Colonial BancGroup becomes biggest bank failure of 2009
BB&T takes over after FDIC shuts Alabama lender at cost of $2.8 billion
By Alistair Barr & Ronald D. Orol, MarketWatch
SAN FRANCISCO (MarketWatch) -- Colonial BancGroup Inc. has become the largest bank failure this year as the 2009 toll of financial institutions approaches 80.
The Federal Deposit Insurance Corporation seized the struggling Alabama-based lender Friday and sold it to BB&T Corp.
Late Friday, the FDIC announced four other banks had been closed: Community Bank of Nevada and its Arizona subsidiary, Community Bank of Arizona; Union Bank, Gilbert, Ariz; and Dwelling House Savings and Loan Association, Pittsburgh.
The Colonial BancGroup deal will knock roughly $2.8 billion off a pool of money, known as the Deposit Insurance Fund, which the FDIC maintains to guarantee bank customer deposits.
BB&T agreed to assume all of Colonial's deposits, which totaled about $20 billion at the end of June, the FDIC said. Depositors of Colonial will automatically become depositors of BB&T and customers can continue accessing their money by writing checks or using ATMs and debit cards, the regulator stressed.
Colonial had $25 billion in assets at the end of June. That makes it the largest bank failure this year, exceeding the collapse of Florida's BankUnited Financial, which had less than $13 billion in assets. See full story.
BB&T agreed to buy about $22 billion of Colonial's assets. The FDIC said it will hold on to the rest - about $3 billion worth - and will try to sell them later.
Colonial BancGroup has become the biggest US bank to collapse this year.
Colonial, a property lender based in Montgomery, Alabama, had about $25bn of assets, said the US regulator, the Federal Deposit Insurance Corp (FDIC).
The agency approved the sale of Colonial's $20bn in deposits to BB&T, a North Carolina-based bank. BB&T will also buy $22bn of Colonial's assets.
The collapse is expected to cost the FDIC about $2.8bn. The total number of bank failures is now over 70 in 2009.
The FDIC also entered into a loss-sharing agreement on about $15bn of Colonial's assets with BB&T, the regulator said.