Independence Federal Plans Merger With ColomboBank

Independence Federal Savings Bank yesterday announced plans to merge with ColomboBank of Rockville, a deal that would create a $300 million thrift controlled by Washington businessman Morton A. Bender.

Bender, who has been majority shareholder in both banks since he took over the historically black Independence two years ago, had proposed the merger several years ago. He was blocked in 2004 by the Office of Thrift Supervision because of questions about Colombo's weak money-laundering controls and failure to comply with consumer protection regulations.

Bank officials said they hoped the transaction could be completed by the end of the second quarter, pending approval by OTS regulators.

Under the deal, the banks will maintain their existing branches in Washington and the Maryland suburbs. Colombo has a branch in the District and four in Maryland, and Independence has two branches in D.C. and two in Maryland. Independence, which has $172.6 million in assets, had announced plans to expand its reach into the suburbs and seek customers in predominantly African American Prince George's County. But the souring economy has produced uneven financial results for the banks, and officials said those plans are on hold.

The merger will blur the historic origins of both banks. The 95-year-old Colombo began as a neighborhood lender in the Little Italy section of Baltimore, while the roots of Independence sprang from the ashes of the 1968 riots, when a black businessman started the thrift to serve African American clients who could not get loans from white-owned banks.

Bender, who holds more than 90 percent of the stock of Colombo, a privately-held institution, moved to take over Independence seven years ago, forcing out board members and tying up the board in multimillion-dollar lawsuits that alleged mismanagement and wrongdoing.

At the time, Bender, who is white, said he would not merge Independence with Colombo, in order to preserve the historically black bank's mission and identity. But since acquiring a majority share in Independence two years ago, Bender has been moving forward with plans to consolidate the institutions. Bender did not return calls for comment.

Under the deal, Colombo shareholders will get 2.89 shares of Independence common stock for each share they hold. Yesterday, Independence stock was down 7 cents a share, closing at $2.95.