DOW JONES NEWSWIRES
Colonial BancGroup Inc. (CNB) said Friday it is the target of a
Department of Justice criminal investigation at its
mortgage-warehouse lending division and related accounting
irregularities.
U.S. federal agents raided the Florida offices of Colonial
BancGroup Inc. and wholesale mortgage lender Taylor, Bean &
Whitaker Mortgage Corp. on Monday, just days after a financial deal
between the two firms fell through.
The Special Inspector General for the $700 billion Troubled
Asset Relief Program at the time said that its agents had executed
search warrants at the two offices but offered no further details
about the ongoing investigation.
Colonial BancGroup said Friday it plans to cooperate with the
investigation.
Taylor Bean, the 10th largest so-called wholesale lender, closed
its mortgage-lending operation on Wednesday, but that was expected
to pose more of a problem for brokers than for small banks.
Colonial BancGroup's Colonial Bank unit agreed in June oversight
by the Federal Deposit Insurance Corp. and Alabama Banking
Department and other steps to fix problems with its financial
condition and performance. The bank has been hurt by its exposure
to Florida's real-estate collapse and its focus on construction
lending. At the time, the bank also said it would increase its
capital levels, reduce its level of criticized assets and
concentrations of credit, and improve its earnings.
Fitch Ratings cut its credit ratings deeper into junk territory
as a result, saying the regulators' actions could hurt a planned
deal for a $300 million receive a $300 million capital infusion
from an investor group led by mortgage lender Taylor, Bean &
Whitaker.
Shares were up 2.9% at 72 cents in recent premarket trading.
-By Tess Stynes, Dow Jones Newswires; 212-416-2481;
tess.stynes@dowjones.com