Omnibanc Corp. of Michigan builds on vision of renewal.

RIVER ROUGE, Mich. - As William T. Johnson drove through dilapidated Detroit-area neighborhoods where he plans to open bank branches next year, he envisioned revitalization amid the boarded-up buildings and rubbish-strewn lots.

"We're not afraid of something that looks ugly or not finished yet," said Mr. Johnson, chairman and co-owner of Omnibanc Corp., River Rouge. "We should be there, because our job is to take the boards down. In fact, it may be to take the buildings down and put new ones up."

Working in such neighborhoods will remind bank employees why they are there, he said.

To spur development, Mr. Johnson said, he will have to explain and promote banking in these communities, long since abandoned by other banks.

Omnibanc, the holding company for $21.6 million-asset Omnibank, plans to purchase $267 million-asset Indecorp in Chicago.

Taking Over a Title

Indecorp is the largest bank holding company owned by African-Americans. Omnibanc would inherit that distinction if regulators approve the deal. It would also become the largest financial institution and the only multistate, multibank holding company owned by African-Americans, he said.

Omnibank now has two locations in River Rouge, a municipality of about 11,000 south of Detroit, and is the only full-service bank there. The company is expanding, he said, because the racially mixed blue-collar town is in decline - and the bank must diversify.

It recently offered guaranteed mortgages to residents ousted by a construction project.

The kicker? The borrowers would have to stay in River Rouge.

"Not one of these people wanted to stay," Mr. Johnson said.

"What can you do as a bank? I have to branch."

Three new Omnibank branches are slated for the Detroit area in the first half of 1994: one in Highland Park and two in Detroit.

Chrysler Pulling Out

Highland Park, with a population of 20,000 - 90% African-American - is about to suffer a major loss. Chrysler Corp. is moving its headquarters to Auburn Hills, about 20 miles away, and Highland Park is facing bankruptcy, Mr. Johnson said.

But economic development efforts will help, he said. The bank has co-developed a strip mall near a new branch site (and also near the only other bank in town). With deposit commitments from the city and Chrysler, the bank will operate profitably, Mr. Johnson said.

Chrysler has said it wants some of its deposits at the Highland Park branch earmarked as credit enhancement for businesses willing to locate there.

Detroit itself is underbanked, Mr. Johnson said. Wayne County has 23 banks and 365 branches; Detroit, with roughly half the county's 2.3 million people, has six banks, with 110 branches.

One of the two new Omnibank branches in Detroit proper will open in a rundown downtown neighborhood. The other will be on the blighted East Side, not far from the building - now a vacant lot - where Mr. Johnson lived as a boy.

Indecorp Deal

With all this decay, Mr. Johnson reasoned, there must be ways for the bank to help, and make a profit doing so.

Earlier this month, Mr. Johnson filed an application with the Federal Reserve Bank of Chicago to acquire Indecorp, the holding company for Drexel National Bank and Independence Bank of Chicago, both on the city's South Side.

He declined to disclose the amount of the cash-and-debt deal, but stressed that Omnibanc, the holding company - not the bank - will buy Indecorp.

Mr. Johnson said he expects regulatory approval by the end of first quarter, when he will move to Chicago to oversee the acquisitions.

He and Detroit attorney Kenneth Hylton are the only shareholders of the holding company. They also own roughly 90% of the bank, which has fewer than 50 other shareholders.

Omnibanc, including the Indecorp acquisition, will probably reach $500 million in assets next year, Mr. Johnson said. The company could reach $1 billion within five years, he added.

Looking Ahead

"Our long-range plan would be to try to keep the subsidiary banks all under $200 million in size, so we can keep ourselves easily manageable," Mr. Johnson said.

Omnibanc will concentrate on the Chicago and Detroit expansions next year. However, Mr. Johnson said he'd also consider acquiring First Independence National Bank of Detroit, the city's only black-owned bank, at any time.

Later, he said, he will consider expanding Omnibanc into other areas - possibly his native Ohio, or Houston, or St. Louis.

Financing acquisitions shouldn't be difficult, he said, because he has successfully raised funds for several endeavors.

Omnibanc's growth plans are feasible, said Detroit's Justin Moran, an independent bank analyst.

If Mr. Johnson can put the Indecorp deal together, "he's going to have a holding-company stock that will not be unattractive," Mr. Moran said. "What he's talking about is ambitious, but still within the realm of possibility."

A Desire to Help

Mr. Johnson said that since boyhood he has wanted to help people.

As a boy, he felt that his family's caseworker did not really care for them, he said. He tried to do better during a one-year stint as a caseworker after graduating from college.

He then went on to law school, worked as a corporate attorney, and became the first African-American to own a cable franchise.

But, having seen African-Americans - including himself - have trouble getting financing from banks, he decided to address the issue by joining the industry.

Looking for a way to start small, Johnson found troubled River Rouge Savings Bank in 1989.

The former owners had paid an insurance judgment out of the bank's capital, leaving it with impaired capital.

"I didn't think the bank would survive," said Norman J. Gawlik, Omnibank's president and chief executive, who was recruited to head the bank shortly before Mr. Johnson arrived.

Mr. Johnson bought River Rouge Savings in 1989, renaming it Omnibank and, with Mr. Hylton, injecting capital.

Profit Turnaround

The bank had lost $700,000 in 1988. It earned $9,000 in 1990 and $203,000 last year.

"He is a very shrewd businessman," Mr. Gawlik said. "He treats a challenge as an invitation."

A major challenge for Mr. Johnson will be increasing the loan-to-deposit ratios of Indecorp's subsidiary banks - which have a combined ratio of 29.06%.

Omnibank's loan-to-deposit ratio is much stronger, having ranged from from 60% to as much as 80%. Mr. Johnson says he will make sure that the Indecorp banks will be far stronger lenders in their communities.

Omnibank is a member of the Federal Home Loan Bank System, and Mr. Johnson plans to make Independence Bank a member, too. He also plans for Independence to meet demand for Small Business Administration loans, which Indecorp has not made.

Mr. Johnson said he plans to support community-development financial institutions while enlisting aid from other institutions and the government.

To increase the banks' non-interest income, he wants to offer a wider range of products and services.

Independence already has trust powers, but Mr. Johnson plans to expand the lineup and add financial planning and estate planning as well as securities and investment products.

Further, Mr. Johnson said, some Chicago investment houses have shown interest in working with the Indecorp banks in securitizing business loans if one of the congressional proposals to create a secondary market for them becomes law.

Mr. Moran, the bank analyst, said many residents of the areas Omnibanc is entering might be risky loan prospects. But Mr. Johnson contends that banks can find ways to make loans if they want to.

Except for "crooks and the incompetent" Mr. Johnson said, "nobody is unbankable."

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