It was sad to read about ShoreBank’s demise. According to the Wall Street Journal, “Regulators seized ShoreBank Corp. on Friday and agreed to sell assets to a team led by the community lender’s executives and backed by several large U.S. financial firms.”

I’ve always admired the work of the bank and its efforts to provide mortgages and loans to people from low and moderate income levels, and the bank’s pioneering work in re-developing and stabilizing neighborhoods. They seemed to be a great example of “doing well by doing good,” in the model of what Mohammed Yunus calls “social businesses” similar to his Grameen enterprises.  And while doing my own research and planning for building GuideStar’s business model of sustainability, I benefitted from my discussions with leaders at ShoreBank as well as my own reading about their work.

But the news is not all bad. The bank is being re-organized and the FDIC has sold the company to a new institution that will be known as Urban Partnership Bank and led by William Farrow, a former First Chicago Corp. executive who was ShoreBank’s president and chief operating officer at the time of its failure.

According to the Journal: “Urban Partnership Bank is buying almost all assets of ShoreBank’s Midwest bank and assuming $1.54 billion in deposits. The FDIC and Urban Partnership also agreed to share losses on $1.4 billion in assets. The holding company will remain intact, according to a person familiar with the deal. Urban Partnership is backed by a consortium of large U.S. financial institutions, including Bank of America Corp., Goldman Sachs Group Inc. and Morgan Stanley. Philanthropic groups and individuals in the Chicago area are also part of the effort. The group is investing between $140 million to $150 million, said a person familiar with the deal.”

Rick Cohen of Nonprofit Quarterly’s “The Cohen Report” has an excellent analysis of ShoreBank and the history of community development banking here.

Cohen ends his piece with the interesting observation that ShoreBank may have gone too far in trying to achieve its mission. It is a cautionary tale for all of us who believe strongly that to have a strong mission we also need to be strong and reliable financially─in other words sustainable. Finding that balance is never easy and always a work in progress.

One long-time advisor suggested that ShoreBank suffered from an “overly zealous commitment to its original mission.” In a world, and sometimes even a sector, which is all too ready to toss mission to the curb in favor of demonstrating free market profitability, ShoreBank dove into solving seemingly intractable domestic and international community finance challenges.

As Cohen so eloquently put it, “Maybe in a recession, with major investments in two cities whose housing markets were virtually destroyed by the subprime implement, ShoreBank found itself stretched beyond the limits of its capitalization. Helping ShoreBank back to health seems to be far more attractive and socially useful than putting billions of TARP money into big banks, Wall Street investment houses, and AIG where the prime beneficiaries seem to have been the highly paid executives, not the poor communities in urban and rural areas that still starve for access to bank capital.”