Advisors.

The Korean government was the first to recognize the opportunity for growth in Los Angeles. Through its ownership of Korea Exchange Bank of Seoul, it opened California Korea Bank in 1978 to cater to the burgeoning immigrant population. The bank changed its name to Pacific Union and dominated the local market for 15 years. More important, it was responsible for creating a rash of competitors.

In the early 1980s, four other banks formed to rival Pacific Union, including Wilshire State, Hanmi, Center Financial Corp. and Nara Bancorp.

Since the mid-1990s, Korean banks have been inundated with the influx of investment dollars from South Korea, which views U.S. real estate as a safe haven, particularly during periods of political drama with North Korea. Investors on Wall Street have recently awakened to the banks' strong profitability and growth metrics. "When immigrants first come to the U.S., their initial investment is more geared to real estate because they don't know as much about other markets," said Cho.

Meanwhile, Koreatown has clearly recovered from the April 1992 riots that destroyed 2,300 Korean-owned businesses and caused roughly $350 million in damage.

Benjamin Hong, president and chief executive of Nara Bancorp, remembers driving to a local bank branch near the center of the looting at Olympic Boulevard and Vermont Avenue.

Hong gave his branch managers the authority to lend up to $100,000 to customers, whether of not they had any collateral. Even though Nara Bancorp had no time to evaluate whether anyone could pay back the loans, the bank's core customers--dry cleaners, grocery stores, hair salons and travel agencies--had to reopen. About 70 customers lined up for loans, and none of them defaulted.

"I had to come out and see my branch," Hong said in an interview last year. "And I had to help my people."