Los Angeles Business Journal • May 12, 2003

Tales of Two Banks: Hope and Independence in L.A.

Out of the Ashes, Operation HOPE Becomes a Force

By RiShawn Biddle
Staff Reporter

YOU CAN SEE THE next phase in the evolution of Operation HOPE, the self-proclaimed "nonprofit investment bank," by just watching founder and Chairman John Bryant scour the L.A.-based non-profit's downtown headquarters.

While a visitor sits in Bryant's office, with its Zimbabwean art and photographs of him and presidents Bush and Clinton, he searches throughout the office for what he calls "propaganda' including a promotional video. Every few minutes, he pops his head into the door and apologizes for the delay. "I don't handle all the little details anymore, so I'm lost whenever I need to do anything," he said.

This would have been a different story 11 years ago, when Bryant, now 37, founded Operation HOPE to help bring banks to inner-city neighborhoods. For most of its history, its survival and success have rested on the shoulders of the charismatic Bryant, who worked as an actor, concert promoter and banker before starting the organization, which helps guide inner-city residents in the ways of finance.

Now Bryant says he is focused on making Operation HOPE an institution. Besides adding new executives and promoting his existing cadre of employees, he is pushing a new business model that emphasizes lower costs. "When I say we've done so much for so long on so little, I'm talking about myself and Operation HOPE," said Bryant over pasta last week at a West L.A. restaurant.

Operation HOPE is really a hybrid of a financial institution that provides a combination of credit counseling and financial education to aspiring homeowners and entrepreneurs. Participants are guided through the approval process and introduced to any one of 46 sponsor banks.

Through it all, Bryant has been the front man.

"We were the Homeboy Shopping Network. It was John Bryant leading this movement of energy. But it wasn't sustainable. Now we have a great brand, we have a following, we get results. Now it has to be less dependent on me."

Stumbling towards success
Considering how intertwined Operation HOPE is with Bryant, this is no small task. Tall, bespectacled and with a booming voice, Bryant combines old-time evangelizing with quick quips about his life.

"He's a real charmer and you like him immediately," said Gary Wehrle, the chairman of Pacific Crest Capital, who has known Bryant for 13 years.

During a speech to a support group for minority employees of SBC's Pacific Bell, Bryant presented videotaped testimonials, as well as stories about how he was beaten up in school for wearing purple crushed velvet suits.

"When I give a speech," Bryant said later over lunch, "I'm talking about myself. I speak from experience. I've been through everything I'm telling others to avoid."

After he achieved modest success in the mid-1980s as a bit player on TV shows, including "Diff'rent Strokes," Bryant began a series of ill-fated ventures, including managing and promoting the languishing career of J.C. Parrish, a one-time member of the Platters, the 1950s pop act.

By 1986, he said he had lost most of the money he made from acting, as well as a beach house he owned in Malibu. "I had great ideas poorly executed. I was trying to do too many things at the same time and not doing it well," he said.

Through a Hollywood connection, he landed at Wade Cotter & Co., a lender of last resort to down-on-their luck homeowners in minority neighborhoods. Bryant found the work predatory, but he realized that the same model could be targeted to folks able to repay such loans -- namely, entertainers who had streams of income but were often cash-poor. He persuaded Wade Cotter to let him form a new division catering to the Hollywood crowd.

When Wade Cotter went bust after an ill-fated diversification, Bryant, on a dare, led a buyout of the division. He started eight new divisions and proceeded to lose $20,000 a month. Said Bryant: "It wasn't smart or fun."

Nor did he feel spiritually fulfilled. His experience with high-interest lending left him wondering if there was a better way of extending financial services to the poor. He said it came to a head in April 1992, after the L.A. riots when Bryant closed up his Westwood office and found himself at the First AME Church. Bryant grabbed his mentor, First AME pastor Dr. Cecil Murray, and asked him how he could help. "He told me to take my business skills and put them to use, then hurried away," said Bryant.

