FDIC Takes a $2.8 billion Hit On Colonial Bank

Here is the estimate of FDIC losses on Colonial Bank. $2.8 billion is should deplete most of the FDIC insurance fund. There are many more big banks in trouble. The FDIC releases a report later this month on the health of banks, it will not be pretty.-Lou

State Seizes Colnial Bank: FDIC Receiver

Colonial Bank, Montgomery, Alabama, was closed today by the Alabama State Banking Department, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Branch Banking and Trust (BB&T), Winston-Salem, North Carolina, to assume all of the deposits of Colonial Bank...........


...........“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. Our industry funded reserves have covered all losses to date. In fact, losses from today’s failures are lower than had been projected. I commend our staff for their excellent work in assuring once again a smooth transition for bank customers with these resolutions. 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.”

............The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $2.8 billion. BB&T’s acquisition of all the deposits was the “least costly” resolution for the FDIC’s DIF compared to alternatives. 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

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