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On August 14, 2009, Alabama-based Colonial Bank was shut down by the Alabama Banking Department, making it the 74th FDIC-insured institution to fail this year. The bank was closed without any advance notice to the public, which is a standard practice in bank closings. The Federal Deposit Insurance Company (FDIC) was named Receiver, and all deposit and loan accounts were transferred to Branch Banking and Trust Company (BB&T) of Winston-Salem, North Carolina under a purchase and assumption agreement. Funds transferred to BB&T will be available immediately.
Headquartered in Montgomery, Alabama, Colonial Bank operated 346 branches in Alabama, Florida, Georgia, Nevada, and Texas. All of the branches will reopen during normal business hours and operate as branches of BB&T. Customers of Colonial Bank are advised to keep using their current bank branch office until BB&T can integrate the deposit records of Colonial Bank. Checks drawn on Colonial Bank accounts will continue to be processed, and Colonial ATM and debit cards will continue to provide access to funds. Loan customers should also continue to make their payments in the same manner as before until they receive notice otherwise.
"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," said FDIC Chairman Sheila C. Bair. "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. In fact, losses from today's failures are lower than had been projected. I commend our staff for their excellent work in assuring once again a smooth transition for bank customers with these resolutions. The FDIC continues to stand by the nation's insured deposits with the full faith and credit of the U.S. government. No depositor has ever lost a penny of their insured deposits."
Earlier this month, Colonial Bank was raided by federal agents in Florida. The search warrants were issued by Neil Barofsky, the special inspector general for the Troubled Asset Relief Program (TARP). Last week it was revealed that the Department of Justice was conducting a criminal investigation of Colonial's mortgage warehouse lending division and accounting irregularities. This week, U.S. District Judge Adalberto Jordan issued a temporary restraining order preventing Colonial Bank from liquidating or transferring assets worth $1 billion. The order came in response to a lawsuit filed by Bank of America (BAC), who is owed more than $1 billion in assets that Colonial failed to pay.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $2.8 billion. BB&T's acquisition of Colonial's deposits was the "least costly" resolution for the FDIC's DIF when compared to alternatives. Colonial Bank is the 74th FDIC-insured institution to fail in the nation this year, and the first in Alabama. The last FDIC-insured institution to be closed in Alabama was Birmingham FSB, Birmingham, on August 21, 1992.
http://www.fdic.gov/bank/individual/failed/colonial-al.html
http://money.cnn.com/2009/08/14/news/companies/colonial/index.htm?source=zacks
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