By J. Coyden Palmer, Chicago Crusader
Last week’s shocking news that Seaway Bank & Trust Co. was taken over by a bank from Texas showed the dire situation African-American banks are in around the country, according to Congressman Bobby Rush (D-1st) and others.
Illinois Service Federal Saving & Loan is now the only Black-owned bank in the Chicago area. Seaway—an institution in the Chatham community on the South Side since 1965—has had their deposits taken over by the State Bank of Texas.
“With fewer than 30 Black banks remaining in the U.S., the crisis for African-American banks is obvious and growing,” Rush read from a statement. “Difficult economic conditions in the African-American community and an inability to expand into more creative and innovative products have limited the amount of economic growth for these banks.”
Depending on who you talk to, what caused Seaway to fail is a multi-layered question with many answers.
Banking experts believe Seaway fell victim to overexpansion and took a major hit during the housing crisis in 2008. Others say after the death of its founder, Jacoby Dickens in 2013, some of the decisions made by the bank’s leadership put the business in jeopardy, including the removal of the CEO shortly after Dickens’ death.
Perhaps the biggest reason involved Seaway losing focus of its primary mission and in some ways abandoning its base community, according to Otis Monroe, founder of the Monroe Foundation, a non-profit organization founded in 1991 to provide technical assistance in starting community and economic development projects within low-income communities.
“I think the genesis of why Seaway failed is because since Jacoby passed, Seaway became significantly disconnected from the African-American community,” Monroe said.
He went on to say, “Our organization for over two years, attempted to sit down with the former chairman of the bank to talk about how to make the bank relevant again in the changing marketplace and we could never get to meet with them. Just as much as they were sponsoring different events, they could have been creating partnerships. Seaway just didn’t make itself a player in the dialogue that the African-American community and social enterprise advocates are having around rebuilding and stabilizing the Black community. They didn’t have leadership at those meetings, so those of thus within that community embraced the banking options and choices that responded to our advocacy.”
In 1991, Monroe shared that the then-called Seaway National Bank received a “needs to improve” rating from its regulator at the time. It is one of the worst ratings a bank can receive according to Monroe. The rating was based on Seaway’s failure to adhere to the Community Reinvestment Act (CRA), a federal law created in 1977 that is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate.
Monroe stated that Seaway, like many Black institutions, failed to adapt to the changing times in its industry. He said he has already spoken with Chan Patel, CEO of State Bank of Texas, to see if he can negotiate some initiatives that are more reflective of the lending, banking and investment opportunities within the African-American community.
“I’m hoping we can make some headway with some new leadership that we were not able to make under the former ownership,” Monroe said. “There is a growing social enterprise movement in Chicago where non-profit organizations that are spinning off their workforce development programs to create community ventures that actually compliment the job training programs. Many of them need the seed financing to launch their social enterprises. That is something we are hoping to work with State Bank of Texas on.”
Another reason Seaway landed itself in trouble was African Americans have more financial options than they have ever had before, according to Professor Linnae Bryant, an accounting and finance instructor at Chicago State University. A resident of Chatham, Bryant said Seaway was slow to add new technology for customers
“I’m disappointed it happened, but I’m not surprised,” Bryant began. “And the reason is because I know they’ve always had some challenges at being competitive as far as technology is concerned; that had always been a source of frustration for me. Once Chase and Bank of America decided they were going to do community outreach and they came into the community, Seaway couldn’t compete.”
Bryant said she and many others with a like mindset stayed with Seaway as long as they did out of a sense of duty to the community. She is the faculty advisor to an organization called the National Association of Black Accountants and they had their operating accounts at Seaway since 1995 because she insisted an organization of Black accountants do business with a Black-owned financial institution.
“I feel one of the biggest things to come out of this will be the community will feel a loss of ownership in the financial stake in the community,” stated Bryant. “You’ve lost a pride in ownership and that will have a psychological impact in terms of what our expectations are about the community. People will look at this and say, ‘Well if we lost the bank, what will happen next?’ Chatham lost a Black-owned grocery store a few years ago. This just adds to the loss.”
Bryant and others say anxiety over what Chatham’s commercial business operations will look like is building. Although no one really knows how much of a financial stake Seaway had in the community remaining, Bryant said she will be pulling her organization’s money out of the bank and possibly shift it down the street to Illinois Service Federal Savings & Loan.
“Anyone who hung in there with Seaway did so because of the pride in ownership, so I would venture to say Illinois (Service) Federal will probably see an increase in their deposits,” Bryant said.
ISF now becomes the lone Chicago-based, Black-owned banking institution in the area among the estimated 20 remaining in the nation. The financial institution attracted needed capital from the Ghanaian-American Nduom, which it has used to upgrade its infrastructure and technology. A spokesperson for ISF said the bank is looking forward to the opportunity to expand its footprint in the community.
Black residents who spoke with the Crusader said they were disappointed at the news about Seaway. For many, the institution represented more than just a bank, but a large part of African-American culture that brought a sense of pride to Black Chicagoans no matter where they lived.
“Another piece of Chatham leaves,” lamented David Ziegler. “Chatham used to be the flagship of the Black middle-class life and the way it is going is indicative of the way we are going as a people. I haven’t had the time to truly put into words how much this disturbs me. We have so much economic power and refuse to come together and use it.”
In the meantime, Monroe is continuing his efforts to do just that. On Feb. 18th, the Monroe Foundation is partnering with the Center for Economic Progress to launch a mobile tax clinic in the village of Maywood in Proviso Township.
The clinic will provide an opportunity for income-challenged families and senior citizens to have their tax returns prepared and filed for free as well as receive other financial coaching instructions.
In the coming weeks, Monroe will also be hosting a symposium to discuss the state of Black banks and banking choices, in general, within the city of Chicago. For more information, contact Otis Monroe at (773) 315-9720.
