Failing Black-Owned Chicago Bank Loses Deal To Recapitalize

August 6, 2013  |  

And then there were two.

It’s a wrap for Highland Community Bank, one of three of Chicago’s black-owned banks. The owner of Highland could not raise the $8 million needed for a deal to recapitalize the bank; the institution may now become defunct, reports Crain’s Chicago Business.

Matthew Roth, a former bank executive of Harris Bank, announced a deal in March to bring Highland back on its feet. Although it would no longer be a black-owned bank, he specified that it would be a “minority-focused financial institution” — more than 50 cent of board members would be non-white. The bank would be renamed Generations Community. However, generating nearly $10 million for the deal was too burdensome for Highland.

As MN has reported, Highland has been struggling to retain its vitality for years. Last year the $83 million-asset bank lost $2.2 million. The first half of this year, the bank posted a $781,000 loss. By June 30, their equity crumbled to $1.9 million.

Highland’s most valuable capital — known as “Tier I capital” — was only 2.5 percent of its assets. “A Tier I leverage ratio at 2 percent or lower typically means regulators will seize a bank soon thereafter,” added Crain’s. With the bank severely undercapitalized, Highland is on the brink of downfall.

The demand for non-white financial institutions has dwindled, leading to a number of bank failures. Prior to the 1970s, minority borrowers had difficulty obtaining loans from lenders. As a result, minority-owned banks sprouted throughout America to satisfy the needs of the community. “But because of the federal Community Reinvestment Act, a 1977 law that requires bank to lend in-less-advantaged areas of their communities, this is not as of much an issue anymore,” MN added.

Do you think we still need black-owned banks?

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