By MARCY GORDON,AP Business Writer AP - Saturday, August 15WASHINGTON - Regulators on Friday shut down Colonial BancGroup Inc., a big lender in real estate development that buckled under the collapse of the market. It was the biggest U.S. bank to fail this year, with about $25 billion in assets.
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Alabama banking regulators closed Montgomery, Ala.-based Colonial and appointed the Federal Deposit Insurance Corp. as receiver. The federal agency approved the sale of Colonial's $20 billion in deposits and about $22 billion of its assets to BB&T Corp. The failed bank's 346 branches in Alabama, Florida, Georgia, Nevada and Texas will reopen at the normal times starting on Saturday as offices of BB&T, the FDIC said.
Colonial was a major lender to developers in Florida and Nevada and was hit hard by the collapse of the real estate market in those states. It was the sixth-largest bank to fail in U.S. history.
While losses on home mortgages may be leveling off, delinquencies on commercial real estate loans remain a hot spot of potential trouble, experts say. Many regional banks like Colonial hold large numbers of them.
BB&T, based in Winston-Salem, N.C., operates throughout the Southeast and is considered among the nation's stronger regional banks. BB&T said the deal, the biggest acquisition in its history, creates the nation's eighth-largest financial holding company by deposits.
The move "represents an exciting growth opportunity for BB&T," company CEO Kelly King said in a statement.
In addition, the FDIC and BB&T signed an agreement to share losses on about $15 billion of Colonial's loans and other assets.
Colonial said early this month there was "substantial doubt" it would be able to continue as a going business, following five straight quarterly losses. In addition to its financial woes, the company has been the subject of federal criminal and civil investigations over alleged accounting irregularities and other issues.
Colonial's failure is expected to cost the deposit insurance fund _ which is financed by assessments on U.S. banks _ an estimated $2.8 billion. Colonial was roughly twice the size of BankUnited FSB, a Florida thrift closed in May with $13 billion in assets, though the expected hit to the insurance fund from Colonial is less than that bank's estimated $4.9 billion impact.
The costliest failure was the July 2008 seizure of big California lender IndyMac Bank, from which the insurance fund is estimated to have lost $10.7 billion. The biggest U.S. bank failure ever also came last year, though there was no cost to the insurance fund from the collapse of Seattle-based thrift Washington Mutual Inc. in September _ with $307 billion in assets _ because it was acquired whole by JPMorgan Chase & Co. for $1.9 billion.
Seventy-seven federally insured banks have failed this year amid rising loan defaults spurred by tumbling home prices and rising unemployment. That compares with 25 last year and three in 2007.
The FDIC also announced Friday the closures of Community Bank of Arizona, based in Phoenix; Union Bank, based in Gilbert, Ariz.; Community Bank of Nevada, based in Las Vegas; and Dwelling House Savings and Loan Association, located in Pittsburgh.
"The past 18 months have been a very trying period in the financial services arena, but the FDIC and its staff have performed as Congress envisioned when it created the corporation more than 75 years ago," FDIC Chairman Sheila Bair said in a statement. "Today, after protecting almost $300 billion in deposits since the current financial crisis began, the FDIC's guarantee is as certain as ever. Our industry-funded reserves have covered all losses to date."
Colonial, founded in 1981 by longtime president and CEO Robert E. Lowder, saw its fortunes crumble over the past two years as its stock price plunged from around $25 in 2007 to less than 50 cents this year.
Lowder stepped down in May as new management took control under a plan for a $300 million investment led by Taylor, Bean & Whitaker Mortgage Co. of Ocala, Fla., an investment designed to make Colonial eligible for $550 million in federal bailout funds.
But the deal fell through and federal agents raided the Ocala headquarters of Taylor, Bean & Whitaker.
Colonial has been under criminal investigation by the Justice Department in connection with alleged accounting irregularities at its division in Orlando, Fla., that provides financing for mortgage lenders, and a civil probe by the Securities and Exchange Commission concerning accounting issues and the bid for federal bailout funds.
Late last month, the Alabama regulators ordered the company to submit a plan detailing how it would build up its capital reserves. Also this week, Colonial said in a regulatory filing that it wouldn't be able to file a second-quarter financial report because of the alleged accounting problems. The company said it didn't know at this point how much money it lost in the April-June quarter.
Colonial's troubles mounted on Thursday as a federal court in Miami froze $1 billion of its assets in response to a lawsuit filed by Bank of America Corp. The suit said Colonial appeared on the verge of collapsing and an emergency order freezing assets was needed.
The suit alleges that Colonial refused to return funds it had held for Charlotte, N.C.-based Bank of America when a mortgage and loan transaction was terminated.
