PORTLAND, Ore. -- From the seventh-floor comer conference room of the Lloyd Centre office tower, several miles of northeast Portland stretch out like a lumpy green quilt.

Leon Smith, chief executive of Northeast Portland Community Bancorp, looks out the window and wields his arms, slicing northeast's boundaries like a piece of pie.

"From this line," he says, extending his left arm to the north, along the dilapidated storefronts of Martin Luther King Jr. Avenue to the Columbia River, "to this line."

Mr. Smith is marking off the sector of the city where Albina Community Bank will become part of the fledgling community development banking movement. But from this height, one can't see the diversity, social problems, and pockets of simmering animosity in northeast Portland's minority neighborhoods that Albina will have to deal with.

Northeast Portland is home to about 40,000 African-Americans, or 70% of the city's total black population. It is home to million-dollar homes just a few blocks from open-air drug markets. Its tree-lined streets have become the focal point of Portland's progressive angst, a petri dish of '90s attempts to contain urban blight.

As Congress prepares to shower millions of dollars on community development banks across the country, the successes and pitfalls of Albina Community Bank should stand as a reminder that even in the best of circumstances and with the best intentions, economic development in America's cities is a business made up of diverse agendas.

"There is no higher calling for me as a banker than to establish a community development bank in a community like this," said Mr. Smith, whose 20-year banking career began at First Chicago Corp. and led him to SeaFirst and Bank of Boston. "There are enough resources here in the formation of this bank to allow us to fix the problems we are addressing. You don't get many chances like that in a lifetime."

Just down Martin Luther King Jr. Avenue sits another banker with another view. Venerable Booker, chairman of American State Bank, has been banking here since 1968, and he thinks Mr. Smith and Albina's primary benefactor, Pacific Power and Light, are doing a snow job on the community.

Pacific Power provided the seed money for Albina in a settlement of a lawsuit charging that the utility had overcharged low-income customers in northeast Portland.

"I don't support it and I don't support the ethics of it," Mr. Booker said. "This bank is being formed with money from a fine. It's dirty money that was ripped off from people to begin with, and I don't think you should start a bank with it."

Mr. Booker also thinks Pacific Power is trying to "make the black community think that this is a black bank. It isn't."

But Mr. Booker is fairly alone in his criticisms of Albina Community Bank. Galvanized by the presence of Mr. Smith as chief executive, once-cool mainstream bankers now are outwardly supporting the project. And community activists and civic leaders, who privately admit to having earlier reservations about Pacific Power and Light's role in forming the bank, say the project has turned into a model of how to form public-private partnerships to find solutions to grass roots economic problems.

"I believe that Leon and his team have a very sensible approach to doing business safely and soundly in an environment where traditional banking methods haven't been successful," said Stephen E. Polzin, president of West One Bank, Oregon, tacitly admitting that Portland's banks have been unable to make a real difference in northeast Portland's economic life. "Banks here will learn a lot from this experience and ultimately benefit from it, even though we will be competing with Leon for some of the same business."

Such a comment is a far cry from the brinkmanship of 1990, when the city's corporate leaders were under attack from a variety of sides. The Oregonian newspaper that year published a series of articles that alleged redlining in northeast Portland by the city's banks. (Save American State, there are no community banks in Portland.)

The redlining stories happened to come at the same time an acrimonious ratepayer lawsuit against Pacific Power was winding its way through the courts. A coalition of citizens groups argued that Pacific Power had improperly charged northeast's utility customers extra to recoup costs of a nuclear power plant built in the early 1980s.

These two events, the redlining stories and the ratepayer lawsuit, would give rise to Albina Community Bank.

Pacific Power settled the lawsuit for $5 million. But instead of just issuing rebate checks, it donated the money to several charities. Little noted at the time of the settlement was a $1.7 million grant "to establish a self-sustaining, private institution to provide development funding to low- and moderate-income residents who do not qualify for private loans under conventional lending criteria."

The seed money went into a kind of community trust with a board made up of northeast community leaders. The board hired Shorebank Advisory Services, the consulting arm of the first community development bank, Chicago's South Shore Bank, to find a way to make it work.

Now, three years later, having hired Mr. Smith, the project is preparing a stock offering that will bring the bank's total capitalization to $5 million. The target for opening the bank, after all regulatory approvals, is next spring. Mr. Smith said another $5 million in federal funds could be added under recently passed Community Development Financial Institutions Act, bringing the total capitalization to $10 million. The organization will be called Northeast Portland Community Bancorp, which will be the holding company for the state-chartered Albina Community Bank and a separately capitalized real estate development subsidiary.

Throughout the four-year formation process, activists that once treated Pacific Power as an adversary are now singing its praises.

"I know that this thing would never have gotten where it is today without Pacific Power," said Howard Shapiro, Portland's corporate gadfly who preaches and practices socially conscious investing. Mr. Shapiro has been agitating for such a community development bank for years, even trying to form his own at one point. "They could have just written a check and walked away from this community. They knew from a business standpoint that a South Shore Bank model was needed in this area. There's not a thing I would change about their involvement."

For Portland's bankers who, like all bankers, are sensitive to their standing in the community, there were worries early on that the formation of a community development bank would be like an admission that the city's mainstream banks didn't want to do business in northeast, according to Eric Sten, a city official involved in community development efforts in northeast.

"I have to admit I had mixed feelings about it and I still do," said one banker on background. "There's only so many bankable credits there, and we're already competing like crazy for them. Their CEO [Mr. Smith] has molded the bank's mission almost as much educational as economical. I think he'll do great things there."

Mr. Smith doesn't appear to fit the mold of a socially conscious advocate for inner city low-income people. He's impeccably neat in his black, pin-striped suit and crisp white shirt. He's also a highly organized banker who says his first love is putting commercial real estate finance syndications together. He's bent over backwards to make sure Albina Community Bank isn't typecast, whether as a bank for minorities or as a bank for just northeast Portland.

Mr. Smith grew up in South Chicago. One of his first experience at a bank was a student loan he received from Independence Bank of Chicago, one of the country's most successful African American-owned banks. He saw South Shore Bank grow into an unprecedented success in his first years at First Chicago's "First Scholar" program, the Chicago bank's vaunted 1970s management training program.

He had a successful nine-year career at First Chicago with one break to go to law school, eventually forming a love of commercial real estate finance. In 1984, he went to Seattle to put together real estate deals for Seafirst. For about a year beginning in 1991, he ran and tried unsuccessfully to save a troubled minority-owned bank in Seattle.

He was working for Bank of Boston in Connecticut when Albina's organizers called him about the job last May.

"My career goal was always to be a senior vice president of a major bank," Mr. Smith said. "But I don't see this as a big career change. I'm trained to run a bank and I think I'm the best person to do this job. But there's an old saying in the African-American community about giving back once you make it. I take that very seriously."

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