The American Bankers Association's new leader knows something about rebuilding and reinvention. He should fit right in.
Arthur C. Johnson, chairman and chief executive of the $425 million-asset United Bank of Michigan, has spent his four-decade career shifting his bank's approach to business as the Michigan economy has itself shifted. With that experience, Johnson, his peers say, is keenly suited to work with policymakers as they consider how to fix banking.
"He truly knows what it is like to not only operate, but thrive, in a difficult economy," said Stephen P. Wilson, chairman and CEO of LCNB Corp. in Lebanon, Ohio, and ABA chairman-elect. "And I think because of that, he is well suited to lead us right now. He brings a certain ability that we need in helping us move forward."
In an interview during the ABA's annual meeting in Chicago late last month, Johnson said that after a decade's worth of job losses in Michigan, his intent as chairman is to advocate for the kind of political change that will help jump-start the economy.
"It is very clear that for the good of our banks, our customers and our communities, we want the economy to get going again. Our prosperity is directly linked to the prosperity of our communities," he said. "I am under no illusions that I can single-handedly change the economy, but my goal is to do all that I can to ensure that policymakers understand the role that community banks play is critically important."
One of Johnson's key issues is a perceived disconnect between regulatory heads in Washington and their field examiners. He notes that an unsympathetic examiner could push a teetering bank into failure by forcing aggressive loan writedowns. "There are going to be failures, but I profoundly hope no banks that have the potential to survive will fail. Let's not close one more bank than we have to," Johnson said. "We need to continue to push regulators to install a mechanism that allows for proper communication between Washington and their regional offices."
Compounding the problem is that some inspector general reports from the Federal Deposit Insurance Corp. suggest examiners didn't act fast enough. Examiners get punished only when they fail to play the bad-cop role, Johnson said.
"There are no consequences for being tougher on a bank than they need to be," he said.
Johnson said he welcomes new laws and programs that will be installed to prevent a meltdown. He said there is no particular one that piques his interest or raises his ire; he just wants measured change that doesn't unfairly penalize community banks, he said.
"In many cases, we are profoundly happy to see changes being made," he said. "The trick is to get it right. We want to make sure that we continue to allow good financial innovation, and that our banks are able to continue to perform."
The key to effecting the right kind of change, Johnson said, is keeping the ABA's membership engaged and pushing members to present their stories to lawmakers.
"We want our bankers to sit down, one on one, and make their bank very personal to the policymakers," Johnson said. "We think we have great stories to tell."
Johnson's banking story began when he joined his father as a lender at the family-owned Wayland State Bank after graduating from Michigan State University in 1972. He spent the '70s doing every job at the-then $23 million-asset agricultural bank as he ascended in the organization.
By the early 1980s, Johnson had taken the helm of the family business. But the bank was ailing as the Michigan dairy industry dried up. "Dairy was dead," he said. "We had to shift. We had to do something."
Johnson looked 20 miles north to Grand Rapids, Michigan's second-largest city. In 1983, Wayland State Bank opened a branch there, eventually moving its headquarters to Grand Rapids and changing its name to United Bank of Michigan. Grand Rapids' economy at the time was decidedly manufacturing-based, with furniture and auto suppliers dominating.
As the new bank in town, Wayland State was forced to take the "guys with a few warts on them" as customers, Johnson said. To do that, the bank began working with the Small Business Administration, and it eventually became the largest originator in Michigan of the SBA's popular 7(a) loan, from the mid-1980s to the mid-1990s.
However, the mid-1990s brought another change: the consolidation of the manufacturing industry in western Michigan. "A lot of our business just kind of slowly went away," Johnson said.
United then shifted again, focusing on commercial real estate. With that industry now under stress, Johnson said the bank is considering what could come next.
"Commercial real estate is not dead; it is not going to go away like the others did," he said. But United is once again looking to increase its SBA business, he said. "We are trying to figure it out now."
Johnson said his example should serve as proof to other bankers that there are good days ahead.
"In Michigan, frankly, we have a lot of experience with recessions, not that this one isn't a dandy," he said. "But I have just as much experience with recoveries, as there has been one on the other side of every downturn, and there will be one on the other side of this one."