Urban Partnership Bank in trouble with regulators (formerly South Shore Bank)

By Becky Yerak, August  19, 2016

Urban Partnership Bank, which rose in 2010 from the ashes of failed South Side lender ShoreBank, is already on the hot seat with financial regulators.

The Chicago-based bank, which has been backed by some of the biggest names on Wall Street, has entered into an agreement with the Federal Deposit Insurance Corp. and the Illinois Department of Financial and Professional Regulation that calls for it to cut its discretionary spending and raise capital, among other things.

The consent order was signed Aug. 5 and recently posted to the state’s website.

On Aug. 11, money-losing Urban Partnership announced plans to raise an unspecified amount of capital. Spokeswoman Monica Carney later said the bank would try to raise about $15 million.

The lender was formed in August 2010 to acquire about $1.3 billion in assets of the failed ShoreBank, which was known for lending in poor South and West side neighborhoods.

Urban Partnership was capitalized with nearly $140 million from Goldman Sachs, JPMorgan Chase, Chicago-based Northern Trust, Citigroup and others.

It has shrunk in size to about $600 million in assets, which consist mostly of loans.

“Resolving the acquired ShoreBank portfolio has been more expensive and time-consuming than expected due to its condition and complexity, which has impacted our capital position,” Carney said. “Urban Partnership Bank has proactively addressed many of the items in the order, including initiating our capital raise to augment the bank’s equity base and restore our capital to the levels expected by the regulators when the bank was formed.”

Carney said the bank remains “confident” in its ability to raise the capital it needs to continue lending in low- and moderate-income inner city minority neighborhoods in Chicago and Detroit.

The FDIC estimated at the end of last year that the failure of predecessor ShoreBank will cost its insurance fund $511.6 million.

Successor lender Urban Partnership has lost about $10.5 million through the first half of 2016. That has wiped out more than a fifth of its year-end capital.

It has lost money every year since its inception.

Urban Partnership is among a shrinking number of banks that continue to lose money.

In the first quarter, 8.4 percent of Illinois banks were unprofitable, compared with 9.3 percent in March 2015 and 11.3 percent in March 2014.

A relatively high percentage of Urban Partnership’s loans are seriously delinquent.

More than 9 percent of its loans were seriously overdue in the first quarter. At the typical Illinois bank, that number is around 1 percent.

Urban Partnership’s workforce also has shrunk, to 152 at the end of the first quarter from 170 at year-end.

It has trimmed the number of its Chicago branches to seven.

byerak@chicagotribune.com

Twitter @beckyyerak