FDIC Shuts Down ShoreBank

Regulators on Friday shut down a big community bank based in Chicago that has been known for its social activism but racked by financial troubles in recent months. A consortium funded by several of the biggest U.S. financial firms is buying its assets and pledging to operate the new bank by the same principles.

The Federal Deposit Insurance Corp. took over ShoreBank, with $2.16 billion in assets and $1.54 billion in deposits. Urban Partnership Bank, the newly chartered financial institution, agreed to assume ShoreBank's deposits and nearly all its assets.

The FDIC also seized seven other banks Friday, bringing to 118 the number of U.S. bank failures this year amid the recession and mounting loan defaults.

In an unusual move, the FDIC allowed some of ShoreBank's executives to continue running the restructured bank. Executives who joined ShoreBank recently, as the bank struggled to raise capital, will manage Urban Partnership Bank. These managers "did not contribute to the bank's problems," the FDIC said.

The FDIC and Urban Partnership Bank also agreed to share losses on $1.41 billion of ShoreBank's loans and other assets.

ShoreBank's failure is expected to cost the deposit insurance fund $367.7 million.

The FDIC also took over Community National Bank at Bartow, in Bartow, Fla.; Independent National Bank of Ocala, Fla.; Imperial Savings and Loan Association of Martinsville, Va.; and four California banks: Butte Community Bank, based in Chico; Pacific State Bank, based in Stockton; Los Padres Bank, in Solvang; and Sonoma Valley Bank, in Sonoma.

ShoreBank lost $39.5 million in the second quarter amid soured real estate loans. The bank had been under a so-called cease and desist order from the FDIC for more than a year, requiring it to boost its capital reserves. ShoreBank was able to raise more than $146 million in capital this spring from several big Wall Street institutions. It was unable, however, to secure federal bailout funds it sought from the Treasury Department's Troubled Asset Relief Program.

Investors in Urban Partnership Bank read like an all-star roster of U.S. finance, including American Express Co., Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., GE Capital Equity Investments Inc., Morgan Stanley, Northern Trust Corp. and Wells Fargo & Co. The Ford Foundation and the MacArthur Foundation also are investors.

ShoreBank was founded in 1973 with the aid of several dozen institutional backers. The bank has been known for promoting redevelopment, minority business and environmentally responsible lending, and serving low- and moderate-income neighborhoods in Chicago. It was the nation's first community development and environmental bank, branching out from its roots on Chicago's South side to Cleveland, Detroit, the Pacific Northwest and 40 foreign countries.

ShoreBank had indirect ties to a few members of the Obama administration -- one of them, presidential adviser Valerie Jarrett, was on the board of a Chicago civic organization led by a ShoreBank director -- and powerful supporters, including former top federal banking regulators Ellen Seidman and Eugene Ludwig.

House Republicans launched an inquiry this spring into whether the administration intervened to help shepherd a bailout of ShoreBank. Rep. Darrell Issa of California, the senior Republican on the House Oversight and Government Reform Committee, sent a letter to a White House legal adviser asking specific questions on possible contacts between administration officials and executives of ShoreBank or potential investors.

The White House has said no administration officials met with ShoreBank concerning its rescue or requested help from financial institutions on its behalf.

The new bank's chairman will be David Vitale, a former president of First National Bank of Chicago and an adviser to Arne Duncan, now the U.S. Secretary of Education, when he headed the Chicago school system.

"Urban Partnership Bank will provide access to financial services and support to distressed neighborhoods in order to help transform distressed neighborhoods into strong, stable communities," Vitale said in a statement issued Friday night. "The private investment in this new financial institution demonstrates commitment to restoring the economic vitality of our communities," Vitale said.

He said the bank will continue the mission of serving low- and moderate-income and minority communities, and to support energy efficiency and environmentally constructive development.