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Associated Press writer Kendal Weaver in Montgomery, Ala., and AP Business Writer Ieva Augstums in Charlotte, N.C., contributed to this report.
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Alabama banking regulators closed Montgomery, Ala.-based Colonial and appointed the Federal Deposit Insurance Corp. as receiver. The federal agency approved the sale of Colonial's $20 billion in deposits and about $22 billion of its assets to BB&T Corp. The failed bank's 346 branches in Alabama, Florida, Georgia, Nevada and Texas will reopen at the normal times starting on Saturday as offices of BB&T, the FDIC said.
Colonial was a major lender to developers in Florida and Nevada and was hit hard by the collapse of the real estate market in those states. It was the sixth-largest bank to fail in U.S. history.
While losses on home mortgages may be leveling off, delinquencies on commercial real estate loans remain a hot spot of potential trouble, experts say. Many regional banks like Colonial hold large numbers of them.
BB&T, based in Winston-Salem, N.C., operates throughout the Southeast and is considered among the nation's stronger regional banks. BB&T said the deal, the biggest acquisition in its history, creates the nation's eighth-largest financial holding company by deposits.
The move "represents an exciting growth opportunity for BB&T," company CEO Kelly King said in a statement.
In addition, the FDIC and BB&T signed an agreement to share losses on about $15 billion of Colonial's loans and other assets.
Colonial said early this month there was "substantial doubt" it would be able to continue as a going business, following five straight quarterly losses. In addition to its financial woes, the company has been the subject of federal criminal and civil investigations over alleged accounting irregularities and other issues.
Colonial's failure is expected to cost the deposit insurance fund _ which is financed by assessments on U.S. banks _ an estimated $2.8 billion. Colonial was roughly twice the size of BankUnited FSB, a Florida thrift closed in May with $13 billion in assets, though the expected hit to the insurance fund from Colonial is less than that bank's estimated $4.9 billion impact.
The costliest failure was the July 2008 seizure of big California lender IndyMac Bank, from which the insurance fund is estimated to have lost $10.7 billion. The biggest U.S. bank failure ever also came last year, though there was no cost to the insurance fund from the collapse of Seattle-based thrift Washington Mutual Inc. in September _ with $307 billion in assets _ because it was acquired whole by JPMorgan Chase & Co. for $1.9 billion.
Seventy-seven federally insured banks have failed this year amid rising loan defaults spurred by tumbling home prices and rising unemployment. That compares with 25 last year and three in 2007.
The FDIC also announced Friday the closures of Community Bank of Arizona, based in Phoenix; Union Bank, based in Gilbert, Ariz.; Community Bank of Nevada, based in Las Vegas; and Dwelling House Savings and Loan Association, located in Pittsburgh.
"The past 18 months have been a very trying period in the financial services arena, but the FDIC and its staff have performed as Congress envisioned when it created the corporation more than 75 years ago," FDIC Chairman Sheila Bair said in a statement. "Today, after protecting almost $300 billion in deposits since the current financial crisis began, the FDIC's guarantee is as certain as ever. Our industry-funded reserves have covered all losses to date."
Colonial, founded in 1981 by longtime president and CEO Robert E. Lowder, saw its fortunes crumble over the past two years as its stock price plunged from around $25 in 2007 to less than 50 cents this year.
Lowder stepped down in May as new management took control under a plan for a $300 million investment led by Taylor, Bean & Whitaker Mortgage Co. of Ocala, Fla., an investment designed to make Colonial eligible for $550 million in federal bailout funds.
But the deal fell through and federal agents raided the Ocala headquarters of Taylor, Bean & Whitaker.
Colonial has been under criminal investigation by the Justice Department in connection with alleged accounting irregularities at its division in Orlando, Fla., that provides financing for mortgage lenders, and a civil probe by the Securities and Exchange Commission concerning accounting issues and the bid for federal bailout funds.
Late last month, the Alabama regulators ordered the company to submit a plan detailing how it would build up its capital reserves. Also this week, Colonial said in a regulatory filing that it wouldn't be able to file a second-quarter financial report because of the alleged accounting problems. The company said it didn't know at this point how much money it lost in the April-June quarter.
Colonial's troubles mounted on Thursday as a federal court in Miami froze $1 billion of its assets in response to a lawsuit filed by Bank of America Corp. The suit said Colonial appeared on the verge of collapsing and an emergency order freezing assets was needed.
The suit alleges that Colonial refused to return funds it had held for Charlotte, N.C.-based Bank of America when a mortgage and loan transaction was terminated.
___
Associated Press writer Kendal Weaver in Montgomery, Ala., and AP Business Writer Ieva Augstums in Charlotte, N.C., contributed to this report.
