Shorebank sticks to what Grzywinski calls “old-fashioned banking” - serving communities, not just stockholders. When the original South Shore Bank wanted to leave its decaying neighborhood in 1973, Grzywinski and partners bought it. Now, Shorebank, the holding company, focuses mostly on two neighborhoods: resurgent South Shore and Austin, a still-struggling area to the west. Most banks considered such areas too risky. But South Shore Bank’s net loan losses are lower than average for similar size banks. Common stockholders have yet to receive a dividend, and the bank admits its return on assets is “moderate.” Still, South Shore Bank has made a profit every year since 1975.
By requiring that real-estate loans be used to fix up local properties, the bank has helped create a group of entrepreneurial rehabbers. Fourteen years ago, electrician Art Smith acquired his first apartment building with South Shore Bank’s backing. He now devotes himself full time to the seven buildings he owns. When Smith bought his latest, housing inspectors handed him nearly seven pages of code violations. Eight months later, he is restoring the courtyard’s elegant fountain and has a list of tenants waiting to sign up. Says Smith: “All I needed was someone to give me a chance.”
The Community Reinvestment Act was designed to fight “redlining” - discrimination by banks against low-income neighborhoods. A bad CRA rating from regulators can keep a bank from expanding. Rep. Paul Kanjorski, a Pennsylvania Democrat, has proposed exempting small banks. Good local banks alone won’t solve the problems of inner-city neighborhoods. But South Shore proves they can make a difference.
