Shorebank and Indecorp (a)

12 Pages Posted: 21 Oct 2008

See all articles by Elizabeth A. Powell

Elizabeth A. Powell

University of Virginia - Darden School of Business

Sheila McMillen

affiliation not provided to SSRN

Multiple version iconThere are 2 versions of this paper

Abstract

Shorebank, owner of the Chicago community-development bank South Shore Bank, must decide whether to acquire another Chicago institution, Indecorp. The A case reviews the history of white-owned South Shore Bank, recounting its rejection of "redlining," its commitment to community reinvestment, and its excellent lending record in a predominantly low-income, minority neighborhood. The A case also reviews the history of Indecorp, then the largest black-owned U.S. financial institution. Though its mission is to increase African Americans' access to financial resources, Indecorp's lending record is not as impressive as Shorebank's. See also the B (E-0121) and C (E-0122) cases.

Excerpt

UVA-E-0120

SHOREBANK AND INDECORP (A)

. . . while we've run our bank on radical values and conservative principles, many banks have done just the opposite. They have grown larger and less community oriented. Banks that began as local institutions grew to national, even global proportions and came to focus more and more on the size, variety, and yield of their transactions, in some cases with dire results. The communities they originally served have changed very little; the banks themselves have changed enormously.

—Ronald Grzywinski

In June of 1993, Mary Houghton, president of Shorebank Corporation, the holding company of South Shore Bank, Chicago's community-development bank, received a call from the owners of Indecorp, Inc., the largest African American-owned financial institution in the United States and the parent company of Independence Bank of Chicago and Drexel National Bank. Based on that initial call, Houghton asked David Shyrock, South Shore Bank's president and CEO, to begin exploring the possibility of acquiring Indecorp. The purchase of Indecorp would nearly double South Shore Bank's assets to $ 500 million, creating the largest community-development bank in the nation and enabling South Shore to increase dramatically the number of loans made to its service area.

If the acquisition took place, however, South Shore would swallow up one of the nation's few minority-owned banks, a process that might alienate the very client base the bank wanted to serve. South Shore Bank had an exceptionally good record of lending to the minority community, but when news of Shorebank's talks with Indecorp reached the press, The Black Leadership Development Institute (BLDI), a Chicago community organization, announced plans to challenge the potential loss of the African American ownership of a major neighborhood institution.

. . .

Keywords: banking loan evaluation, community relations, corporate social responsibility, minorities in business

Suggested Citation

Powell, Elizabeth A. and McMillen, Sheila, Shorebank and Indecorp (a). Darden Case No. UVA-E-0120. Available at SSRN: https://ssrn.com/abstract=908392

Elizabeth A. Powell (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-982-2730 (Phone)

HOME PAGE: http://www.darden.edu/faculty/Powell.htm

Sheila McMillen

affiliation not provided to SSRN

No Address Available

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