The nation's economic crisis is having an unexpected positive impact on a select few local banks and thrifts, even as jittery customers are pulling their money out of others.

The financial industry landscape in Los Angeles is being reshaped as customers flock to what they perceive to be sounder institutions, redistributing billions of dollars of deposits in advance of what may be a wave of bank branch closings and rebrandings.

"Customers are seeking safety," said Henry Walker, chief executive of Long Beach-based Farmers & Merchants Bank, the sixth largest local bank with $2.2 billion in deposits as of June 30, according to the Federal Deposit Insurance Corp.

"When times are good, being a conservative bank isn't exactly in vogue, but in these times, everyone is constantly re-assessing where they are and what they're doing."

In July alone, Walker said Farmers & Merchants, with 22 local branches, gained $170 million in deposits. The bank followed that up with another $80 million in August and more than $100 million in September. All in all, third quarter deposit growth has been about three times greater than normal, Walker said.

At the same time, however, the more volatile institutions have lost deposits while struggling through a once-in-a-generation financial crisis. Already, a handful of high-profile institutions have collapsed or been acquired by larger competitors.

Homegrown mortgage lenders Countrywide Financial Corp. and IndyMac Bancorp, each of which had fledgling retail banks, have already succumbed to the financial turmoil Countrywide bought by Bank of America Corp. and IndyMac seized by federal regulators.

Meanwhile, Seattle-based Washington Mutual, this area's No. 2 depository institution, was seized by federal regulators and then swallowed up by JP Morgan Chase & Co. last month. And Charlotte, N.C.-based Wachovia Corp., which has 34 local Wachovia Bank branches, has been the subject of an acquisition struggle between Wells Fargo & Co. and Citigroup Inc.

Washington Mutual, the nation's largest thrift, held more than 10 percent of all the deposits in the county as of June 30. JP Morgan Chase has not announced if it will close any of the thrift's nearly 200 L.A. branches. The other institutions also would not comment on their branch plans.

"Right now, a lot of people are afraid and don't know if their bank will survive or not," said Wade Francis, president of the bank consulting firm Unicon Financial Services Inc. in Long Beach.

Deposit transfers

This redistribution began in earnest in early summer, as the mortgage market troubles began hitting local financial institutions particularly hard.

Pasadena-based IndyMac, which was the sixth largest financial institution in the county with more than $18 billion in deposits, became one of the most high-profile failures in the emerging financial crisis when it was seized by the FDIC in July. More than $1 billion in deposits were pulled from the thrift before the FDIC arrived, and most of the remaining deposits fled in the following weeks.

IndyMac turned out to be a harbinger of things to come as Newport Beach-based First Heritage Bank failed several weeks later, and Downey Financial Corp., also of Newport Beach, drew nationwide attention for liquidity troubles.

This left billions of dollars in deposits up for grabs, and Farmers & Merchants was not the only beneficiary. Institutions as diverse as Bank of America, the financial conglomerate that holds nearly 20 percent of L.A.'s deposits, and K-Fed Bancorp, a small Covina-based thrift, have grown deposits faster than usual.

"Bank of America is one of the most stable and liquid banks in the world, so we are clearly benefiting from consumer and business flight to safety, nationally and here in Los Angeles," said Brad Dinsmore, a Bank of America regional executive in Los Angeles, in an e-mail.

Bank of America saw an 11.5 percent increase in its portfolio in Los Angeles since January with about two thirds of that growth coming in the third quarter alone, according to Dinsmore's e-mail, which did not specify absolute dollar amounts.

City National Corp., the largest locally-headquartered bank company, has won deposits as well. The Beverly Hills-based bank is one of the healthier local institutions, managing to remain profitable even in these tough times. In a recent research report, Michael Diana, an analyst with Noble Financial Capital Markets, called City National "the best and most desirable small-cap bank franchise in the nation."

The bank has fortified its position by reaching out to customers to reassure them that their money is safe, said Chief Executive Russell Goldsmith.

"Whether it's IndyMac or Countrywide or some of the other banks that have experienced difficulties and visibility in the press, we're seeing a flight to quality in Southern California," Goldsmith said. "City National has definitely seen an increase in clients and deposits as a result, as have a few of the other big banks."

However, Goldsmith declined to provide specific information regarding deposit growth because the company has yet to release third quarter earnings.

Of course, once banks get new deposits, they have the issue of putting that money to work. That can be more of a head scratcher today, given the turbulent economy, but Walker, of Farmers & Merchants, said his bank looks for safe investments, such as Treasury securities.

Volatility fear

While steady institutions have benefited, more volatile ones are losing out.

FirstFed Financial Corp., a Santa Monica-based thrift, has several billion dollars tied up in risky option adjustable-rate mortgage loans and has been hurt by its perceived vulnerabilities.

Following the collapse of IndyMac, depositors and investors feared that FirstFed could suffer the same fate. Both FirstFed's deposit base and stock price dropped as a result.

"Right after IndyMac, people didn't know what to expect," acknowledged Babette Heimbuch, chief executive of FirstFed. "Because the FDIC took IndyMac and some depositors lost deposits, naturally everyone is concerned that can happen again."

In an Aug. 20 filing with the Securities and Exchange Commission, FirstFed said it had reduced its exposure to adjustable-rate loans and mortgage-backed securities, but retail deposits dropped 8 percent from the month prior.

A number of struggling institutions have fought back, hoping to regain customer confidence and bring lost deposits back. Some have been advertising high interest rates on certificates of deposits. FirstFed has sent letters to depositors and investors explaining federal deposit insurance and how that keeps their money safe.

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