Here's the setup for what's going on at a major Chatham neighborhood financial institution:
Two failed-bank acquisitions gone awry led Seaway Bank & Trust Co. to post a big loss for 2013 — the first loss in more than three decades for Chicago's largest African-American-owned bank — and helped destroy 30 percent of its book value.Also let's bear in mind the bank's longtime chairman Mr. Jacoby Dickens passed away last year:
Seaway, the third-largest black-owned bank in the country, reported a $4.4 million loss last year. Its equity, which began the year at nearly $47 million, ended at less than $33 million. Its capital level finished just barely above the minimum needed to be deemed “well-capitalized” by regulators — the most important gauge of a bank's financial health.
The apparent cause was a large number of writedowns tied to Seaway's acquisitions in 2010 and 2011 of assets and deposits of failed banks in west suburban Maywood and Milwaukee.
The deals for Maywood's First Suburban National Bank and Milwaukee's Legacy Bank boosted Seaway's assets by more than a third, to $552 million as of Dec. 31. But loss projections for the two — particularly Legacy — have mushroomed. The Federal Deposit Insurance Corp., which entered into agreements with Seaway to share losses on the bad loans at the two banks, boosted its own loss projections from Legacy to $84.3 million as of the end of 2012 from $43.5 million when the bank failed in March 2011.
The reversal in fortunes comes on the heels of the death in April of Jacoby Dickens, Seaway's longtime majority owner. His widow, Veranda Dickens, inherited his majority stake and succeeded him as bank chairman.Uhhhhh, not to be contradictory but I don't believe First Suburban Bank of Maywood was minority-owned. Legacy Bank of Milwaukee on the other hand was. Although, it's good that the FDIC elects to sell failed minority banks to other minority buyers.
The change in leadership and the significant loss in value raise questions about the bank's future. Ms. Dickens is said to be open to exploring options for Seaway, according to people familiar with the matter.
Exploring options could mean trying to raise equity from existing or new investors while keeping control. Or, more dramatically, it could mean seeking a buyer.
Either course would be challenging. Mr. Dickens in past years was said to consider selling Seaway, but would entertain offers only from African-American buyers.
Ironically, the failed-bank deals that hurt Seaway were available to it because both banks were minority-owned, and federal bank regulators prefer to sell failed minority banks to minority buyers.
If Seaway confined itself only to African-American buyers today, the pool of potential suitors might be even slimmer than when Mr. Dickens tested the waters. There are only two African-American-owned banks larger than Seaway — one in New York and one in Boston. One of those, Carver Federal Savings Bank in New York, survived the recession only after a $55 million bailout in 2011 by Goldman Sachs Group Inc., Morgan Stanley and other big New York financial firms.
Seaway is only the third-largest Black-owned bank in the nation. Two other banks are larger than Seaway. If the leadership ever decided to sell the bank would they be able to make the deal:
If Seaway confined itself only to African-American buyers today, the pool of potential suitors might be even slimmer than when Mr. Dickens tested the waters. There are only two African-American-owned banks larger than Seaway — one in New York and one in Boston. One of those, Carver Federal Savings Bank in New York, survived the recession only after a $55 million bailout in 2011 by Goldman Sachs Group Inc., Morgan Stanley and other big New York financial firms.The article concludes with some optimism. Stating Seaway remains well capitalized and could eventually return to profitability assuming no further writedowns on acquired loans. At this moments there is no pressure to seek more investors as well.
BTW, I became aware of this article via a e-mail blast from the Greater Chatham Alliance. I'm very sorry that this article had been overlooked during the past month.