The African American banking industry took on a decidedly Hollywood glitz last March. Basketball star-turned-entrepreneur Earvin “Magic” Johnson joined with recording artist Janet Jackson and music industry executive Jheryl Busby to acquire majority common stock in Founders National Bank of Los Angeles for nearly $2.5 million.
By purchasing a 60% share in the company, Johnson, Jackson and Busby will assume control under the banner JJB Limited Partnership. Founders operates five branches in the Los Angeles area.
In 1990, Founders chairman emeritus Leon Garr and a group of investors purchased the bank for nearly $1 million. After acquiring assets and assuming deposits of the failed Founders Federal Savings and Loan Association from the Resolution Trust Corp., Founders was established as a national bank in 1991. But last year Garr, 83, decided to sell his majority interest and approached Busby, former president of Motown Records. Garr “wanted to liquefy his investment to retire,” says grandson and Founders President and CEO Carlton J. Jenkins, 43. “He also wanted to insure that the bank remain in African American hands.”
New to banking, Busby opted to join the board last year. “I wanted to learn more about the inner workings of Founders,” says Busby, who spearheaded a push to get rid of problem loans. “We wanted to clean up a few problems before the deal went through,” he adds. Founders (No. 16 on the BE BANKS list) earned about $100,000 in the first quarter of 1998 and has assets of $100 million.
But before proceeding with purchase plans, Busby sought out Jackson and Johnson, whose charitable foundation had an account at Founders. “I felt athletes and entertainers would make great investors. There’s so much wealth in those communities, which is good from a depository point of view,” says Busby. “Magic has proven his commitment to the community, and once Janet heard our proposal, she said yes.” Together they paid approximately $2.5 million for the stock, which will be split three ways.
The three equal partners formed JJB, with Bushy as general partner. Jackson and Johnson will be limited partners. “They will work closely with me and have the same amount of input,” explains Busby, now an executive at Dreamworks SKG’s records division in Beverly Hills, California. Day-to-day activities will be overseen by Jenkins. An executive search is being conducted for a COO. Busby says there will also be changes on the bank’s board of directors.
Founders’ current preferred shareholders include the Arco Foundation of California, BankAmerica Capitol Investments, Interinsurance Exchange, Automobile Club of Southern California, State Farm Companies Foundation, Sumitomo Bank of California, Citicorp North America and Shell Community Financing Co. of California. With Johnson and Jackson in place as partners, Busby says Founders will actively pursue athletes and entertainers as depositors. Their involvement and the connections they bring to the bank can only help in this effort, he says.
“Our community tends to give great importance to leaders, whether it be in entertainment, sports or business,” says Jenkins. “This will bring a heightened awareness of black banks and perhaps encourage