Regulators Order Cease and Desist on Colonial’s Capital Woes

Colonial BancGroup (CNB) on Monday consented to a cease-and-desist order given by the Federal Reserve. The order, which takes effect July 22, addresses the capital, liquidity and loan loss allowance issues at the bank, Colonial said in a statement on the order. Colonial BancGroup acknowledged loan losses in its portfolio are greater than estimated or expected, leading to a liquidity crisis that also affected the firm’s ability to raise additional capital and close on a pending agreement with investors led by Taylor, Bean & Whitaker Mortgage Corp. (TBW). In March, Colonial signed an agreement with investors led by TBW for a $300m equity investment, according to a quarterly report filed with the Securities and Exchange Commission (SEC). The firm in May reported a $168.36m net loss in the three-month quarter ending March 31, compared with $30.13m of profit posted in the previous-year quarter, according to the quarterly SEC filing. Write to Diana Golobay. Disclaimer: the author held no relevant investments when this story was published.