DOW JONES NEWSWIRES 
 

Colonial BancGroup Inc. (CNB) said Tuesday its Colonial Bank unit agreed to oversight by the Federal Deposit Insurance Corp. and Alabama Banking Department and other steps to fix problems with its financial condition and performance.

Shares sank 55% to 55 cents in after-hours trading as the bank also said it would increase its capital levels, reduce its level of criticized assets and concentrations of credit, and improve its earnings.

Chief Executive Lewis Beville said the agreement doesn't affect customer deposit accounts or loans.

Late last month, Robert Lowder, Colonial's combative chief executive, said he intends to step down from the Southeastern regional bank he founded in 1981.

That announcement came as the company awaits federal approval of a $300 million capital infusion from an investor group led by Ocala, Fla.-based mortgage lender Taylor, Bean & Whitaker. The bank has been operating under strict guidance from regulators and was promised aid from the Treasury Department if it could raise $300 million privately.

Lowder built Colonial into a $26 billion institution via a string of aggressive community bank acquisitions throughout the Southeast. But during the recent financial crisis he has been the target of analysts and shareholders angry about the company's plummeting share price and performance. The bank lost$88.5 million in 2008, hurt by its exposure to Florida's real-estate collapse and the bank's focus on construction lending.

-By Kathy Shwiff, Dow Jones Newswires; 201-938-5975; Kathy.Shwiff@dowjones.com