ShoreBank Corp. in Chicago is considering going public in the future so it can raise more money now.
The $2 billion-asset community development banking company, which makes about $400 million of loans a year, wants to increase that figure to $2 billion by 2013. It would need capital to reach that goal, and George Surgeon, its chief financial officer, said in an interview Tuesday that its next private placement might come with a covenant that says that ShoreBank would go public a few years down the road.
"If we're really serious about quintupling the level of development impact by 2013, we at least have to consider whether we want to be a public company," Mr. Surgeon said. ShoreBank officials believe they could raise more in a private placement if investors "could see a definitive liquidity option in the shares that they buy."
ShoreBank intends to hold its next private placement in mid-2007, though it has not yet decided how much it wants to raise. It expects to make a decision about going public by the middle of next year.
Founded in 1973 to make loans in an inner-city Chicago neighborhood, ShoreBank has evolved into the nation's largest and best-known community development bank. Its 63 investors include foundations, large banks, insurance companies, and wealthy individuals.
ShoreBank also champions conservation. Many of its construction loans require borrowers to use "green" building materials and install such things as energy-efficient windows and appliances.
Mr. Surgeon first raised the issue of taking ShoreBank public this month at the National Community Investment Fund Conference in Chicago.
He said that even though shareholders have received solid returns on their investments, the fact that shares are not traded has limited the possible pool of investors and hindered growth.
Still, Mr. Surgeon said that if the company were to go public, it would not sell more than 50% of the voting shares to outside investors. It also would structure the voting rights of its shares to ensure that it would remain in control of its own destiny and could pursue its goals of community development and environmental protection with the same zeal as pursuing a monetary return for investors, he said.
"We think that we could structure a public offering or a group of shares that will float in such a way that we can protect the primacy of our development mission," he said.
Along with changing its capital structure, ShoreBank is considering internal changes to boost its lending, Mr. Surgeon said.
For example, it originates $50 million to $100 million of mortgages each year but sells only about $30 million to $40 million, because most of the loans do not conform with secondary market standards, he said. The company is looking at ways to make those loans more attractive to investors, so it could roughly double what it sells, he said.
"The capital planning is just one aspect of this long-term growth strategy that we are trying to implement," Mr. Surgeon said.
