FDIC Seizes Colonial Bank, Four Others

The Federal Deposit Insurance Corporation announced Friday that it was appointed receiver of five more banks that were shutdown by State Commissions this week.  The biggest name of which is Colonial Bank, which has been in the news the past few weeks. 

Speculation started to surround Colonial when the U.S. Department of Justice opened up an investigation in order to probe the accounting practices of the banks mortgage unit.

The investigation led Colonial to postpone its second quarter financial report indefinitely.  At that point rumors began to swirl if the bank would even remain solvent.  Adding to the challenges the bank faced, Bank of America then filed suit against the bank for $100 million over proceeds and loans that Colonial was formerly the custodian of, but failed to return when that capacity ceased.

The FDIC was able to quickly turnaround the failed bank as BB&T Bank, based in Winston-Salem, NC has agreed to purchase all of Colonial’s branches, $22 billion of its $25 billion in assets and assume its $20 billion in deposits. 

The Colonial Bank failure is by far and away the largest failure in 2009 and ranks sixth in U.S. history.  Colonial had a total of 345 branches throughout Alabama, Georgia, Nevada, Texas and Florida.

The four other banks that saw their assets seized by the FDIC were: Community Bank of Nevada located in Las Vegas, NV; Community Bank of Arizona, Phoenix, AZ; Union Bank, National Association in Gilbert Arizona, and Dwelling House Savings and Loan, Pittsburgh, PA.

The FDIC has found buyers for three of the four banks.  The exception is the Community Bank of Nevada, which the FDIC created the Deposit Insurance National Bank of Las Vegas (DINB) for in order to protect depositors.  The DINB will remain open for 30 days to allow customers access to their deposits and time to open accounts at other banking institutions.

MidFirst Bank of Oklahoma City, OK has agreed to purchase all of the assets and assume the deposits of both Community Bank of Arizona and Union Bank, National Association.

Lastly, Dwelling House Savings and Loan will be taken over by PNC Bank, based in Pittsburgh PA.  The sole Dwelling House branch will be reopened as a PNC branch on Monday and customer accounts will automatically be converted to PNC accounts.

Friday’s five announced bank failures bring the 2009 total up to 77 financial institutions.