Breaking: Seaway Bank Shut Down, Maywood Could Take Its Deposits Elsewhere, Says Village Manager

Seaway Bank Draped in Purple

Seaway Bank & Trust’s Maywood Branch. | File

Friday, January 27, 2017 || By Michael Romain || @maywoodnews || Updated: 1/28/17

Seaway Bank & Trust, the state’s largest black-owned minority bank and the sixth largest in the country, was shut down today by state bank regulators, according to multiple reports. According to a Crain’s report published today, all of the bank’s deposits and a majority of its assets will be transferred to State Bank of Texas, effective Saturday.

According to a report by the Chicago Tribune, “All 10 branches of Seaway Bank and Trust will continue to be open during normal business hours under the new ownership, the FDIC [Federal Deposit Insurance Corporation] said. During the weekend, people with deposits will be able to access their money by writing checks or using ATMs or debit cards. Deposits will continue to be insured by the FDIC.”

Crain’s reports that State Bank is based in Dallas and owned by Indian-Americans, not the kind of fate that Seaway’s African American owners had hoped for the 52-year-old institution. In the wake of recent financial struggles, the bank’s owners had sought out black investors to come to the rescue. Ultimately, however, that didn’t happen.

The bank’s failure means that the Village of Maywood, which still has hundreds of thousands of dollars in deposits at Seaway, could go shopping for another place to park that money even though the amount the village has with the failed bank is insured by the FDIC and isn’t required to be collateralized.

“Essentially, the money that’s held at Seaway is below the [$250,000] federal [threshold], so if there is a failure we don’t lose any money nor are we at a capacity where the money has to be collateralized,” said Village Manager Willie Norfleet, Jr. during an interview today.

Late last year, the village transferred funds from its corporate, water and escrow accounts from Seaway to Hinsdale Bank.

“Several months ago, the issue was to get us below the level at which funds need to be collateralized,” Norfleet said. “Hinsdale Bank came in and we moved money from those accounts and only wired money to Seaway when checks had to be cleared, so if the bank failed we’d be covered by federal insurance.”

Norfleet said that the village still banks with Seaway to cover payroll and water payments, among other matters. Last year, he said, Seaway officials approached Maywood requesting that the village take out any money that would put it over the level at which it would need to collateralize its deposits.

For the bank, the collateralization meant additional costs that only added to its already strained finances.

“They were trying to say, ‘Hey, it’s not like we’re kicking you out, but you can’t be here and have a risk because [the bank] will have a problem, too,'” Norfleet said, adding that the village might consider other banks to park its deposits.

“That’s always on the board, continuously, it’s just that we didn’t formally bid out [to other banks] to take all of our funds,” he said. “Eventually, though, we’ll have to take [our money out of Seaway].

“The issue, however, is that Hinsdale doesn’t have [a sufficient amount of readily available] checks. We have to have a whole bunch of checks to keep operating. If you’re going to switch over, you have to have those checks from the other bank to cut. Another thing with Hinsdale is that there isn’t a close physical location to take deposits. So, there are logistical challenges.”

When asked if the village would consider transferring its deposits to nearby U.S. Bank, which has a Maywood branch at the corner of Madison St. and 5th Ave., Norfleet said that the possibility prompts other concerns.

“How much do they really want to take?” Norfleet said. “We think banks are just happy to take money, but they have to pay service fees, accumulate charges and then they have to collateralize because that costs money. So, they have their own expenses associated with [large accounts]. The bank is a business, too.”

Seaway has branches in Maywood, at 150 S. 5th Ave., and Broadview, at 2100 Roosevelt Rd., both of which will be affected by the closure.

According to Crain’s, with Seaway having failed, only one black-owned bank remains in the Chicago area — Illinois Service Federal.

“That bank, also in danger of failing, was rescued early last year with $9 million from a Ghanian-American family, keeping it black-owned,” Crain’s reported, adding that the FDIC has estimated that Seaway’s failure “would cost its insurance fund $57.2 million. The FDIC retained $52 million of Seaway’s assets for later sale.” VFP

To read the full Crain’s report, click here.To read the full Tribune report, click here.

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