Chicago: South Shore Bank Is on Life Support

Can’t believe this is truth, according to news from Crain. Chicago’s South Shore Bank has been a staple of the southside of Chicago and the South Shore community since I can remember. It seems like everyone in the city is familiar with their name, community, and brand that has stood the test of time and the worst financial fallouts ever…..until now.

Well, allow me to not cast the final shovel of dirt on them yet. They are still alive, but on life support as the title suggest. Just this week, the Federal Reserve has stepped in and giving them a specific time period to submit plans and raise funds to meet capital requirements and get the bank back on solid ground or the Federal Reserve will have to step in and take control of the bank.

This would be a sad sight to see a company and brand like South Shore that has stood for opportunity, equality, and capitalism on the southside of Chicago for so long, but it is not looking good. According to the report in Crain, the fledgling bank took a big hit over the last two years as many of their loans went into foreclosure and the value of many of their asset saw a steep decline month after month until they are in this situation with the Federal Reserve trying to figure out what to do next.

This is a particularly sore spot for investors and real estate professionals in the City of South Shore as we all have sure either done work with or for Shore Bank, or at least considered them in the process of our daily businesses. To see them go, would be a shame, but I guess everyone cannot survive in the new age of capitalism. Just hate to see them struggling so bad and facing the possibility of shutting their doors.

Crain’s article is printed below:

ShoreBank gets Fed order that bars dividends

By: Steve Daniels Jan. 12, 2010
(Crain’s) — ShoreBank Corp., the holding company for the Chicago-based lender of the same name that operates in low-income South and West Side neighborhoods, has been hit with a new regulatory order restricting it from paying shareholder dividends or making interest and principal payments to some debt holders.
The order from the Federal Reserve Bank, dated Jan. 8 and released Tuesday, follows a “cease and desist” order imposed by state and federal banking regulators on the company’s ShoreBank unit last July.
The Fed order bars the holding company from making dividend payments to shareholders without permission from the regulators. It also bars payment of interest or principal to holders of trust-preferred securities and subordinated debentures without prior regulatory approval.

ShoreBank is given 60 days to produce a plan to boost capital, which has been depleted by heavy loan losses.
At the holding-company level, ShoreBank recorded a net loss of nearly $27 million in the first nine months of 2009. In normal years, ShoreBank pays small dividends on its common stock; through the first nine months of last year, it did not pay a common-stock dividend, according to filings with the Fed.
The last time ShoreBank paid dividends was in 2008.

Assets stood at $2.8 billion as of Sept. 30. Capital was just below the levels needed to be considered “well-capitalized.”
But with $234 million in loans at least 90 days past due — 15% of ShoreBank’s $1.5-billion loan portfolio — the company needs to raise tens of millions in new capital to remain solvent.
Bank CEO George Surgeon is trying to raise the money now, and holding company Chairman Ronald Grzywinski and President Mary Houghton have announced plans to ease out of the company over the course of this year.

A spokesman had no comment on the new regulatory order

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