Colonial BancGroup Inc. of Montgomery, Ala., said Friday that there is "substantial doubt" it will survive after a plan to sell itself to a Florida mortgage lender fell through.
Colonial, which also reported its fifth straight quarterly loss, said there was a mutual agreement to terminate plans to sell a majority stake to Taylor, Bean & Whitaker Mortgage Corp. It is the second capital-raising transaction to fall through for Colonial this year.
Colonial said it hired Citigroup Global Capital Markets Inc. in early July to advise it on a capital plan that could include another attempt to sell itself. In July the $25.5 billion-asset Colonial announced it had agreed to sell its branches in Nevada, and it said more branch sales could occur.
Colonial disclosed last month that it was operating under a cease-and-desist order from regulators. The C&D was cited as creating the most doubt about the company's future. Colonial said it has ample liquidity for now.
Capital is another matter: Colonial reported a loss of $605.7 million for the second quarter, or $3.02 a share. It posted a first-quarter loss of $168.4 million and a $3.6 million loss for last year's second quarter.
Its loan-loss provision rose 14% from the first quarter and nearly quadrupled from a year earlier, to $294 million.
Net chargeoffs nearly doubled from the first quarter and more than tripled from a year earlier, to $244 million.
Nonperforming assets rose 55% from the first quarter and grew more than fourfold from a year earlier, to $1.7 billion. The company said it sold $75 million of problem assets in the second quarter at 46% of their value.
Colonial, which has a majority of its assets in hard-hit Florida, was relying on the sale to Taylor Bean to raise the $300 million it needed to qualify for more than $550 million in additional capital from the government's Troubled Asset Relief Program.
However, the deal's termination frees Colonial to seek another buyer, removing a $10 million fee embedded in the purchase agreement.
Analysts have said that several banking companies might be interested in buying Colonial but that they would only be willing to do so with some backing by regulators to cover problematic assets.
Colonial shook up management this year, announcing in May that its longtime chairman and chief executive officer, Robert Lowder, would retire and replacing him with sitting directors.
Lewis E. Belville was named CEO and Simuel Sippial Jr. became chairman.
