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MONTGOMERY, AL-Locally based Colonial BancGroup Inc. has formally been acquired by Winston-Salem, NC-based BB&T Corp. after the Federal Deposit Insurance Corp. seized Colonial on Friday. The second-biggest bank based in Alabama was declared a failure after a series of events that cast doubts on its ability to stay in business.

BB&T took over all 346 Colonial branches Saturday, along with $22 billion in assets and $20 billion in deposits, while the FDIC retained $3 billion in Colonial assets. The transaction advances BB&T efforts to expand within the Southeast.

“We’re gaining solid market shares in great markets in Alabama, Florida and Georgia,” Kelly King, BB&T chief executive, said in a prepared statement. “And it comes at minimal asset risk to BB&T because of our loss sharing agreement with the FDIC.”

The deal concludes a trying final week for Colonial. A federal judge in Miami froze up to $1 billion in Colonial assets Thursday after Charlotte, NC-based Bank of America sued the bank on the grounds that it failed to pass along Freddie Mac funds destined for Ocala, FL-based mortgage broker Taylor Bean & Whitaker Mortgage Corp.

Bank of America is the custodian for Taylor Bean, which abruptly shut down Aug. 5 after federal agents raided its headquarters as well as several Colonial branches in Florida. Taylor Bean planned to invest $300 million in Colonial, but the deal fell apart.

The temporary restraining order from US District Judge Adalberto Jordan was yet another blow to Colonial. It was widely anticipated that a larger Southeastern bank would take over its deposits and loans, along with numerous branches and leases in downtown office towers.

Colonial’s offices extend west to Texas and Nevada, while BB&T, with $152 billion in assets, has 1,500 locations in 11 states and Washington, DC. There is little overlap between the banks’ branches in the Southeast.

What is uncertain is how a joint BB&T-Colonial operation will affect office leasing, since some of their buildings are practically neighbors and redundant space will not be needed in some major markets. Office vacancy rates are currently in double digits and exceed 20% in some markets where Colonial and BB&T have their names atop landmark buildings.

Colonial posted $1.7 billion in soured real estate loans and could not meet capital requirements to qualify for the federal government’s $700-billion Troubled Asset Relief Program. Its takeover is being termed as the biggest bank seizure of 2009 and sixth-largest in US history. It is also the first in Alabama since 1987.

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