It was the new bank on the block seven years ago. Now one recession and five straight losing years later, Ohana Pacific Bank finally has turned the corner.

The state’s smallest bank still has only one branch, but it has posted profits the last two years, is on track for a third straight positive year and is exploring adding a second branch in the Kalihi area soon.

Still, when you’re operating in an environment that includes banking heavyweights First Hawaiian Bank and Bank of Hawaii, getting your name out and attracting customers can be the biggest challenge.

Just ask Ohana Pacific President and CEO James Hong. Informing people he meets when shopping or playing tennis that he is CEO of Ohana Pacific Bank can result in a blank stare.

“Some of the people don’t even know about us,” Hong said from his 11th-floor corporate office above the bank’s ground-floor branch, a block from Ala Moana Center. “I have to explain to them we’re on Kapiolani, and they say, ‘Yah, yah, yah.’ So, it’s been difficult. First we have to let them know about us. Otherwise, how can we attract those potential customers? That’s the big challenge for us.”

Ohana Pacific, which opened on June 1, 2006, targeting the Korean-American community and small businesses, reached a milestone in May when it topped $100 million in assets.

Along the way, it has had to overcome some regulatory hurdles stemming from delinquent loans that drained the bank’s capital, as well as internal management issues.

But the South Korean-born Hong, 59, who was chief credit officer for First Standard Bank in Los Angeles before taking over at Ohana Pacific in May 2010, says the attitude around the bank has changed for the better.

“When I first came here the atmosphere was kind of negative,” he said. “There were a lot of complaints, and there were a lot of unhappy voices. But right now I think we’ve pretty much resolved all those issues and we’re in a good mood. But the challenge is when you break $100 million, you want to break $200 million and then $300 million. So as a business person, you have to worry about the next step. It’s a continuous thing. I don’t think there will be an end where I will be completely happy, but compared to three years ago, year by year we’ve been making progress.”

Ohana Pacific, which has 19 employees, lost a combined $7.4 million its first five years. That raised some red flags with the Federal Deposit Insurance Corp. and the state Division of Financial Institutions.

So after raising $14 million in capital to get off the ground in 2006, the bank had to attract additional capital and raised $3.4 million in 2010 and $1.1 million in 2011.

“That was primarily because of the loans,” Hong said. “You take a big loss on loans and that’s going to eat up your capital. So we ended up having a lower capital ratio and had to boost it up. We never really had a low capital ratio, but because of some loan problems in the initial years, the regulators were a little concerned because the bank had only started a few years earlier and then started having loan problems.

“There were some other factors that were regulatory issues, like management control. Because we’re a small organization, we don’t really have a big staff, so it’s difficult to have good, qualified people in every sector of the business. But even though it’s a small bank, we still have the same vision as the larger banks. It may be a one-person department, but now I think we have a more qualified, more stable management team, and the regulators are really happy with our results.”

Ohana Pacific finally turned a profit in 2011 when it earned $470,000 and followed that up with a profit of $833,000 in 2012. Through the first quarter of this year, Ohana Pacific had net income of $279,000.

Its largest shareholder, Chairman Donald Kim, owns 21.45 percent of the company, while Donald Kang, a board member and the owner of Hilo Hattie, is the second-largest shareholder at 6.3 percent.

“We offer exactly the same things that any big bank offers product-wise, but when you choose a bank, the service level, the people, the efficiency, those are the key factors that the customers would like to see,” Hong said. “Obviously, as a small bank just newly opened, it’s difficult to attract other customers who already have had existing relationships for many, many years. It’s hard to transfer them to our bank, but we’re gradually doing that and I’m proud of the services we can offer — very prompt, very accurate and very friendly. That’s the main thing, but we have other, more technical features.”

For example, Ohana Pacific routinely calls its customers if their checking account is overdrawn.

“That kind of service is probably hard to find in bigger bank relationships,” Hong said. “Loan decisions are also a lot quicker than the bigger banks.”

And even though Ohana Pacific has just one ATM — a drive-thru outside its 2,992-square-foot branch at 1357 Kapiolani Blvd. — it pays all the fees its customers incur when they use other banks’ ATMs.

Hong said the bank never expected to be profitable from the start due to startup and overhead costs, but the bank’s early efforts are starting to pay off.

“That’s just the natural process,” he said. “In the initial years most banks used to take two or three years before breaking even. But we happened to be in a flat economic situation when we opened the bank. So that initial period extended a little bit — four years, five years — to break even. It took us a little longer.

“To be more specific, we had to develop more customers. We were able to increase our loans and deposits, and we cut down our overhead expenses. In the initial years we had some credit losses, too, and then we were successful resolving all those issues. There were also regulatory issues as well that have been resolved. So it naturally brings us a little more positive reaction from the community. That’s how we attracted more people.”

Ohana Pacific, which had doled out about $70 million in loans through March 31, has roughly half of its lending portfolio, or $35.1 million, in the commercial sector. Business, consumer and lines of credit make up 34 percent, or $23.9 million; residential comprises 13 percent, or $9.2 million; and land development and construction make up $1.8 million, or 3 percent.

“One of our strengths is the small-business lending, say $100,000 or $200,000 to small-business people,” Hong said.

Hong said being a small bank has its advantages because it can process loans faster than larger banks and can adapt more quickly in changing product lineups. He also said the bank applies more flexible criteria when evaluating loan applications.

“It’s not necessarily lenient lending criteria, but it’s flexible to be customized to each different type of business or different situations of individuals,” he said. “The bigger banks normally tend to have a preset rigid criteria, for example, loan to value of 75 percent, 70 percent, and a certain percentage of cash flow that they accept. But when you look at the cash flow, what’s the components of cash flow?

“For example, foreign nationals, Japa­nese nationals or Korean nationals apply for the loan here (in Hawaii). Will they get the loan? Some banks will offer, some banks will not offer. Some banks will offer but will take years. When they look at the assets in foreign countries, how are they going to value that? For example, we might know the language, we might know their system in Korea and we might have better access to whatever they have in Korea. That’s an example of how we might be different.”

Chief Financial Officer Dianne Seo, who was hired in January 2012 from US Metro Bank in Los Angeles, said the bank is able to respond immediately to the needs of customers.

“There’s no hierarchy like the bigger institutions,” she said. “We can address customer service better. We have a smaller group of customers so we know them by heart, and we address issues if any issue arises. So there are some good things about banking with a smaller institution. It’s like being your family. We know each other very well.”