At deadline, Colonial Bank finds Ocala rescuer
Down to the deadline we go... Colonial Bancgroup, a Montgomery, Ala., banking company prominent in the Tampa Bay area, skirted disaster yesterday by cutting a deal with a privately-owned Ocala mortgage banking company to invest $300 million in the struggling regional banking company.
Federal and state regulators had given Colonial until yesterday, March 31, to find more capital or face dire consequences, including a possible sale to another banking company.
Colonial's stock had dropped to an astonishing low of 29 cents in early March. It now trades at 90 cents a share -- hardly a comeback for a large bank to still trade under a buck, but definitely back from the brink. Exposure to Florida’s real estate collapse put Colonial in the red last year, losing $880.5 million.
The Ocala savior of Colonial Bancgroup is Taylor, Bean & Whitaker Mortgage Co. which agreed to make a $300 million equity investment in the bank. Taylor Bean, whose chairman is Lee Farkas, is hardly a household name even though it is headquartered just north of the Tampa Bay area, but it claims to be one of the "top ten" national wholesale mortgage lenders. It is also a savings and loan holding company regulated by the Office of Thrift Supervision through its ownership of Platinum Community Bancshares, the parent of Platinum Community Bank, a federal savings bank headquartered in Rolling Meadows, Ill. Taylor Bean also has numerous area affiliates, including an insurance company and a business called Citrus Land Title.
For Colonial, Taylor Bean's rescue comes at a steep cost. First, Taylor Bean immediately becomes Colonial's 75 percent majority owner, which means the Alabama bank is now effectively controlled out of Ocala.
Second, Colonial -- which operates as a holding company of a commercial bank (Colonial Bank), will drop its bank charter and instead become a thrift holding company, in effect becoming apples to apples with Taylor Bean's existing thrift business.
And third, Taylor Bean also gets five seats on Colonial’s 15-member board and will have a say on five other board members, in collaboration with Colonial.
By attracting new capital, Colonial also met a separate federal deadline to qualify for $550 million in federal bailout or TARP funds. Colonial CEO Robert E. Lowder, in a press release, may win this week's award for understatement about a transaction that effectively saved Colonial:
"We are pleased to announce this proposed equity investment and to welcome TBW and the Investors as shareholders. This transaction should strengthen our financial position and allow Colonial to continue to offer its customers high quality banking services."
Colonial has 30 days to shop around for a better deal. If it finds one, it has to pay a $10 million termination fee to the investors, the release said.
-- Robert Trigaux, Times Business Columnist