Discussions that went into the wee hours last night finally produced an agreement among a who’s who of Wall Street banks and a group of local lenders that will provide about $140 million of private capital to rescue ShoreBank, a person familiar with the matter said.
That will enable ShoreBank to tap up to $75 million in bailout funds from the Treasury Department. The Federal Deposit Insurance Corp. had prepared to seize ShoreBank, which lost more than $100 million last year due to huge losses from real estate loans in its low-income neighborhoods, but held off as the extraordinary private-sector rescue effort gained momentum.
Other major investors include Goldman Sachs Group Inc., which sources say is contributing $20 million; Citigroup Inc., which says it's in for $20 million; J.P. Morgan Chase & Co., which a source says is committing $15 million, and Bank of America Corp., which says it will chip in $15 million. Morgan Stanley is another major contributor.
Local financial services firms participating with smaller contributions include Northern Trust Corp., State Farm Insurance Cos. and Harris N.A.
ShoreBank hasn't yet said it's hit its capital-raising target.
In a statement, ShoreBank President George Surgeon said today, "We are continuing our capital-raising efforts and the results we have achieved so far are encouraging. We are very appreciative of the efforts of all investors who have expressed support, those who have been with us over the years as well as new supporters; and we are also grateful to the people in our communities of Chicago, Detroit and Cleveland."
The $2.3-billion-asset bank has become a national cause celebre in recent days. ShoreBank is perhaps the best-known community bank in the country, vaunted for its track record of lending profitably for three decades in neighborhoods most other banks avoided.
But ShoreBank ran aground in the most recent recession, with even its bread-and-butter loans to apartment building owners and rehabbers souring in large numbers.