Colonial Bank failure... this one hits close to home

[datagirl]

I'm glad the Feds have the new deal lined up before they announce these things...

http://news.yahoo.com/s/ap/20090815/ap_on_bi_ge/us_bank_closures_14

Anyone here gone through a bank failure and subsequent takeover?

I'm expecting a smooth transition.  It's not as if I have large holdings or anything.  It is my business account and quarterly taxes are due next month.

It's sad, though.  This was one of the more reputable of the "locally-based" banks.

Regards,
-DG

[TRexx]

I'm glad the Feds have the new deal lined up before they announce these things...

I now a guy who works for the FDIC. He's one of the guys that shows up on Friday afternoon to take over. (His job is to connect the branch's computers into his network)

Before they takeover a bank that have everything in place so it will reopen the next day under new management.  They often have a crew from the new bank parked down the street with new signage.    

He says it's usually a very smooth process. The spend weeks planning the takeover without knowing the name of the failing bank. A week before the takeover they are told the region (so they know what kind of clothes to pack).  They usually fly in on Thursday and meet at a  hotel.  It's not until they are actually in the van on Friday afternoon that they are told the name of the bank,  (Simultaneously, separate teams are sent to each branch)

Once the employees realize they are not about to lose their jobs and/or life savings everyone cooperates. The goal is to make things look as normal as possible when the doors open the next day.  There is just someone else in the corner office calling the shots.

Anyone here gone through a bank failure and subsequent takeover?

My local bank went under during the S&L crisis. The only immediate difference was the name on the door, and I got letter saying I had to make my mortgage checks payable to "the Resolution Trust Company in Receivership for My Local Bank" (try fitting that in the payee field on a check  )

Since then my bank has been taken over by First Union, Wachovia and now Wells Fargo.   But they are in the same building and mostly the same staff.

[Origisaurus]

If it's a checking account, it's not insured by FDIC.  Reason to be uneasy.  For ease of mind, you could open a new account in a different bank and zero out the present one.  This would also forestall any delays or snafus due to the transition.

In the 1930s, before FDIC, thousands of farmers lost their farms to tax sales because of bank closures just ahead of tax day.  Then came the "penny auctions" where the farmers' friends bid the price up to a dime or so, and anybody looking like a serious bidder would be surrounded by more of the farmers' friends and "persuaded" not to bid.

[datagirl]

"If it's a checking account, it's not insured by FDIC."

Really?  I thought all deposit accounts are insured up to $1/4 million.  Time to do some research...

Okay, here it is:  http://www.fdic.gov/deposit/deposits/DIfactsheet.html

 

There is no need for depositors to apply for FDIC insurance or even to request it; coverage is automatic. FDIC insurance covers funds in deposit accounts,   including checking and savings accounts, money market deposit accounts and certificates of deposit. FDIC insurance does not cover other financial products   that insured banks may offer such as stocks, bonds, mutual fund shares, life insurance policies, annuities or municipal securities.

The current limit of $250,000 per depositor is in effect until 12/31/2013.  Then all but certain types of retirement accounts will return to $100,000.

This site also has a place to ask about specific accounts at specific failed banks, but the Colonial data is not available yet... your tax dollars at work.

Regards,
-DG

[datagirl]

Thanks, TRexx.  That's some interesting info.

I switched S&L's just ahead of a takeover back in those days.  You could just tell they were desperate for new deposits.

I stayed with the newer bank until Wachovia bought it a couple of years ago.  I didn't like all the piddly fees that suddenly appeared on my statements.  I moved all my personal accounts to my husband's credit union, but they don't do business accounts.

My former employer used Colonial, and I had always thought they were pretty solid.  The only signal I got was a note a few weeks ago that large business accounts would start paying a fee that's a percentage of the balance.  Well that's dumb.  I suppose the large depositors put their money elsewhere.

-DG

[codger]

Good info., DG. Thanks for the research.

I hope that none of us ever lose a penny to a bank failure, although I feel that there are many more ahead. Good luck. Let us know how things unfold for you.

[Origisaurus]

I stand corrected <blush>.

Most likely the process is seamless, and if you write a check that gets delayed, you did so in good faith and only an ogre would give you grief about it.

[datagirl]

I stand corrected <blush>.  
 
  Most likely the process is seamless, and if you write a check that gets delayed, you did so in good faith and only an ogre would give you grief about it.

Well, FWIW, there was some verbiage on another page about some program last fall that was for "unlimited" coverage for non-interest bearing checking and savings which required an opt-out from each institution.  My reading of it is that this was to protect folks who had inadvertently gone over the $100,000 limit, but the bank opting out would mean the limit was still in force.  So either way my small account is still okay.  The new legislation does not supercede this program - so if the institution has not opted out, some accounts might still have the unlimited coverage, else the limit is now $250,000.

Perhaps this was the program you were thinking about.  The wording is not straightforward, so it would be easy to think that some checking and saving accounts are not covered at all, rather than covered to the max.

Personally, I can't imagine having that much money in an account that was not interest bearing.  Well actually, these days I have a hard time imagining having that much money... period.

So, thanks for the heads up.  Made me do a little work, but hey - serendipity.  Now I know where to find out what to do next with my account, sometime in the next few days, after the data is available on the fdic site.

-DG

[datagirl]

Thanks, codger.  Will do!

-DG

[datagirl]

Talked to the branch manager yesterday.  She said it would take about six months for everything to shake out with the change.  I can continue to use my checks, etc. for now.  No worries.

We chatted for a bit.  They were Colonial when they closed the doors at 5pm on Friday, and by 5:30 they were BB&T.  She said a rep from the new company showed up to say "hi" to all the staff and answer any questions.  Over the weekend, she and the other branch officers went to Montgomery to meet their new CEO.  Apparently Colonial had bought some banks in Florida last year, which turned out to be too much expansion at a bad time.

I've been researching BB&T, and so far haven't found any reason for concern.  If anyone here knows something I should worry about, please PM me.

Regards,
-DG