CHICAGO -- The nation's largest black-owned banking company, Indecorp, has put itself on the block, with South Shore Bank, the community development lender, emerging as a possible suitor.

The merger, which would create a $500 million-asset institution headquartered on the city's South Side, has sparked debate inside and outside Indecorp over how best to serve the community.

Some Indecorp officials, sources said, are reluctant to sell out to a nonminority-owned institution.

While South Shore's parent, Shorebank Corp., has operated in predominately black neighborhoods of the South Side since its inception, the majority of the bank's management and ownership is not African-American.

Lagging Behind in Loans

"We have had a debate about the direction of the company," said Alvin J. Boutte, Indecorp's chairman and chief executive.

Though Indecorp's remaining a black-owned institution offers a source of pride, there is some feeling that the bank's community might be better off with South Shore's lending expertise.

Indeed, Indecorp's lending record has lagged behind that of its city cousins.

The company's two subsidiary banks had unusually low loan-to-deposit ratios at the end of the first quarter.

Drexel National Bank had a loan-to-deposit ratio of just 28%, and Independence Bank of Chicago had a ratio of 31%, according to data from Ferguson & Co.

The loan-to-deposit ratio for all Chicago banks under $500 million of assets was 60%.

South Shore, the $244 million-asset institution that President Clinton has pointed to as a model for community development lending, had a roughly 75% loan-to-deposit ratio, and made more than $17 million of multifamily housing loans last year.

By contrast, Indecorp's two banks, with combined assets of $267 million, made only $2.3 million of such loans last year, according to data compiled by the Woodstock Institute, a nonprofit Chicago group that tracks lending patterns.

Shopping for a Buyer

Mr. Boutte said Indecorp's board was looking for a suitor that would meet community credit needs, while offering shareholders a hefty premium.

The bank has hired investment bankers William Blair & Co. to assist them in finding a buyer.

South Shore completed a private placement of stock earlier this year, raising close to $9 million from a group of six Chicago banks and three private individuals.

Also in merger talks with Indecorp are two consortiums of African-American private investors, and Seaway National Bank, a black-owned, $202 million-asset Chicago bank.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.