Merger With Union Bank Hastens Colonial Expansion Plan
By Samantha Joseph
Colonial BancGroup may be rethinking its expansion
plans following Tuesday’s $233 million acquisition of Union Bank of
Earlier this year, the Alabama company announced it would add 15 branches across South Florida by 2007. But its purchase of 18-branch Union Bank could prompt officials to revisit those plans, according to Israel Velasco, who heads Colonial’s local operations.
"Right now, we’re going to rethink our strategy and pick and choose our
remaining locations," Mr. Velasco said. "By acquiring 18 (branches), there
is some overlap. It’s not a perfect science, but it’s really as good as it
can get in terms of the expected footprint."
The footprint, if all goes as planned, would cover South Florida and give Colonial more branches in Miami-Dade, Palm Beach and Broward counties.
It was unclear Tuesday whether Colonial would close any of its newly
acquired branches, but the deal makes significant headway into other expansion
Before it announced the Union Bank buyout, Colonial had added four its targeted new branches. Tuesday’s acquisition adds about six.
"We’ve minimized the list tremendously – at least by half," Mr. Velasco said.
The deal with Sunrise-based Union Bank strengthens Colonial’s business in Broward, tripling its branches there to 18.
"It bridges the gap between Palm Beach County and Dade County," Mr. Velasco
said. "That’s really the main focus."
The banks need regulatory approval to complete the deal. They expect
it by April, with a name change for Union Bank operations slated for the following summer.
Colonial BancGroup has total assets of $17.6 billion with 294 offices in Florida, Alabama, Georgia, Nevada and Texas. Its 28 branches in South Florida would grow to 46 after the acquisition.
Union Bank has $1.1 billion in assets with 18 offices in Miami-Dade, Broward and Palm Beach counties.
Bowman Brown, chairman of Shutts & Bowen’s financial-institutions practice group, said many larger banks have expressed interest in acquiring banks with assets of $1 billion or more. Smaller banks are generally less sought after for consolidation because they don’t build a bank’s market share and have high acquisition costs, he said.
Mr. Velasco said many banks with $1 billion in assets have trouble finding an identity. They face a decision to sell or invest in growth, he said. "That’s a benchmark measure," he said. "You reach a size where economies of size are very important."
Colonial Bank doesn’t acquire banks because of their size, Mr. Velasco said. He said Union Bank is the only $1 billion acquisition among Colonial’s 60. "This is our largest acquisition to date," he said.
The merger is in an indication of the strength of the state’s banking
industry, according to Alex Sanchez, CEO of the Tallahassee-based Florida
Bankers Association. He said the deal points to the area’s appeal to
out-of-state institutions such as Colonial.
Florida is the nationwide leader in applications for new banks, he said, and
small banks continue to thrive.
"There is room in the marketplace for banks of all sizes to operate in
Florida," he said. "Florida banking has survived and will continue to
survive for a long, long time. … Community banks will always continue to