Regulators from the Federal government shut down Covenant Bank Friday night after two and a half years of probation from the FDIC. The Lawndale-based bank’s assets were sold to Liberty Bank and Trust Co. of New Orleans.
Depositors of the bank 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 congregation members who 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, 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.
“Over the last few years, we made every attempt to raise the additional money needed to meet the regulatory requirements for the bank,” Winston said on his website.
Forest Park’s Living Word Christian Center Pastor Bill Winston founded Covenant Bank in 2008. Shareholders purchased the former Community Bank of Lawndale for $3 million.
The bank 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.
“Unfortunately, the troubled economic times made it difficult for people to invest. My vision for the bank was to provide an economic engine to help revitalize urban communities, such as Lawndale, by providing lending for small businesses, commercial development, and affordable housing, as well as education and financial literacy to local residents.”
Winston’s website said he would be communicating directly with shareholders.
In November, Illinois State Rep. LaShawn K. 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.
In November, Covenant’s President Belinda Whitfield, who is also the treasurer of Living Word Christian Center, complained that the FDIC had given “a very short timeframe” to the bank to raise adequate capitalization. Whitfield was not available for comment on Saturday morning.
Covenant Bank is the third FDIC-insured institution to fail in the nation in 2013, the FDIC reported. It is the first bank failure in Illinois in 2013. The last FDIC-insured institution closed in Illinois was Citizens First National Bank in Princeton in November 2012.