October 22, 2010 – First Suburban National Bank, Maywood, Illinois, was closed today by the Office of the Comptroller of the Currency (OCC), which appointed the FDIC as receiver.
The OCC, in its press release stated that “The OCC acted after finding that the bank had experienced substantial dissipation of assets and earnings due to unsafe and unsound practices. The OCC also found that the bank incurred losses that depleted its capital, the bank is significantly undercapitalized, and there is no reasonable prospect that the bank will become adequately capitalized without Federal assistance.” The OCC had previously taken enforcement actions against First Suburban in August 2009.
The fact that the OCC admits that First Suburban National had no “reasonable prospect” raises the question of why it took regulators so long to close this bank. First Suburban Bank had a huge troubled asset ratio of 374% compared to a national average of 15%. Virtually all failed banks in the past several years have had troubled asset ratios of 100% or greater in their final quarter of reported data. Once a bank reaches a troubled asset ratio of 100% or greater, recovery becomes a remote prospect. (See discussion on Why Problem Banks Are Allowed to Stay Open).
The FDIC sold First Suburban Bank to Seaway Bank and Trust Company, Chicago, Illinois, which will assume all deposits and purchase virtually all assets of failed First Suburban Bank. Seaway Bank did not pay the FDIC a premium for First Suburban’s deposits.
First Suburban had total assets of $148.7 million and total deposits of $140.0 at June 30, 2010. The FDIC and Seaway entered into a loss-share transaction covering $116.6 million of the asset pool purchased by Seaway from First Suburban. The loss-share transaction has been used on almost all failed bank purchases in order to attract bidders for failed banks. The ultimate losses that the FDIC may incur on its guarantees remains unknown – if real estate markets do not improve for a long period of time, it is a certainty that the FDIC will incur greater losses than originally estimated.
First Suburban had four branches which will reopen on Saturday to give depositors access to their money. All First Suburban depositors will automatically become depositors of Seaway Bank with no interruption in FDIC deposit insurance coverage.
Seaway Bank, a $340 million asset institution describes its history and mission on its website.
Seaway Bank and Trust Company is a full-service commercial bank that emphasizes quality service and community commitment. Established in 1965 as Seaway National Bank of Chicago, it was created to counter discriminatory lending practices on Chicago’s South Side. The founders, a group of local businessmen, sold shares door to door throughout the community to raise the $1,000,000 in capital needed to secure the Federal charter. By the end of its first year, Seaway’s assets had climbed to over $5,000,000, and the bank has grown steadily over the years.
Today, we are proud to be recognized as:
- the largest Black-owned bank in the Midwest (4th largest in the nation)
- one of only a few minority-owned banks with corporate trust services
- the only minority-owned bank with depository and foreign currency exchange operations
at a major city airport (O’Hare)
At year end 2007, Seaway had more than $340,000,000 in assets and 250 employees (80% are community residents).
Seaway reported net income of $1.9 million for the year ending December 31, 2009 compared to net income of $3.3 million for year ended December 31, 2008, a decrease of 41.6%.
First Suburban National Bank is the 137th banking failure of the year and the 16th in Illinois. The estimated cost to the FDIC Deposit Insurance Fund to close First Suburban is estimated at $31.4 million.