Financial services directory.

Financial Services Directory

Befitting a major metropolis, Los Angeles County boasts headquarters for some of the nation's leading financial services companies and is served by many other major financial institutions.

Consolidation, however, is in the wind, as a potent recession weeds out the weak among the financial institutions and spurs others to reduce their operations or merge - most notably, the melding of California's largest commercial banks, downtown Los Angeles-based Security Pacific Corp. and BankAmerica Corp. of San Francisco.

Analysts expect a merger of California's other largest commercial banks, First Interstate Bancorp of Los Angeles and Wells Fargo & Co. of San Francisco.

Commercial banks make money from an interest spread between what they pay depositors for the use of their money and the rate they charge borrowers. They also earn money from fees charged for bank services like checking accounts, fees for nonsufficient funds in an account, trust and account receivables services for businesses.

With banks making relatively few loans, they are expected to turn more toward fees to supplement their income.

Savings and loans earn their money in a similar manner to banks although they specialize in long-term residential lending, loans for individual homes in particular. This concentration has become even more pronounced since the passage of a 1989 law which discouraged, and in some cases forbade, risky investments and loans.

Los Angeles County is headquarters to most of the largest S&Ls in the country, notably Irwindale-based Home Savings of America, Beverly Hills-based Great Western Bank, Mid-Wilshire-based California Federal Bank and Glendale-based Glendale Federal Bank.

Great Western and Home Savings are in expansion modes, taking advantage of the plethora of low-cost assets of failed S&Ls to buy growth. California Federal and Glendale Federal, with adequate though marginal capital, are selling off assets and cutting other costs in an effort to shore up their capital ratios. Like banks, further consolidation is expected in the thrift industry.

Also involved in the residential loan market are mortgage brokers and bankers. Mortgage brokers specialize in home equity loans, matching individuals who wish to sell their mortgage to raise capital with investors who buy the loans.

Foremost among mortgage brokers is Los Angeles-based Aames Financial Corp. Inc. - by far the largest mortgage broker in California.

Mortgage bankers, who specialize in underwriting mortgage loans, capture a greater share of the profit than do brokers in return for a greater share of the risk. The largest company focusing exclusively on mortgage banking in Los Angeles County is Countrywide Funding Corp. of Pasadena.

Like S&Ls, mortgage bankers are seeing most activity in refinancing, as lower interest rates make it worthwhile to pay off older, higher-interest mortgages by acquiring a new mortgage at a lower rate.

Credit unions are not-for-profit institutions typically formed by employees of a company, labor union or a religious group and operate as cooperatives. They typically offer a narrower range of financial services and make less risky loans than banks, but tend to offer lower loan rates and higher interest payments on deposits to their members.

Among the larger credit unions in the county are Hughes Aircraft Credit Union of Manhattan Beach, Los Angeles Water and Power Credit Union in downtown Los Angeles and Rockwell Credit Union of Downey.

In a recent development which may offer credit union users a wider geographic range of service, 17 credit unions throughout California agreed to buy into a shared branching network, the Pomona-based Credit Union Service Center, which will allow members to gain access to their institution throughout the state.

Another animal in the financial jungle is the thrift and loans - state-chartered, federally insured lenders that typically lend at a high interest rate to borrowers refused by banks and S&Ls. Since July 1, 1990, all thrift and loans which accept deposits have been required to be FDIC-insured.

Prominent thrift and loans headquartered in the county include Topa Thrift & Loan of Beverly Hills, Countrywide Thrift & Loan of Pasadena, Imperial Thrift & Loan of Burbank, Foothill Thrift & Loan in Agoura Hills and Community Thrift & Loan of Monterey Park.

Several large life insurance companies also reside in Los Angeles County, notably downtown Los Angeles-based Transamerica Life Cos. and several subsidiaries of Century City-based Broad Inc.

Los Angeles is also home to the defunct parents of two large seized life insurance companies, Executive Life Insurance Co. and First Capital Life Insurance Co., which were both taken over by the California Department of Insurance after large junk bond investments deteriorated and increasing numbers of policyholders began withdrawing their money in panic.

In addition to whole-life and term-life insurance products, which pay benefits upon the death of the insured, life insurance companies offer annuities, which promise regular payments from an earlier single or multiple investments.

Some insurers, like Executive Life, offer guaranteed investment contracts, relatively speculative investments which promise a high, fixed rate of return on an investment.

In the late 1980s, the trend was toward greater risk and higher return investments, although concern about insurers' quality of pricing and investments is pushing the industry toward more traditional investments and products.

The property/casualty market in California is dominated by automobile insurance. Automobile-happy Los Angeles County is one of the most important markets for auto insurance in the country - though also one of the most precarious, with arguments continuing over implementation of Proposition 103, which sought to reform the automobile insurance market and cut or contain rates.

Several local auto specialists like Twentieth Century Insurance Group of Woodland Hills and Mercury General Corp. of Los Angeles have grown rapidly by providing low-cost insurance to good drivers.

Larger property/casualty companies, such as Farmers Insurance of Los Angeles and Transamerica Insurance Group of Woodland Hills, provide a wide range of insurance lines, including property, liability, workers compensation and specialty lines of insurance. Like the overall property/casualty industry nationwide, rapid price increases are predicted in the near future as insurance companies effectively underprice themselves, analysts say.

The securities brokerage and investment banking industries have also been in a cost-cutting mode, stung by the recession and overleverage of the 1980s. In addition to the 1990 bankruptcy of junk bond brokerage Drexel Burnham Lambert and Woodland Hills-based MuniciCorp., most local brokerage have reduced their staffs.

The largest locally based securities firms include Torrance-based Financial Network Investment Corp., Long Beach-based Barbaran Securities Inc., Los Angeles-based Bateman Eichler Hill Richards Inc., an arm of Kemper Securities in Chicago, and Los Angeles-based Crowell Weedon & Co.

All of these brokerage houses trade in already existing stock in the secondary market, as opposed to investment banks, which underwrite new stock issues and arrange corporate mergers and restructurings.

Also stung by the recession is the venture capital business, whose firms take an equity investment in a promising growth company and then cash out in various stages of a company's expansion. Venture capital investments have been extremely tight, mirroring the recession and the greater risk it presents for small businesses.

Leading venture capital firms based in Los Angeles include Brentwood-based Brentwood Associates, Woodland Hills-based Greylock Management and Santa Monica-based Oxford Partners.

A number of other financial operations service the community, including appraisal and valuation firms, which evaluate the worth of property and other goods; business brokers, which buy and sell businesses too small for investment bankers to negotiate; factoring companies, which provide financing for companies in exchange for taking possession of receivables; real estate investment firms; money managers, who invest large amounts of cash in liquid investments; and financial advisers, who counsel individuals on how to establish a financial investment plan tailored to their needs.