Feds Seize Colonial Bank, 6th-Largest Failure In U.S. History
BB&T buys Colonial deposits, branches; four other banks fail
In the sixth-largest bank failure in history, Colonial Bank of Montgomery, Alabama, was seized by regulators Friday night. Its branches and deposits have been purchased by BB&T. With $25 billion in assets and 346 branches in five states, Colonial was a major lender in Florida and other areas troubled with high foreclosure rates and falling home prices.
Four smaller banks were also seized by regulators Friday. No buyer could be found for the largest, Community Bank of Nevada, and it will be closed after depositors' accounts are transferred to other institutions.
The Colonial failure sent shivers through the financial sector. While large financial institutions have been recovering in recent months, many small- and medium-sized lenders are being pulled down by the tanking housing market, particularly in the South and West.
Colonial Bank's 346 branches in Alabama, Florida, Georgia, Nevada and Texas will reopen under normal business hours Monday and operate as branches of BB&T. Depositors of Colonial Bank will automatically become depositors of BB&T. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage.
Customers should continue to use their existing branches until BB&T can fully integrate the deposit records of Colonial Bank.
Over the weekend, depositors of Colonial Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.
Customers who have questions can call the FDIC toll-free at 1-800-405-8739 or visit the agency's Web site. The FDIC estimates that the cost to the Deposit Insurance Fund will be $2.8 billion. BB&T's acquisition of all the deposits was the "least costly" resolution, the agency said. 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 the state was Birmingham FSB, Birmingham, on August 21, 1992.
"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."
"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," Baird said. She said the Colonial Bank were "lower than had been projected."
More banks fail
Four other banks -- in Arizona, Nevada and Pennsylvania -- were seized Friday. The FDIC said it was unable to find a buyer for the largest, Community Bank of Nevada, based in Las Vegas, and encouraged customers to move their deposits elsewhere.
To protect the depositors, the FDIC created the Deposit Insurance National Bank of Las Vegas (DINB), which will remain open for approximately 30 days to allow depositors access to their insured deposits and time to open accounts at other insured institutions.
At the time of closing, the receiver immediately transferred to the DINB all insured deposits of Community Bank of Nevada, except for brokered deposits, certificates of deposit (CDs) and individual retirement accounts (IRAs). The receiver also transferred to the DINB all secured public unit deposits.
Nevada State Bank will provide operational management of the DINB under a contract with the FDIC. The main office and all branches of Community Bank of Nevada will open on Monday. Banking activities, such as direct deposit and writing checks, ATM and debit cards, can continue normally for former customers of Community Bank of Nevada during the 30-day transition period. It is also important to note that Community Bank of Nevada official checks will continue to clear and will be issued to customers closing accounts.
All insured depositors of Community Bank of Nevada are encouraged to transfer their insured funds to other banks. They may do so by asking their new bank to electronically transfer their deposits from the DINB or by writing checks for the amount in their accounts.
The FDIC will mail checks at the end of the transition period to the address of record for depositors who have not closed or transferred their accounts during the transition period.
Brokered deposits, CDs and IRAs were not transferred to the DINB. The FDIC will mail checks directly to deposit customers with CDs and IRAs. The FDIC will pay the brokered deposits directly to the brokers for the amount of their insured funds. Customers with brokered deposits should contact their brokers directly for information concerning their money.
Source: By Truman Lewis (ConsumerAffairs.Com)
August 15, 09