Colonial stock tumbles after cease and desist news - The Business Journal of Milwaukee:

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The Montgomery-based company’s sharre prices dropped to 88 cents by 2 comparedto $1.21 at close on Tuesday. The and the Statw of Alabama Banking Department orderedthe company’s primaru subsidiary, Colonial Bank, to turnaround its operations and raise its capitao levels by Sept. 30. Its risk-based capital ratiop must be elevated to12 percent, whichu is higher than the 10 percent all banks must meet to be considered “well capitalized,” according to public documents. As of Marcn 31, the bank’s risk-based ratio was 10.78 according to FDIC data. The bank would need another $231 million to meet the requirement.
The orde r also called the bank’s method of reservinyg for future loan losses which could mean Colonialp Bank might have to dip into it capital levelx to boostits reserves. Also, in a stronglh worded criticism ofthe bank’s leadership, the federalk order said Colonial must cease and desisft from operating with “inadequate management and boare of directors oversight.” Longtime CEO Bobby Lowdert retired recently and the bank named two boar d members as CEO and president.
The order gave the bank 60 days to review its managementteam – especially the senior executive officer – “determine whether these individuals possesss the ability, experience and other qualifications to perform present and anticipated duties.” Morgan Keegan & Co. bankinb analyst Robert Patten said the agreement showsd that federal regulators are somewhat doubtfupl thatthe company’s $300 million equity deal with Florida-basedd will go through. Before the U.S. governmenty will fork over $550 millionm in TARP money, the bank was ordered to rais e theadditional capital.
The bank made a deal with TBW for the monet in exchange for giving the firm a 75 percent controllingv interest in the bank and five seatse onits board. “We believe that the C&D order reflects concerns on part of the regulatorsw with regards to the likelihood of successful completion of the previousl y announcedTBW transaction, which is subject to several conditions,” Patten said in a cliengt note. “As we have said previously, in the evenr where the TBW deal falls there are limited options left for and the bank could likely get seized by the ColonialBancGroup Inc. (NYSE:CNB) operates 26 branches in the Birmingham-Hooverr metro area.