Niche Accent Profile: Bank Of Whittier

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BANK OF WHITTIER

Whittier

FOUNDED: 1982

CEO: Yahia Abdul-Rahman

FOCUS: Muslims and other customers

following religious

prohibition on interest

L.A. COUNTY BRANCHES: 1

The subprime lending crisis hurt many banks and borrowers. But it barely affected Bank of Whittier – and that’s no coincidence.

That’s because the 30-year-old bank follows Islamic precepts against paying interest, which insulated it from upheaval in the market for adjustable-rate and other high-risk loans. Rather than give traditional mortgage loans, the bank does extensive market analysis on residential properties, buys customers’ homes and then rents the places back to them.

“That saved many of our members from the housing bubble,” said Yahia Abdul-Rahman, Bank of Whittier’s chief executive.

The small bank, which has $53 million in assets, serves local customers who follow the financial tenets of Shariah law, or what Abdul-Rahman calls the “responsible finance” model.

The institution’s prudent financial approach has resulted in low default rates: In a $6 million residential loan portfolio, for instance, only $72,000 was listed as past due in the third quarter. Bankers also counsel their customers to buy only what they can afford and pay off their credit card balances monthly.

Making money without charging interest can be tricky. Bank of Whittier does it by buying houses and charging customers rent at a level roughly equivalent of the market-rate payments on a traditional home loan with interest. The bank attracts a wide array of foreign-born customers, mostly from Asia, the Middle East and Northern Africa, and has 22 staffers who transact business in more than a dozen languages.

Abdul-Rahman and a group of investors bought the bank in 1998, but they already had experience with Shariah-compliant lending. In 1987, Abdul-Rahman helped start American Finance House, a boutique mortgage finance company in Pasadena now known as Lariba. That company is now an affiliate of Bank of Whittier, and the two companies often refer customers to one another.

While the bank’s policies and personalized customer service attract a loyal following, they are also limiting, Abdul-Rahman admitted. The bank’s business model is narrow and the returns are limited.

“It is very difficult to find qualified and committed staff who believe in the cause,” he said. “It is difficult to find patient capital that would help us grow our business.”

Originally from Egypt, Abdul-Rahman arrived in the United States in 1968 as a postgraduate student at the University of Wisconsin, Madison. Over his career, he worked for major U.S. oil and natural gas producers, got an engineering doctorate and was tapped by the World Bank to help start the Industrial Bank of Kuwait. In 2003, he took early retirement as a financial consultant to help run Bank of Whittier.

At the bank, he focuses on first-generation immigrants who need their first checking accounts or want financing for their small-business ventures.

“I remember when I came to America, I did not know the way to the bank and regarded borrowing as an unacceptable social behavior. In fact, many immigrants suffer from that lack of knowledge,” he said. “We want to help them move out of their small apartments to a decent house in order to send their children to decent neighborhood schools and integrate in America and participate in the American dream.”

— Karen E. Klein

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