U.S. Bancorp on Friday acquired nine banks held by FBOP Corp, picking up $18.4 billion in assets after regulators seized a major Los Angeles lender and eight other banks in the latest failures to emerge from the financial crisis.

Among the banks Minneapolis-based U.S. Bancorp acquired was Los Angeles-based California National Bank, taken over by regulators on Friday in what the Los Angeles Times called the fourth-largest U.S. bank failure this year.

Bank failures in 2009 hit 106 last week, their highest annual level since 1992, with more expected to come. The largest institution to fail in the current financial crisis was Washington Mutual, which boasted $307 billion in assets when it was shuttered in September 2008.

Visibly worried employees lined up to file into Cal National's head offices in the heart of a deserted downtown Los Angeles on a chilly Friday evening, where they had their employers' fate explained to them, regulators said.

We're getting ready to turn everything over to U.S. Bank, said Roberta Valdez, a spokeswoman for the Federal Deposit Insurance Corp, which helped supervise the transfer of FBOP's assets. They will continue to operate as normal in the interim, she added, referring to lenders acquired from FBOP.

U.S. Bancorp -- which has been buying up distressed assets this year -- is picking up eight other lenders once owned by FBOP, a private Illinois group with over $18 billion in assets that owns banks in Texas, Illinois, Arizona and California.

Cal National is FBOP's largest bank by branches. Others that will now go under the U.S. Bancorp umbrella included BankUSA, Citizens National Bank, Madisonville State Bank, North Houston Bank, Pacific National Bank, Park National Bank, San Diego National Bank, and the Community Bank of Lemont.

This transaction is consistent with the growth strategy that we have outlined many times in the past, which includes enhancing our existing franchise through low-risk, in-market acquisitions, said Rick Hartnack, vice chairman of consumer banking for U.S. Bancorp.

This transaction adds scale to our current California, Illinois and Arizona footprints.


In the near future, all nine lenders' branches will be re-branded U.S. Bank, which is the California-focused unit of U.S. Bancorp's that operates a network of more than 770 branches across Illinois, Arizona and California.

U.S. Bancorp did not specify what would happen to the new employees it inherits.

Cal National operates 68 branches across Southern California with more than $7 billion in assets. As of June 30, the lender maintained five times as much foreclosed property on its books and twice as many non-current loans as it had a year earlier, according to the Los Angeles Times, which first reported news of its evening takeover on Friday.

Cal National lost about $500 million on heavy investments in Fannie Mae and Freddie Mac preferred shares, the newspaper added, referring to securities rendered nearly worthless by the government takeover of the mortgage firms last year.

A bank official who answered the main number at Cal National's headquarters said they could not talk at the time.

More lenders are expected to go under this year as the industry tries to get a handle on commercial real estate loans that will continue to worsen, as more strip malls go vacant and residential developments stall.

Banks held about $1.7 trillion in commercial real estate loans at the end of September, according to Federal Reserve data, or about 15 percent of their total assets. But to the extent these loans weaken, small banks are likely to be hit the hardest because larger banks were better diversified.

Banks that analysts say could risk big losses include Salt Lake City's Zions Bancorp, Columbus, Georgia's Synovus Financial Corp and Dallas-based Comerica Inc.

The Wall Street Journal had reported earlier this month that U.S. Bancorp was conducting due diligence on FBOP.

Before FBOP, U.S. Bancorp bought Downey Savings of Newport Beach and PFF Bank & Trust of Pomona when those thrifts failed last November, the newspaper said. Just this month, U.S. Bancorp bought 20 Nevada branches from BB&T Corp., which had acquired them as part of its deal to buy Colonial BancGroup Inc, it added.

(Additional reporting by Mary Milliken; Editing by Bernard Orr)