Colonial BancGroup of Montgomery, Ala., has culminated a busy month by signing a $16 million deal to acquire an Atlanta thrift specializing in the mortgage business.

The deal would enhance Colonial's presence in the dynamic Atlanta mortgage business by adding three full-service offices plus a mortgage loan production office from the thrift company, called Mount Vernon Financial Corp.

The move underscores the ambivalence banks have shown toward mortgage banking in recent months. While some larger banks, such as Wachovia Corp. of North Carolina and AmSouth Bancorp of Alabama, have downsized in this area, others are beefing up these operations.

"There are a lot moving towards it (the mortgage business), and a lot moving away from it," said Peter W. Tuz, bank analyst at the Morgan Keegan Co. in Memphis. "Some banks think they have to be $30 billion in size to be effective, but there are much smaller ones who think they can be very competitive."

The $2.9 billion-asset Colonial last month merged Atlanta-based Colonial Mortgage Co. into its holding company. Colonial Mortgage was owned by Robert E. Lowder, who is Colonial BancGroup's chairman and chief executive.

The $193 million-asset Mount Vernon would change its name to Colonial Bank, but as to its charter, Colonial officials are discussing whether to retain its thrift status, in light of Georgia's restrictive branching laws. A thrift charter allows an institution to branch anywhere, but a Georgia state bank must still buy a whole bank in a neighboring county in order to expand.

The deal, pending regulatory and shareholder approval, would pay Mount Vernon shareholders $18.79 worth of Colonial stock for each share of their stock, representing 146% of Mount Vernon's book value.

The move follows other significant actions by Colonial in the last several weeks. Beyond acquiring Mr. Lowder's mortgage company, Colonial consolidated its two classes of stock on Feb. 21 and three days later began trading on the New York Stock Exchange.

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