The future of community banks

ShoreBank logo

TEXT OF INTERVIEW

STEVE CHIOTAKIS: For 30 years, it was known as a bank that truly served an underserved community. Giving loans to those who might not have qualified elsewhere. Now ShoreBank is under new management. Federal regulators took control of the Chicago bank on Friday after financial troubles caused it to collapse. Dory Rand is president of the Woodstock Institute, this is a think-tank in Chicago. She's with us live from Chicago to talk about it. Good morning.

DORY RAND: Good morning, Steve.

CHIOTAKIS: Thanks for being with us. What was the significance of ShoreBank for its customers on the South Side, a very impoverished part of town, right?

RAND: It was. And with the help of ShoreBank, it had become a more stable middle-class community because ShoreBank was willing to make loans that the big banks wouldn't make and things like small business development and affordable, multi-family rental housing buildings and then making prime mortgage loans.

CHIOTAKIS: You know, take us through what sort of differentiates, Dory, a community bank from a traditional bank.

RAND: Well, a community bank is based in the community. People are comfortable going there. There's more relationship-based banking. They know what the community needs are and they direct their products and services to meet those needs at an affordable, sustainable level.

CHIOTAKIS: So this is just a different way or doing... I mean, I don't want to say that other banks don't like to do business that way, but it's a different way of doing business, right?

RAND: Right. And it's often at a smaller scale. So, for example, a large bank might not be willing to make small business loans for less than $100,000 and a entrepreneur on the South Side might have a plan to start a small business and they only need about $25,000. ShoreBank was willing to make those kinds of loans and then that generated jobs and contributed to a thriving economy.

CHIOTAKIS: All right. So the bank gets taken over by this consortium of other banks. What's going to happen now? Is it still a community bank? And the future of community banking.

RAND: Well David Vitale, who will be the chairman of the new Urban Partnership Bank, has said that they will have a similar mission to provide financial services to distressed neighborhoods like ShoreBank and Chicago and also in Detroit and Cleveland. And that they will apply to become a community development financial institution, as ShoreBank was, certified by Treasury and eligible to get funds to make those kinds of lending and investments in communities where the big banks really are not serving the needs.

CHIOTAKIS: So we'll see if the community bank continues. Dory Rand, joining us from Chicago. Dory, thanks.

RAND: Thank you.

Comments

I agree to American Public Media's Terms and Conditions.
With Generous Support From...