The second bid gets the bank: what does Indecorp's proposed sale to Shorebank mean for African Americans?

What does Indecorp's proposed sale to Shorebank mean for African Americans?

After a two-year auction, which had many bidders but no takers, Chicago's Indecorp has finally been purchased by Shorebank Corp., the holding company of South Shore Bank. The merger will allow the bank to increase its low-cost community deposits and maker more loans.

Although everyone agrees that the acquisition will make more money available to the community, the deal is not without its critics. Many argue that the merger will mark the end of one of the nation's few black owned financial institutions.

According to Sheshunoff Information Services, Shorebank's 1994 assets topped #305 million. Indecorp, the parent company of Independence Bank of Chicago and Drexel National Bank (ranked No. 6 and No. 7 respectively on the BE FINANCIAL COMPANIES list), has assets of #279 million. If approved by the Federal Reserve Board, the merger would make South Shore Bank of the largest in Chicago. While Milton Davis, the bank's chairman, won't reveal the specifics of the deal, he says the holding company is trying to raise at least $15 million from its 40 shareholders, consisting of large corporations and banks, to acquire Indecorp. There is speculation that Shorebank will pay an estimated #30 million to obtain Indecorp.

But a source close to the holding company says, "It's a bad deal--they're paying too much money for what they're getting."

Just last December, Chairman Bill Johnson of the OmniBanc Corp., a small bank holding company in suburban Detroit, proposed a deal to acquire Indecorp for #35 million. The acquisition would have created America's largest black-owned bank.

However, Johnson slashed its bid to #26 million when his financial advisors cited problems in Drexel's bond portfolio. Rising interest rates were depressing the bank's bond value, taking a severe toll on its asset base. The deal eventually collapsed; Indecorp President Alvin Boutte refused to sell for a price he considered too low.

This isn't the first time Indecorp has attempted to sell to Shorebank. In 1993, when Indecorp first announced its bid to sell, Shorebank was a bidder. But there were two major hurdles: Indecorp's low CRA rating didn't match Shorebank's philosophy of community banking; and community activists wanted Indecorp to remain black-owned. CRA stands for Community Reinvestments Act, the federal mandate that grades banks on how well they serve minority borrowers.

"If this deal goes through, black people as a race are really going to lose ground when you talk about finance on a large corporate and reinvestment level," says Willie Lomax, executive director of the Chicago Roseland Coalition for Community Control and a principal leader of economic development efforts in Indecorp's service area.

Lomax says he has met with Boutte and Indecorp's Chairman George E. Johnson on several occasions, and they expressed that they wanted to sell the banks to the right people and then retire. Lomax is convinced that Indecorp's officials are not interested in trying to improve their banks or concerned about who their buyers are.

"There will be some meetings around this issue with the [Black Leadership Development Institute] and the Federal Reserve. We will also be talking to some of the investors that Shorebank is looking for money from," Lomax says.

Harold L. Lucas, the executive director of the Black Metropolis Convention and Tourism Council, says, "There is a question of accountability that must be addressed in this situation, from a moral base and principle. That principle has been violated in terms of respect for African Americans who contribute to their banking organizations." Lucas is also restoration coordinator with the Mid-South Planning and Development Commission.

Neither Boutte nor Johnson would agree to be interviewed about the terms of the acquisition. But Milton Davis of South Shore Bank remarked that it was "a bit too early" to determine the specifics of the deal. He did say, however, that Drexel Bank would remain "as it is," suggesting that he does not expect any branch closing or lay-offs. How many blacks will have seats on the new board? Davis says, "Currently, out of 13 executives on the Shorebank holding board, four are African American, but again, it's too early to determine how many blacks would be on the newly structured board."

Lucas says, "Shorebank may have a very distinguished core of black employees, but if you talk about liberation in this day, it's about the ownership of building institutions which black people should control."