This Week's Busted Banks

One more in Illinois brings the 2010 total to 110 in 32 weeks.

Regulators on Friday shut down a bank in Illinois, bringing to 110 the number of U.S. banks failures this year amid mounting loan defaults.

The Federal Deposit Insurance Corp. took over Palos Bank and Trust Co., based in Palos Heights, Ill., with $493.4 million in assets and $467.8 million in deposits. First Midwest Bank, based in Itasca, Ill., agreed to assume the assets and deposits of the failed bank.

In addition, the FDIC and First Midwest Bank agreed to share losses on $343.8 million of Palos Bank's loans and other assets.

The failure of Palos Bank is expected to cost the deposit insurance fund $72 million.

It was the second straight week marked by the failure of an Illinois bank. Last week the FDIC seized Ravenswood Bank, a small bank in Chicago. The closure of Palos Bank brought to 14 the number of bank failures this year in Illinois.

With 110 closures nationwide so far this year, the pace of bank failures far outstrips that of 2009, which was already a brisk year for shutdowns. By this time last year, regulators had closed 77 banks.

The pace has accelerated as banks' losses mount on loans made for commercial property and development. Many companies have shut down in the recession, vacating shopping malls and office buildings financed by the loans. That has brought delinquent loan payments and defaults by commercial developers.

This will only get worse as the economy continues to weaken.  Community banks like this are the heart and soul of the small business lending industry, and that's being wiped out by Bush siding with the huge megabanks in the TARP debate and Republicans refusing to allow Democrats to fund small business lending by assisting smaller community banks like the ones that are closing by the dozens each month.