BB&T takes over Colonial bank

US sees biggest bank failure since Washington Mutual’s collapse last year.

Colonial BancGroup Inc, the Alabama lender facing a criminal probe, had its banking operations closed by regulators and taken over by BB&T Corp in the biggest failure since Washington Mutual Inc collapsed last year.

Regulators also shut two companies in Arizona, one in Las Vegas and one in Pittsburgh, pushing the tally of failed banks this year to 77.

Branches and deposits of Colonial Bank, ranked second in its home state, were turned over to BB&T in a deal brokered by the Federal Deposit Insurance Corp, the regulator said in a statement. The failure of Montgomery-based Colonial followed a Florida expansion that left the company with more than $1.7 billion in soured real-estate loans.

 

“We’re gaining solid market shares in great markets in Alabama, Florida and Georgia,” Kelly King, chief executive officer of Winston-Salem, North Carolina-based BB&T, said in a statement. “It comes with minimal asset risk to BB&T because of our loss-sharing agreement with the FDIC.”

Regulators are closing banks at the fastest pace in 17 years. The September 25 seizure of Seattle-based Washington Mutual was the biggest bank failure in US history; its branches and assets were sold to JPMorgan Chase & Co Colonial is the sixth-biggest, FDIC spokesman David Barr said.

Colonial had assets of $25 billion and deposits of about $20 billion, the FDIC said. BB&T will buy about $22 billion of the assets and the FDIC will dispose of the rest later. The FDIC and BB&T signed a loss-sharing agreement on about $15 billion of assets, the regulator said. The failure will deplete the FDIC’s deposit insurance fund by $2.8 billion, the agency said.

BB&T won’t assume any assets or liabilities “related to fraudulent, criminal or inappropriate activities of Colonial,” the North Carolina bank said. BB&T also won’t take assets or liabilities related to Taylor Bean and Whitaker Mortgage Corp, the Florida-based lender that stopped making loans this month after being suspended by US agencies and Freddie Mac. Colonial provided financing for dozens of smaller mortgage firms.