There are a thousand ways to identify sickly big banks.
Awash in bad loans? They missed the recession's warning signs.
Turnover at the top? They're seeking new blood.
Regulators setting specific fix-it goals? They're not turning things around fast enough.
Here's another: When competing bankers whisper that many of their peers at the bank are looking for jobs.
Such is the plight of Alabama's Colonial Bank, a whopping $26 billion bank out of Montgomery. It roared into Florida about a decade ago to become the No. 6 bank in deposit size. The bank operates nearly 200 Florida offices — more than two dozen in the Tampa Bay area — that hold about $10 billion in deposits.
Colonial invaded Florida with the herd of other Alabama banks. Alabama was growing, but not nearly as fast as Florida at the time. Getting on the Florida economic gravy train would look smart to Alabama banks' shareholders!
The idea seemed sound. The execution in Colonial's case (and others) was flawed.
Sound familiar? I wrote about Colonial this past spring when its stock price drooped to 60 cents a share and the bank tried to get federal bailout money that the U.S. Treasury was doling out to the financial industry.
With Colonial shares dipping Monday to 49 cents, things are bleaker. Here's why:
1. The banking company last week reported a $606 million loss in the second quarter. A very big number.
2. An odd Florida deal concocted earlier this year to have an Ocala firm called Taylor, Bean & Whitaker Mortgage Corp. invest $300 million in Colonial is officially dead. The bank and Ocala investor called off the transaction last week. But Colonial needed that deal before it would be eligible to receive $550 million from the Treasury.
The failed deal led Colonial to express "substantial doubt" about its "ability to continue."
3. In June, Colonial faced a "cease and desist" order from Alabama bank regulators and the FDIC, demanding Colonial raise capital and clean up its act. On July 22 came a second "cease and desist" from the Federal Reserve, demanding improvements by the end of September.
Warns Fitch Ratings: "It will be extremely challenging for Colonial to raise the required capital by the Sept. 30 deadline."
4. Colonial last week said its nonperforming assets hit $1.7 billion, or a dangerously high 12.29 percent of net loans, mostly from bad real estate loans in Florida.
In response, Colonial has brought in a new CEO, laid off 136 workers and plans to sell its branches in Nevada.
Way too little. Way too late. It's funny how often banks caught in a downward spiral can't react quickly enough.
Here's more intrigue: Federal agents working with the Treasury's Troubled Asset Relief Program on Monday executed search warrants at a Colonial office in Orlando and the Ocala office of Taylor, Bean, the ex-investor.
So what happens to Colonial? Here's one blunt scenario. Regulators try to shop Colonial, but other banks refuse and wait. Why? If Colonial fails, the feds will take over bad assets and sell the better parts. Then scavenger banks make their move.
It won't be pretty. But it's all part of the cleanup from too many gung-ho banks chewed up by a nasty downturn.
Robert Trigaux can be reached at firstname.lastname@example.org.