Turning around a struggling company certainly is an achievement. But overcoming fraud wrought by a longtime CEO that threatened the core business and guiding that business back to prosperity is a feat that few will ever accomplish—or ever want to.

Pat Frawley, chairman of the board and CEO at the 18-branch Community Bank, based in Blountsville, Ala., has led the bank since January 2003, when longtime CEO Kennon Patterson was fired amid charges of fraud. Patterson was convicted in March 2005 of 15 counts of conspiracy, bank fraud, causing false entries in bank records, and filing false returns. He was sentenced to 60 months in prison but remains free while appealing the sentence.

“This is the most-enjoyable assignment I’ve had in my career, but the hardest I’ve ever worked,” said Frawley, citing frequent 15-hour days. “You can’t turn something around in a heartbeat. It’s fun, but it’s stressful.”

In the black
Little more than three years after Frawley assumed the top job, Community Bank is back in the black, and its parent corporation, Community Bancshares, Inc., has agreed to merge with Birmingham, Ala.-based Superior Bancorp in a stock and cash transaction valued at $98 million. Superior Bank, whose parent company was known as The Banc Corp. until last month (May), operates 26 branch locations and is planning six more in Alabama and Florida.

Superior previously had announced a merger with Kensington Bankshares Inc., and by the time both transactions close later this year, Superior Bank will be a $2.3 billion community bank with 60 offices stretching from Huntsville, Ala., to Tampa, Fla.

Once the Community Bank transaction is complete, Frawley is scheduled to serve as chairman of Superior Bank’s North Alabama operations. But he’s holding open the possibility of taking over another troubled banking company, working with the investor group that invested $20 million in Community Bank to help fund its turnaround. The transaction with Superior was the second-highest premium paid for an Alabama banking company in the past six years. “When you double somebody’s money in two years, they love you,” Frawley said. “In due course, should the investors find another opportunity, I’d consider doing this again.”

Community Bank can trace its history in northern Alabama to 1923, when the Bank of Blountsville was chartered. The bank changed names in 1985 when Community Bancshares was chartered. The company then underwent a growth spurt through acquisitions and a building program, including a foray into the southern part of Middle Tennessee. The company sold some of its assets in 2002 to raise capital, returning to its northern Alabama roots.

The bank now has 18 banking and 16 financial services offices located in 14 Alabama counties. Its two major subsidiaries are 1st Community Credit Corp. and Community Insurance Group. As a whole, Community Bancshares employs 300 people in 27 Alabama communities. In its home county, Blount, the bank enjoys a 45% marketshare.

Meeting resistance
Frawley joined Community Bank in March 2002, reporting directly to the board of directors as head of risk management, compliance, audit, and control functions. His three decades in the banking industry include 13 years with the Comptroller of the Currency and 16 years with what’s now Bank of America, last serving as director of regulatory relations.

“I was fresh blood, coming from a much larger bank, and I knew about the regulatory issues,” said Frawley, who said the tension among himself, Patterson, and the board that was mainly hand-picked by Patterson was palpable. “I met resistance at every turn, and the situation was worse than I was led to believe,” Frawley said. “There were times when I was looking for other jobs because it was such a quagmire.”

The bank and its holding company were operating under four regulatory agreements, which Frawley called “unprecedented,” and Community Bank was rated as “troubled.”

The situation came to a head in January 2003 when Patterson, who was accustomed to being paid his $1 million annual salary in a lump sum at the beginning of the year, didn’t tell the board he had filed for bankruptcy when he requested the collateral for a large personal loan be released. While the board took the matter under advisement, Patterson released the collateral himself, which led to his firing. Nepotism at the bank was rampant, with a half-dozen relatives working for the company, including Patterson’s wife, who at one point was on the payroll as interior decorator.

With Patterson out of the picture, the board of directors turned to Frawley as their new leader. “I didn’t come here to run the bank,” Frawley said. “But since I knew so much about regulatory issues, they asked me to lead the bank during this time of transition.”

Frawley made wholesale management changes, including replacing most bank officers. After developing a strategic plan to stem losses, the bank raised $20 million in capital to fund the clean-up. “There were many, many doubting Thomases, including regulators, who said, ‘Who’d buy stock in this bank?’”

Guiding with a steady hand, Frawley brought his plan to fruition in 2005 as the last of the regulatory liens was lifted and the bank’s rating was upgraded. In the interim, Community Bank had sold $16 million in bad loans, settled protracted litigation, overhauled systems and controls, adopted new corporate governance, and created a strict code of ethics for the board.

In recognition of the turnaround, Bank Director presented the Community Bancshares board with the L. William Seidman Courage Award, “presented to a board whose directors, during a time of great adversity, had the courage to do the right thing.”

Although Frawley didn’t intend to lead Community Bank, he said he’s grateful for the experience. “Turning around a bank means getting to the heart of the matter and getting some order around it,” Frawley said. “It can be frustrating and time-consuming, but the rewards are enormous.”

Grayson Walker, This e-mail address is being protected from spam bots, you need JavaScript enabled to view it , is a freelance writer based in Atlanta.