Covenant Bank, the only black-owned bank on the West Side, was shut down Feb. 15 by the federal government, following nearly three years of probation from the Federal Deposit Insurance Corporation (FDIC).
The North Lawndale bank’s assets were sold to Liberty Bank and Trust Co. of New Orleans, a 40-year-old, black-owned institution. Formerly Community Bank of Lawndale, Covenant has been owned by Living Word Christian Center in Forest Park since 2008. Prior to that ownership, the bank existed for 30 years as Community Bank of Lawndale, its founders including members of that West Side neighborhood.
Covenant’s depositors will continue to have access to their funds, which are insured by the FDIC. But the bank’s closing wiped out the investment of more than 3,000 of Winston’s congregation members of Living Worldwho were shareholders in the bank.
According to filings with the FDIC, in 2012 — through Sept. 30 — the bank lost $2.2 million. Financial reports showed that in September the bank had only $573,000 in funds to support losses. As of Dec. 31, ’12, the bank had approximately $58.4 million in total assets and $54.2 million in total deposits. The FDIC said the banks’ closing will cost its insurance fund $21.8 million.
Living Word Pastor Bill Winston acquired the bank in ’08 for $3 million with the help of congregation shareholders. Covenant issued real estate loans, many of them to rehabilitate Lawndale multi-unit buildings, which went sour in the bad economy. In 2011, Covenant was warned by the FDIC that it needed to raise $3 million to be adequately capitalized. The bank received another FDIC warning in December of 2012.
A month prior to that, state Rep. LaShawn Ford asked the Illinois Secretary of Financial and Professional Regulation to grant an extension to the bank to give them more time to raise capitalization funds. At that time, Covenant’s President Belinda Whitfield complained that the FDIC had given “a very short timeframe” to the bank to raise adequate capitalization. Whitfield, who’s also the treasurer for Living Word, was not available for comment late last week.
Covenant Bank is the third FDIC-insured institution to fail nationally in 2013, the FDIC reported. It is the first bank failure in Illinois this year. The last FDIC-insured institution to close in Illinois was Citizens First National Bank in Princeton last November.
Covenant’s financial problems date back to its days as Community Bank of Lawndale (CBL). CBL faced closure in late 2002 before it was bought by South Side-based International Bank of Chicago, an Asian-owned entity, for $2.5 million.
Covenant’s new owners, Liberty Bank and Trust Co., has been around since 1972 and is one of the country’s three largest black-owned financial institutions. With Covenant, Liberty Bank now has 19 branches in seven states. According to published news reports, Covenant will reopen as a Liberty Bank branch and its account holders will automatically become depositors of that branch.
Liberty has been acquiring banks since 2000, including in such cities as Detroit, Houston and Jackson, Miss.