This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Corus, Colonial on the Brink

Colonial's Confusing Communications

The federal raid at Colonial comes as the company faces scrutiny for its litany of confusing announcements related to its application for government bailout funds.

According to published reports, federal agents from the Federal Bureau of Investigation, Treasury Department and Department of Housing and Urban Development were seen carying boxes from Colonial's office. The office of the TARP Inspector General would only confirm that agents served a search warrant in Orlando and at one other Florida location, according to WESH News in Orlando. According to Ocala.com, federal agents also raided the offices of Taylor, Bean & Whitaker Mortgage, which in March had agreed to invest $300 million in Colonial.

Colonial BancGroup had total assets of $25 billion as of June 30 and operates 352 branches in Florida, Alabama, Georgia, Nevada and Texas. The company announced a second-quarter net loss of $606 million, or $3.02 per common share. This left the company's main subsidiary, Colonial Bank, adequately capitalized with a Tier 1 leverage ratio of 4.18% and a total risk-based capital ratio of 9.21%.

Colonial has a major residential lending operation, with $12.4 billion in first mortgage originations in 2008.

Colonial is operating under a cease and desist order with the Fed, FDIC and State of Alabama. An earlier memorandum of understanding between the holding company and FDIC and state regulators required Colonial Bank to achieve and maintain respective Tier 1 leverage and total risk-based capital ratios of at least 8% and 12% by March 31. These ratios normally need to be at least 5% and 10% for a bank to be considered well-capitalized.

Colonial made several attempts to raise capital, publicized in several ill-advised announcements made by the company. For starters, Colonial said on Dec. 2 in a Securities and Exchange Commission filing that the Treasury had approved its application to receive a capital infusion of $553 million via the Troubled Asset Relief Program, or TARP.

Not until Jan. 27 did Colonial share an important feature of its "approval" for TARP money -- the company was first required to raise $300 million in new capital from other sources.

Then on March 31, Colonial announced a deal with wholesale mortgage lender Taylor, Bean & Whitaker to raise $300 million. The company didn't actually receive any money that day, since the investor group wouldn't fork over the money until receiving confirmation from Colonial that the TARP money would be received.

3 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,556.61 -6.69 -0.04%
S&P 500 1,931.38 +0.71 0.04%
NASDAQ 4,365.0530 -4.72 -0.11%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs