California National, other banks seized

LOS ANGELES, Oct. 31 (UPI) -- California National Bank and eight others owned by an Illinois company have become the country's fourth-largest bank failure this year, U.S. officials said.

The Federal Deposit Insurance Corp. said the 68-branch California National, of Los Angeles, and eight smaller banks also owned by FBOP, a privately held Oak Park, Ill., company, were seized by regulators Friday and acquired by U.S. Bank, the Los Angeles Times reported.

Among the other FBOP banks taken over were San Diego National Bank, with 28 offices, and San Francisco's Pacific National Bank, which has 17, the newspaper said. It quoted FDIC officials as saying the seizure of the nine FBOP banks -- which had combined loans and other assets totaling $19.4 billion as of Sept. 30 -- will cost the federal deposit insurance fund $2.5 billion.

A letter to California National employees, obtained by KTLA-TV, Los Angeles, blamed the bank's failure on its purchase of $855 million in preferred shares of Fannie Mae and Freddie Mac -- rendered worthless when the government placed the giant mortgage firms into conservatorship in September 2008, the Times said.

Before Friday's moves, 106 U.S. banks had failed this year, the newspaper reported.