ShoreBank shut down by FDIC

An exterior view of ShoreBank at 3401 S. King Drive on the South Side, May 18, 2010. (Chris Walker/Chicago Tribune)

ShoreBank, which billed itself as the nation’s first and leading community development and environmental lender, failed Friday and was acquired by a consortium of big banks, insurers, philanthropic groups and civic-minded individuals.

ShoreBank is the 15th Illinois lender to fail this year, and the 114th to be seized by regulators nationally.

Its failure is expected to cost the Federal Deposit Insurance Corp. $367.7 million. The FDIC is funded by the banking industry.

But even though remnants of ShoreBank are being acquired by a sympathetic investor group that for months has been willing to help the institution, the bank’s failure raises questions about whether its business model is flawed and, going forward, must change in its markets of Chicago, Cleveland and Detroit. ShoreBank has pointed out that it was profitable for decades before the current recession.

“When I sat in the regulatory meetings briefly with ShoreBank early this year, even the state banking commissioner said ‘There’s no doubt if we had to save ShoreBank, or if the regulators hold off, its near-term business model has to change because it’s a little out there in terms of mortgages,’” Bill Brandt, chairman of the Illinois Finance Authority, a government financing body that looked at ways to help ShoreBank, recalled recently.

He has said ShoreBank’s failure could devastate already down-on-their-luck neighborhoods.

“The FDIC will try to sugarcoat it and say, ‘We’re not, like we did with Park National Bank, acting irresponsibly and cavalierly to the needs of this community,’” Brandt said. “The truth of the matter is when they seize it, what was and is ShoreBank will be forever lost to that community.”

For about a year, ShoreBank, which has 15 branches, has been under pressure to raise capital. Last spring, several big financial institutions, philanthropic groups, insurance companies and civic-minded individuals pledged about $150 million to undercapitalized ShoreBank, which then hoped to be eligible for about $75 million in government aid.

But bailout money from the U.S. Treasury’s Troubled Asset Relief Program wasn’t forthcoming as ShoreBank’s finances continued to deteriorate, and as critics complained about the prospects that a relatively small bank was getting preferential treatment by Washington insiders for a possible taxpayer-funded program.

Now that $2.17 billion-asset ShoreBank is history, the new bank, called Urban Partnership Bank, has many of the same big institutions as investors and has named former First Chicago executive Bill Farrow as the chief executive and president of the institution. It will assume all the deposits.

He had joined ShoreBank a few months ago as president and chief operating officer, along with two other First Chicago executives, David Vitale, who became executive chairman, and Eileen Kennedy, recently named chief financial officer.

A ShoreBank spokesman said the team wasn’t available for interviews on Friday.

Loans on ShoreBank’s books had already fallen from nearly $1.5 billion as of March 31, 2009, to about $1.3 billion as regulators restricted ShoreBank’s lending and the bank tried to conserve capital.

As of June 30, ShoreBank carried about $5 million in foreclosed real estate and about $335 million in seriously delinquent loans.

Starting in 2001, ShoreBank has filed more than 325 foreclosure lawsuits in Cook County, according to Kaneville-based Record Information Services, which compiles real estate data. About two-thirds have been one- to four-family single-family residences, followed by apartment buildings and commercial properties. Many of its foreclosures have occurred in such communities as Englewood, Roseland, South Shore, North Lawndale, South Chicago and West Englewood.

ShoreBank has filed more than 30 Cook County foreclosure cases so far in 2010, and, if the pace continues, will surpass those filed in 2009 and 2008.

“The number of foreclosures that occurred and continue to occur in these neighborhoods was a symptom of our desire to have full homeownership without any sanity attached to it,” Record Chief Executive Jeff Metcalf said.

From its beginning in 1973, the mission of South Shore Bank, later ShoreBank, was to revitalize declining, mostly black Chicago neighborhoods. Redlining and other discriminatory practices had taken a toll on communities such as South Shore, and the bank set out to prove that reinvestment could help revitalize communities.

Urban Partnership Bank will pay the FDIC a premium of 0.50 percent to assume all of the deposits of ShoreBank. In addition to assuming all of the deposits of the failed bank, Urban Partnership Bank agreed to purchase essentially all of the assets except for the marketable securities and fixed assets.

The FDIC and Urban Partnership Bank entered into a loss-share transaction on $1.41 billion of ShoreBank’s assets. Urban Partnership Bank will share in the losses on the asset pools covered under the loss-share agreement. The loss-share transaction is projected to maximize returns on the assets covered by keeping them in the private sector.

Chatham faces problems with crime, aging residents

Planting flowers along right-of-ways is one way that residents show they care about their neighborhood. For years, Chatham residents have planted flowers along King Drive.
Courtesy 6th Ward Alderman's office

Changing dynamics have hurt neighborliness - alderman

Even good neighborhoods can face tough times.

The middle-class, South Side neighborhood of Chatham has long been considered a strong and secure neighborhood. But more recently, residents have been challenged by an aging population and a generational divide, says Ald. Freddrenna Lyle (6th), not to mention a tragic increase in crime in recent months.

Notably, in May, Army National Guardsman and Chicago policeman Thomas Wortham IV was shot and killed when, according to police, thieves tried to steal his motorcycle. In the past few months, there also have been a number of burglaries and shootings that have left neighbors on edge.

When Lyle was growing up in Chatham, she said the neighborhood had a vital system of block clubs. Residents on blocks that shared an alley would work together to keep it clean and to take care of one another.

"We have less workers and fewer young legs," Lyle said. "Many are single women who have outlived their husbands, and don't have the resiliency to head off some of these problems. When I became alderman, we had the second largest population of seniors in the city."

Almost all of her peers have moved to other neighborhoods or suburbs, she said, but those who have come back don't seem to have time for neighborhood events.

"Their children have homework and dance lessons and karate lessons, and we haven't been able to get that group to understand the value of CAPS [Chicago Alternative Policing Strategy]," she said.

"And we have trouble getting our young back because the seniors didn't leave, and because of the schools. If you move back here, you might have to put your child in private school. You cannot have a vibrant community without the schools."

The alderman thinks that the proliferation of magnet schools has put neighborhoods like Chatham at a disadvantage. When she was growing up, all the children on the block went to the same school, but now they are dispersed among many schools. That means their parents don't meet at school functions.

"We have to become involved in the schools in our community," she added. When she was growing up, she could walk to school, and so could everyone else. Everyone knew one another.

"If you were somewhere else and were threatened, even the bad kids would protect you because you were from their school," she said. "Now we have children on one block who go to five different schools."

Still there are some things that can be done and are being done. For one thing, neighbors in Chatham have planted flowers on the corners of King Drive between 87th and 92nd every year, which shows everyone who passes by that neighbors care about their community.

"We all say it takes a village to raise a child," Lyle added. "There is some truth to that, but in urban America, the 'village' is the block. We stress that through block clubs. We have to get the blocks talking to each other, and connecting.

"If you have a house with children out of control, the other 39 houses on that block can adopt that family and mentor the children. One burglar told us he would not go where people were outside watering the grass."

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6th Ward Democrats

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New Search For Evidence In Chicago Cop's Murder: Police Recruits Help Look For Clues In Shooting Death Of Officer Michael Bailey

Chicago Police Officer Michael Bailey was shot and killed on July 18, 2010, as he was just getting home from a night shift guarding the home of Mayor Richard M. Daley.

His murder tore apart the city. On last Friday, nearly a month later police hit the streets, searching for answers in the killing of Chicago Police Officer Michael Bailey.

CBS 2's Mike Puccinelli was there during the search.

A $140,000 reward is being offered information leading to the arrest of Bailey's killer or killers. Although people say money talks, so far with this murder, that's not proving to be the case.

Nearly 60 members of the Chicago Police Department Training Academy walked through tall grass and weeds on Friday hoping to find a clue that might help catch a killer.

Chicago Police Lt. John McMurray said, "If there is anything in these vines and bushes or anything we should be able to see it."

