Update: It’s official, Colonial is no more. Estimated FDIC loss will be $2.8b, link.

Looks like Colonial Bank will get the Old Yeller treatment from FDIC tonight.  It will be the biggest bank failure of 2009, with $25b in assets. Could be an interesting evening for the FDIC, we’re due for a fail-spree at some point. CNB is just one of 4 big banks widely viewed as doomed-to-fail. FDIC usually makes these announcements Fridays from 7:00-10:00 pm EST.

BB&T is set to take over Colonial’s assets. There was concern over whether a buyer would be found for Colonial, so BB&T is probably getting a sweetheart deal (hence the 8% jump today) for taking on a share of their horrific assets. But most of the toxic mess will be absorbed by FDIC (which will likely be taxpayer-funded by EOY).

One interesting side effect of Colonial’s failure will be to mortgage availability. They are one of the last big facilitators of loans through independent mortgage brokers (which played a big role in the collapse). CNN explains in “If Colonial fails, mortgages get more scare”. Snippet:

The Southern regional bank, based in Montgomery, Ala., is the largest remaining player in warehouse lending, which provides short-term financing to independent mortgage bankers. At one time, these mortgage bankers originated half of all U.S. home loans using these funds.