Federal regulators hit Colonial Bank with a cease and desist order, which set high demands for the company to turn around its operations, juice up its capital levels and overhaul its business strategy.
The Montgomery, Ala.-based bank, which has struggled with a plethora of nonperforming loans in once-hot markets that have hit rock-bottom during the financial crisis, was ordered by the Federal Deposit Insurance Corp. and the state of Alabama Banking Department to raise its risk-based capital ratio to 12 percent - a rate higher than the 10 percent all banks must meet to be considered "well capitalized," according to public documents.
Colonial must also submit a capital plan, providing details on how it plans to raise the fresh capital. Its plans must also include "a plan to sell or merge the bank," in case it fails to meet the new capital requirements, the order said.
Colonial BancGroup Inc. (NYSE:CNB), the bank's parent company, said the company is "committed to working with the FDIC and state of Alabama to implement the actions required by the Order."
Colonial Bank is among the largest banks in the Tampa Bay area with 50 offices, $2.8 billion in deposits and a 3.6 percent deposit market share, according to the most recent information available from the FDIC.
Within 60 days of the order, the bank must review its management team, especially the senior executive officer, to "determine whether these individuals possess the ability, experience and other qualifications to perform present and anticipated duties."
The bank recently appointed two new executives to take long-time chief Bobby Lowder's dual position as chief executive officer and board president.
Board members Lewis Beville and Simuel Sippial Jr. recently took the helm as CEO and board chairman, respectively.
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