Colonial Bank

Colonial Bank was the principal banking subsidiary of The Colonial BancGroup, a regional financial-services holding company based in Montgomery, Alabama. The bank grew from an Alabama-centered institution into a sizable Southeastern commercial bank through a long series of acquisitions, eventually operating hundreds of branches across Alabama, Florida, Georgia, Nevada, and Texas. Its activities included consumer and commercial banking, mortgage warehouse lending, mortgage servicing and origination, wealth-management and brokerage services, and related financial products. The bank's immediate corporate predecessor was formed in 1974 as Southland Bancorporation. The holding company adopted the Colonial BancGroup name in 1981, the same year Colonial Bank was established in Montgomery through the reorganization of Exchange National Bank of Montgomery. Under the leadership of Bobby Lowder and other managers, the group pursued an acquisition-led expansion strategy. Purchases of Alabama banks broadened its statewide presence during the 1980s, while later transactions extended its network into Tennessee, Georgia, Florida, Nevada, and Texas. By the mid-1990s, Colonial had consolidated several separately operated banks into a single Alabama-chartered institution. Expansion accelerated during the 1990s and early 2000s. Colonial entered Florida and Georgia in 1996, acquired a series of Florida institutions, and added banks in Las Vegas and Dallas in 1998. Its mortgage operation served customers in many states, giving the group a business footprint beyond its branch network. By 2002, the bank operated 263 branches; before its failure, Colonial Bank had 346 branches and was among the larger commercial banks in the United States. The group reported assets of approximately $26 billion after growing from $166 million in 1981. The bank's growth also increased its exposure to real-estate and mortgage-market risks. During the late 2000s, Colonial's financial condition deteriorated amid the United States housing and credit crisis. Its Texas ratio, a measure of problem assets relative to tangible capital and loan-loss reserves, rose substantially during 2008. The institution was also affected by a mortgage-warehouse fraud involving Taylor, Bean & Whitaker Mortgage Corporation. Fraudulent or improperly supported mortgage transactions were used to conceal overdrafts and make Colonial's records appear to contain valuable mortgage assets. Catherine Kissick, a former senior vice president who led Colonial's Mortgage Warehouse Lending Division, later admitted involvement in the scheme with Taylor, Bean & Whitaker executives and other participants. Colonial disclosed a federal search of its mortgage operations and regulatory concerns in August 2009. On August 14, 2009, regulators closed Colonial Bank and seized its branches. The Federal Deposit Insurance Corporation arranged the sale of the bank's deposits and banking assets to BB&T. The closure was the largest United States bank failure of 2009 and one of the largest in the country's history, while the FDIC estimated the cost to its Deposit Insurance Fund at approximately $2.8 billion. The holding company filed for Chapter 11 bankruptcy on August 25, 2009. Colonial Bank no longer operates as an independent institution; its former branch and deposit franchise became part of BB&T, which later became part of Truist through the BB&T–SunTrust merger.

