Colonial Bank - Warehouse Lending


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Today Colonial Bank became the biggest bank failure of the year, and perhaps the biggest loss of warehouse lines in the country. Colonial provided warehouse lending facilities to an estimated 70 Mortgage Companies.

Reeling from a criminal investigation into accounting fraud, under a Temporary Restraining Order protecting $1 billion dollars in claims from Bank of America, most analysts pegged today as the day.

It's over.

More on this news as it comes in...

Original Ailing/Watch Listing - 2009/08/07: According to an article out today in the Birmingham Business Journal, Colonial BancGroup may be taken over by the State of Alabama:

"The Alabama banking department has informed Colonial BancGroup that may be placed in receivership over as soon as next week ..."

The above news followed right on the heels of the earlier announcement as seen on the Wall Street Journal, "Colonial BancGroup Inc.'s (CNB) struggle to find the capital to survive received another severe blow with the bank's announcement that it is the target of a federal criminal investigation."

Shares of Colonial performed the classic 'dead-fish-flop' over the past 48 hours running up 37% after news got out the Federal raid appeared to be looking for TB&W evidence. Shares at the time of this posting closed 30% back down.

Update - Midday: Just in, the Orlando Sentinel confirms agents with the U.S. Treasury's TARP unit and the FBI were "executing warrants both at the Colonial office on East Pine Street and at a location in Ocala." Turns out that location in Ocala was none other than the headquarters of Taylor, Bean & Whitaker.

Original Posting - 2009-08-03: Unconfirmed but not unexpected, we're hearing that Montgomery Alabama based Colonial Bank may be in the process of being taken over by regulators today. An eye witness report has it that federal authorities descended on the Colonial Bank branch in Orlando, FL this morning. They were "in and out of there like ants on a nest," the source said. As reported in the Birmingham News, "Colonial BancGroup received a search warrant from a U.S. government agency."

""We are cooperating with the federal government," spokeswoman Merrie Tolbert told Bloomberg News today in an interview."

In its second quarter earnings statement on 2009-07-31, holding company Colonial Bancgroup announced it had failed to close and mutually terminated a stock purchase agreement with Taylor, Bean & Whitaker. The deal would have provided a much needed capital infusion of $300 million and was a contingency for Colonial obtaining additional funds through the Fed's Troubled Asset Relief Program. Unable to make that arrangement, reeling from huge losses and operating under regulatory restriction, the bank issued a dire warning about its future:

"As a result of the above described regulatory actions and the current uncertainties associated with Colonial's ability to increase its capital levels to meet regulatory requirements, management has concluded that there is substantial doubt about Colonial's ability to continue as a going concern."

The Birmingham Business Journal noted Colonial Bancgroup's reported 2Q loss of $606 million was "more than three times higher than the $168 million net loss reported in the first quarter."
A story on Colonial Bank that ran in the Press Register on 2009-08-01 characterized an FDIC takeover as the "sixth-largest seizure, by assets, in American history."

Colonial Bank is the nation's largest provider of warehouse lines-of-credit to non-depository lenders according to a recent article in National Mortgage News. U.S. Banker reported the bank had $4.1 billion in outstanding commitments and was the "primary warehouse source" for Taylor, Bean & Whitaker. The Ocala, FL-based lender headed up an investment group comprised largely of other Colonial Bank warehouse clients "all in hopes of staving off an FDIC seizure."

We are continuing to monitor for news and reports as this situation unfolds. If you can provide additional information please don't hesitate to contact us.


Tobby at 14:16 2009-08-03 said:
Local main stream news services are confirming that the FBI and HUD raided the Colonial Bank in Orlando. The FBI raided Taylor Bean in Ocala (north of Orlando). No mention of HUD in Ocala. No one is talking.

IMOHO this appears to go well beyond a typical bank failure where the FDIC would march in on a Friday. This looks like some serious crime if both the FBI and HUD are involved. Permalink

luckyface at 18:15 2009-08-14 said:
Does anybody have any idea of who used this line? Permalink
MORTGAGESRUS at 18:04 2009-08-15 said:
Randall at 18:22 2009-08-15 said:
Does anybody have any idea of who used this line?
In addition to the comments on this page, there is a Forum thread dedicated to Colonial Bank on the Implode-O-Meter Forums here:

SOME of the answers to your question are answered there. Permalink

add a comment | go to forum thread

Important: This company is on our list of lending operations that have "imploded". However, please note that "imploded" is a somewhat subjective and does not necessarily mean operations are ceased permanently: it can mean bankruptcy filing, temporary but open-ended halting of major operations, or "firesale" acquisition. All information here is provisional, and may contain inaccuracies (especially newer information). If you are planning on doing business with this company or any other one listed on this site, you should inquire with them directly on whether they can still meet your needs. Many are still operating in some capacity.