A community bank that was too good to fail

1. Neither race nor wealth nor geographic
location should bar an individual from
access to capital to buy a home, build a
business, or develop a community. The
bank’s motto, “Let’s Change the World,”
VISION & MISSION
The first bank holding company to
combine commercial banking, real
estate development, nonprofit loan
funds, and international advisory
services aimed at community
development. Originally developed as a
neighborhood development bank for
low-income African-American
communities, ShoreBank eventually
expanded nationally and internationally.
ShoreBank was a community
development bank. At the time of its
closing it was the oldest and largest
such institution, and in 2008 had $2.6
billion in assets. It was owned by
ShoreBank Corporation, a regulated
bank holding company.
ABOUT

2. 1960s -
1970s
1973 1983 1983
INITIATION
SHORE BANK
FOUNDED BREAK EVEN
Launched a successful
urban development
division focused on a
minority-owned small
business loan program.
Expansion from using a
bank to using a bank
holding company
acquired a small bank,
the South Shore
National Bank
A decade later
achieved breakeven for
banking operations.
1980 - 1987 2008 2008
EXPANSION
SHOREBANK
CORPORATION
NETWORK
FINANCIAL CRISIS
• Growing lending
• New branch in Chicago
• Created a replicable
model for Winthrop
Rockefeller Foundation
• Initiated programs in
Michigan, Cleveland and
Detroit.
Three circles of activity.
For-profit, nonprofit
organizations and
contractual and
consulting services.
By the end of 2008
ShoreBank had
increased its loan loss
estimate to $42 million
(vs. $6 million in 2007)
and recorded a net loss
of $13 million (vs. net
income of $4 million in
2007).
2009
DETERIORATING
FINANCIAL
CONDITION
The regulators rated
ShoreBank as a
“problem bank.”
2010
CLOSURE
On Aug. 16, 2010,
ShoreBank was closed
by order of the state of
Illinois and Urban
Partnership purchased
its assets.

3. TOO GOOD TO FAIL
• Did not receive requested
government support.
• The federal government could have
saved it from the collapse.
POLITICS
• Resource Limitation
• Hiring enough new leaders—both
strong in banking knowledge and
passionate about the social mission.
• Rapid Expansion (heavy travel
schedule and management structure
of the co. difficulty hiring leaders with
top banking skills and commitment to
social values)
• Too little capital in the face of an
unexpectedly deep recession
• The impact was most severe on the
bank’s risk management and capital
requirements.
• ShoreBank’s credit and risk
management processes were not
sufficient to withstand the full force
of the financial meltdown.
2008 FINANCIAL CRISIS HUMAN RESOURCES
FAILURE AND LESSON LEARNED
An organization’s social mission must be balanced with financial realities. A social mission should
serve as a powerful incentive to strengthen an organization’s operating systems from the harsh
consequences of the economy, competition, or a hostile environment. For market-based social
ventures, mission should be highly integrated with and responsive to the changing realities of the
market.