By James G. Muhammad
When you talk to William Farrow III, president and CEO of Urban Partnership Bank (UPB), the conversation eventually finds its way to the importance of establishing meaningful banking relationships. Like the conversation he had with a young man while standing in line at a store.
The man told Farrow how money he’d inherited dwindled away because he lived on a cash-only basis. The man had gone from “owning a six-flat (building) to drinking a six-pack,” Farrow recalls. It’s the kind of story he hopes to prevent.
“How do you change the trajectory of an individual’s or family’s life unless you have some sort of responsible banking relationship?” Farrow asks. “A banking relationship could mean the difference between going to college or not going.”
Urban Partnership Bank is a certified community development financial institution whose name reflects collaboration. With its headquarters located at 7936 South Cottage Grove on Chicago’s South Side, UPB’s mission is to fill the void left by the collapse of the historic ShoreBank, an institution that was an important lifeline to the Black business community here.
ShoreBank closed in 2010. That same year, UPB was chartered as a new bank and assumed the assets – loan portfolios and deposits – of the failed institution. Many of the loans were “troubled” and future losses on those loans are partly covered by the FDIC (Federal Deposit Insurance Corporation).
Knowing they had a long way to go but committed to the mission, Farrow and his staff rolled up their sleeves and went to work managing the $1.3 billion in ShoreBank loans that UPB assumed.
The bank has resolved $474 million of those loans to date, according to reports. UPB expects to be profitable by 2014. It actually exceeded its $26 million loan origination goal for 2012 and has a goal of generating $42 million in loans in 2013.
“It’s like wrestling in a pit of alligators,” Farrow says with a half smile, explaining the daily task of making a totally new bank function, while simultaneously trying to sort through the problems of the former bank.
“There was no big bank infrastructure to stick (UPB) into and we were buying it from a receiver (FDIC). So, as we were trying to respond to customer issues and trying to do business, we also were trying to put branches in place, write credit policies” and many other things, Farrow says. “It was like trying to change a tire on a moving car.”
Tall, slender with graying hair, Farrow was raised in Englewood, the son of a schoolteacher mother and a father who retired as an industrial relations manager for a division of Commonwealth Edison. He graduated from Augustana College and holds an MBA from Northwestern University’s Kellogg Graduate School of Management.
Farrow’s calm demeanor belies the obvious pressure on him to establish a successful financial institution that seeks to continue the tradition of its predecessor in underserved neighborhoods.
Involved in nearly every facet of the new bank’s development, Farrow even took an active role in envisioning the bank’s logo: a grid of blocks, not unlike urban neighborhoods, with gold occupying several of those blocks. The gold, Farrow says, symbolizes how partnerships transform neighborhoods.
The banker’s career has taken him through the technology and support sides of finance. He has held upper management positions with JPMorgan Chase/Bank One and First Chicago Bank. Farrow sits on the board of the Federal Reserve Bank of Chicago and owns Winston and Wolfe LLC, a privately held technology development consulting firm.
He was director of corporate strategy and business development for Dart & Kraft, a food and consumer products company, and manager of acquisitions at GD Searle Pharmaceuticals, where, he once told an interviewer, he experienced the most lasting impression of his career while working with Donald Rumsfeld, who later became President George W. Bush’s defense secretary.
But, “I have no path,” Farrow says, explaining his unlikely career journey. “My interest is in situations that are potentially negative and trying to turn them into positives.”
The collapse of ShoreBank was a huge negative for the South Side of Chicago. The bank’s demise was hastened by the housing collapse – it had invested heavily in housing – and the emerging recession. Despite management’s efforts, ShoreBank was unable to access federal bailout funding through the TARP (Troubled Asset Relief Program) that saved other banks.
Farrow’s approach will be to focus the bank’s efforts on a more diverse product line, including small business, real estate and consumer loans made in communities where branches are located.
“Our loan portfolio will be in the communities we serve. Our bank will rise as our customers thrive,” he says.
Financial education for customers is at the core of Urban Partnership’s business strategy. Along with UPB’s Chairman David Vitale and Chief Financial Officer Eileen Kennedy, Farrow has established a rigorous and detailed loan process. UPB wants to make sure that applicants know the risks prior to getting a loan, thereby eliminating some of the problems before they manifest.
