Thursday, February 16, 2017

Why did Seaway Bank die?


Cover Seaway Bancshares Inc. 1996 annual report
We've covered bank closings before especially those that directly affected our community. Shore Bank had been a presence in Chatham for example and in 2010 it failed and purchased by Urban Partnership Bank. The loss of Seaway is painful surely for the many longtime supporters and even the shareholders who held stock through Seaway Bancshares from the beginning.

My often stated hope since the failure last month has been that Seaway will be back in the hands of a Black ownership group. It's gone, that bank that was is history. If you want to come up a possible holding company that could own whatever was left of Seaway you need cash for that.

Greg Hinz wrote a piece about why Seaway was allowed to wither. From some of our political leaders the response to this big event was tepid. While it's something I would like to explore in a future post, Hinz pointed to Mayor Rahm Emanuel and county board president Toni Preckwinkle for allowing this bank to fail.

The point of this post is to share my ideas as to what happened as I see it. Perhaps even as it has been reported. So four visible indications that Seaway Bank was in trouble long before January.
  1. Purchase of two failed banks - As an observer I was glad to see Seaway expand into the market served by the Maywood, Illinois based First Suburban Bank and into Milwaukee served by the Black-owned Legacy Bank. Both banks were purchased the same way Seaway Bank had been purchased itself, both banks were shut down by the FDIC and their state regulators. Both banks failed near the tail end of the sub-prime loan crisis where a number of banks failed around the country. The purchase of those two banks caused Seaway to suffer losses after a long period of profitability.
  2. Jacoby Dickens dies - Until 2013 the majority owner and chairman of the board of directors was Mr. Jacoby Dickens. It doesn't take long to do a Google search and find out the impact he's had on the community and the influence he's had in Chicago's business community or even in Chicago Politics. His untimely demise unfortunately moved forward the next series of changes which are the next bullet points. If he was still living it's possible that the executive management team would've remained the same and perhaps the bank would survive.
  3. Veranda Dickens takes the reins - Greg Hinz refers to the now former Chairwoman of Seaway's board of directors as "well-intended but inexperienced widow." I will take great pains to not point at her as the reason for the banks untimely demise. Bottom line was that she was at the top when the FDIC shut down the bank. Many of the issues Seaway had predated her succession to Mr. Dickens role in 2014. Regardless, although she wasn't wrong to overhaul the bank and bring in consultants that remained until the very end one can only wonder if this was a disastrous decision at the worst possible time. We see the results of this now!
  4. Departure of President/CEO Darrell Jackson - One could say that if former CEO Walter Grady or any of his management team remained at the helm Seaway would likely be OK. Unfortunately Grady retired or who knows perhaps it wasn't his decision. The savior could've been Darrell Jackson except that he departed after only 14 months, with Mrs. Dickens assuming his role on an interim basis afterwards. I did a blog post about this development which asked "What is going on at that bank?" We may never know but one can only wonder did he like what he saw? Either way from roughly October 2014 to January 2016 Seaway Bank had no permanent President/CEO, the consultants remained until the very end, and issues with recaptization. The regulators took note surely of all those factors and pulled the plug.

If you look at quite a few reports by Crain's reporter Steve Daniels you see an anatomy of Seaway's problems within the last three years. I've shared many of his reports especially the issues with gaining more capital for the bank - refer to Daniels' final report before the January failure - or the "c-suite" shuffle .i.e. Darrell Jackson or even attempts in 2016 to get more capitol. Daniels' work was noted by Hinz as they're colleagues at Crain's Chicago Business.

Now the assets that were the former Seaway Bank - also known as Seaway National Bank or Seaway Bank & Trust Company - are in the hands of the Indian-American owned State Bank of Texas. In recognition of Seaway's history and stature in our community they've opted to keep the name. However, I recognize that they have a business to run and they're going to do things their way to insure the success of their business. In spite of what happened we're still talking about business and the main language of business is money. That's the main reason Seaway is gone...

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