BB&T Buys Failing Colonial Bank
Colonial BancGroup failed Friday and the FDIC sold most of the remains of the bank to North Carolina-based BB&T.
BB&T assumed all $20 billion of deposits at the bank, according to the FDIC.
Colonial's failure was the first in Alabama since Aug. 21, 1992, when Birmingham Federal Savings Bank failed. It also is the largest of the 74 U.S. banks to fail this year.
In all BB&T purchased $22 billion of Colonial assets, mostly the deposits and 346 branches in Alabama, Florida, Georgia, Nevada and Texas. According to information from Colonial, about 190 of those branches are owned by the bank and the remainder are in leased spaces.
The FDIC agreed to loss-share with BB&T on about $15 billion worth of loans held by Colonial. That means the FDIC, which expects to spend $2.8 billion on the transfer, will share the loan losses with BB&T.
Colonial customers still have access to all their money on deposit, both the FDIC and Alabama Banking Department said. All offices will open either Saturday or Monday during normal business hours. Checks and debit cards remain good, and the bank will honor any checks written on a Colonial account that has sufficient funds.
Robert Brooks, a professor of finance at the University of Alabama, said customers will find the transition easy to navigate.
"Most of the retail customers, if they didn't read the paper, wouldn't know any difference next week when they pull up to the drive-through," he said.
The future for Colonial employees is murkier. Neither bank commented on the seizure and transfer Friday, but often employees at branches can keep their job after a similar transfer, according to the FDIC.
Brooks said the former Colonial employees in Montgomery have a good chance of keeping their jobs.
"Colonial had some talented folks," he said. "I am sure BB&T will retain those that they want."
Even though some, perhaps most, Colonial employees will keep their jobs, not all of the 975 workers in the market will still be employed, he said.
"I am sure there will be layoffs," he said. "There is some redundancy."
Alabama Gov. Bob Riley said during the day Friday that he hoped Colonial's jobs could be protected.
"Colonial has been a mainstay for Montgomery," he said. "We have a lot of people who depend on it."
Events in the last two weeks foreshadowed Friday's seizure. Colonial cast doubt on its ability to continue as an ongoing concern in a July 31 announcement, but the bank's demise may have been hurried by a federal criminal investigation that unfolded this month.
Officials at the Alabama Banking Department did not return calls seeking comment on the action.
Brooks said the investigations probably led to a quicker demise for Colonial because the bank lost the trust of its peers.
"Once the FBI shows up at one of your branches, that stunts the trust for your customer base," he said.