When Jerry A. Grundhofer visits the U.S. Bancorp offices in his new California domain, he is treading on more than just familiar turf.

From Sacramento to Santa Monica, the management ranks of California’s community banks are staffed by executives who, at one time or another, worked for Mr. Grundhofer or his older brother John “Jack” Grundhofer during their early careers as California bankers.

The Grundhofer brothers are now working in tandem, having sealed their partnership in February when Jerry’s Milwaukee-based Firstar Corp. acquired Jack’s Minneapolis-based U.S. Bancorp. And their myriad ties to the state, business contacts, and similar histories of building by acquisition means that the question on everyone’s mind these days is not whether but when they will buy something in California.

Right now, Jerry Grundhofer, chief executive officer of the new U.S. Bancorp, is quick to say that he has a much narrower range of objectives. “We are focusing on this integration right now,” he said after a presentation at a bank mergers conference in Los Angeles last week. He declined to give his estimate on when the focus could shift.

Still, there are plenty of bankers in California who think an eventual buildup in the state is all but certain.

“The presumption is that once they’ve assimilated this major merger, they’ll build” on the smaller California banks they have acquired in the last couple of years, said Jim Hill, a Los Angeles investment banker who specializes in community banks.

Indeed, the pre-merger U.S. Bancorp had long-held, public designs on expansion in California. In an interview before the U.S. Bank-Firstar merger was announced, Jack Grundhofer, then chief executive of U.S. Bancorp, said, “in time it could become our largest state by deposits.”

A year before that, when the bank was announcing one of its California acquisitions, then vice chairman Richard Z. Zona said, “California is a fabulous market, it’s a place we want to be, and we want to be there in a bigger way than we are today,”

U.S. Bancorp’s acquisition pace slowed considerably after it bought Western Bancorp in Newport Beach (a holding company for two business-oriented community banks, Santa Monica Bank and Southern California Bank) and two San Diego area banks — Bank of Commerce and Peninsula Bank — in 1999 and 2000. But observers said they don’t expect the slower pace to last.

“They’ve been somewhat conspicuously absent in the market over the last several months,” so “we’re waiting for them to come back,” said Mr. Hill, the investment banker.

Indeed, analysts named U.S. Bancorp as one of the potential acquirers of Pacific Century Bank of Encino, Calif., after its parent, Pacific Century Financial Corp., announced plans to sell it. U.S. Bancorp’s senior California executive declined to comment.

The Grundhofers’ California-based lieutenants, three of whom have worked with Jerry or Jack at least once already, indicated they are eager to take advantage of growth opportunities.

U.S. Bancorp has its largest market shares in states outside of California, where it only has a hold on 2% of deposits. “Even though we’re based out of the Midwest,” the Grundhofer brothers “know the middle-market in California as well as anyone in the country,” said David Rainer, state president for U.S. Bancorp’s California commercial banking operations.

In the early 1980s, his graduate degree in hand, Mr. Rainer entered the training program of San Francisco-based Wells Fargo & Co. He then spent most of the decade in a “world run by Jack Grundhofer” — commercial banking, of which Mr. Grundhofer was appointed chief in 1980.

In 1989, Mr. Rainer left Wells Fargo for what was then Los Angeles-based Security Pacific Corp. There he joined an organization in which Jerry would play a senior role, becoming president and chief executive in 1990. When Mr. Rainer left Security Pacific National Bank shortly after it was acquired by BankAmerica Corp. in 1992, it was not his last encounter with the Grundhofers.

After running a small community bank in the San Fernando Valley called CU Bancorp with a group of ex-Security Pacific bankers, Mr. Rainer and chief executive Scott Carpenter sold the bank to Pacific Century Financial Corp. Mr. Rainer joined Santa Monica Bank, part of holding company Western Bancorp.

Just under 10 months later, Jack Grundhofer’s U.S. Bancorp bought Western Bancorp and Mr. Rainer found himself working for his old boss.

“They recognize all the potential California holds to the bank,” Mr. Rainer said of the Grundhofer brothers.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.