Today, in the sixth largest bank failure in U.S. history and the third largest in the current crisis (after Washington Mutual and IndyMac), the Alabama State Banking Department closed Colonial Bank, headquartered in Montgomery, Alabama, and the FDIC was named as receiver. As receiver, the FDIC entered into a purchase and assumption agreement with BB&T, headquartered in Winston-Salem, North Carolina to assume all of the deposits of Colonial Bank.

As of June 30, 2009, Colonial Bank had total assets of $25 billion and total deposits of approximately $20 billion. BB&T will also purchase approximately $22 billion of Colonial Bank’s assets, with the FDIC retaining the remaining assets for later disposition. The FDIC and BB&T entered into a loss-share transaction on approximately $15 billion of the failed bank’s assets.

In the FDIC's press release, FDIC Chairman Sheila Bair stated, “The past 18 months have been a very trying period in the financial services arena, but the FDIC and its staff have performed as Congress envisioned when it created the corporation more than 75 years ago.” She went on to state, “Today, after protecting almost $300 billion in deposits since the current financial crisis began, the FDIC's guarantee is as certain as ever. Our industry funded reserves have covered all losses to date.”

The FDIC estimates that the cost to the Deposit Insurance Fund will be $2.8 billion. Colonial Bank is the 74th bank to fail in the nation this year and the first in Alabama.