The Federal Reserve Board has filed a cease and desist order against Colonial Bancshares Inc., Des Peres, Mo., and four of its officials.

The order requires the officials to tender to Colonial a total of 98 shares from stock bonuses that were distributed to them more than three years ago.

It also orders them to submit a joint written plan for an appraisal of Colonial stock purchased by the two affiliate banks' employee stock plans. The stock was acquired for $250,292 in five transactions between September 1990 and July 1992. The Fed wants to determine whether the plans overpaid for the shares. Prices ranged from $422 to $535 a share.

"I don't think this particular order will have any great impact on Colonial Bancshares in the long run," said Gene Brockland, a partner with Herzog, Crebs & McGhee, St. Louis, who represents the bank.

In agreeing to enter into the order, the company and its officials made no admission of wrongdoing.

Mr. Brockland said the officials have already tendered the 98 shares, and the bank is selecting a appraiser.

The action comes two months after Firstbank of Illinois Co., a $1.5-billion banking company in Springfield, Ill. signed a definitive agreement to acquire Colonial for $11.9 million. Colonial has 20,002 shares outstanding, and shareholders will receive about $614 a share.

Mr. Brockland said the banks are conducting due diligence. He expects the merger to close by the end of the year.

Chris R. Zettek, Firstbank's chief financial officer, said the company isn't unduly concerned with the order. Firstbank officials knew about it before they agreed to acquire Colonial.

"It is not something we think is going to preclude us form completing the merger," Mr. Zettek said. "We have to get the Fed's approval, so they will have to be comfortable."

It would be Firstbank's initial foray into Missouri.

Colonial operates Colonial Bank, Des Peres, and the Village Bank of St. Louis County, Ellisville, Mo. Combined assets were $169 million at the first quarter. It also owns Guido Insurance Agency Inc., and Minuteman Properties Inc.

The Colonial officials named in the order are: Kenneth Tiemeyer, chairman; Kenneth Davis, chairman emeritus; David Fairchild, a director; and John Weber, vice president.

Under the July 13 order, Mr. Davis must pay Colonial $35,788 in interest on the redemption price of this Colonial stock on those redemptions made since December 1989.

Mr. Brockland said Mr. Davis has made full payment.

Stepping In

The Federal Reserve has ordered Colonial to:

* Not declare or pay dividends

without Fed approval.

* Submit a written policy on

payment of dividends by

subsidiary banks.

* Not directly or indirectly pay

fees or salaries or make any

payments to its directors or

officers without Fed approval.

* Submit a written plan to

improve the capital position of

the consolidated organization.

* Not increase its borrowings

or incur any debt without

written approval.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.