Seaway Bank and Trust Co., on the South side of Chicago, may become the last black-owned financial company left standing in the Windy City. Currently, Seaway Bank ranks third on the BE100s Financial Services Banks list with $551.6 million in assets in 2014.
According to Crain’s Chicago Business, Illinois Service Federal Savings & Loan, a thrift founded by 13 African-American men in 1934 as a depositor-owned lender, is seeking a $7 million lifeline. Crain’s reports that a federal consent order issued April 16 puts the pressure on the $110 million-asset lender to shore up its capital or face “corrective action” from the U.S. Office of the Comptroller of the Currency. Without an infusion, Illinois Service risks closure and transfer of its deposits and loans to another bank.
Illinois Service’s financial troubles follows the failure five months ago of Highland Community Bank, a black-owned lender on the South Side. Highland once held the number 13 spot for banks on the BE100s list with $67.2 million in assets. What’s more, regulators closed Covenant Bank, an African American-owned bank on Chicago’s West Side, in 2013. Black banks in Chicago have been a huge source of capital access to black owned businesses in the city.
CEO Norman Williams, told Crain’s, Illinois Service is taking steps to raise the money, including transforming from a depositor-owned thrift to a shareholder-owned bank. That “demutualization” is a necessary first step before new investors can provide an infusion. Assessing Illinois Service’s chances of survival, Williams added in an interview that he’s “as confident as anyone can be, having had the (economic) shock of the last four years.” But said, “I would be naive not to recognize that 1,000 other bankers in my shoes (whose banks ultimately failed) in the last decade have felt the same way.”
In the three years ended last year, Illinois Service suffered nearly $9 million in net losses. The losses wiped out about two-thirds of its capital. Williams attributed the bank’s woes to persistently high unemployment on the South Side and property values that haven’t recovered much from the depths to which they sunk in the recession.
Williams went on to say that he already is talking to potential investors but wouldn’t identify them. As part of its rescue effort, Illinois Service has hired investment banking firm Stifel Nicolaus and law firm Vedder Price, both in Chicago.
Seaway, even with a potentially more profitable business model as a commercial bank, tried for a time to attract new investors and struggled to do so. Like Illinois Service, Seaway reportedly is operating under a consent order, but its leaders have stated it doesn’t have to raise capital to survive.