By Paul Gores of the Journal Sentinel
November 1, 2011
Johnson Financial Group said Tuesday that Racine's Johnson
family will make a capital investment of $235 million in the
company, a move that will recapitalize Johnson Bank and assure it
remains privately owned.
Johnson Bank, the second-biggest bank based in Wisconsin, lost
$220 million in 2010, mostly because of real estate loans that
soured in the weak economy. Through the third quarter of this year,
it has lost about $10 million, according to regulatory records.
"My father, Sam Johnson, founded Johnson Bank over 40 years ago
to deliver the exceptional service our customers deserved but
couldn't get from the large national banks, and that need has never
been greater," Helen Johnson-Leipold, chairman of the board of
Johnson Financial Group, said Tuesday in making the announcement.
"This is a commitment by the family to ensure we remain
independent, privately owned and focused on meeting the needs of
our local customers and communities for the long term."
The Johnson family's investment was formalized on Oct. 28, and
will close following completion of the regulatory approval process.
The additional capital will raise the bank's capital ratios above
well-capitalized status and position the company and its customers
for sustainable, long-term success, Johnson Financial Group
said.
Last summer, Johnson Financial hired Tom Bolger, a former
M&I and Harris Bank executive, to run the bank and its parent
company.
Although Johnson Bank expects to have loan losses into 2013,
Bolger said Tuesday, the infusion of capital allows the bank's
employees "to begin playing offense rather than playing defense, as
they have for basically a year now."
"As the economic recession has lingered and as the turmoil in
the banking industry - particularly in Wisconsin - has intensified,
we think there are many employees and customers of other banks who
are unhappy or unsure or frustrated with their current financial
institutions," Bolger said. "And we think this announcement today
is really a key cornerstone in presenting Johnson Financial Group
as a great alternative for employees and for customers."
Johnson-Leipold said the bank never was for sale as it struggled
last year, but the company looked at all its options, including
outside investors, to raise capital. The company has been under
orders from regulators to develop a capital plan.
"I think it was very thorough and very productive, and the
family always was going to participate in some way, but we didn't
really know exactly at what level and we were still in the process
of identifying how much capital actually was needed. So we went
through the process and had quite a bit of interest," she said. "I
think where we ended up is that we felt even better about the
business and about the opportunities and also the importance of
being family owned and operated, so we decided as a total family to
participate at the 100% level."
Bolger said there were outside investors "that were very
interested in the investment and made very credible offers to put
the investment in," but those investors would have brought
different terms and exit provisions in as part of the deal.
"Ultimately, at the end, the family decided it was the best
long-term investment to put all of the funds in and have it as a
family owned company," he said.
Bolger said going through the process of considering outside
investors helped validate $235 million in capital.
"The $235 million number was really a number that the outside
professional investors felt was needed to recapitalize the company,
to keep us above 'well-capitalized' status and really allow us to
run the business and grow the business going forward," Bolger
said.
Johnson-Leipold said the commitment of Bolger to run the
business also was "a critical aspect of moving forward."
Jon C. Bruss, chief executive of Fortress Partners Capital
Management in Hartland, said the decision of the Johnson family to
make the entire capital investment is good for banking in
Wisconsin.
"I'm pleased with the outcome because ultimately I suspect what
would have happened is that second-largest bank in the state would
end up being controlled by someone out of state," Bruss said. "And
I don't know that that's something that would be particularly
healthy for the state of Wisconsin."