CHICAGO - Shorebank Corp., the renowned community development lender, is facing opposition in its own back yard as it bids to acquire the country's largest bank owned by blacks.
Community leaders on Chicago's South Side want to keep Indecorp Inc. in minority hands, and filed formal protests with federal regulators this week to block the acquisition.
"We are asking that South Shore Bank ... withdraw from this illicit sale and work with a group of us that would like to acquire the bank," said the Rev. Al Sampson, head of the Metropolitan Area Black Churches, who said black groups are exploring financing for an Indecorp bid.
Mr. Sampson's group and others filed protests with the Office of the Comptroller of the Currency and the Federal Reserve.
The protest is ironic, considering Shorebank's sterling reputation as a lender in communities that mainstream institutions have shunned. President Clinton praised the Chicago institution throughout the 1992 campaign, and made it a model for his community development bank legislation.
But community leaders are unimpressed. They said that Indecorp's two banks, whose history is steeped in the civil rights movement of the 1960s, symbolize blacks' hard fight for bank ownership.
"If we lose this, I think it's going to be equal to losing affirmative action," said a community leader who asked not to be named. "It's two more black banks that we've lost."
Shorebank management doesn't expect the protests to affect regulatory approval. "We're not a minority-owned institution and we're not going to become a minority-owned institution," said Joan Shapiro, executive vice president of South Shore Bank. "It would appear to be unlikely that the Fed would deny an application based on the race of the prospective purchaser."
The company has been a strong supporter of other black-owned businesses, she said. "South Shore Bank is probably responsible for creating more minority ownership in Chicago than perhaps any other corporation in the city."
Indecorp previously had sought an acquirer with black ownership - and even spurned earlier interest from Shorebank.
But after a deal with Omni Banc Corp., River Rouge, Mich., fell apart last year, Shorebank and Indecorp announced their agreement in June.
William T. Johnson, president of Omni, said the black ownership issue is important to Indecorp's communities.
"The spark plug for the South Side is enhanced by black ownership that is proactively charged for the community," Mr. Johnson said.
But another observer who asked not to be identified said that residents outside South Shore Bank's core South Side market may not be familiar enough with the company's redevelopment history.
"Minority ownership is important, but if there aren't minority buyers ... a bank like South Shore ... has a very good community reinvestment record."
Shorebank and Indecorp management said they hope to transcend the backlash.
"We're hoping that Shorebank will make peace with the community and convince them of the good work they've done in the past," said Indecorp president Alvin J. Boutte. He said Indecorp has received no other interest from black buyers.
Shorebank management is meeting with community groups and will move forward with the acquisition, provided it raises the necessary funding and receives regulatory approval, Ms. Shapiro said.
The acquisition has a base price of $26.5 million, according to filings with the Federal Reserve Bank of Chicago. With related costs, the total tab will come to about $31 million.
Crain's Chicago Business reported that Shorebank was having trouble getting $15 million in funding for the deal, possibly because larger bank companies that have contributed in the past now have South Side offices or want to avoid the community protests.
However, Ms. Shapiro said she expects new and existing investors to contribute. "We have not secured all of the funds, but the capital-raising efforts are going very well," she said.
The acquisition of Indecorp's $140 million-asset Independence Bank and $135 million-asset Drexel National Bank would nearly double South Shore Bank's assets, to about $550 million.