A small Chicago bank that is largely owned by the members of an area church has warned that it could fail if it does not raise additional capital.
The $61 million-asset Covenant Bank is undercapitalized and nearly 14% of its loans were at least 90 days past due as of March 31, according to Federal Deposit Insurance Corp. data. In its annual report filed with the Securities and Exchange Commission in late May, the bank said that given "precipitous decline in the value of the collateral securing its loan portfolio and a sharp decrease" in its capital...no assurances can be made about [its] ability to continue as a going concern."
Covenant Bank was acquired by the Rev. Bill Winston in 2008, when it was called Community Bank of Lawndale, and many of its roughly 3,000 shareholders are members of his Living Word Christian Center of Forest Park, according to Crain's Chicago Business.
The bank significantly grew its real estate loan portfolio after the acquisition, but many of those loans have since soured, Crain's said. Covenant has been operating under a cease-and-desist order with state and federal regulators since June of last year and has been trying to raise additional capital since.
The bank, which has one branch in Chicago's west side, needs to raise at least $3 million in equity to become well capitalized, Crain's reported Monday.
