Los Angeles-based banks overtake national banks in profits

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First Credit Bank in West Hollywood is the most profitable bank in Los Angeles County.

Big banks based outside Los Angeles County may have locked in the lion’s share of the local market, but a basket of local banks have racked up the profits.

On the contrary, last month’s $ 8 billion acquisition of New York-based MUFG Union Bank by Minneapolis-based US Bank shows how the LA County banking market is controlled by a few huge corporate giants. whose headquarters are everywhere except here.


Once the US bank completes the purchase of Union Bank from Japanese parent company Mitsubishi UFJ Financial Group Inc., the top five banks will control 62% of the local market. US Bank and Union Bank will have more than 170 branches in LA County and billions of assets, deposits and commercial loans. The combined organization will hold 10.4% of the LA County market based on deposit share.


Currently, US Bank holds 1.9% of the market while Union Bank holds 8.5%, ahead of Wells Fargo & Co.


“We don’t really have a large, significant local bank headquartered in the city center,” said Walter Mix III, managing director of Berkeley Research Group, an Emeryville-based financial advisory firm. “I think it’s interesting,” added Mix, who is based at BRG’s Los Angeles office.
Yet the city’s small banks have the financial strength to falter.

Small but mighty
First Credit Bank – which has assets of $ 441 million – holds the distinction of being the most profitable bank in Los Angeles County, as of June 30.



In 1979, First Credit Bank President Farhad Ghassemieh and his family fled Iran to the United States to find a bleak economy struggling with 15% inflation and double-digit interest rates. .


He needed a job and said he believed the time had come to start planning for a bank, even though many savings and loans and banks were failing at the time due to economic problems. .


His strategy was to form a new bank by merging two failed banks in 1983 in Blythe. Because he didn’t want to live in the High Desert, he moved the charter to West Hollywood. The move paid off.


In the second quarter of fiscal 2021, First Credit Bank had $ 234.7 million in deposits, $ 300 million in loans receivable and profit of $ 10.6 million.
That’s good enough to give the bank a 4.7% return on assets, more than double the second-most profitable bank, Rowland Heights-based First General Bank, at 2.3%, according to a Business analysis. Log of FDIC data filed by local banks.
Return on Assets, or ROA, shows how efficient a business is in using its assets to generate profit.


In Ghassemieh’s case, he said he believed his fortune was based on First Credit’s business lending strategy of lending at gas stations; convenience stores; and small family motels with 40 to 60 rooms.


Most of the big banks will not touch the high interest rate loans given to these type of borrowers, especially gas stations, because there are too many responsibilities associated with the environmental issues behind them.


But gas prices are high these days, and Ghassemieh sees no problem with loan repayments or potential debts.
“There is a good reason for our profitability,” said Ghassemieh. “Small banks are flexible. They welcome the borrower. We don’t have too many (corporate) restrictions.


Dominic Ng, chairman and CEO of Pasadena-based East West Bancorp Inc., the parent company of the $ 60 billion East West Bank and Los Angeles County’s largest independent bank in terms of assets, agreed with his smaller rival.


“They have a lot more flexibility to do what they can do,” Ng said. “And I would say that so far it is working well.”

Competitive landscape
Of the five most profitable Los Angeles County banks in terms of return on assets, four have total assets of less than $ 2.1 billion, which is considered minimal in the banking world.



First General Bank, with $ 1.17 billion in assets, has an ROA of 2.3%; Koreatown-based Pacific City Bank, with $ 2.09 billion in assets, has an ROA of 2%; and Arcadia-based American Plus Bank, with $ 583 million in assets, has an ROA of 19%.


Beverly Hills-based Pacific Western Bank, with $ 34 billion in assets, and which concocted 31 acquisitions between 2000 and this year, is the outlier in the ROA universe locally. The bank has an ROA of 2.1%, good enough for third place on the list of the county’s most profitable banks.


Since the pandemic began in early 2020, deposits with the county’s top 10 banks by market share have increased 25% to $ 25.4 billion as of June 30, from $ 20.4 billion. During the same period, loans grew 7 percent to $ 19.3 billion from $ 18 billion, and assets grew 18.6 percent to $ 29.3 billion from $ 24.7 billion. dollars.


“I have to tell you, things are very competitive,” said Chang Liu, chairman and CEO of Cathay Bank, a $ 20 billion-asset city center-based institution. “There is still a strong demand for loans and given the low interest rate environment, this has made the landscape possibly the most competitive I have ever seen. “

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