Resolution Deal Shows ShoreBank Was Savvy to the End

By Robert Barba

Even in failure, ShoreBank adroitly maneuvered the political waters. The $2.16 billion-asset Chicago institution, the nation’s first community development bank, was seized by regulators Friday after months of trying to stay afloat. Its deposits and nearly all its assets were sold to Urban Partnership Bank in Chicago, a new entity backed by the same investment fund that had been working to rescue ShoreBank. At Urban Partnership’s helm is David J. Vitale, who was brought in as ShoreBank’s chief executive in March to save the ailing institution. The Federal Deposit Insurance Corp. said the group’s bid was the only one it received for ShoreBank. The structure allowed the group to sidestep a politically sensitive subject: open-bank assistance. Though used during the savings and loan debacle, it has not been in recent years. A regulatory overhaul in the 1990s made it all but impossible to attempt such assistance except in certain cases. The fact that ShoreBank’s owners were wiped out puts the resolution in the category of failure instead of open-bank assistance. “Open-bank assistance throws good money after bad. That is not the case here. It’s new money,” said Karen Shaw Petrou, managing partner at Federal Financial Analytics Inc. “In a [purchase and assumption] the old shareholders and the old debtholders and everybody else are toast. They aren’t toast in an open-bank deal.”

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