Crain’s Chicago Business: Urban Partnership Bank Q42016 Earnings

Crain’s Chicago Business: Urban Partnership Bank Q42016 Earnings

 

February 07, 2017

Urban Partnership Bank turns a profit for first time

By STEVE DANIELS  

Urban Partnership Bank has turned its first profit since its 2010 inception.

The South Side bank, which caters to business borrowers in low-income parts of Chicago and Detroit, said that its fourth-quarter profit means it has finally turned the corner after a relentless series of losses that now require it to seek new investors.

UPB was founded to continue the mission of failed ShoreBank, which for decades had profitably lent in low-income Chicago neighborhoods until foundering in the Great Recession. Infused with more than $140 million in capital from the biggest financial names in the U.S.—Goldman Sachs, JPMorgan Chase, Citigroup, etc.—UPB has struggled for six years to dig out of the pile of bad loans left by ShoreBank.

The losses left UPB with just $33 million in capital as of Sept. 30. Its $1 million in net income in the fourth quarter helped boost its capital to just over $35 million.

For the year, UPB posted an $11.5 million net loss. Its assets at the end of the year were $553 million, down from $636 million a year earlier.

In 2016 UPB cut costs substantially, closing branches and laying off employees.

"Our Q4 results and the stabilization in the value of our loan portfolio show we can be successful banking partners in these markets," UPB CEO William Farrow said in a release.

UPB still needs to raise $15 million in new equity to meet the terms of a consent order with state and federal regulators.

The bank hopes to complete that late in the second quarter or early in the third, a spokeswoman said in an email.

UPB has approached locally headquartered banks and other financial institutions for the cash. To date, it's won some commitments but not nearly enough to raise the whole $15 million, sources said.

Still, the stability shown in the fourth quarter should help reassure would-be investors that their money won't be used to absorb losses from past decisions—a crucial step.

UPB's importance grows now that another significant South Side player, African-American-owned Seaway Bank & Trust, recently failed. State Bank of Texas has assumed Seaway's deposits and most of its assets.

While not black-owned, UPB's CEO and most of its customers are African-American.

Our new branches reflect our mission to make a difference in the lives of our customers and communities

- William Farrow
Former President and CEO, Urban Partnership Bank