Banking from coast to coast.

BBOC expands interstate reach with Founders National merger

Boston Bank of Commerce (BBOC) (No. 15 on the BE BANKS list) and Los Angeles-based Founders National Bank (No. 19 on the BE BANKS list) have agreed to merge. The deal will expand the country's first black-owned banking chain and create the third-largest black-owned bank in the U.S.

In 1999, BBOC merged with Peoples National Bank of Commerce based in Miami, an other black-owned bank (see "Boston Bank of Commerce Breaks New Ground," Newspoints, February 2000). When the Founders merger is complete, BBOC will have branches in Boston, Los Angeles, and Florida, extending its footprint as the first interstate black financial institution. Founders will be known as Founders Bank of L.A. Peoples was renamed the Peoples Bank of Commerce. The institutions will keep different names in order to maintain community recognition.

"The industry has seen mergers with the major financial institutions and minority-owned banks are not immune to that," says Robert Patrick Cooper, senior counsel to BBOC. "We started to look at the survival of black-owned banks in this economy and realized that creating a black-owned banking chain would not only help ensure our economic survival but maintain a viable part of our communities. Often the black-owned bank is the largest employer in black communities." According to Cooper, the merger will "help [us] niche players to compete."

At press time, the Founders-BBOC merger had received shareholder approval and was awaiting the go-ahead from federal regulators. Among the owners of Founders are basketball-star-turned-entrepreneur Earvin "Magic" Johnson, singer Janet Jackson, and DreamWorks Records executive Jheryl Busby. Along with Busby, Kenneth Lombard, president of Johnson Development, has been appointed to the new Founders board. The merger was structured as a stock swap.

Founders' shareholders will own 40%, BBOC shareholders will own 60% of the combined companies.

If the merger is approved, the new bank will have assets of more than $260 million. Founders, founded in 1991, has assets of $109 million and over nearly 75 employees at its three branches in the L.A. area. BBOC has assets of $160 million, including those of Peoples Bank.

Headquartered in Boston, BBOC is also in talks with other black-owned banks across the country. BBOC has previously pursued a partnership with Carver Bancorp of Harlem (see "Battle Royale," June 2000). BBOC's owners, Kevin Cohee and Teri Williams, became members of the Carver board of&rectors at a February 2000 stockholders' meeting. BBOC is the beneficial owner of 170,700 shares of Carver's common stock. Garver, which has assets of more than $400 million, has been in financial trouble lately. The bank had more than $10 million in nonperforming assets and losses of more than $5 million in the third quarter ending December 31,1998. In contrast, Lombard says Founders was financially stable prior to the BBOC merger. "[Founders] was not forced into making this decision," says Lombard. Likewise, Busby concedes "our vision was always to grow this bank through merger and acquisitions."

In 1996, Cohee, 41, a former investment banker at Salomon Brothers, and his wife, Williams, a former American Express executive who now serves as the BBOC's senior vice president of marketing, took over management of the 17-year-old bank with a $1 million investment. Now the BBOC is looking forward to bigger innovations. Says Cooper, "Our goal is to create a national banking chain."

BOSTON BANK OF COMMERCE

Employees       52
Assets(*)     $137.746
Deposits(*)    109.698
Loans(*)        45.038

FOUNDERS NATIONAL BANK OF LOS ANGELES

Employees       81
Assets(*)     $105.853
Deposits(*)     97.247
Loans(*)        79.208

(*) IN MILLIONS OF DOLLARS

SOURCE: 2000 BE RANKS LIST

Kevin Cohee will serve as chair, and Ken Lombard will serve as vice chair of their new combined entity.