Execs position former ShoreBank for growth

By Becky Yerak
Posted Feb. 1 at 2:36 p.m.

William Farrow, 55, remembers trying to scrape together enough money to attend graduate school.

A product of Chicago’s Englewood neighborhood, Farrow had graduated from Augustana College in Rock Island in 1977, but got nowhere in obtaining a student loan from a couple of  banks. But when he visited a branch of Northern Trust Corp., the Chicago-based bank lent him $1,500. The son of two teachers was on his way to a master’s in management from Northwestern University in 1979.

It wouldn’t be the last time Northern helped him out.

Chicago’s biggest locally headquartered bank is among a group of  financial institutions that last August seeded Urban Partnership Bank, where Farrow is chief executive.

Urban took over most of the assets of failed ShoreBank in August, when the civic-minded South Side lender collapsed under bad real estate loans and was seized by the Federal Deposit Insurance Corp.

In their first interview since Urban got off the ground, Farrow and Chairman David Vitale, both former First Chicago executives, said their plans for Urban include modernizing the bank, including improving and expanding its ATM network and online banking for both consumers and businesses.

Headquartered at 7054 S. Jeffery Blvd., Urban also wants to offer a branded credit card and prepaid phone cards, and compete more directly with check-cashing services and currency exchanges in its neighborhoods to get a piece of  market that doesn’t or rarely uses traditional banks. Urban would like to offer such transactions  at a lower cost to consumers who don’t necessarily have accounts at the bank.

Waiting to get his photo taken by the Tribune, Farrow looked out the window and commented on all of the foot traffic in the check-cashing service directly across the street from Urban headquarters.

Urban should be in a position to start generating new business by this spring or summer, Vitale said.

The $1.4 billion asset bank,  highly capitalized with backing of nearly $140 million from such institutions as Northern, Goldman Sachs, Citigroup and JPMorgan Chase, is spending nearly all of its time serving customers of ShoreBank.

Vitale and Farrow hope to lessen the reconstituted ShoreBank’s dependence on real estate loans and diversify  more into loans for consumers and small  and midsize businesses.

But although Urban plans to continue serving inner-city neighborhoods, executives made clear that the business model has to change, saying they’ll have  more stringent underwriting standards so it doesn’t share the fate of ShoreBank.

“We’ll have much more rigorous and disciplined” underwriting processes, similar to the more traditional banks that Vitale and Farrow have worked for, Vitale said.

He said Urban Partnership, which assumed $1.4 billion in ShoreBank assets through a loss-sharing deal with the FDIC, will likely be that size for a “fairly long time.”

But room will be made for new customers as the bank tries to run off business from troubled existing customers, particularly from outside the Chicago area.

It’s trying to restructure about $300 million of its $600 million in troubled assets with help from consulting firm Loan Management Solutions.

Urban, which is about a third smaller than ShoreBank, also recently announced plans to close a branch each in Chicago’s Kenwood and Bronzeville neighborhoods. Their lobbies are up to 10,000 square feet big, and in the future, Urban will be looking for sites to accommodate “microbranches” of 1,000 to 1,500 square feet.

“Some customers aren’t comfortable coming into a big bank building,” Vitale said.

Vitale and Farrow said the bank’s not out to earn a return of, say, 20 percent of its capital, but would be happy with 7 percent or 8 percent.

The two also disclosed that new members of its board of directors will include Andrea  Zopp, chief executive of the Chicago Urban League.


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