For a small community bank on Chicago's South Side, ShoreBank Corp. has been the subject of some recent high-profile media coverage. Exactly why deep-pocketed Wall Street bankers have swooped in to bail out the troubled lender is the subject of plenty of speculation. But the fact that they did is good news for the predominantly African-American communities that ShoreBank prides itself is on serving. Or is it?
In years past, we've reported that ShoreBank was one of only a handful of lenders whose hands were clean when it came to subprime mortgage lending in Chicago's black and Latino communities. After updating the numbers this week, our new Chicago Reporter analysis found that the bank can't boast it's squeaky-clean record any longer.
Turns out that ShoreBank got into the high-cost loan business in 2008. Our analysis of federal mortgage data found that of the 684 Chicago home loans loans issued by the South Side lender that year, 7 percent, or 48, were above prime rates. And the majority -- 35 -- went to black borrowers in predominantly African American communities. Check out this map for a snapshot of where that lending occurred.
That's a far cry from the bank's record in 2006 and 2007 when, by our count, not a single high-cost loan was issued.
Still, just days after reiterating to the Wall Street Journal a stellar lending record, Vice President of Corporate Communications Brian Berg is sticking with his statement that the bank hasn't engaged in subprime or high-cost lending. "They [borrowers] pay above prime because of credit standing or risk," Berg told the Reporter of the high-cost loans issued in 2008,"but they are standard 15 to 30 year loans."
Still, the practice is a first for ShoreBank, and puts the storied South Side lender in the same league as other banks that its gone to great lengths to distance itself from. And going forward, ShoreBank will be referring to many of those same institutions as shareholders.
- Co-authors: Jeff Kelly Lowenstein and Angela Caputo