Bank to keep name, operate as credit union
By Keith Chambers, Chicago Crusader
In its final years, Seaway Bank was a shell of itself before federal regulators finally closed it on January 27. The bank that helped thousands of Blacks become first time homebuyers during the Great Migration was forced to cut back on lending after suffering huge losses during The Great Recession. To many, Seaway was never the same. Many Blacks seeking mortgages and personal loans from Seaway were turned away. Unlike its storied past, Seaway became known for its loan rejections more than its commitment to aspiring Black loan applicants.
As Black neighborhoods struggled to recover, Seaway’s legendary founder, Jacoby Dickens died. With its titan gone, Seaway’s demise seemed inevitable. When the bank in January, finally went under, it fell into the hands of the State Bank of Texas, headquartered in Dallas, whose founder and CEO, Chan Patel, is a self-made multimillionaire.
By purchasing Seaway, Patel is close to becoming America’s newest billionaire as he aims to turn his latest acquisition into a money making machine. But some in the Black community were concerned that the State Bank of Texas would not serve neighborhoods of color and would instead strip Seaway and focus primarily on a practice that made Patel rich: lending to hotels. The State Bank of Texas bought Seaway in a distressed sale when federal regulators closed the bank in January.
But as many in Chicago and across the country bemoaned the closure of the city’s largest Black-owned bank, Self-Help, a non-profit organization jumped in to rescue Seaway’s name and perhaps its legacy. Self-Help has acquired some of Seaway’s $240 million in deposits and nine of its branches. Patel, whose family owns another Chicago institution – The National Republic Bank of Chicago – will keep Seaway’s $209 million loan portfolio.
Under the deal, Seaway Bank will retain its name and operate as a credit union under the Self-Help charter. Self-Help’s vision for Seaway is similar to some principles that Dickens used to create a successful institution that forged a special bond with Chicago’s Black community, especially the Chatham neighborhood.
With long-term goals to help low-income borrowers, Seaway Bank may be able to return to its roots- a feat it was unable to accomplish as a for-profit bank. Self- Help is banking on its non-profit status to yield big returns for Seaway’s future.
In its heyday, Seaway flourished as Dickens financed thousands of mortgages for aspiring Black homeowners at a time when many banks discriminated against people of color. Many small businesses got their start with the help of Seaway. With a focus back on underserved neighborhoods, Seaway’s fortunes could match those of its glory days.
The possibility is closer to reality as Self-Help work out the deal’s details with the State Bank of Texas. The State Bank of Texas executives are reportedly looking at capitalizing on Seaway’s lending arm and its lucrative branch at O’Hare Airport. Self-Help will acquire some of Seaway’s customer deposits and branch operations that will keep the storied name. Before it closed, Seaway has as many as 15,000 customer accounts, according to Self- Help.
Self-Help hopes to close the deal May 1.
When that happens, Seaway will become part of a successful organization that was started 35 years ago with funds from a $77 bake sale. Headed by CEO and co-founder Martin Eakes, the non-profit organization is not Black-owned, but Self-Help has appointed Al Bass, a veteran African-American banker, as executive vice president. Self Help expects to name a new chief within a year.
“All of Self-Help recognizes and respects the efforts begun in 1965 to bring economic empowerment to Black Chicagoans,” said Bass. “We are committed to becoming a community partner that listens and learns from the people of Chicago. The people who live, work and worship in the Windy City know better than anyone else the community’s needs, priorities and concerns.”
Self-Help has a strong reputation of investing in underserved communities across America. With $1.2 billion in assets and $600 million in reserves Self-Help is prepared to absorb the financial risks that come with lending.
In a similar distress sale in 2012, Self-Help acquired the deposits and two branches of Chicago’s Second Federal Savings and Loan. Since then, Self-Help has been doing brisk business in the Brighton Park and Little Village neighborhoods.
In South Side neighborhoods, the new Seaway aims to provide home mortgages to some candidates who may have below-average credit scores. Loan applicants with spotty job histories will also be considered because of their ability to make a regular monthly payment and build equity.
Seaway’s long-term goals include helping finance homes, neighborhood institutions including health care centers, churches and businesses. With many of these struggling institutions on the South Side, Self- Help’s new Seaway may be a game changer.
Self-Help said by focusing on underserved neighborhoods, it has developed a track record of $7 billion in total financing, including $18 million in loans to 27 Black churches and 11,600 mortgages for first-time Black homebuyers.
As a credit union, Seaway may be even more successful this time around. As a nonprofit credit union, Seaway will be collectively owned by its members, who are also its customer. Credit unions are also government-regulated institutions that have strict capital and loan standards. However, as a credit union Seaway will not operate under the same pressures as it did in the days when it was a for-profit institution beholden to shareholders.
Some are also feeling relief that Seaway’s assets are not entirely in the hands of the State Bank of Texas.
Patel is one of several Indian-American bankers who have profited from America’s hotel and motel industry, which has 20,000 properties valued at $130 billion last year, according to the Association of Asian American Hotel Owners.
An Indian-American bankers’ association within the hotel industry goes as far back as the 1940s. Many immigrants got jobs at small, mom-and-pop hotels and motels. In many instances, they hired family members when they joined them in the United States.
Patel came to the United States in 1965. He bought his first hotel in 1976; he now reportedly owns 10.
In 2014, the State Bank of Texas, took over another Indian American bank – The National Republic Bank of Chicago – in another distress sale prompted by federal regulators.
According to the American Banker website, about 60 percent of the State Bank of Texas’ $509 million in loans involve hotels.
“We’re known now as a hotel bank,” Patel said in an article on the website, noting that his bank originates hotel loans in 26 states.
With Self-Help’s ownership of Seaway’s operations, there is little concern that the bank’s focus will be diverted from its original purpose: underserved neighborhoods.
“Self-Help’s experience of serving people in Chicago’s West Side suggests that they will be able to continue Seaway’s work of providing banking services on the South Side,” said Norman Williams, retired Chairman of the Board and Chief Executive Officer of Illinois Service Federal Savings and Loan (ISF Bank). ISF Bank has served Black Chicagoans since 1934.