It may not be the Hatfields versus the McCoys, but the founding families of Cole Taylor Financial Corp. are in a rare public tiff over the company's future.

The Cole and Taylor families each own roughly a quarter of the Wheeling, Ill., company's stock. The families, however, have different ideas about what to do with the $1.8 billion-asset company, which went public 16 months ago.

The controversy sent the company's stock soaring to a 52-week high this week. The stock was up more than 10% on Monday, to $26.25.

Lori Cole, daughter of founder Irwin Cole, wants the board to investigate all of its options, including a possible sale.

"We can't know the value of Cole Taylor unless we test the marketplace," said Ms. Cole, a director since her father became ill in July.

"That doesn't mean the company's up for sale," she said. "If the best end is the sale of the company, then we're for selling the company. We must look at all the options in this merger market."

But the Taylor family, led by company chairman and CEO Jeffrey W. Taylor, says staying independent has so far paid shareholders handsome returns. Mr. Taylor, son of the company's other founder, took issue with Ms. Cole's speaking with the press about board matters.

"The board is fully aware of its responsibilities to all shareholders," he said. "However, it is not our practice to publicize our board discussions in the news media."

However, he said that he was not surprised by the turn of events. "When somebody, a partner, becomes less active in the business, I think it is not uncommon for them to start looking at alternatives other than staying the course," Mr. Taylor said. "I think it's almost natural that would happen."

Ms. Cole took issue with Cole Taylor's assertion in a news release over the weekend that the Cole family was "considering disposal of its shares."

Mr. Taylor said he believed the company's current business plan, which has achieved a return for investors of 67% since the concern went public, was best for the company.

"I have confidence in it," Mr. Taylor said. "I think it enhances our shareholder value more than any other alternative."

John E. Snow, a research analyst in the Chicago office of Rodman & Renshaw Inc., said such differences of opinion are probably not unique - they're just kept private. "What you've got here is a discussion that probably isn't uncommon in a lot of boardrooms that has somehow made it into the public," he said.

Ms. Cole, who owns Chicago Sound Inc., an audio equipment company, said the issue shouldn't be trivialized as a family feud. "It's something bigger than a family feud," she said. "It's about doing what's right for all the shareholders and letting the directors assess the value of the company."

The families' banking ties go back a long way. Irwin Cole and Sidney Taylor bought their first bank in 1969 and created their holding company in 1978, merging several subsequent bank acquisitions into one entity starting in 1988. Their fast-growing finance company, Reliance Acceptance Corp., which finances used-car loans, debuted in January 1993.

Both of the founding fathers are still on the board but don't have management positions. Lori Cole said that because of her father's illness, she is acting as the spokeswoman for the whole family. Sidney Taylor declined to comment.

The company and its subsidiaries have performed well, and the stock has become a favorite of Midwest community bank investors.

For the first half of 1995, Reliance Acceptance net income jumped 270%, to $3.8 million, from a year earlier. For the same period, Cole Taylor Bank's net rose 15%, to $8.5 million, while the holding company's earnings increased 36%, to $10.3 million.

Cole Taylor has several options for its future, analysts said: It could maintain the status quo, sell the whole company, or sell just its financing unit.

"I really believe it's premature at this point to either split them up or sell the whole unit," said Michael E. Sammon, senior vice president, Howe Barnes Investments Inc., Chicago.

While the company has done a "super" job with its finance unit, it has "a ways to go" with the bank, he said. "Their performance would be better if they didn't pay themselves so well," Mr. Sammon said of management, four of whom received a base salary of $300,000 in 1994.

If the company were to sell, it could be an attractive fill-in target for several companies already in the Chicago market, such as First Bank System Inc., Harris Bankcorp, or Banc One Corp., Mr. Snow said.

He added that subprime-credit companies like Reliance "seem to be of greater interest to the banking community these days," citing last week's deal in which Keycorp acquired AutoFinance Group Inc.

But Mr. Snow said the families' disagreement could hurt a possible sale, because an acquirer might be afraid of losing top management.

"Given that the Taylors are running the company," he added, "it doesn't seem likely to me that there could be a forced deal here."

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