Commercial Real Estate Foreclosures Down Colonial BancGroup
August 18th, 2009 by 
Joseph Smith
The deal for North Carolina-based BB&T Corp. to acquire the branches and deposits of struggling Alabama-based bank Colonial BancGroup has been approved by the Federal Deposit Insurance Corp., which has been appointed as receiver of Colonial.
After news of the planned acquisition spread, stocks of BB&T Corp. rallied on Wall Street as investors expected BB&T to acquire Colonial’s deposits at a discounted price.
Colonial BancGroup runs 355 branches in Nevada, Florida, Alabama, Georgia and Texas and holds over $25 billion in total assets. It has been the largest U.S. bank to fail so far this year. It was founded in 1981 by its CEO and president Robert Lowder.
BB&T runs 1,505 branches in 11 states and in Washington, D.C. and holds $152.4 billion in total assets. It is considered among the country’s stronger regional banking firms. It was one of the 19 banks that underwent the Federal Reserve stress test and it was one of the few which were not required to increase their equity capital.
BB&T received a total of $3.1 billion from the federal Troubled Asset Relief Program, but it was able to pay back the full amount in June.
According to bank officials, Colonial has been battered by the foreclosure crisis, with soaring foreclosures on commercial mortgage loans it provided in Florida and in Nevada.
Last week, Colonial officials said the bank is being investigated by the Department of Justice for the alleged accounting violations of its mortgage warehouse lending operation in Orlando, Florida. Other news items also reported that Colonial was being investigated by the Securities and Exchange Commission for its loan loss reserve accounting practices and its effort to ask for federal bailout money.
Colonial also announced that it has informed the SEC it will not be able to submit its financial report for the second quarter because of ongoing investigations on its accounting practices.
Meanwhile, the Alabama Banking Department has confirmed it has held a meeting with top Colonial officers. Last month, the department ordered Colonial to submit a detailed plan on how it is going to build up its deficient capital reserves.
In addition, Colonial’s troubles increased when a Miami federal court moved to freeze $1 billion worth of Colonial BancGroup’s assets to respond to a lawsuit filed by Bank of America to protect its loan funds held by Colonial. BofA alleged that Colonial refused to return the loan money it held for BofA after a mortgage loan transaction was canceled.
