#SeawayBank failure was self-inflicted

Now owned by Self-Help FCU

Steve Daniels is back discussing further what happened with the former Seaway National Bank. Perhaps nothing new is to be found in a recent FDIC report on Seaway's failure, however, this article brings to light some things that were interesting.

To start I did a post where I gave four bullet point reasons why Seaway died. This article shed some light on some unexplained issues such as for example the shuffle in the "c-suite" why Seaway couldn't attract any executives who could handle the bank's pressing problems.

In 2014, she fired long-time CEO Walter Grady. But the new CEO, Darrell Jackson, formerly of Northern Trust, didn't work out either. He was fired in the fall of 2015 after Dickens and the board decided he didn't have the experience to fix things, the report said. After that, Dickens herself served as interim CEO. "Seaway's board and management were largely ineffective from 2013 through its failure," the report stated.

In much of that period, high-priced consultants ran much of the day-to-day operations. The costs sent Seaway's overhead skyrocketing, ultimately hitting 11 percent of assets in 2016, the report said. Peer banks' overhead costs average 2.8 percent.

In a statement to Crain's, Veranda Dickens wrote: "Seaway Bank's board ... replaced the entire management team that caused the vast majority of problems that eventually led to the failure of the bank. ... The management team did the best we could to continue operating so we could serve our community under trying and difficult circumstances."

Also mentioned on this blog recently:

It also was unable to attract qualified executives. That led to a decision in November 2015, a little over a year before Seaway failed, to bid on $65 million of South Side mortgages offered by Urban Partnership Bank. Bizarrely, Seaway submitted the bid before informing regulators, even though the bank was under a regulatory consent order, according to the report. "Upon learning of the transaction, (regulators) informed Seaway that it may not have had sufficient capital to execute the deal," the report said.

As it turned out, Seaway pulled the plug anyway over a dispute with UPB, but it had made a $6.5 million deposit that UPB held until Seaway's failure. That deposit now is the subject of litigation between UPB and the FDIC.

As I've already seen in various reports regarding this unfortunate and shocking failure it was a combination of issues that forced regulators to shut Seaway down. It was some missteps as far as managing the portfolios of two failed banks, the changing of the guard as far as ownership - i.e. Jacoby Dickens and then his wife Veranda, then the executive management shuffle, then a mention of the board of directors, and then those consultants. With all the changes, Seaway was bleeding and no one can stop it.

As a result Seaway which had been independently owned for 52 years is now a subsidiary of Self-Help FCU.

BTW, attached to the article is the FDIC report that Mr. Daniels used to write his article. Give it a look if you're so inclined.