Regulators closed eight banks Friday night including Chicago's ShoreBank, the politically connected institution that, despite its efforts, could not be saved from oblivion by investors.
It was one of the busiest nights for the Federal Deposit Insurance Corp. in recent memory. The last time more banks were closed in a single day was Oct 30, 2009, when regulators seized nine banks.
ShoreBank was by far the largest closure of the night. The bank had $2.16 billion in assets and $1.54 in deposits.
Friday's closures also include:
Los Padres Bank; Solvang, Calif.; with $870.4 million in assets and $770.7 million in deposits.
Butte Community Bank; Chico, Calif.; with $498.8 million in assets and $471.3 million in deposits.
Sonoma Valley Bank; Sonoma, Calif.; with $337.1 million in assets and $255.5 deposits.
Pacific State Bank; Stockton, Calif.; with $312.1 million in assets and $278.8 million in deposits.
Independent National Bank; Ocala, Fla.; with assets of $156.2 million and deposits of $141.9 million.
Community National Bank at Bartow; Bartow, Fla.; with $67.9 million in assets and $63.7 million in deposits.
Imperial Savings and Loan Association; Martinsville, Va.; with assets of $9.4 million and deposits of $10.1 million.
The FDIC arranged for other financial institutions to take over the branches, deposits and most of the assets of those failed banks. The combined cost of the closings to the FDIC's deposit insurance fund is an estimated $473.5 million, with ShoreBank's failure costing $367.7 million.
Friday night's bank failures bring the 2010 total to 118. Sonoma Valley Bank had received $8.3 million in taxpayer aid through the Troubled Asset Relief Program. Its failure likely means that the Treasury Department's investment is now worthless.
Despite ShoreBank's relatively small size -- it had just 15 branches -- it had strong community support and the backing of prominent politicians, including U.S. Sen. Richard Durbin (D-Ill.). Rumors abound that Wall Street faced pressure to help shore up the bank.
According to the Chicago Tribune, ShoreBank developed a name as a community development bank and sought to reinvest in declining black neighborhoods starting in the 1970s.
ShoreBank had been trying to raise capital for about a year. Earlier this spring, financial instituions pledged $150 million to recapitalize the bank in hopes that the federal government would step in and provide aid through the Troubled Asset Relief Program. That government assistance never came.
But even with those connections, the bank was struggling. The bank lost $39.6 million in the first half of this year, and lost $119.2 million in 2009.
In January, the Federal Reserve took action against ShoreBank, ordering it to stop paying dividends and issuing new debt, and instructing it to develop a capital plan. In March, the FDIC stepped in and issued a cease-and-desist order highlighting "unsafe or unsound" practices at the bank and calling for higher capital levels.
The bank is taken over by Urban Partnership Bank, a new institution. The Wall Street Journal reports that Urban Partnership Bank is led by William Farrow -- ShoreBank's president and chief operating officer -- and is backed by Bank of America, Goldman Sachs Group Inc. and Morgan Stanley, among others. That group includes some of the same firms that tried to bail out the bank.