One of those entrepreneurs is Tess McKenzie, a small business owner who already had a relationship with ShoreBank. Owner of All About Kids childcare facilities, McKenzie obtained a $43,000 loan to expand her current facility and renovate another older day care center she would acquire, Lakeshore Learning Academy.
She was glad that UPB had continued the community-based mission of ShoreBank. But not only did UPB extend the loan, they presented a host of other resources McKenzie did not expect.
“I had a vision but there were some things I didn’t know I needed that they made me aware of,” McKenzie explains. “It’s the personal attention they bring. You are not just a small business; it’s about the relationships. It goes beyond just giving you a loan.”
In addition to receiving the bank’s financial guidance, McKenzie and other small business owners were invited to a management training session given at the bank, where she was awarded a scholarship that would provide training for her management team.
“I wouldn’t have thought of having a consultant to help me think out of the box about my business,” she says.
On the consumer side, Farrow plans to go after young customers who have no banking relationships and also attract the “under-banked” customer, whom he describes as consumers who operate on a cash basis.
Using mostly payday lenders and high-charging currency exchanges for financial transactions, many of these consumers earn $40,000 to $50,000 a year but are unfamiliar with banking options, he says.
Young people want “24/7, 365 online” opportunities to banking, according to the bank president, which means expanding UPB’s technology to allow smart phone banking and making their offices more attractive and convenient.
To facilitate that, Farrow closed some of the larger branches, opening instead smaller “footprint” branches that allow for visibility and quick in-and-out convenience. These smaller branches also offer drive through options and will compete with currency exchanges, he notes.
“It’s the direction that banking is headed in,” says Farrow, adding that UPB has expanded its no-fee ATM availability to 50,000 locations through a national Allpoint network.
Personal banking options offered at UPB include free bank by phone and online savings, overdraft transfers, direct deposit, student checking, competitive CD rates, money market accounts and IRAs, among others.
Commercial real estate and business loans include fixed-rate transactions, interest rate-only rehab and Small Business Administration loans. There also are products for non-profit and faith-based organizations.
UPB’s current loan portfolio consists of commercial real estate, home rehabbers and small businesses. Their primary customers are senior citizens. With $1.1 billion in assets, Farrow proudly notes that UPB is “one of the best capitalized banks” in Illinois.
The bank has 10 Chicago locations and one each in Cleveland and Detroit. It’s most recent acquisition is the iconic Northern Trust Bank building at 79th Street and the Dan Ryan expressway, a location that Urban Partnership hopes will bring its brand a higher profile.
Northern Trust reportedly closed the location to reduce costs, but chose to sell to UPB instead of putting the building on the market. Northern Trust is an investor in UPB, having sought initially to rescue ShoreBank with other large financial institutions in deals that fell through. Those banks then helped to capitalize the new UPB start-up.
“Northern Trust is a responsible partner. They will keep a presence through the community center in the bank where non-profit organizations put on programs and services. They’re working with us in the marketing and promotion of the space,” Farrow says.
Similarly, Farrow adds that many of UPB’s employees are from the communities they serve, which provides familiarity and deeper personal relationships for customers. Some are former ShoreBank employees.
“We have hired and retained experienced financial service professionals with roots in our communities who have a passion for our mission,” Farrow says. “They are putting renewed focus on partnering with key stakeholders to help restore the economic vitality of our urban neighborhoods and transforming them into places where more people will want to go to work, live, and to do business.”
Reviving neighborhood economic vitality will help to address the devastating impact caused by the recession and urban violence, Farrow hopes. He bemoans the loss of wealth in the Black community resulting from the housing collapse, and recounts a comment of a friend that a home in his neighborhood now could be purchased for the same price his parents paid in the 1960s.
Farrow also sees job creation as a major part of the solution in stemming the anti-social activities of some Black youths.
“If you have nothing to look forward to and have a lot of idle time, what do you do?” he asks with a shrug of his shoulders. “Everybody wants to be a part of something.”
He’s hoping that UPB will be that resource that “turns the community from gray to gold” through the relationships established and the generation of community wealth.
