Mending Markets

By Newkirk, Kristine M. | Independent Banker, October 1997 | Go to article overview

Mending Markets


Newkirk, Kristine M., Independent Banker


Southshore Bank and its parent company Shorebank Corp. have long been viewed as catalysts for community renewal on Chicago's south side. President Clinton first brought Southshore's efforts national recognition in the early 1990s, calling Southshore Bank an established leader in development banking and a model for others to emulate.

While much of the hype over community development corporations, like the one operated by Shorebank Corp., died quickly once Clinton settled into the Oval Office, the work that Southshore and countless other community banks are doing to revitalize their neighborhoods, cities and states continues quietly-without fanfare and without partisan politics.

Shorebank Corp.'s primary mission is to restore markets and increase opportunities in under invested communities with the lure of potentially lucrative tax credits. Robert Weissbourd, executive vice president of Shorebank Corp. savs the impact of such focused efforts can be felt immediately. "People start getting loans that they couldn't get before, which starts to change the dynamics of the community immediately," he says. (See Main Street Focus story on page 70.)

Shorebank's commitment extends beyond lending money in "under invested" areas to ensuring that large scale, permanent economic stability is achieved. This is evident in how it places offices of a bank, a real estate development company, a venture capital corporation and a technical assistance group in its targeted neighborhoods to help boost the chance for success. Those offices support new job opportunities, create capital, increase housing values and contribute to long-term revitalization.

"We bring a huge amount of talent to bear on community problems to anchor activities that will attract capital to the area," Weissbourd explains.

In Chicago, where the corporation got its start, Shorebank's real estate subsidiary is the largest affordable housing lender in the city and is responsible for renovating approximately 17,000 housing units in five city neighborhoods. Shorebank invests $50 million annually in new development and has invested $492 million in real estate, business and other developments in Chicago's minority neighborhoods since its inception 25 years ago.

Proving that community development and profitability mix, Shorebank's book value has grown at a compound annual rate of 12 percent since 1986. This steady profitability, Wessbourd says, demonstrates investment potential in urban America, a message he frequently delivers to lenders, community leaders and community activists to create similar revitalization efforts in communities across the nation and the world.

BEYOND URBAN SPRAWL

Community development corporations outside urban areas play a key role in reviving rural towns as well. The West Virginia Capital Corp., a multibank equity investment fund to fuel industry in West Virginia, was organized in 1994. Fully funded by 55 of West Virginia's commercial banks, the corporation provides "mezzanine" financing, a hybrid of venture capital and bank financing, to small businesses that fail to meet conventional lending standards.

As a mezzanine lender, West Virginia Capital takes a second position behind a local financial institution that puts up at least 50 percent of the loan funding. The corporation then funds the balance.

William E. Casto, president of the $61 million-asset Bank of Ripley, W.Va., contributed $9,100 to the more than $7 million pool to enhance his customers' options. …

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