Gaining momentum
That May, Bryant gathered a group of businessmen, including Wehrle and Carlton Jenkins, then managing director of Founders National Bank, on a police-escorted "banker's bus tour" through South Central. "We were devastated by the smell. It was still burning. It really made me want to volunteer," remembered Bernard Kinsey, a former Xerox vice president.

From that first tour, Bryant started Operation HOPE, though he had little more than an idea and some national attention. He turned to his contacts for help.

Kinsey, who had also become a mentor, got Bryant onto the board of Rebuild L.A., the now-defunct revitalization outfit headed by former baseball commissioner Peter Ueberroth. Its staff helped him organize and publicize additional bus tours.

Two years and several lending partners later, Bryant started Operation HOPE's first major project, a home loan center in South Central. Bryant soon noticed that many of the people who came to the center had never balanced a checkbook or set foot in a bank.

Bryant decided that Operation HOPE needed to add credit counseling and financial education to the mix. He convinced Hawthorne Financial, parent company of Hawthorne Savings, to put up $1 million to create a "Hope Center" that would combine educational seminars, check cashing services and home loan originations.

But the $1 million wasn't enough. By the time the first HOPE Center opened in 1996, operating costs had skyrocketed. Worse, only three-quarters of Hawthorne's original grant actually went to operating the centers; the rest was for matching grants to help aspiring homebuyers save for a down payment.

"There was no defined exit strategy on the back end, but we were only getting money for four years. We didn't ask for enough money up front and we didn't consider the costs," admitted Bryant. He began soliciting other donors for help and expanded the center's offerings to cash checking services for below-market fees.

By 2000, two more HOPE Centers had opened and Bryant started programs like Banking on Our Future, in which bank executives tutor school kids on balancing checkbooks and saving money.

Operation HOPE won some acclaim -- and notoriety -- when it teamed with UnionBanCal Corp., parent of Union Bank of California, to acquire a 45 percent stake in Navicert Financial, parent of the Nix Check Cashing chain.

Even now, there is some grumbling.

"It's poverty pimping. It's all smoke-and-mirrors. I've walked into these check cashing shops and I've not seen anything about becoming bank consumers," said Sharon Kinlaw, assistant director of the Fair Housing Council of the San Fernando Valley. Union Bank senior vice president Thomas Branch says it has converted "thousands" of check cashing customers into banking clients.

The next step
Even with Operation HOPE's success, problems remained. By 2002. the three HOPE Centers were losing $3 for every dollar in funds raised to support them, Bryant said, which led Operation HOPE's auditor, KPMG, to warn of pending insolvency.

The problem: Because the centers only facilitated loans and deposits for its lending partners, they never reaped the fruits of their efforts. "If we got a new customer, it went directly to the bank," said Bryant. "A new loan? Went directly to our banking partner. But we never had a way to stay solvent without tapping our own balance sheet."

Bryant sold the banking portions of the three centers to three banks, including Hawthorne Financial, for an undisclosed sum.

He also pulled together a new model that has banks sponsoring HOPE Centers over a four-year period. After that, the sponsoring bank has to buy out the banking portion of those centers, leaving Operation HOPE to focus on credit counseling and facilitating new borrowers.

To help banks with branches in areas that have become mostly minority, he also opened a new division called HOPE Consulting that sends a "SWAT team" of case managers to counsel existing customers, as well as prospective depositors.

Until last year, Bryant continued to handle many of the administrative, financial and fundraising roles despite its growing size. "John was one-third administrator, one-third fundraiser and one-third finance. Yet we were growing rapidly," said Wehrle.

Now, he says things are different. He has hired a chief financial officer, a comptroller and five new accounting officers. He also elevated several longtime staff members, including Lance Triggs, who now supervises all of Operation HOPE's operations.

The plan? To eventually run himself out of a job by spinning off Operation HOPE's operations into self-supporting nonprofits. "It's become more of an institution. John's really become a good delegator and superb leader. But at the end of the day, he's still the driving force and it doesn't run on autopilot," admitted Wehrle.

Bryant admits it as well. "Am I aware that if I walked away, it would fall apart? Yes. Is the organization highly dependent on me? Yes. But that's always a problem. And I have a plan to make it less of one."