Another Chicago Bank Fails

By Sean Stillmaker in News on Aug 22, 2010 3:00PM

Chicago-based ShoreBank, which primarily lended financing to the South and West side communities failed Friday and was seized by the Federal Deposit Insurance Corp. ShoreBank’s deposits and assets were acquired by Urban Partnership Bank, which will reopen the 15 branches, including those in Detroit and Cleveland, under the new name. It's closing marks the 15th Illinois bank to be seized by the Feds this year, and the 118th nationally.

ShoreBank started in 1973 as a micro financing bank. It’s vision was to give out loans to those in the community that demonstrated skills, a business model, but were turned down from larger banks as a risk or from a bad credit history. ShoreBank’s model seemed fundamentally flawed, but it’s philanthropic goals have been an asset of the community revitalizing the neighborhood. For over 35 years the bank stayed profitable while the poor were able to ascend their situation.

ShoreBank’s success and model caught the eyes of the Clintons when Bill was a governor in Arkansas. He decided to setup a similar bank, the Southern Development Bancorporation in 1988. It’s ShoreBank’s political connections that saved it with a bailout rather than liquidation. The FDIC is consuming 80 percent of the losses. The recession’s credit crunch and job glut hit the bank’s borrowers hard and led it to failing. Despite the dreary reality Urban Partnership Bank is applying to become a Community Development Financial Institution so is can still serve the mission.