Urban Partnership emerges upon close of ShoreBank

ShoreBank of Chicago became Urban Partnership Bank on August 20 when state regulators closed the nation's first and largest community development bank. Urban Partnership Bank is being run by Chairman David Vitale, who had served as ShoreBank's CEO since last March. ShoreBank had been operating under a cease and desist order since July 2009.. ShoreBank was known for ties to the Clintons and the Obamas. The bank's marketing slogan was "Let's Change the World.". ShoreBank was owned 100 percent by ShoreBank Corporation, a holding company for one other bank and several nonprofit entities which operate throughout the country and internationally. ShoreBank Pacific of Ilwaco, Wash., was sold on August 21 to OneCalifornia Bank, an Oakland, Calif.-based community development financial institution. The holding company continues in operation for the non-profits.. The Illinois Department of Financial and Professional Regulation closed ShoreBank. The FDIC, as receiver, immediately sold its assets and liabilities to the newly-chartered Urban Partnership Bank, which was capitalized by a consortium of large financial institutions, including American Express, Citibank, Bank of America, Goldman Sachs and others. The FDIC said it put ShoreBank out for the usual bidding process and Urban Partnership Bank was the only one to submit a bid.. ShoreBank had branches in Detroit and Cleveland, as well as throughout Chicago; Urban Partnership Bank is maintaining all 15 of the branches.. Urban Partnership Bank paid the FDIC a premium of 0.50 percent to assume all of ShoreBank's $1.54 billion in deposits and essentially all of its $2.16 billion in assets. Urban Partnership Bank obtained a loss-sharing agreement on $1.41 billion of the assets.. The FDIC estimates the resolution will cost the Deposit Insurance Fund $367.7 million.. ShoreBank experienced asset quality problems, which were centered in residential rehabilitation loans, both multi-family and single family, and condominium conversion loans. In the second quarter, the bank lost $39.5 million.. The FDIC said ShoreBank "will have an entirely new board of directors. The ShoreBank board of directors and executives who presided during the deterioration of the condition of the institution will not be retained. New management leading the efforts to save the institution and that did not contribute to the bank's problems will be retained. The investors selected the new management with regulatory approval.". In addition to Vitale and President/CEO William Farrow, the Chicago Tribune reported that the board includes Eileen Kennedy, Daniel Lupiani and Jerome Szott.. Urban Partnership Bank intends to maintain ShoreBank's focus on providing loan and deposit products and services to individuals and small to mid-sized businesses, with a special emphasis on the underserved low-to-moderate-income areas of Chicago, Detroit and Cleveland. The FDIC said Urban Partnership Bank intends to apply to the U.S. Department of the Treasury to become a certified community development financial institution.. Regulators told ShoreBank it was critically undercapitalized on Feb. 23, 2010. In March, several large banks, including CitiBank, Goldman Sachs, Bank of America and others made multi-million dollar commitments to recapitalize the bank. If it could raise $200 million, ShoreBank expected to be able to obtain an additional $75 million in TARP funds. Actual funds raised totaled $146 million, however, and no TARP money was ever obtained. The FDIC said it extended the start date on its 90-day prompt corrective action period to March 22 as a result of the money raised. The bank was still undercapitalized by mid-August, however, so it was closed August 20.. Urban Partnership Bank was capitalized with funds from many of the organizations that stepped in last March. On the ShoreBank blog, it says "Urban Partnership Bank enters the market as well-capitalized with a Tier 1 leverage ratio of at least 8 percent, and has sufficient capital to meet pre-opening expenses, projected growth and overall capital needs.". ShoreBank ran an attractive online savings account called ShoreBank Direct. It offered competitive rates from its launch in 2007 until January 2010, when it reduced its rates, presumably to accommodate a cap imposed by the FDIC on banks that are less-than-well capitalized. Urban Partnership Bank is maintaining the ShoreBank Direct accounts and raised the rate on balances under $100,000 to 1.20 percent APY from 1.03 percent. Balances over $100,000 now pay 1.25 percent APY compared to the old rate of 1.19 percent.