Colonial BancGroup Fails, 305 Bank On Watch

Have not seen this posted in the forum yet, Colonial BankGroup has officially failed, BB&T, another Regional Banking power has purchased Colonial for $22billion, with an unknown amount sibsidized by the FDIC. The FDIC it's self is expected to take a $2.8 billion dollar hit directly, from insuring accounts of $250k or less.

This $2.8 expense comes from the FDIC's remaining $13.5 billion left in the FDIC Trust. There is an additional $25 billion remaining that was set aside back in 2008.. questions regarding the FDIC's solvency should be answered by the fact that there is remaining funds in the Trust as well as a separate Trust. Not to mention even if the FDIC were to go bankrupt, the fund went bankrupt in 1992, and would simply be replenished to cover losses...... however...

It is now a rare Friday night that the agency does not seize the assets of a newly failed bank. And the number of banks judged as troubled has soared to 305 as of March 31, up from only 90 a year earlier. Those 305 problem banks on the FDIC's confidential list have combined assets of $220 billion.

From 90 to 305 .. simply amazing. These are anything from small town banks, to regional banks to possibly one of the major banking institutions... Colonial it's self was the 6th largest bank failure in American history... just to show the significance of the situation..

Four other banks fail: Late Friday, the FDIC also said that four other banks had failed. Outside of Colonial, the largest collapse of the day was Community Bank of Nevada in Las Vegas, which went under with assets of $1.52 billion and total deposits of about $1.38 billion. Its failure will cost the FDIC's Deposit Insurance Fund an estimated $781.5 million

Dwelling House Savings and Loan Association in Pittsburgh closed its door for the last time Friday. The FDIC said PNC Bank will assume control of its assets. It was the first Pennsylvania bank to fail this year. As of March 31, Dwelling House held assets worth $13.4 million and total deposits of $13.8 million. The FDIC estimates that this closure will cost the its insurance fund $6.8 million.

MidFirst Bank of Oklahoma City assumed all deposits of two failed Arizona banks, Union Bank in Gilbert and Community Bank of Arizona in Phoenix. Community Bank of Arizona had assets of $158.5 million and total deposits of approximately $143.8 million. Union Bank had assets of $124 million and total deposits of approximately $112 million.

Last two cost the FDIC $84 million.

77 bank failures so far in 2009 has more than tripled last year's total of 25.

money.cnn.com...

Another interesting bit about Colonial... Colonial was a major Mortgage Warehouse distributor.. basically meaning they provided financing for mortgage brokers and non-banking lenders.. the failure of a major Mortgage Warehouse provider will lead to a rise in mortgage rates, which it seems have been in a steady climb even with the Fed rate at 0. Last I checked the average 30yr fixed was at 5.5-5.75 before Colonial went bust.

reply to post by Rockpuck


Nothing to see here...move along! Green shoots man, green shoots!



On a more realistic look, another bad FDIC Friday....

Trust fund hit: The failure of Colonial is another blow to the FDIC trust fund, which has had to cover 77 bank failures so far in 2009 -- including four more late Friday (see below).

The fund took a $35.1 billion hit in 2008, and an additional $4.3 billion decline in the first quarter of this year, leaving it with assets of only $13 billion as of March 31. But most of last year's decline was due to $25 billion the agency set aside to cover future losses.

money.cnn.com...

As you point out, Colonial was a mortage warehouse...the dominos continue to fall!

www.abovetopsecret.com...

This is one of my posts from early on in this mess.
None of us should be surprised by this one bit.

reply to post by projectvxn


From your own thread:

At the current rate, nearly 100 institutions-- with a combined $50 billion in assets -- will collapse by year's end.

With 77 so far and another 4 1/2 months to go.. it looks like 100 will easily be broken. Several times this year we have broken the "single day record" for bank failures. Though I believe 1992 is still the year of "most failures" .. though size wise, 2008 and 9 only have one competitor: Savings and Loan crisis.

Burntheships:

As you point out, Colonial was a mortage warehouse...the dominos continue to fall!

As far as I know they are the first Mortgage Warehouse to fail during the crisis.. I don't know how "far reaching" the effects will be, but will surely be felt to some degree. The higher the interest rate climbs, the less loan modification that takes place = the less mortgage activity to claim "green shoots" for..

An update:

money.cnn.com...

Colonial BancGroup controls 25% of all warehouse-lending funds. If that money disappears, mortgage loans will be even harder to get.

Today, the warehouse lending market is decimated. In 2007 it was worth an estimated $200 billion; now there is just $25 billion available -- 25% of which belongs to Colonial. With Colonial's failure, those funds could become even more scarce.

"It's like if they shut down half the concession stands at the baseball game," said Scott Stern, CEO of the Lenders One mortgage bankers group in St. Louis. "It means the guy who's last in line is going to have to wait a lot longer to get a hot dog, and in this market who knows what the price is going to be when he gets there?"

Colonials impact on the markets will be larger than expected... this is major economic news, not being discussed much..

Well, just sent a text to a friend who works(ed) for Colonial. She verified it and said that the fact that they are BB&T now is a good thing. *shrug*, I dunno. I have some knowledge of BBT, their name means Banker's Bank and Trust. That is what they mostly do. They provide non Fed based banking for banks. Seems awfully risky, IMHO.