Seaway Bank & Trust is in the early stages of a capital-raising campaign that, if successful, could well threaten its status as the largest black-owned bank in the Midwest.Seaway's closest competitor apparently is Urban Partnership Bank:
The South Side lender has suffered $16 million in total losses over the past five quarters ended March 31. Its capital is below the minimum needed for the bank to be deemed “adequately capitalized” by regulators. To prop it up and enable it to lend actively, Seaway is preparing to select an investment banker to raise what one source says would be more than $15 million in fresh capital.
In an email, a spokeswoman acknowledges the need for cash but won't comment on the amount sought. “Seaway is currently engaging investment bankers for a capital raise,” she says. “We remain committed to our mission and our markets.”
The bank also remains without a CEO since the departure in September of Darrell Jackson, who led Seaway for only a year before his exit. Executive Chairman Veranda Dickens, who has been in charge since the 2013 death of her husband, longtime Seaway owner and Chairman Jacoby Dickens, “is managing day-to-day operations of the bank,” the spokeswoman says. The CEO search “is ongoing and progressing well,” she adds.
Those optimistic words notwithstanding, Seaway has suffered quite a reversal of fortune in the 18 months since Dickens declared that the bank wouldn't need financial help. That came after high-priced consultants determined that the previous management team had made material accounting errors not in the bank's favor. After financials were restated for all of 2013 and half of 2014, a substantial loss was changed to a profit for 2014. Since then, however, losses have piled up, leaving Seaway with just $25 million in equity. At the end of 2014, when Dickens made her declaration, the bank's equity stood at $43 million
It's not assured that Seaway will be able to raise the money, especially when another South Side bank catering to African-Americans, Urban Partnership Bank, also is seeking more than $20 million in new equity.I've attached a graphic regarding Seaway courtesy of Crain's.
UPB—already backed by banking giants JPMorgan Chase, Bank of America and Goldman Sachs—is expected to seek the funds from a group of local and national banks. It's ahead of Seaway in terms of holding meetings with prospective investors and other preparations.
If other banks end up bailing out UPB, that could eliminate an important potential source of capital for Seaway.
And if Dickens does find help, the likelihood of keeping the bank in African-American hands may be remote. The amount of money Seaway needs likely will compel her to seek investors interested in preserving an important city lender regardless of their race.
Chicago has been losing black-owned banks, with two failing in recent years. Another on the verge of failure—South Side thrift Illinois Service Federal, formed during the Great Migration of blacks to Chicago from the South—recently was rescued with $9 million from a Ghanaian-American family.