Founders Plans to Merge With Boston Bank
Founders National Bank, Los Angeles’ only black-owned commercial bank, is expected to announce today that it plans to merge with Boston Bank of Commerce in an effort to build the nation’s first African American-owned banking chain stretching from coast to coast.
The new institution, which would use the Boston Bank of Commerce name, plans to launch with service in Florida, Boston and Los Angeles, areas the two banks currently serve. It hopes to expand in other states with urban markets.
If approved by regulators, the merged bank would have assets of more than $260 million and be the third-largest African American-owned bank in the nation, said Robert Patrick Cooper, senior counsel for Boston Bank.
Started in 1991, Founders made its mark by helping to rebuild South-Central Los Angeles following the 1992 riots. Its high-profile owners include former Lakers great-turned-businessman Earvin “Magic” Johnson, singer Janet Jackson and Jheryl Busby, former Motown president and currently the head of urban music at DreamWorks SKG.
With headquarters in Boston, and a local management team in each of the company’s three regions, the merged company would represent the first step in creating a national black bank, Cooper said.
“The question is, how are [minority-owned] banks going to survive? The way to survive is to consolidate, and you’re going to see more of this,” he said, adding that the company is in merger talks with other black-owned banks.
He would not identify those banks, but Kevin Cohee, chief executive of the state-chartered Boston Bank, has tried twice to merge with Carver Bancorp of Harlem, the country’s largest black-run bank.
The Founders merger is structured as a stock swap and should be completed by year’s end, Cooper said. Boston Bank shareholders will own 60% of the combined companies; Founders’ shareholders, 40%.
The announcement follows a wave of mergers that has swept through the financial services sector, connecting such banking titans as NationsBank and Bank of America and some smaller banks as well. Both banks are privately held.
“Over the last couple of years we’ve seen a consolidation in the community banking industry,” noted Gary S. Findley, editor of the Findley Reports, a banking newsletter. “The smaller banking institutions are combining to get increased customer base and to provide additional services for revenue enhancement.”
Founders--with its headquarters on Martin Luther King Boulevard and branches in Compton, South-Central and the USC area--has become a fixture in the African American community.
Cooper and Founders’ President John P. Kelly say the local bank won’t lose its community feel, even though the headquarters would be on the East Coast.
Kelly hinted that he may leave the bank after the transition.
Founders, which has assets of about $109 million, has about 75 employees, Kelly said. Some of them could face layoffs, but he said specific decisions had not been made.
In the merged company, Cohee, chairman and CEO of Boston Bank since 1996, would continue in that role. Kenneth Lombard, president of Johnson Development Corp. and the Magic Johnson Theaters, would serve on the new board, as would Busby and three other Founders directors.
The bank was rocked this year when its controller pleaded guilty in federal court to misappropriating nearly $413,000. Siriluck Hastanand, 47, of La Canada Flintridge, admitted transferring the money from the bank’s internal accounts to a savings account she held in trust for her daughter.
