Chicago Treasurer Summers deposits $20 million in Illinois Service Federal Savings & Loan – Finance News

on Sep18

18 September 2017 | 11:00 am

There are benefits to being Chicago’s last remaining black-owned bank. Millions of them.

Chicago Treasurer Kurt Summers has struck an agreement to deposit $20 million of city funds in Illinois Service Federal Savings & Loan. The infusion alone, which will be announced this morning, will bulk up the Bronzeville lender’s deposit base by 20 percent.

It’s the first such deposit the treasurer’s office has made in a community bank like this, Summers said in an interview.

Summers said the idea is to promote support of small businesses in parts of the city that larger banks tend to avoid.

The failure early this year of Seaway Bank & Trust, Chicago’s largest black-owned bank, also loomed large. The financial crisis and recession resulted in the failure of numerous black-owned banks, including three in Chicago. There are 23 left nationwide.

‘CRISISPROPORTIONS’

“The state of the black-owned bank in the country is at crisis proportions,” Summers said. “In Chicago, we’re on our last legs.”

Illinois Service almost was one of the casualties. A Ghanaian-American family rescued the teetering lender with a $9 million equity infusion in the spring of 2016. The bank had $112 million in assets at June 30 and $100 million in deposits.

In the first half of the year, Illinois Service posted a loss of $81,000—essentially break even. Its loans of $49 million were less than half of its $100 million in deposits, a lower than average loan-to-deposit ratio. With fixed-income securities yielding very little, community banks today must lend to boost their profits.

Bank officials weren’t available over the weekend to discuss their strategy.

But Summers said he’d spoken extensively to the family that owns the bank and isn’t concerned. They’ve been “getting a handle on what they inherited,” he said.

ANOTHERHELPFULDEPOSIT

This isn’t the first time Illinois Service, whose origins go back to the Great Migration in the 1930s, has benefited from its status. Billionaire J.B. Pritzker, who’s running to be the Democratic nominee for governor, announced a $1 million deposit in May.

Summers said he’d like to bolster more community banks that are dedicated to lending in their neighborhoods. But to qualify, banks must go through a process to become an approved municipal depository. In addition, they must pledge collateral (in Illinois Service’s case, in the form of federal government securities) to obtain the city deposits.

“If we want to grow the local economy of Chicago and we want that economic opportunity to be available for everyone in Chicago, we have to think differently about what we do with these assets,” Summers said.



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