Colonial BancGroup reported July 31 a net loss of $606 million in the second quarter and the termination of a key agreement with a Florida mortgage company to provide $300 million in capital. The Montgomery bank's net loss for the second quarter is more than three times higher than the $168 million net loss reported in the first quarter. Besides the bad news of the loss, Colonial also reported the loss of a deal with Taylor Bean & Whitaker Mortgage Corp., which Colonial said fell through because it was still pending by the required close date of July 31. The bank had hoped the $300 million would help it reach eligibility for federal TARP funds, which would have boosted its capital. FBC Mortgage LLC and Securities Capital Holdings, both of Orlando, were part of the group that was led by Taylor, Bean & Whitaker. The deal called for the group to obtain 75 percent of Colonial's stock for its $300 million. Colonial is suffering under a big portfolio of bad real estate loans, many of them in Florida. In the second quarter, the bank reported non-cash charges of $377 million related to a valuation allowance on its deferred tax assets and a $75 million writedown of goodwill. Loan loss provisions were $294 million, up 14 percent from the first quarter and net charge-offs for the quarter were $244 million, compared to $132 million the 1st quarter of 2009. Writedowns and expenses on foreclosed properties registered $43 million in the quarter, up $36 million from the first quarter of 2009 and the balance in the allowance for loan losses was $500 million. Nonperforming assets increased to $1.7 billion, up $603 million over March 31. The bank said the increase in nonperforming assets reflects the continued economic distress in the its struggling markets, primarily Florida, and weakness in the construction-related sector, which comprised 72 percent of Colonial's nonperforming assets at June 30. While loan losses were high, the bank said total deposits increased 7.3 percent from Dec. 31, 2008. To combat escalating problems, Colonial said it is pursuing a variety of strategic capital alternatives, including selling or merging the company, selling branches, selling problem assets, reducing expenses, exchanging bank-level subordinated debt for senior debt, which is expected to increase Tier I capital at the bank, seeking sources of private capital and reducing assets. Lewis Beville, Colonial's CEO and president, said the actions should put the company in a better position to reinforce its value with the businesses and household customers who bank with Colonial. Colonial has hired Citigroup Global Markets Inc. as its financial advisor. Citi bought 21 Nevada branches in mid-July along with $492 million in deposits and $440 million in loans. Colonial BancGroup operates 355 branches in Alabama, Florida, Georgia, Nevada and Texas with more than $25 billion in assets. Colonial has 35 branches and nearly $2.23 billion in deposits in the Orlando area as of June 30, 2008, according to the Federal Deposit Insurance Corp.
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