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August 17, 2009

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Regulators shut down Colonial

REAL estate lender Colonial BancGroup Inc has been shut down by federal officials in the biggest United States bank failure this year.

The Federal Deposit Insurance Corp, which was appointed receiver of the Montgomery, Alabama-based Colonial and its about US$25 billion in assets, said the failed bank's 346 branches in Alabama, Florida, Georgia, Nevada and Texas will reopen at the normal times on Saturday as offices of Winston-Salem, North Carolina-based BB&T.

The FDIC has approved the sale of Colonial's US$20 billion in deposits and about US$22 billion of its assets to BB&T Corp.

Regulators also closed four other banks - Community Bank of Arizona, based in Phoenix; Union Bank, based in Gilbert, Arizona; Community Bank of Nevada, based in Las Vegas; and Dwelling House Savings and Loan Association, located in Pittsburgh.

The closures boosted to 77 the number of federally insured banks that have failed this year. That compares with 25 bank failures last year and three in 2007.

As the economy has soured - with unemployment rising, home prices tumbling and loan defaults soaring - bank failures have cascaded and sapped billions out of the deposit insurance fund. It now stands at its lowest level since 1993 at US$13 billion by the first quarter.

The FDIC established a temporary government bank for Community Bank of Nevada to give depositors about 30 days to open accounts at other financial institutions. The failed bank had assets of US$1.52 billion and deposits of US$1.38 billion as of June 30.

Community Bank of Arizona had assets of US$158.5 million and deposits of US$143.8 million as of June 30, while Union Bank had assets of US$124 million and deposits of US$112 million as of June 12. The FDIC said that MidFirst Bank, based in Oklahoma City, has agreed to assume all the deposits and US$125.5 million of the assets of Community Bank of Arizona, as well as about US$24 million of the deposits and US$11 million of the assets of Union Bank. The FDIC will retain the rest for eventual sale.

Dwelling House had US$13.4 million in assets and US$13.8 million in deposits as of March 31. PNC Bank, part of Pittsburgh-based PNC Financial Services Group Inc, has agreed to assume all of Dwelling House's deposits and about US$3 million of its assets; the FDIC will retain the rest for eventual sale.


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