Colonial Bank's history is closely connected to that of The Colonial BancGroup. The holding company began in 1974 as Southland Bancorporation in Montgomery, Alabama. In 1981 it adopted the Colonial BancGroup name, and Colonial Bank was established as the group's principal banking institution through the formation of a Montgomery bank from Exchange National Bank of Montgomery. The group was associated with Bobby Lowder, who led its expansion and served as its chief executive. During the 1980s, Colonial followed an aggressive acquisition strategy in Alabama. Its 1985 merger with Bank of Oxford gave the organization a presence in the state's major metropolitan areas and brought reported assets to approximately $750 million. Colonial also developed a new Montgomery financial center for the bank, holding company, and affiliated broadcasting operations. An attempted 1987 purchase of Liberty Bank of Pensacola did not proceed, but the company continued to expand through other transactions. Colonial entered Tennessee through the 1993 acquisition of First AmFed of Huntsville and also acquired United Savings Bank of Anniston. By the end of that year, the organization reported 96 branches across Alabama and Tennessee. In 1996, Colonial entered Georgia and Florida through acquisitions including Southern Bank of Orlando, Commercial Bank of Georgia, and Dothan Federal Savings Bank. A subsequent series of Florida acquisitions was consolidated into one Alabama-chartered bank, producing a network of 181 branches and approximately $6 billion in assets by 1997. The company added operations outside its Southeastern core in 1998 through the purchase of Commercial Bank in Las Vegas and FirstBank of Dallas. It also developed a mortgage operation that serviced customers across a much broader geographic area. Expansion increased branch count to 263 by 2002, and the group later reached 346 branches in Alabama, Florida, Georgia, Nevada, and Texas. In parallel with branch banking, Colonial BancGroup operated or held interests in brokerage, wealth management, mortgage banking, insurance, and real-estate activities. In 2006 it sold its interest in Goldleaf Technologies, a provider of Internet and automated-clearing services for community banks. The expansion left Colonial exposed to property and mortgage-market deterioration. The bank's financial metrics weakened during the credit crisis, and its Texas ratio rose sharply in 2008. A central problem was the relationship between Colonial's Mortgage Warehouse Lending Division and Taylor, Bean & Whitaker Mortgage Corporation. From the early 2000s through 2009, participants used transfers between accounts and fictitious mortgage-loan sales to conceal overdrafts and make Colonial's books show mortgage assets that were nonexistent, already pledged, or otherwise lacked the represented value. The resulting misstatements affected filings by Colonial BancGroup and obscured the scale of the bank's losses. Colonial disclosed in August 2009 that federal agents had searched its mortgage warehouse offices in Orlando and that the company had entered into a cease-and-desist order involving accounting and loss-recognition practices. Regulators closed Colonial Bank on August 14. The FDIC arranged the transfer of the bank's deposits, branches, and other banking assets to BB&T. The closure was the largest United States bank failure of 2009 and imposed an estimated $2.8 billion cost on the FDIC Deposit Insurance Fund. The parent company filed for Chapter 11 on August 25, 2009. Later litigation included claims concerning PwC's audits of Colonial Bank; the FDIC announced a $335 million settlement in 2019. The Colonial Bank brand is defunct.

• 2009

  Bank closure and transfer to BB&T

  [1]Colonial BancGroupen.wikipedia.org

  Regulators close Colonial Bank on August 14 and facilitate the transfer of its banking operations to BB&T.

• 2009

  Chapter 11 filing by Colonial BancGroup

  [1]Colonial BancGroupen.wikipedia.org

  The parent holding company files for Chapter 11 bankruptcy protection on August 25.

• 2006

  Sale of Goldleaf Technologies interest

  [1]Colonial BancGroupen.wikipedia.org

  Colonial sells its interest in Goldleaf Technologies, which supplied Internet and automated-clearing services to community banks.

• 1998

  Expansion into Nevada and Texas

  [1]Colonial BancGroupen.wikipedia.org

  Colonial acquires Commercial Bank in Las Vegas and FirstBank of Dallas, extending its operating footprint beyond the Southeast.

• 1996

  Colonial enters Florida and Georgia

  [1]Colonial BancGroupen.wikipedia.org

  Purchases of banks in Orlando, Atlanta, and Dothan establish the group's presence in Florida and Georgia.

• 1993

  Expansion into Tennessee

  [1]Colonial BancGroupen.wikipedia.org

  Acquisitions including First AmFed of Huntsville and United Savings Bank of Anniston bring the network to 96 branches in Alabama and Tennessee.

• 1985

  Bank of Oxford merger expands Alabama coverage

  [1]Colonial BancGroupen.wikipedia.org

  The merger gives Colonial a presence in Alabama's major metropolitan areas and reported assets of about $750 million.

• 1981

  Colonial BancGroup and Colonial Bank are established

  [1]Colonial BancGroupen.wikipedia.org

  Southland Bancorporation adopts the Colonial BancGroup name, while Colonial Bank is formed in Montgomery from Exchange National Bank of Montgomery.

• 1974

  Southland Bancorporation is founded

  [1]Colonial BancGroupen.wikipedia.org

  The predecessor holding company is established in Montgomery, Alabama, as Southland Bancorporation.

A regional full-service commercial bank serving consumers, businesses, and mortgage-market participants, with a concentration in the Southeast and additional operations in Texas and Nevada.

• Retail banking

  Consumer banking

  Colonial Bank's branch network provided conventional consumer banking services, including deposit accounts and other day-to-day banking products for households in its regional markets.

• Business banking

  Commercial banking

  Commercial banking served businesses and institutions through lending, deposits, cash-management capabilities, and related financial services. It was a core part of Colonial's regional-bank model.

• Mortgage finance

  Mortgage warehouse lending

  The Mortgage Warehouse Lending Division provided financing connected with mortgage originations and was a significant specialized business. The division later became central to the Taylor, Bean & Whitaker fraud that contributed to Colonial's failure.

• Mortgage finance

  Mortgage banking and servicing

  Colonial operated mortgage-related businesses serving customers across numerous United States states, giving the company a national mortgage presence in addition to its regional branch footprint.

• Investment services

  Wealth management and brokerage

  Through Colonial Brokerage and related activities, the group offered full-service and discount brokerage services, investment advice, and wealth-management capabilities.

• 2019

  PwC audit litigation

  Claims concerning the adequacy of PwC's audits of Colonial Bank were pursued after the bank's collapse. The FDIC, acting as receiver, announced a $335 million settlement with PwC in 2019 concerning professional-negligence claims.

  Source

• 2009

  Taylor, Bean & Whitaker mortgage fraud

  A multiyear scheme involving Colonial mortgage-warehouse personnel and Taylor, Bean & Whitaker executives used concealed overdrafts and fictitious or unsupported mortgage-loan transactions to overstate the value of assets recorded by Colonial. Catherine Kissick admitted participating in the scheme, and Taylor, Bean & Whitaker chairman Lee Farkas was later convicted of fraud. The affair contributed directly to Colonial Bank's failure.

  Source

Read more

• 2009

  FDIC-assisted transfer of Colonial banking operations to BB&TM&A

  Background

  Regulators closed Colonial Bank after the institution's financial deterioration and the disclosure of mortgage-related accounting and fraud problems.

  Action taken

  The FDIC brokered a transaction in which BB&T acquired Colonial's branches, banking assets, and approximately $22 billion in deposits.

  Aftermath

  Colonial Bank ceased to operate independently, while The Colonial BancGroup entered bankruptcy proceedings.

  Estimated cost to the FDIC Deposit Insurance Fund. $2.8 billion (2009 bank failure)

  • BB&T — BB&T participated as the acquiring institution in the FDIC-assisted transaction.

  Source

• 2006

  Divestiture of Goldleaf Technologies interestStrategy

  Background

  Goldleaf Technologies supplied Internet and automated-clearing services to community banks, but it was not part of Colonial's core banking franchise.

  Action taken

  Colonial sold its interest in Goldleaf Technologies.

  Aftermath

  The transaction narrowed the group's direct technology holdings while leaving its banking and financial-services businesses as the central activities.

  Source

• 1996

  Consolidation of Florida banking acquisitionsStrategy

  Background

  Colonial had acquired several Florida banks while entering Florida and Georgia and needed a unified operating structure.

  Action taken

  The separately operated Florida banks were consolidated into a single Alabama-chartered institution.

  Aftermath

  The consolidated institution had 181 branches and approximately $6 billion in assets by 1997.

  Source

1. 1Colonial BancGroupen.wikipedia.org
2. 2FDIC announces settlement with PwC related to Colonial Bank audit claimsfdic.gov