UPDATE 2-Regulators close well-connected ShoreBank in Chicago

* ShoreBank shut down by regulators

* Deposits, branches shift to new bank

* 114th bank so far this year shut down by FDIC
(Adds details of closure, assets)

By Nick Carey

CHICAGO, Aug 20 (BestGrowthStock) – U.S. regulators on Friday
seized notable Chicago-based community development bank
ShoreBank after Wall Street backers failed to rescue the
institution, and its deposits will be taken over by a
newly-chartered bank.

ShoreBank, a privately owned bank with a national
reputation for its philanthropic activities, had received
multi-million dollar investment commitments from Goldman Sachs
(GS.N: ), Citigroup (C.N: ), JPMorgan (JPM.N: ) and Bank of America
(BAC.N: ), as well as from General Electric (GE.N: ).

But the bank, which was put on the ropes when the recession
hit its lower-income borrowers especially hard, was unable to
secure the funds it was seeking from the government’s Troubled
Asset Relief Program, or TARP, it needed to match
private-sector pledges.

ShoreBank’s deposits will be taken over by a
newly-chartered institution called Urban Partnership Bank. Its
15 branches also will shift to the new bank.

The Federal Deposit Insurance Corp said the bank had $2.16
billion in assets and $1.54 billion in deposits.

It is one of the larger banks to fail in recent months and
the 114th FDIC-insured institution shut down so far this year.

Regulators expect the closures to peak this quarter, as the
community bank industry continues to struggle under the weight
of poor-performing loans, many tied to commercial real estate.

Attempts to rescue ShoreBank have played out in the media
for months, with lawmakers and watchdogs questioning whether
special treatment was being given to the bank.

ShoreBank is located on Chicago’s South Side near the home
base of President Barack Obama and some of his top aides, and
the bank has promoted on its website connections to Obama.

The bank has some prominent supporters with strong ties to
Washington, including Ellen Seidman, former director of the
U.S. Office of Thrift Supervision, and Eugene Ludwig, former
U.S. Comptroller of the Currency.

ShoreBank has received national recognition over the years
for its efforts to extend loans to low-income communities and
environmental cause.

But bank activity with a philanthropic bent has not been
profitable lately. For the quarter ending March 31, ShoreBank
reported a $17.1 million operating loss, compared with anoperating profit of $384,000 in the year-earlier period.

UPDATE 2-Regulators close well-connected ShoreBank in Chicago