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Corus, Colonial on the Brink

Since the agreement came right at the deadline for the company to raise capital under its regulatory agreement, there were several breathlessly positive headlines suggesting that Colonial had actually gotten the money, while TheStreet.com expressed doubt.

Colonial remained positive about its prospects for raising capital in a May 22 press release, saying that the "due diligence contingency under the stock purchase agreement dated March 31, 2009 has been satisfied."

The company never got the money and announced Friday that the agreement with Taylor, Bean & Whitaker was terminated.

Colonial BancGroup's nonperforming assets comprised 6.54% of total assets as of June 30. The company's net charge-offs (actual loan losses) for the second quarter totaled $244 million or an annualized 7.02% of average loans. This is a fast pace for charge-offs. In comparison, the company's ratio of loan loss reserves to total loans was 3.69% as of June 30, meaning that unless loan charge-off activity slows down considerably, Colonial will need to set aside large amounts for loan loss reserves over coming quarters to keep up with the charge-offs, leading to more net losses.

-- Written by Philip van Doorn in Jupiter, Fla..

Philip W. van Doorn joined TheStreet.com Ratings., Inc., in February 2007. He is the senior analyst responsible for assigning financial strength ratings to banks and savings and loan institutions. He also comments on industry and regulatory trends. Mr. van Doorn has fifteen years experience, having served as a loan operations officer at Riverside National Bank in Fort Pierce, Florida, and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a Bachelor of Science in business administration from Long Island University.
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