The police recruits were hoping to find evidence that might lead them to the person or people who murdered Bailey last month.

Rickey Comodore lost his next door neighbor when the 62-year-old was gunned down. First he heard four or five shots.

"I looked out the apartment and I see him lying over there where that fire hydrant is at. I couldn't believe it. It was a shock," said Comodore.

Bailey's family promptly moved out of their Park Manor home. Comodore fears his block has become the crime's next casualty.

"This block is dead. It's not exciting no more," said Comodore.

The young father and others believe that catching Bailey's killer would go a long way towards taking back the neighborhood. That's why they were hoping Friday's search would turn up significant evidence.

"We're out here doing a grid search based on info we have that the offender ran up this embankment and across the Skyway and down through that rail yard," McMurray said.

But the search ended a few hours after it started, with no significant discoveries. Comodore said that until the killers are brought to justice it will be hard to have peace of mind especially with the memories of he saw on the street.

"My wife, she started screaming. She was in disbelief. I was in disbelief," Comodore said.

Bailey's killer was last seen running from the scene south on the 7400 block of South Evans Avenue. Police believe he cut across an abandoned lot before making his way to the Skyway area they were searching on last Friday.

Suspected pickpocket arrested at least 57 other times

A Chatham man with dozens of arrests on his record was arrested again after an off-duty court deputy caught him trying to steal a woman's purse in a downtown restaurant, according to the Cook County sheriff's office.

Reginald McNeil, 43, of the 8300 block of South Vernon Avenue, is facing attempted robbery charges for the Aug. 9 incident and is still in Cook County Jail.

Counts vary as to how many times McNeil has been arrested. According to the sheriff's office, this is McNeil's 58th arrest -- 20 of them for theft, attempted theft or pickpocketing.

Chicago police say he has been arrested 60 times, including 12 times on felony charges and 42 times on misdemeanor charges.

Court records show he has been convicted several times, including once for burglary in 1989.

According to a sheriff's statement, McNeil walked into a restaurant on Madison and Dearborn streets around 12:30 p.m. on Aug. 9, wandered around for a while and sat down without ordering anything.

Deputy Otto Molina, who was having lunch, saw McNeil move closer to the chair of a woman who had hung her purse on the back, police said. McNeil opened the purse and Molina got up to confront him. At the same time, the woman realized what was happening and yelled out for help.

McNeil allegedly struggled with the woman over the purse until Molina stopped him and held him until Chicago police arrived.

McNeil is being held on $80,000 bail.

Jobs, Business, Opportunity and Development for Chatham!

In order for Chatham to produce the much need jobs, businesses and opportunities for our young people, the main industry in the neighborhood is must be high technology research and development. How about all the the residents and civic leaders of Chatham banding together and asking the First Lady of the United States, Michelle Obama to aid in gathering the financing for facility development in the creation of the Chatham Council on Infrastructure and Facility Development? Chatham really needs new infrastructure like a fitness center, ice-skating rink, athletic and aquatic center and the like Ms. Obama would be a great help in having Chatham band together and approach Oprah Winfrey, Tiger Woods, Michael Jordan, Magic Johnson, and Bill Cosby, about being benefactors to facility development in Chatham with an all-new state-of-the-art athletic and aquatic center that is superbly well equipped with a fitness center, weight room, indoor tennis courts and with Olympic-size swimming and diving pools and NBA league-type basketball courts, at 79Th & Rhodes, an indoor ice-skating rink at 84Th & King Drive, a two-story "Bucktown-Wicker Park"-type public library at 79Th & King Drive, a YMCA and YWCA right next to each other at 76Th & South Chicago, a Boys and Girls Club at 75Th & South Chicago, and a Starbuck's at 79Th & St. Lawrence. Let's start by creating a letter-writing campaign to: The Honorable Michelle LaVaughn Robinson Obama, First Lady of the United States, ATTN: Private Secretary for Correspondence, The White House, 1600 Pennsylvania Avenue, N.W., Washington, D.C., 20025.