Saturday, August 15, 2009

Colonial BancGroup Fails In Alabama

Yeah, we know...
You're wondering why in the hell we're posting a story about a bank failing... one that happens to be the largest in state history...

The details, thanks to our friends at WSFA-TV in Montgomery...

Colonial ((pictured, thanks David Bundy/Montgomery Advertiser)) was founded in 1981 with $166 million. The bank grew to a value of more than $25 billion over the years, and its stock paid handsomely. In 2005 the Wall Street Journal ranked it "Number One Among Southeast Banks" for shareholder returns. In 2007 Forbes ranked the bank on its list of "Platinum 400 Best Publicly Traded Companies in America" and its Global 1,000 list for international businesses based on revenue.

So what happened?

"I think the main problem Colonial Bank had was it was very aggressive in Florida," finance professor Bruce Gordon said. "They made a lot of construction loans and lot of real estate loans then the value of those loans just plummeted because of the real estate problems in Florida. I feel they were a little too aggressive in a market that turned out to be very bad."

The bank reported losing more than $1 billion in the last year and at least $600 million in the second quarter of 2009, mostly due to those bad real estate loans.

Just this week Bank of America Corporation sued Colonial for more than a billion dollars to protect its claims on the Colonial loans and to keep Colonial from selling or disposing of the assets.

A federal criminal investigation by the Department of Justice and probe by the Securities and Exchange Commission added to the troubles Colonial was facing, and things just became too much.

We've buried the lead...

Robert E. ((Bobby)) Lowder, one of the more influential boosters in the history of the world ((or the Southeastern Conference)) was the founder of Colonial in 1981 and was in charge of it all until May of this year. He has served on the Auburn University board of trustees since 1983, and was Colonial's largest shareholder with more than 7.6-million shares.

At it's height, Colonial was pulling in an average share price of $25.74 ((2006))- a net worth of over $195-million. Now you know how Lowder was able to spring for private jets and try to recruit the likes of Robert Petrino, ESQ. to become head coach when Lowder grew dissatisfied with Tommy Tuberville on a yearly basis.

The share price for Colonial before the FDIC took the company over Friday...?

41-cents...

An inherent value of a little over $3-million.

Sources close to the Auburn situation have an interesting angle...involving Lowder's future.

The new round of trustees is set for a 2011 announcement- politics permitting. In the past, Lowder's term has been up for renewal, but if there was an opportunity to "delay" the appointment until a more "ideological-agreeable" pol could be in place to keep Lowder in charge- it was done.

((See Don Siegelman's run for governor when he was Lieutenant Governor))

Lowder, we've been told by our sources, wanted Petrino to be the new coach AGAIN in the post-Tuberville search. He was overruled by Jay Jacobs- who chased after and got- Gene Chizik.

The biggest question for Lowder between now and two years from now is:

"Can he suck up enough to whoever he thinks he needs to suck up to keep his place, or is he out on his tookas...?"

And even if he keeps his place, how much stroke will he have in the say of the athletic department and their choices in direction. He could bring in whoever he felt like to be the new coach on the sidelines in the halcyon days of Colonial, but he'll have to bus candidates instead of flying in the future.

Unless his hands are tied from now on...

More when we know more...

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