Shorebank’s financial hole deepens

By Becky Yerak
Posted Aug. 2, 2010 at 9:34 a.m.

ShoreBank’s capital deficiency worsened in the second quarter, according to newly submitted financial results to regulators, and the Chicago-based lender now needs to raise at least $190 million just to meet targets set out in March by state and U.S. banking regulators.

The South Side bank has arranged a capital infusion of about $150 million from Wall Street investment firms, big banks, insurance companies and philanthropic groups. It’s hoping that private investment will then make it eligible for about $75 million in bailout funds from the U.S. Treasury Department.

In June, the Tribune reported that the expected bailout of ShoreBank had hit a serious snag as federal banking regulators dragged their feet on whether to provide funding to the ailing South Side lender.

Concerns have been raised about whether $225 million will be enough to save ShoreBank. Fox Business reported in June that people with knowledge of the situation say the Fed believes that, to remain solvent, ShoreBank would need at least $300 million and probably more because of the toxic nature of its balance sheet.

About a quarter of its loans continue to be seriously delinquent.

ShoreBank declined to comment.

The Treasury relies on the advice of banking regulators such as the Federal Reserve and the Federal Deposit Insurance Corp. in doling out money that has been repaid from the other banks from a new program in Treasury’s Troubled Asset Relief Program.

The talk of using federal dollars to bail out $2.17 billion-asset ShoreBank, which prides itself on helping hard-hit areas, has provoked a backlash. Some have also called for a congressional inquiry into the ShoreBank matter.

After the financial reform bill was passed last month, President Obama said there would be “no more tax-funded bailouts.”

In March, ShoreBank was effectively ordered to raise $159 million based on its December 31 numbers, but its financial results have gotten progressively worse, creating the need for even more capital.

The undercapitalized bank has lost $39.5 million in the first half, and financial records show that its tier 1 capital levels have fallen to $4.1 million, from $26.2 million in the first quarter and $43.5 million at year end.

Regulators have asked ShoreBank to keep a tier 1 capital ratio as a percentage of total assets of at least 9 percent. Tier 1 capital includes common and preferred stock. The bank has been trying to raise about $200 million.


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  1. ejhickey Aug. 1, 2010 at 7:02 pm

    Let it die

  2. erikcaden Aug. 2, 2010 at 9:52 a.m.

    This is the only bank that tried to help people in lower or middle class areas achieve the American Dream buy funding them to become homeowners. Now, there is a backlash against this bank for essentially doing what banks are originally intended to do. This bank is looking for a small amount for bailout (in comparison to other banks who stole money, paid out exorbant bonuses and engaged in illegal activity). Why is it that when people need some help just to make it over the top, they are labled negatively. Large banks received hundreds of billions and they are still not issuing credit. Shorebank should be applauded for at least providing funding in the communities where they do business. Just because a bank just opoened a branch office in your area does not mean they are writing loans in that community, Shorebank, writes the majority of their loans in their own community.

  3. Chelle Aug. 2, 2010 at 11:03 a.m.

    Let ShoreBank fail. They are a fraud. They have let down the south shore community by refusing to restructure/modify residential and multi-unit loans.

    Good riddens.

  4. Gimmeabreak Aug. 2, 2010 at 1:44 pm

    Regardless of whether or not another larger bank paid out large bonuses or got a bigger TARP award is irrelevant. If the cash is paid back with interest, does it matter? I doubt any bank, large or small are issuing credit. They are all sitting on piles of money (mainly deposits) because investors have pulled out of liquid investments. Nobody is making any loans because the economy has contracted and not growing enough to outpace $ demand. Granted Shorebank lends in their community, but were they making smart investments? Based on the crunch from the regulator, they did not extend credit to the right people. Sure, keep Shorebank alive so they can blow through the rest of their capital and make more bad loans. As soon as I open my ******* Jack, I will confer your diploma from business school.

  5. JOHN C Aug. 2, 2010 at 4:28 pm


    No bank needs my tax money if it such a great place, some else will help them with private cash.

  6. DAS Aug. 3, 2010 at 10:26 a.m.

    SBK is a badly run bank…has been for years. The founders are still calling the shots and have not been able to find any capable, intelligent people to succeed them. The smart ones they did choose were held back and soon left. I have no problem with their mission and overall objectives but they have wasted their opportunities to the tunes of millions…Bailout money is not the only wasted funds. They receive other Federal grants and foundation monies by the millions that are not accounted accurately or well spent… it is time to let others come in. There is no way someone new can do worse.