Another life insurance company is planning to buy a troubled banking company to qualify for government capital.

Protective Life Corp. in Birmingham, Ala., said after the market closed Tuesday that it has signed a letter of intent to acquire the $241.6 million-asset Bonifay Holding Co. Inc. in Florida.

A definitive agreement is still in the works, but the deal would be contingent on Protective Life's approval for a capital injection through the Treasury Department's Troubled Asset Relief Program.

Protective Life said it has filed an application with the Federal Reserve Board of Governors to become a bank holding company.

Neither Protective Life nor Bonifay returned phone calls Wednesday.

A spokeswoman for the Federal Reserve Bank of Atlanta confirmed that an application had been filed, but she would not to say whether regulators helped arrange the match with Bonifay.

She also would not say whether other acquisitions by nonbanks looking to access government capital might be in the works.

At least seven other nonbanks, including five insurance companies, have said they would employ a similar tactic. Those seven companies have applied to the Office of Thrift Supervision to become thrift holding companies. Four of the insurance companies — Hartford Financial Services Group Inc., Genworth Financial Inc., Lincoln National Corp., and Aegon NV — agreed to acquire troubled thrifts as part of their plans to apply for the capital. Sources said the OTS facilitated the pairings.

Phoenix Cos., Rock Holdings Inc., and PHH Corp. filed applications for a thrift charter and a capital injection but had yet to arrange an acquisition.

Steven D. Schwartz, an analyst at Raymond James Financial Inc. who covers Protective Life, said some insurance companies have had thrift charters for years.

"I think the view of the Lincolns of the world, the Hartfords of the world, the Protectives of the world is, if those companies can qualify and get Tarp, to be competitive, we should do the same," he said.

Protective Life lost $100 million in the third quarter after taking a hefty hit on its investments. Its stock, has lost 80% of its value over the past 52 weeks. By Wednesday afternoon it had tumbled about 11% from Tuesday's close, to $7.35 a share.

Bonifay run into trouble with construction and land development loans. It signed an agreement July 21 that requires Fed approval to pay dividends, buy back stock, incur dept, or repay trust-preferred securities, among other things.

Second-quarter earnings at its banking unit fell 88% from a year earlier, to $104,000, as its noncurrent loan ratio ballooned to 9.8%, according to data from the Federal Deposit Insurance Corp.

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