Largest Bank Failure This Year

Bank closure Friday started early this week and it's a big one. I warned you a few weeks ago that there was a rumor that at least two large banks were at the verge of failure. Colonial Bank's failure is the sixth largest in U.S. history. There is no details on how much the failure of Colonial Bank will cost the FDIC insurance fund but it's going to be huge, it may even drain the remainder of the FDIC insurance fund. Bailout time for the FDIC-Lou

BB&T to buy Colonial bank

NEW YORK (CNNMoney.com) -- Troubled Colonial BancGroup appeared to be on the verge of failure Friday as a federal judge ordered a freeze of its assets and a wire service reported that its deposits and branches were to be purchased by rival BB&T.

The Montgomery, Ala., bank, which has 355 branches spread across Florida, Alabama, Georgia, Nevada, and Texas, would be the sixth largest bank failure in U.S. history and by far the largest failure of 2009. With about $25 billion in assets, Colonial is 100 times larger than the typical bank to have failed this year.

Financial wire service Dow Jones reports that BB&T will buy Colonial's deposits and branches, but not the loans and other financial assets it holds. Terms were not known.

Colonial spokeswoman Mary Tolbert had no comment on the report, nor did FDIC spokesman David Barr. BB&T spokeswoman A.C. McGraw was not immediately available for comment.
BB&T, based in Winston-Salem, N.C., is also a regional banking power, with 1,500 branches across the Southeast. It is also a major mortgage lender.

Most customers of Colonial should not be affected by the closing. The Federal Deposit Insurance Corp., the federal agency that has protected bank deposits since the Great Depression, will guarantee account balances up to $250,000.

Still, the failure of Colonial will be another blow to the FDIC trust fund, which has had to cover 72 bank failures so far in 2009, including IndyMac's collapse in July 2008, which was the most expensive bank failure in history.

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