Bank of Shorewood, Illinois, which survived the high inflation of the 1980’s and the savings and loan disaster of the 1990’s, collapsed today under the weight of bad loans.
The Bank was closed by state regulators who appointed the FDIC as receiver. The FDIC sold Bank of Shorewood to Heartland Bank and Trust of Bloomington, Illinois, which will assume all deposits of the failed bank.
Since its inception, Bank of Shorewood concentrated on community banking and personal service. The small three branch Bank was established in 1978 and was locally owned and operated. At the time of closing the Bank had total assets of $110.7 million.
All branches of Bank of Shorewood will reopen on Saturday as branches of Heartland Bank and Trust. Depositors will have full access to their money over the weekend through the use of checks, debit cards and ATMs.
Business conditions for small banks have become increasingly difficult in a slow economy. Smaller banks are experiencing slow loan growth, high costs from increased regulation and competition from larger regional banks. In addition, the declining real estate market is increasing bank losses by reducing loan recoveries on defaulted loans. Most of the small banks being closed this year were unsuccessful in raising additional capital. Investors will not commit new capital to struggling banks based on the poor fundamentals of the banking industry.
Bank of Shorewood received a prompt corrective action directive earlier this year that required the bank to raise an additional $2.6 million in capital. In different times, with a recovering economy, job growth and increasing real estate values, Bank of Shorewood would have had no difficulty raising additional capital.
Heartland Bank and Trust, besides assuming all deposits of Bank of Shorewood agreed to purchase all of the failed bank’s assets.
Heartland Bank and Trust previously acquired two other failed Illinois banks. Heartland bought failed Bank of Illinois in March 2010 and failed Western Springs National Bank in April 2011.
Heartland Bank and Trust is an 80 year old, locally owned bank that is regarded as one of the soundest banks in Illinois. Heartland, which was founded in 1971, has over $1.6 billion in total assets.
The cost to the FDIC for the closing of Bank of Shorewood is $25.6 million. Bank of Shorewood is the nation’s 62nd banking failure of 2011 and the 6th in Illinois.