There are more Koreans in Koreatown than in pretty much any other place in the world outside of their native country. Same goes for Russians in West Hollywood. And Armenians in Glendale. And so on.

Not surprisingly, Los Angeles County, which has large populations of many ethnic groups, boasts one of the most extensive and developed networks of ethnic banks in the United States.

“We have the most in the whole country, without a doubt,” said Wade Francis, president of Unicon Financial Services Inc. in Long Beach and a frequent consultant to ethnic banks. “They are important. A business would much prefer to find a loan officer who can speak their native tongue than just going into a B of A. You go where you feel comfortable.”

Some of the county’s ethnic banks are well-known nationally. After all, Pasadena’s East West Bank is the largest Chinese-American bank in the country and Koreatown’s BBCN Bank is the nation’s largest Korean-American lender.

But Los Angeles also has a diverse community of smaller and lower-profile ethnic institutions, and the Business Journal focuses on them in this special report. For example, Pan American Bank in East Los Angeles serves the local Hispanic community, and downtown L.A.’s Manufacturers Bank has made inroads with local Japanese-American businesses. EH National Bank in Beverly Hills opted last year to switch its focus from general small-business lending to serving local Armenian- and Lebanese-owned businesses.

Many small ethnic banks have struggled in recent years: A local Cambodian-American bank couldn’t survive. And the ongoing sluggishness in the economy has led some ethnic banks to try to expand their business to more mainstream customers.

But others are doubling down in their chosen markets, looking to fill a deep demand for loans among ethnic customers who can’t or don’t want to borrow from a big bank.

Ethnic banks operate like mainstream banks but typically target minorities through advertising and opening branches in particular neighborhoods. The institutions also hire employees who speak the language and offer services desirable to immigrants, such as remittances or trade financing.

Yahia Abdul-Rahman, chief executive of Bank of Whittier, which makes no-interest loans that conform to Shariah law, said making customers feel welcome – even if they are thousands of miles from their home country – is the core mission of a community bank. For some lenders, that might mean embracing customs that are foreign to more mainstream American banks.

“We are a small bank that focuses on the communities,” he said. “That means personalized service.”

Diverse population

The diversity of Los Angeles makes it a natural home to many ethnic banks. For instance, the San Gabriel Valley and surrounding areas have nearly 500,000 Chinese-Americans, according to 2010 census figures. There are now more than 10 local banks catering to that community.

With high rates of entrepreneurship among many immigrant groups, ethnic banks have done big business with customers who might have a tough time with mainstream establishments. Perry Wong, an economist and director of research at the Milken Institute in Santa Monica, said despite efforts by large banks to reach out to ethnic communities, some lenders see risk among customers with little collateral or experience working in the United States.

“Bigger banks may view small ethnic businesses as higher risk and often decline the loans,” he said. “It’s not that they outright discriminate, but they just see a higher risk profile dealing with ethnic business connections.”

Ethnic banks, on the other hand, tend to have a better understanding of their groups’ customs and the way they do business. That understanding can increase a business owner’s chances of securing a loan.

“It goes beyond tellers speaking the language, beyond that convenience factor,” Wong said. “These smaller community banks understand what the client really wants.”

Still, cultural connections might not be enough to sustain an ethnic bank.

Golden Coast Bank in Long Beach was believed to be the nation’s only Cambodian-American bank when it was established in 2006. But with considerable losses during the downturn, the owners sold the institution, which changed its name to Evergreen International Bank. One person familiar with the lender said that despite the size of the community, there were not enough wealthy Cambodian-American customers to keep the original bank afloat.

What’s more, focusing on a narrow community can limit a bank’s business prospects, analysts said. For some institutions, that has become problematic in today’s climate as rising regulatory costs and sluggish loan growth has made it more difficult for smaller banks to remain competitive.

Richard Levenson, president of Western Financial Corp. in San Diego, an investment banking firm that caters to community banks, said some banks might need to shift their strategies to bring in more business.

“It would be advantageous for some ethnic-specific banks to look beyond just their primary marketplace,” he said.

Banco Popular, a large Puerto Rican bank that has a dozen L.A. County branches, changed its name last year to Popular Community Bank to help broaden its reach beyond the local Hispanic market. Manuel Chinea, senior vice president of the bank’s U.S. retail banking operations, said at the time that “the objective behind this is to be more inclusive.”

Not interested

Some ethnic groups, it turns out, aren’t interested in having banks that cater to them.

Francis, the bank consultant, said he was approached a few years ago by an attorney who wanted to start a bank in Los Angeles for Russian emigrants. But the attorney could not raise the necessary capital because many prospective customers were afraid that such a lender would have ties to the Kremlin or corrupt officials.

Meanwhile, despite Southern California’s large Hispanic population, there are relatively few banks catering to that community – and those that do are mostly small. Pan American, for instance, has just one location and $38 million in assets, making it the second smallest bank headquartered in the county.

Francis said some ethnic communities simply want to assimilate and use large U.S. banks, many of which have hired multilingual employees or introduced programs to appeal to minorities.

“Some groups just don’t want their own bank,” he said. “They want to blend in.”