Colonial BancGroup Red Flags

Less cushion against potential loss Its set aside $450 mil by the end of second quarter while its nonperforming asset was 1058 mill. The average ratio for safe banks is at least 100%. Furthermore, its total shareholder equity book value is 1.6 bill. Large exposure to risky asset Among its $26 bil assets, $14 bil goes to loan portfolio. Where CRE and constuction loans accounted for $10 bil. Its nonperforming asset ratio as a percentage of loan portfolio is 7.58% while the average ratio is around 3%. It reflects the fact that has relative high exposure to risky assets. Dilemma in Deposits $20 bill out of its $24 bil liability are deposits. It is like a double edge sword. On the one hand, it benefits from relatively low interest rates, paring the cost through private market funding. But unlike other long term debt, it is expected to pay back deposits in whole in extreme worst conditions. And it even take the risk of bank run if the bank's condition further slip.