Downey Savings & Loan, headquartered in Newport Beach, and PFF Bank & Trust, based in Pomona, were heavily involved in high-risk mortgages, the Los Angeles Times reported. They lost millions of dollars when the California housing market collapsed.

"The closing of these two thrifts once again demonstrates the tremendous impact of the housing market distress on the state of California," John Reich, director of the OTS, said in a statement.

Downey lost $547.7 million in the first three quarters of the year. The bank had lent heavily in adjustable rate mortgages that allowed borrowers to make such small payments that the amount owed could actually increase.

Pomona First Federal lost $289.5 million. It lent heavily to developers in the Inland Empire, the area east of the mountains in Riverside and San Bernardino counties in Southern California.

Regulators say depositors will not lose any money and branch bank activities will continue normally.