Colonial BancGroup Is This Year’s Biggest Bank Failure; Number Of Closures Now Up To 77
Despite talks of an economy on the rise again, it’s evident that many banks aren’t quite in the clear just yet. Five more banks went into the receivership of the FDIC last Friday (Aug 14), bringing the total number of bank closures in 2009 to 77.
Included in the five closures is this year’s biggest failure so far, Montgomery, Ala.-based Colonial BancGroup Inc. With about $25 billion in assets, Colonial is also the 6th largest bank to fail in US history.
The FDIC approved the sale of Colonial BancGroup’s $20 billion in deposits and around $22 billion worth of assets to BB&T Corp., which is considered one of the country’s more stable regional banks based in Winston-Salem, N. C.
By acquiring the failed bank’s 346 branches spread out across four states, BB&T will significantly expand its branch base in Alabama where it will add Colonial’s 90 branches to its current 3 branches, and in Florida, where Colonial’s 204 branches will beef up its present 107 branches.
Meanwhile, it’s business as usual for the former customers of Colonial BancGroup Inc. as they are now automatically BB&T depositors and can continue to access their accounts using checks, ATMs, or debit cards.
The country’s largest closure this year however, signifies not only a simple change in management for the failed bank’s clients. It could also mean that mortgages may be even harder to come by.
Colonial BancGroup Inc. was one of the largest remaining players in the warehouse lending industry, controlling 25% of the $25 billion worth of funds available in the market. Warehouse lending is a crucial link in getting funds to independent mortgage bankers and consequently, home loans to consumers.
Colonial’s closure is reportedly going to cost the FDIC some $2.8 billion. While this will certainly be another dent on the FDIC’s dwindling coffers, funded largely by bank assessments, the amount is still a far cry from the $10.7 billion spent on the failure of IndyMac Bank in July 2008.
The four other banks that were shut down by regulators last Friday are Las Vegas-based Community Bank of Nevada and its subsidiary Community Bank of Arizona, based in Phoenix, Union Bank located in Gilbert, Arizona, and Dwelling House Savings and Loan Association of Pittsburgh.
