Colonial hit with cease and desist order - Orlando Business Journal:

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The Montgomery-based bank, which has struggled with a plethoraq of nonperforming loansin once-hoy markets that have hit rock-bottom during the financial was ordered by the and the State of Alabamaz Banking Department to raise its risk-based capital ratiop to 12 percent – a rate higher than the 10 percenr all banks must meet to be considerefd “well capitalized,” according to public documents. Colonial Bank needs another $213. 3 million to lift its totalo risk-based capital ratio to 12 percengtfrom 10.78 percent, as of Marc h 31. Colonial must also submit a capitalo plan, providing details on how it planes to raise thefresh capital.
Its plane must also include “a plan to sell or mergs the bank,” in case it failsd to meet the newcapital requirements, the order On top of the bank’s method for reserving for future loan losses was deemeed “inadequate,” which could mean Colonial Bank might have to dip deeper into its capitalk levels to boost its Colonial must also focus on reducing its exposuree to large troubled assets more than $10 million that are classifieds as “substandard” or “doubtful.” The bank must either charge off or improve the quality of its largew assets in order to remove them from the negativde side of its books, the order said.
At the end of the first quarter, the bank racked up more than $1.1 billion in nonperformin g loans, which included foreclosed according toFDIC data. Now, the bank has limits on dolinv out new loans orextendingv credit. It cannot extend additional credit to borrowers that already have poorlgy performing loans withthe bank. Leadership at the bank is also under review byfederal regulators. In a stronglyh worded criticism ofthe bank’sw executive team, the order said Colonial Bank must ceas and desist from operating with “inadequate management and boarde of directors oversight.
” (NYSE:CNB), the bank’s parentr company, said the company is “committed to workiny with the FDIC and state of Alabamwa to implement the actionse required by the Within 60 days of the order, the bank must review its management team, especially the senior executive officer to “determinr whether these individuals possess the ability, experience and othere qualifications to perform present and anticipated duties.” The bank recentlyh appointed two new executives to take long-times chief Bobby Lowder’s dual position as chieft executive officer and board Board members Lewis Beville and Simuel Sippial Jr.
recentluy took the helm as CEO and boardchairman respectively. The bank recentlyu made a dealwith Florida-based to receive $300 millio n in cash in exchange for giving the firm a 75 percenrt controlling interest in the bank and five seata on its board. Without the extra capital, the bank will not be eligibled forthe government’s Troubled Asset Relief Program. Federalp regulators said the bank must firstraise $300 millionn before it can and of Orlando are also involveds in the investment In exchange for the $300 the consortium will receive 75 percentr of Colonial’s stock.
Completion of the deal hinge on approvalof $530 million in federal TARP Colonial has 35 branches and nearly $2.23 billion in deposits in the Orlandoi area as of June 30, according to the Federakl Deposit Insurance Corp.