BB&T takes over Colonial Bank

Aug 15, 2009 (Sun Sentinel - McClatchy-Tribune Information Services via COMTEX) -- CNB | Quote | Chart | News | PowerRating -- Colonial BancGroup Inc. was taken over late Friday by BB&T Corp. of Winston-Salem, N.C., becoming the largest bank to fail this year.

Alabama's second-biggest bank collapsed after it expanded into Florida, saddling Colonial with more than $1.7 billion in bad real estate loans.

It was the 74th bank to fail in 2009, the sixth based in Florida. Industry analysts expect the onslaught of closings to continue amid the worst economic downturn since the Great Depression.

"I think we're in the eye of the hurricane," said Lew Freeman, a banking consultant in Fort Lauderdale and Miami. "We're not anywhere near the end of the storm."

Colonial had about $25 billion in assets, $20 billion in deposits and 346 offices in five states. It had 36 offices in Palm Beach and Broward counties.

Branches will open for normal business hours Saturday, according to the Federal Deposit Insurance Corp., which brokered the takeover.

Accounts are insured up to $250,000 per person. Customers can continue to use Colonial's ATMs, checks and debit cards.

"Nothing's really going to change for customers at all -- except the services they get will now be backed by a much stronger institution," said Ken Thomas, a Miami-based bank analyst.

BB&T dates to 1872 and becomes the ninth-biggest U.S. bank by assets. It will buy about $22 billion in assets of Colonial, with the FDIC holding the remaining amount for later disposition. The failure of Colonial is expected to cost the agency's deposit insurance fund an estimated $2.8 billion.

"The FDIC continues to stand by the nation's insured deposits with the full faith and credit of the U.S. government," Chairwoman Sheila Bair said in a statement. "No depositor has ever lost a penny of their insured deposits."

Colonial grew quickly, buying roughly 20 Florida banking companies beginning in 1996, including Palm Beach National Bank, Union Bank of Florida, which was based in Sunrise, and some branches of Union Planters bank.

Colonial had a $606 million loss in the second quarter, its fifth consecutive deficit. Many of its loans to developers and home builders in Florida turned sour.

Ocala-based Taylor, Bean & Whitaker Mortgage Corp. had planned a $300 million infusion into Colonial, but the deal fell through last month.

Colonial had confirmed it's the target of a criminal inquiry by federal investigators related to alleged suspect accounting practices in its mortgage finance unit. Meanwhile, the Department of Housing and Urban Development is investigating mortgage fraud allegations against Taylor, Bean & Whitaker.

For more information on the takeover of Colonial Bank, visit the FDIC website at www.fdic.gov or call 800-405-8739.

The Associated Press and Tribune wire services contributed to this report.

Paul Owers can be reached at Powers@Sunsentinel.com or 561-243-6529.

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