Minneapolis-based U.S. Bancorp says its transformation of failed Newport Beach-based thrift Downey Savings & Loan is complete.
U.S. Bancorp took over Downey’s $9.7 billion in deposits and 34 local branches eight months ago as part of a government-brokered deal after the thrift was deemed a failure from too many bad home loans.
The absorption of Downey happened relatively quickly.
Rival Wells Fargo & Co. still is in the early phases of absorbing Wachovia Corp., which was taken over at the point of near collapse last fall.
JPMorgan Chase & Co. has converted local branches of failed thrift Washington Mutual Inc. but still is integrating other parts of the business.
The Downey takeover, which was smaller than those of Wachovia or Washington Mutual, gave U.S. Bancorp a Western foothold, according to Chairman and Chief Executive Richard Davis, a California State University, Fullerton, graduate who lives in the Minneapolis area and calls Southern California “home.”
For the 12 months through June, the bank said it saw a 25% increase in local deposits above and beyond what it gained by absorbing Downey. U.S. Bancorp has an estimated $4 billion in local deposits.
Executives at the bank, which has about 970 workers in the county, said the takeover saw few hitches. They declined to say how many jobs were lost in the transition.
A year ago, Downey employed about 1,400 people here, though the thrift went through dramatic cutting before it was taken over by U.S. Bancorp.
Nearly 700 former local Downey employees, who worked mostly in branches as tellers and other customer service roles, stayed at their posts, said Darrell Brown, a senior vice president and region manager for the bank in Orange County and Los Angeles.
“Our strategy was to make sure everyone who worked directly with customers stayed put,” he said.
In all, U.S. Bancorp acquired 145 branches in Arizona and California and more than 2,200 employees from Downey.
All of Downey’s branches were converted to U.S. Bancorp’s U.S. Bank brand. It plans to add a branch in Irvine this year.
Branch workers, many of whom were said to have felt lucky to still have jobs, were retrained. U.S. Bancorp also held on to two managers who oversee the branches, one for the northern part of the county and one for the south.
The former Newport Beach headquarters building of Downey’s parent, Downey Financial Corp., was taken over by the Federal Deposit Insurance Corp. and is being marketed for sale by the government.
U.S. Bancorp moved local administrative offices to Irvine.
Unlike Downey’s business, which was driven mostly by collecting deposits and making home loans, U.S. Bank focuses on a wider range of services, including business banking, credit cards and investment accounts.
“Our biggest challenge was making sure everyone learned this,” Brown said. “There was a four-month period for all to be certified.”
Learning U.S. Bank’s history, calling customers by their names, making eye contact and saying “thank you” were part of the training.
The changes were minor, according to Brown, down to dress code.
“We had a lot of similarities,” he said.
Business Banking
Business banking has been flat with less demand from customers, according to Bill Cave, market president for the bank in OC and the Inland Empire.
Downey didn’t have much business banking before U.S. Bank took it over, he said.
Many of the branches now have business banking specialists.
“There are a lot of faithful Downey customers who are business owners who we plan to convert as customers,” Brown said.
Locally, U.S. Bank plans to cater to businesses with $10 million to $250 million in yearly sales. Its corporate office handles anything more than that.
U.S. Bank doesn’t plan to make home loans with initial low rates that reset higher,those adjustable mortgages proved the undoing of Downey.
The bank did hold on to lending workers, including its executive leader.
A couple hundred workers from Downey’s mortgage department moved to an operations center in Los Alamitos, where U.S. Bank handles underwriting and loan processing.
The bank, which had sidestepped many of the problems in home loans that crippled some of its competitors, expects “to continue to increase the allowance for loan losses until credit quality has stabilized,” Chief Executive Davis said.
U.S. Bancorp agreed to assume the first $1.6 billion in losses from Downey, with the FDIC assuming an estimated $2.1 billion in additional losses.
