Colonial BancGroup shut by regulators | Shanghai Daily

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Colonial BancGroup shut by regulators

REGULATORS yesterday shut down Colonial BancGroup Inc., a big lender in real estate development that buckled under the collapse of the market. It was the biggest US bank to fail this year, with about US$25 billion in assets.

The Federal Deposit Insurance Corp. was appointed receiver of Montgomery, Alabama-based Colonial. The agency approved the sale of Colonial's US$20 billion in deposits and about US$22 billion of its assets to BB&T Corp. The failed bank's 346 branches in Alabama, Florida, Georgia, Nevada and Texas will reopen at the normal times starting today as offices of BB&T, the FDIC said.

BB&T, based in Winston-Salem, North Carolina, operates throughout the Southeast and is considered among the nation's stronger regional banks.

The failure of Colonial is expected to cost the deposit insurance fund an estimated US$2.8 billion.

The bank was a major lender to developers in Florida and Nevada and was hit hard by the collapse of the real estate market in those states.

Colonial, founded in 1981 by longtime president and CEO Robert E. Lowder, saw its fortunes crumble over the past two years as its stock price plunged from around US$25 in 2007 to less than 50 cents this year.

Lowder stepped down in May as new management took control under a plan for a US$300 million investment led by Taylor, Bean & Whitaker Mortgage Co. of Ocala, Florida, an investment designed to make Colonial eligible for US$550 million in federal bailout funds.

But the deal fell through and federal agents raided the Ocala headquarters of Taylor, Bean & Whitaker.

Colonial has been under a criminal investigation by the Justice Department in connection with alleged accounting irregularities at its division in Orlando, Florida, that provides financing for mortgage lenders, and a civil probe by the Securities and Exchange Commission concerning accounting issues and the bid for federal bailout funds.



 

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