By Becky Yerak | Harris Bank and Chicago-based Northern Trust Corp. have tentatively
agreed to participate in a possible financial bailout of teetering South
Side lender ShoreBank.
“Northern Trust has been a long-time supporter of ShoreBank and its
important role serving traditionally underserved communities,” said a
statement from the Chicago area’s biggest locally headquartered bank.
“We support its recapitalization and have committed several million
dollars to assist with this effort.” It didn’t say exactly how many
millions it was willing to kick in.
Also, Harris, a Canadian-owned lender that’s the third-biggest bank in the Chicago market in terms of deposit market share, has been tentatively penciled in for $3 million to $5 million, said a person familiar with the ShoreBank’s plight. Harris, which is already a ShoreBank investor, declined to comment.
JPMorgan Chase, already an existing ShoreBank investor, has agreed to tentatively invest another $15 million, people familiar with the matter say.
The bargaining to raise capital for ShoreBank continued through the weekend, with concerns being raised about whether the dollar commitments being lined up now will be adequate in the future if loan losses continue. The potential new and existing investors want to make sure that they don’t find themselves back in the same position in a few months.
The bank has been trying to raise more than $200 million. It needs to raise private capital before it can qualify for about $75 million it’s seeking from the U.S. Treasury Department.
As the Tribune reported last Wednesday, Goldman has made a tentative commitment of at least $20 million, and Citi has also expressed a willingness to take a leading role in the recapitalization.
Citibank is also willing to step up with at least $20 million or $25 million, a source said Monday. Goldman’s contribution could also be as much as $25 million.
Bank of America, also an existing supporter of ShoreBank, could be kicking in between an additional $5 million to $15 million, a person familiar with the talks said.
Existing investors would find their current stakes diluted if not wiped out due to ShoreBank’s problems and the need to raise fresh capital.
ShoreBank’s capital deficiency worsened in the first quarter, and the Chicago-based lender to hard-hit areas now needs to raise at least $179 million to meet targets set out in March by state and U.S. banking regulators.
In March, ShoreBank, which has been serving hard-hit urban areas, was effectively ordered to raise $158.7 million, but in light of newly released first-quarter financial results, it finds itself in an even bigger capital hole and now must raise even more.
Investors who have tentatively committed to lesser amounts include various foundations and State Farm, which also has been a ShoreBank shareholder.
A person familiar with the talks on Monday morning characterized ShoreBank’s chances to raise capital as 50-50.
U.S. Rep. Jan Schakowsky (D-Ill.) has called on U.S. regulators, not-for-profit investors, and Wall Street banks “to leave no stone unturned” to help save ShoreBank.
She said the big Wall Street banks have a “moral and economic obligation to step up and make certain that ShoreBank can continue serving Chicago’s low-income communities for years.”
Helping ShoreBank with its capital-raising efforts are former Chicago banker David Vitale, who will play a greater role at the bank if its capital raise is successful, and former U.S. Comptroller of the Currency Eugene Ludwig, now with Promontory Financial.
RE: ShoreBank has “demonstrated beyond question that banks can be profitable at the same time they invest in low-income neighborhoods.”
This is clearly NOT the case. If the bank was profitable, they wouldn’t be running around trying to get a bail out and donations so they don’t go out of business. Shorebank may do a lot of good, but maybe they should be a nonprofit, not a financial institution insured by the government–and ultimately, taxpayers.
Where is Rep. Jackson Jr. on this issue? The bank is in his his district! Is Sandi jacksin still the alderman? You never hear from her with all of the problems in South Shore!
On a superficial level it’s very easy to say the problems ShoreBank is going through are an indicator that investing in low-income situations is a failure, but that’s just simplistic logic. The Big Picture is much, much more convoluted. ShoreBank focuses on local community investment and ‘local’ is not downtown Chicago nor upper-end neighborhoods. Their target audience is the neglected element of our country, the parts of society that have suffered the most in this economic downturn. The big banking corporations, the ones that triggered this recession, pay little if any attention to Mom & Pop type loans. And the most bizarre part of this unbalanced scenario is the big banks are the ones getting the bulk of the Federal bail-out money. Not banks like ShoreBank that put community investment over pure profit. So yes, it’s easy to say ShoreBank doesn’t deserve help from ‘taxpayer’ money but personally I think ShoreBank deserves more support than Wall Street. Money that gets invested in any community stays primarily in the community, money going to big corporations is diverted to select, non-local banks, or worse, siphoned off into tax-free, non-U.S. banks. Small, local businesses were the foundation of America and even though the big corporations have done a great job convincing the public otherwise, the more we allow big business to concentrate our resources into a tiny part of the population, the closer we move our nation to banana-republic status.
All the arm-twisting from the White House Chicago mafia who have ShoreBank interests must have these bankers writhing in pain.
None of this ‘arm twisting’ is illegal.
When the government extorts money for it’s cronies it’s always legal.
What a transparent scam. Goldman trying to curry favor with the hand that bites them is hilarious to watch. Scamsters and pimps, the whole lot. With Oblabba leading the sordid parade. Oh, and don’t forget Jan (my husband’s a convicted felon) Schakowsky, quietly pulling the strings in congress.
Throw every one of these criminals OUT.