Hoping to boost its profitability, Washington, D.C.-based Independence Federal Savings Bank (No. 14 on the B.E. Banks list with $150.9 million in assets) plans to acquire Colombo Bancshares Inc. of Rockville, Maryland in a stock deal valued at roughly $4.8 million.
The deal, announced last month as a merger, would more than double Independence Federal’s size to more than $350 million in assets. It would obtain an additional $150 million in deposits and boost its branches to nine from its current four in the nation’s capital and Maryland area. Colombo Bancshares is the parent of Colombo Bank.
The deal is a move by Washington investor and businessman Morton Bender, a longtime vocal critic of Independence Federal, to reverse the thrift’s fortunes. Bender, who is white, gained control of Independence Federal two years ago when he and his wife increased their stock ownership to 51%. He and his family now own more than 90% of Colombo’s stock.
The merger, which must still be approved by shareholders of Independence Federal and Colombo and banking regulators, is expected to be completed by June.
The transaction would come after Independence Federal — founded in 1968 after the D.C. riots as an entity where all segments of the population could get a loan– in recent years has faced many challenges.
Those hurdles include numerous quarters of losses, many board and top management changes, and multi-million-dollar lawsuits from Bender. Moreover, Harlem-based Carver Bancorp Inc., holding company of Carver Federal Savings Bank, (No. 1 on the B.E. Banks list with $802.7 million in assets) unsuccessfully tried to buy Independence Federal about six years ago.
Some observers also have questioned whether Independence Federal is a minority-run bank given that Bender controls the majority of its stock. Bender says five of the combined bank’s directors will be minorities, it will have a black chief executive officer, and it will mainly serve predominately black communities.
“If the combined company enhances the community from a lending and services perspective, then the communities it serves will be better served,” says Bert Ely, president of Ely & Co., an Alexandria, Virginia-based bank consulting firm.
Bender said he was motivated to do the deal to cut Independence Federal’s costs, adding, “Hopefully, we’ll be profitable within a year.”
Independence Federal’s new board chairman has not been determined, Bender says. Lester Johnson, now Colombo Bank’s president and CEO, will assume those roles at Independence Federal after the merger.
Johnson says Independence Federal will pick up about 2,300 deposit accounts and 800 loans from Colombo, and will be able to do several things it could not before. Among those, it can:
– Boost its legal lending limit to individuals and businesses to about $3.5 million from $1.6 million.
– Offer customers a wider array of mortgage products.
– Expand its retail products to include such things as home equity and personal lines of credit.
– Provide financing to small government contractors in new and existing markets, allowing Independence to boost deposits and increase interest and fee