Omnibank, the River Rouge, Michigan-based financial company led by William T. Johnson, chairman of the board and CEO, and Kenneth Hylton, secretary to the board and a shareholder, was recently seized by the Michigan Commissioner of the Financial Institutions Bureau. The Federal Deposit Insurance Corp. (FDIC) assumed control of the concern’s four branches in early April.
The closure — due to fiscal mismanagement-marked the first state-chartered bank failure in Michigan in a decade and the first FDIC-insured failure this year. As a result, First Independence National Bank (No. 17 on the BE BANKS list with $99.7 million in total assets and $81.1 million in deposits) and Home Federal Savings Bank are now the metropolitan area’s only black-owned banks. The move came in January as a result of Omnibank’s failure to raise an additional $1.4 million to reach Michigan’s capital requirements to cover their loans, as ordered by the state’s Financial Institutions Bureau in Lansing. The bank also had a series of nonperforming loans.
ShoreBank Detroit, a recently created subsidiary of ShoreBank Corp. in Chicago, assumed the institution’s $39.9 million in 5,100 deposit accounts. It paid the FDIC a premium of $154,000 for the rights to receive the institution’s deposits and purchased $41.8 million in assets. Omnibank had total assets of $44 million. The FDIC will retain the remaining assets for later disposition.
OmniBank became a black-controlled institution when attorneys Johnson and Hylton bought the River Rouge Savings Bank, a small, whiteowned concern, in 1988. The two renamed the bank and developed a holding company, OmniBanc Corp., as the parent firm.
In 1994, OmniBanc Corp. proposed the acquisition of Indecorp Inc., the Chicago-based holding company that at the time owned two black institutions: Independence Bank and Drexel National Bank. The $35 million transaction promised to do two things: place OmniBank among the largest black banks and create the first black interstate banking operation. Ironically, when this deal collapsed, ShoreBank stepped in and acquired the two institutions, worth roughly $279 million in assets at the time.
Hylton says the board was not given adequate time to correct the institution’s financial ills. While he admits they had a number of loans “that went sour,” he says the bank raised the required sum of money to keep it from being declared insolvent. But Hylton says the state then reclassified another series of loans as being nonperforming and set new capital requirements. “We were a moving target. The board was in the process of doing everything that the state required,” says Hylton. “The closure came as a complete surprise to us. We never had a fair opportunity to correct the problem.”