Colonial BancGroup seeks bankruptcy after U.S. probe revealed

Colonial BancGroup Inc., the bank holding company under a criminal probe that was taken over Aug. 14 by North Carolina lender BB&T Corp., filed for bankruptcy.

The Montgomery, Alabama-based holding company filed for Chapter in 11 listing assets of $45 million and debts of $380 million. Its banking unit became the biggest bank to be seized by regulators since the collapse last year of Washington Mutual Inc.

Colonial's mortgage unit provided so-called warehouse credit lines that mortgage companies used to make loans to home buyers. Colonial said in an Aug. 7 regulatory filing that it was told by the U.S. Justice Department that an investigation is related to accounting irregularities and the mortgage warehouse unit.

The company said it is cooperating with the investigation.

Colonial had $20 billion of deposits and assets of $25.5 billion as of June 30 and reported $1.7 billion in losses over the past five quarters, mostly from defaults on loans to Florida builders and developers.

The company provided funding for Taylor Bean & Whitaker Mortgage Corp., the 12th-largest U.S. home lender, which shuttered its mortgage-lending a week after being suspended by federal agencies.

Colonial said in July that there is "substantial doubt" it can survive. The U.S. Securities and Exchange Commission issued subpoenas for documents related to its accounting for loan loss reserves and its participation in the U.S. Troubled Asset Relief Program, the bank said.

The case is In re Colonial BancGroup Inc, 09-32303, U.S. Bankruptcy Court, Middle District of Alabama.