CHICAGO (Reuters) - Regulators on Friday seized notable Chicago-based community development bank ShoreBank after Wall Street backers failed to rescue the institution, and its deposits will be taken over by a newly-chartered bank.
ShoreBank, a privately owned bank with a national reputation for its philanthropic activities, had received multi-million dollar investment commitments from Goldman Sachs, Citigroup, JPMorgan and Bank of America, as well as from General Electric.
But the bank, which was put on the ropes when the recession hit its lower-income borrowers especially hard, was unable to secure the funds it was seeking from the government’s Troubled Asset Relief Program, or TARP, it needed to match private-sector pledges.
ShoreBank’s deposits will be taken over by a newly-chartered institution called Urban Partnership Bank. Its 15 branches also will shift to the new bank.
The Federal Deposit Insurance Corp said the bank had $2.16 billion in assets and $1.54 billion in deposits.
It is one of the larger banks to fail in recent months and the 114th FDIC-insured institution shut down so far this year.
Regulators expect the closures to peak this quarter, as the community bank industry continues to struggle under the weight of poor-performing loans, many tied to commercial real estate.
Attempts to rescue ShoreBank have played out in the media for months, with lawmakers and watchdogs questioning whether special treatment was being given to the bank.
ShoreBank is located on Chicago’s South Side near the home base of President Barack Obama and some of his top aides, and the bank has promoted on its website connections to Obama.
The bank has some prominent supporters with strong ties to Washington, including Ellen Seidman, former director of the U.S. Office of Thrift Supervision, and Eugene Ludwig, former U.S. Comptroller of the Currency.
ShoreBank has received national recognition over the years for its efforts to extend loans to low-income communities and environmental cause.
But bank activity with a philanthropic bent has not been profitable lately. For the quarter ending March 31, ShoreBank reported a $17.1 million operating loss, compared with an operating profit of $384,000 in the year-earlier period.