The Los Angeles banking industry could be in for some consolidation now that six local institutions have received government investments under the U.S. Treasury Department's $250 billion financial rescue plan.
The government has said it hopes banks use the bailout funds to increase their lending activity. But some analysts believe the infusions which totaled slightly more than $1 billion locally could help larger banks take over struggling smaller ones, particularly since most of the money has been given to relatively healthy banks that now may have excess capital to put to use.
"Thus far, most of the banks where we've seen preliminary approval or actual issuance of the preferred shares, the banks have been stronger banks with a good balance sheet," said Aaron James Deer, a stock analyst who follows several local banks, including City National Corp. and Cathay General Bancorp.
"Certainly the government has indicated that it would like to see the banks use the funds to ramp up their lending, (but) I think there's likely to be an increase in M & A; activity."
Beverly Hills-based City National, which with $16.1 billion assets is the area's largest bank, became the first local bank to secure government investment when it announced Oct. 26 that it will get $395 million under the Troubled Assets Relief Program.
More recently, Cathay, East West Bancorp Inc., Nara Bancorp Inc., Wilshire Bancorp Inc. and Broadway Financial Corp. said they would receive infusions ranging from $9 million to $316 million.
City National Chief Executive Russell Goldsmith has stated publicly that his bank would consider acquisition opportunities. However, Paul Hudson, chief executive of Broadway Financial, the holding company for Broadway Federal Bank, said his institution would use the money for its intended purpose.
Meanwhile, 1st Century Bancshares Inc. was one of the rare banks to specifically announce that it would not be applying for the funding. The Los Angeles bank said it believed it had enough capital for its purposes.
1st Century Chief Executive Alan Rothenberg agreed in a recent interview that in a troubled market there are deals to be had for those with the money.
"With all the problems in the financial sector, there's going to be opportunities and we're going to look at all of them," he said.
In a bid to extend its reach into Southern California, Denver-based First Western Financial Inc. has acquired its second local investment management firm since June.
First Western announced this month the acquisition of Los Angeles-based Ryder Stilwell Inc., which had 11 associates and $110 million in assets under management. Ryder Stilwell focuses on long term, steady investments for high net worth individuals and families. Terms were not disclosed.
Founded in 2002, First Western has had an aggressive growth strategy that included the purchase of several wealth management firms across Colorado and into California. In June, the company acquired Financial Management Advisors LLC. Corp. The Los Angeles firm specializes in pension funds and other institutional clients, as well as high net worth individuals.
In addition to its wealth management subsidiary, First Western is the holding company for First Western Trust Bank, a private bank with $2.5 billion in assets.
Struggling FirstFed Financial Corp., the holding company for struggling First Federal Bank of California, said last week that it has opened a branch in Thousand Oaks.
The announcement comes amid an expansion initiative that has seen the thrift open six new offices since January.
Though the institution has risk-based capital ratios that are in excess of 15 percent, qualifying it as well-capitalized, FirstFed has worried investors with its loan portfolio, which contains a significant number of pay-option adjustable rate loans. The company recently reported a $51.6 million third quarter loss as a result of charge-offs for the bad loans.
Shares of the company closed Nov. 19 at $4.19, off more than 90 percent from its 52-week high.
Comings & Goings
First California Financial Group Inc., a Westlake Village-based holding company for First California Bank, announced that its chief credit officer, Walter Duchanin, died unexpectedly Nov. 18. He was 55. The cause of death was not announced. Chief Executive C.G. Kum will assume Duchanin's responsibilities until a replacement is named . Tony Radaich has been appointed executive director of CNM LLP, a Woodland Hills-based accounting and advisory firm.
Staff reporter Richard Clough can be reached at email@example.com or at (323) 549-5225, ext. 251.
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