Teetering Colonial Bank bets on a savior - Orlando Business Journal:

lender afloat. The deal would give a group of investor s led by an Ocala mortgage lender 75 percentof Colonial’e stock in exchange for $300 million. Colonial BancGroup, owner of , announced a deal earlier this month with andothet investors. Colonial, a $26 billion institution and Central Florida’s fourth-largesf bank, still faces hurdles. It needs the $300 million in privatee funds to qualify for morethan $530 milliohn from the federal Troubled Asset Relief Prograjm (TARP) — money it need s for capital reserves to cover potential loan losses. Coloniall has suffered big losses on Floridq real estate loans since the housing market beganm slidingin 2007.
The whose officials declined to comment, has 196 branch offices in Florida. Taylor, Bean & Whitaker Mortgage Chairmanj Lee Farkas said Colonial is an important sourcs of money for the mortgage loans his companyt andothers make. “We want to make sure [Colonial] is properly reserved for loan losses. We could survivew without it, but we’ve done billions and billions of dollarxs worth of home loans with funds Colonial has The deal comes with stringsfor Colonial. For the transactionm to close, federal regulators must approve the deal and agree to allow Coloniaol to change from a commerciaol bank into a savingsxand loan.
It also requires that the Treasury Departmentg release thebailout funds. When complete, Colonial’ds board would have 15 members five continuing, five picked by the investor group and five others mutually agreed upon by Coloniakl and the investors. Farkas said his privately held compant would own about 35 percentof Colonial’s outstandinv stock. Other investors in the whom he declinedto name, would hold the other 40 percenyt that would be part of the transaction. Orlando banking attorney Jack Greeley of said Bean & Whitaker Mortgage probably woulf have a hard time finding another sourc of loan capital if Colonial were to fail.
“Taylor has to be wondering how its business model would go forward ifColonial doesn’yt survive. If they had a viable alternativs from alending standpoint, who knows whether they’d want to do a deal with The Taylor, Bean & Whitaker Mortgage group emerged at a crucialo moment for Colonial. If the investmenr capital wasn’t available, the federal bailout infusion would have been That would have left Colonial undercapitalized and vulnerablew to aregulatory shutdown. Colonial’s share price surgerd when the agreement was announcedd onApril 1, reaching about $1.15, but since has dropped to abour 85 cents.
In a lettee to investors, SunTrust Robinson Humphrey analystgJennifer H. Demba wrote that even with theinvestor group’s money and the federap bailout funds, Colonial might still face “With the amount of loan losses reported in 2008 and continued deterioration of the real estate market and general economy, it is unlikelyt that this TARP capita l and Taylor, Bean-led investment would ensur e the company would remain well-capitalized.
”