Bay National Bank, which was created in 2000 in Baltimore, Maryland, in response to the unprecedented level of bank mergers and acquisitions, has finished its first decade in business by being closed down.

Established by a group of successful local business and community leaders, who teamed up with a number of seasoned banking professionals, they created a unique financial institution, one that would compete against the larger banks.

The mission of the bank's founders was to establish an institution where executives and customers knew one another, where there was little turnover in personnel, and where decisions were made fairly, efficiently, and locally.

On Friday however it all came to an end when Bay National was closed down by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.

The bank was in a loss situation over several quarters. In the first quarter of this year the bank lost $2.8 million.

To protect the depositors, the FDIC says it has entered into a purchase and assumption agreement with Bay Bank, FSB, of Lutherville, Maryland, to assume all of the deposits of Bay National.

The two branches of Bay National Bank will reopen on Monday as branches of Bay Bank, FSB.

Depositors of Bay National Bank will automatically become depositors of Bay Bank, FSB. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship in order to retain their deposit insurance coverage. Customers of Bay National Bank should continue to use their existing branch until they receive notice from Bay Bank, FSB that it has completed systems changes to allow other Bay Bank, FSB branches to process their accounts as well, an FDIC statement published on Friday said.

Over the weekend, depositors of Bay National Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual, the FDIC statement said.

As of March 31, 2010, Bay National Bank had approximately $282.2 million in total assets and $276.1 million in total deposits. Bay Bank, FSB did not pay the FDIC a premium for the deposits of Bay National Bank. In addition to assuming all of the deposits of the failed bank, Bay Bank, FSB agreed to purchase essentially all of the assets of the failed bank.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $17.4 million. Compared to other alternatives, Bay Bank, FSB's acquisition was the "least costly" resolution for the FDIC's DIF. Bay National Bank was one of two banks in Baltimore, Maryland, which was closed on Friday. The other was Ideal Federal Savings Bank. Prior to Friday the last FDIC-insured institution closed in Maryland was Waterfield Bank, of Germantown, on March 5, 2010.