Regulators close down Colonial BancGroup

The Montgomery, Ala.-based company will be open for business today under the auspices of BB&T, which has purchased the failed bank.

The Alabama State Banking Department closed Colonial, which has close ties to Ocala-based Taylor Bean & Whitaker Mortgage Corp., at 5 p.m. Central time Friday and appointed the Federal Deposit Insurance Corp., known as FDIC, as receiver effective immediately. The FDIC struck an agreement with the BB&T Corp., headquartered in Winston-Salem, N.C., to buy Colonial.

Colonial operated two branches in the Ocala area, one in Spruce Creek off U.S. 441 and another in Lady Lake. They will now operate under the new ownership. BB&T also operates three of its own branches in Marion County.

Colonial customers should continue using their existing branches until BB&T can fully integrate Colonial's records. The transition is expected to be seamless to customers.

All Colonial's deposit accounts have been transferred to BB&T and are available immediately. Customers can continue to use automatic teller machines, write checks and use debit cards. Friday's acquisition makes BB&T the No. 5 bank in Florida market share.

Colonial's deposits are insured by the FDIC up to $250,000. Trust accounts, joint accounts and non-interest bearing transaction accounts may have additional insurance coverage.

The company's failure is expected to cost the FDIC nearly $3 billion.

Depositors, creditors and other interested parties may obtain more information at the FDIC's Web site, www.fdic.gov, or by calling the FDIC's toll free number, 1-800-405-8739. The phone number is operating today from 10 a.m. to 7 p.m. and on Sunday from 1 to 7 p.m. After that, call between 9 a.m. and 9 p.m.

"The [Colonial] employees will still have their jobs for right now," FDIC spokesperson Samantha Johnson said Friday.

Colonial has 355 branches in Florida, Alabama, Georgia, Nevada and Texas. About 196 of those branches are in Florida.

In a news release issued Friday evening, BB&T reported it has acquired $22 billion in Colonial assets and assumed $20 billion in deposits under its agreement with FDIC. Both entities will share losses that cover nearly all acquired loans and securities.

BB&T will not acquire any assets or assume any obligations relating to Taylor, Bean & Whitaker.

Also excluded from the sale are assets and liabilities the FDIC determines are related to fraudulent or criminal activities.

Hit hard by the collapse of the Florida real estate market, Colonial has been beset by financial and legal troubles of late.

At the request of Bank of America, a federal judge on Thursday froze $1 billion of Colonial's assets -- money and loans that Bank of America in its motion claims the company failed to remit.

In addition, Colonial BancGroup is the subject of a U.S. Department of Justice criminal investigation into its mortgage warehouse lending division as well as alleged related accounting irregularities. The irregularities concern more than a year's audited financial statements and regulatory financial reporting.

As a result of the investigations, Colonial was unable to report its second quarter activity on time.

The now-defunct Colonial Bank has had a long lending history with Taylor Bean.

Ocala-based TBW, one of the nation's largest wholesale mortgage lenders, had been doing business with Colonial for 11 years. Colonial was TBW's primary funding bank.

In April, TBW had an agreement with Colonial to put up half of a $300 million equity investment to help ailing Colonial meet its regulatory deadlines for raising private capital in order to qualify for bailout funds under the U.S. Treasury's Troubled Asset Relief Program.

That deal ended unsuccessfully on July 31.

The Special Inspector General for the Troubled Asset Relief Program, known as SIGTARP, and the FBI raided TBW's Northeast 14th Street headquarters in Ocala on Aug. 3 and served a search warrant for company documents.

Colonial Bank's Pine Street Branch in Orlando also was served a warrant from SIGTARP that day.

The next day, the FHA told Taylor Bean it would no longer allow the company to underwrite its government-insured loans.

At the same time, Ginnie Mae also barred TBW from selling its government-backed securities.

On Aug. 5, Taylor, Bean & Whitaker closed its doors in Ocala, laying off nearly 1,000 employees.

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