SAN DIEGO -- After much speculation and rumors, a long-time San Diego banking institution was shut down Friday by the federal government, 10News reported.

As part of the takeover, an insertion team consisting of Federal Deposit Insurance Corporation (FDIC) agents and representatives from U.S. Bank arrived at San Diego National Bank's downtown branch to go over documents and computer systems.

San Diego National Bank is owned by privately held Oak Park, Ill-based FBOP Corp. California National Bank, also owned by FBOP, along with its 68 branches, will be reflagged as U.S. Bank, along with eight smaller banks.

An FDIC official said the bank will open at its regular Saturday business hours and all money in the bank is safe and accounted for.

All 28 branches in San Diego are going through the same process, and 17 offices of the sister bank in San Francisco, Pacific National, is also part of the takeover.

San Diego National Bank lost over $40 million in the second quarter of the year, and almost five times that in the Fannie Mae and Freddy Mac situation in 2008.

"They need a cushion to absorb losses when mortgages go bad. They need a cushion to absorb it. If that goes away, it's time to shut down the institution," said David Ely, a professor of finance at San Diego State University.

The federal takeover of San Diego National Bank is the fourth largest in 2009. As with the other federal takeovers, bad investments and defaulted loans were to blame.

Since the downturn of the economy, 106 banks have failed. Though there are signs of recovery, some experts said more banks are likely to suffer the same fate as San Diego National.

"People out of work, struggling to pay the mortgage, credit cards … they're going to eventually end up as bad loans at financial institutions," said Ely.

Ely said there is a market for smaller banks, but customer loyalty is the key.

"A failed institution still has goodwill built up with its customers. Another bank will pay a premium for that goodwill," said Ely.

Experts said when a bank is taken over on a Friday, customers see little impact at the time the bank re-opens the following Monday.

Customers with questions about the closure can call the FDIC at 800-913-5861 between 9 a.m. and 6 p.m. Saturday, noon to 6 p.m. Sunday and 8 a.m. to 8 p.m. weekdays.