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ShoreBank Corporation
Location:
Chicago, IL
Area of Focus:
Smart Growth
Local Contact
For more information on ShoreBank, please contact bank co-founder Mary Houghton at mary_houghton@sbk.com or visit www.sbk.com.
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Once known throughout Chicago for fine boutiques, the South Shore neighborhood fell victim to steady disinvestment during the 1960s. A symptom of the area’s economic decline was the South Shore Bank, which was floundering in the face of tremendous economic and demographic changes.
In 1974, however, four friends took over the tiny South Shore Bank (now ShoreBank) and sought to build a powerful financial institution. They created a strategy to enter markets where traditional banks were afraid to invest and turn around the South Shore and other low-income urban neighborhoods by giving local businesses the capital they need to flourish.
Building a New Way of Banking
Within two years, ShoreBank was growing. It began investing in small businesses, mortgages, and the rehabilitation of apartment buildings throughout the South Shore neighborhood. Through these investments, the bank began to almost single-handedly rebuild the neighborhood’s housing stock and profit from a segment of the market in which traditional lenders refused to compete. As its assets expanded, ShoreBank’s capacity to finance innovative redevelopment projects grew and by the 1980s the bank was attracting national attention. America’s first community development bank, ShoreBank had developed a competitive advantage in markets traditional lenders had ignored.
ShoreBank also created a series of affiliate organizations, including a minority venture capital fund, a real estate development firm, and a worldwide consulting firm. These profitable entities empowered ShoreBank to provide an expanding network of financial services to distressed communities.
As a “triple bottom line” company, ShoreBank evaluates its investment performance not only on earnings, but also on its ability to revitalize priority communities and create a healthier environment. In the Pacific Northwest and Michigan’s Upper Peninsula, ShoreBank targets communities with a link between economic wellbeing and environmental health, particularly communities whose economies are based on logging, fishing or mining. In these communities, ShoreBank fosters economic growth by assisting businesses that diversify the local economy, provide local jobs, and use natural resources in sustainable ways.
Investing in Existing Infrastructure
In urban areas, ShoreBank places greater emphasis on renovating existing structures, mainly near public transportation, to increase the local tax base and shift perceptions that the neighborhood is in decline. Rehabilitating residential real estate not only changes the perception of that community, but as the value of the rehabilitated property increases, the owners’ net worth also increases.
In addition, ShoreBank finances the cleanup and redevelopment of brownfields into vibrant commercial and residential areas. They have helped urban neighborhoods address the abandoned gas stations and manufacturing sites that lie vacant, degrade the tax base, pose health risks, depress the value of surrounding real estate, and add to the perception of neighborhood decline.
Community Success AND Financial Success
While ShoreBank rarely uses the words “smart growth” in discussing their financing interests, by investing in existing communities, diversifying the local economy, cleaning up brownfields, and supporting local homeowners and businesses, it has helped to create communities that are wonderful places to live, work, and play.
Thirty years after it was taken over by four friends,
ShoreBank is a profitable and powerful agent of economic change. With more than $1.4 billion in assets, it offers loans for multi-family, commercial, and individual home projects; provides financial management to companies, nonprofit organizations, and religious institutions; and provides a wide array of traditional retail banking services. Recently, ShoreBank’s lead bank, based in Chicago/Detroit, was listed in Independent Banker magazine as number 17 for its return on equity for banks with over 1 billion in assets. In fact, the return on equity of their lead bank often rivals that of traditional banks.
As Mary Houghton, one of the founders of ShoreBank reminds us, “if you want your community to grow steadily over the next twenty years, invest in small businesses and rehabilitation of real estate—support local entrepreneurial activity that builds the basis of your community’s economy. Think long term, not short term.”
With offices in Illinois, Michigan, Ohio, Oregon, and Washington, ShoreBank has become a national force for economic and, increasingly, environmental change. Its affiliated consulting business, ShoreBank Advisory Services, now operates in international markets such as Romania and the Republic of Georgia. Even more importantly, the ShoreBank has paved the way for a new generation of Community Development Financial Institutions (CDFIs), which are entering untapped markets and unlocking previously ignored economic value. As of 2001, there were more than 500 CDFIs operating around the country, managing assets of more than $8 billion dollars. The net loan loss rate for these companies has been less than one percent. Following ShoreBank’s lead, CDFIs are becoming a powerful agent of community change, revitalizing neighborhoods and making them attractive alternatives to expensive new growth on the suburban fringe.
Updated Date: 01/27/2004
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