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New Bank or Just a Name Change? Aurora, Ally, OneWest & Alostar

POSTED ON BY

In the last few years several internet banks have changed their names after their old names were associated with problematic or failed businesses. From a marketing perspective, I'm sure these name changes have been helpful. However, it might anger new customers if they find out the true identity of their bank after they open accounts. They might feel the association with the problematic or failed business would imply financial health problems of the bank. Also, they might not want to support a bank that was part of an institution that received a government bailout.

It should be noted that banks can be financially healthy even if the parent company had financial problems. So the old name can be a little unfair in judging the bank. Nevertheless, it's interesting to know the history of your bank or a bank that you are considering. Below are four internet banks that have recently changed their names:

  • Aurora Bank used to be Lehman Brothers Bank. In April 2009 the bank officially changed its name to Aurora Bank. Lehman Brothers was the fourth largest investment bank before it filed for bankruptcy on September 15, 2008. This helped spark the 2008 global financial crisis. As I reported in December 2008 Lehman Brothers Bank, a subsidiary of Lehman Brothers, was not included in the bankruptcy, and it was operating without changes. I'm sure from a marketing perspective, they realized they had to change their name to avoid confusion.
  • Ally Bank used to be GMAC Bank. Most regular readers probably remember this change which officially occurred in May 2009. The parent company has also changed its name to Ally. GMAC's financial troubles and the major assistance it received from the US government were definitely marketing issues.
  • OneWest Bank used to be IndyMac Bank. Unlike the last two banks, IndyMac Bank failed and was taken over by the FDIC. That failure occurred just over 3 years ago. It was the first major bank closure of the financial crisis. The FDIC managed IndyMac until March 2009 when it was sold to a newly formed bank called OneWest Bank, FSB.
  • Alostar Bank used to be Nexity Bank. Like IndyMac Bank, Nexity Bank failed. This happened recently in April, and at the time of the failure, the FDIC arranged for the newly-chartered bank, AloStar Bank of Commerce, to assume all of Nexity's deposits.

One interesting thing to note is that all four of the above banks have competitive internet CD rates. If you're interested in the current health of these banks, click on the bank's name. That will take you to our hub page for that bank. Click on the health tab, and you can view their financial stats. None of these banks have weak financials. We don't have stats for Alostar Bank since it's so new.

How important to you is the financial history of a bank? Is it more important to you than high deposit rates and useful account features?


  Tags: Ally Bank, AloStar Bank of Commerce, OneWest Bank N.A. (Pasadena, CA)

Comments
7 Comments.
Comment #1 by Anonymous posted on
Anonymous
High rates trump - "financial health" is the FDIC's problem.

6
Comment #2 by Anonymous posted on
Anonymous
All of the old banks had a better services and products.
GMAC was much friendlier and had one day ACH, now is two days and hold of two extra days.
IndyMac had flexible products and CDs,
Lehman Brothers Bank had fabulous money market and checking services.
Nexity Bank had many free services and fast and free ACH system.

Now, they all offer similar products but with fees and slower ACH and less flexibilities.
Customer service is not as it used to be and they are all geared up to collect sneaky fees if not being careful. The innovation of new products stooped and the rates are copycats of each other.
Conclusion: New names, new fees, less customer support, slower ACHs, less products and less customer being satisfied with the banks.

12
Comment #3 by Mike B (anonymous) posted on
Mike B
As long as the account is FDIC/NCUA insured, then I'm not too worried. But, of course, I'm no where near the limits of the insurance. A bank with a low rating would just be a flag to me that there could possibly be some nuisance paperwork if the bank gets closed.

3
Comment #4 by Jeanne posted on
Jeanne
Like Mike B mentioned, I'd like to avoid the hassle of a potential failure and the possibility of losing the CD rates. So I look at the FDIC's bank assets page and pretend I know what looks more stable than not. Since Aurora Bank's "Cease & Desist" order from Jan, 2009 is still on the books, I prefer to pass on that bank. Likewise, AloStar Bank is too small and was newly formed by a few private equity firms, who purchased Nexity Bank when it failed. 

Regarding the other two banks in this article, I just have to say "So far, so good."

What I'd like to know is how do these banks/firms/private individuals know that a bank is about to be closed by the Feds and have enough time to muster the buyout sums ($160 million in the case of Nexity)?

1
Comment #5 by Sandra posted on
Sandra
M&T Bank, N.A. has changed its name to Wilmington Trust, N.A. as of July 1, 2011. I wonder, could this have something to do with M&T's dismal 1 star user review ratings here at depositaccounts.com?

1
Comment #6 by Anonymous posted on
Anonymous
You have it all backwards, Sandra.  M&T is highly rated, healthy, and certainly didn't change its name.  Wilmington Trust got bought out by M&T, and Wilmington didn't have good ratings.  That is now pretty much irrelevent, given that M&T has now taken over.

1
Comment #7 by Sandra posted on
Sandra
@Anonymous #6: I guess you haven't read the reviews of M&T here at depositaccounts.com. I didn't say anything about the bank's health, only its 1 star user review rating here at depositaccounts.

The following is a letter M&T sent to me, verbatim:

July 21, 2011

Sandra ******

************

************

Dear Valued Customer,

We are writing to let you know that M&T Bank, N.A. changed its name to Wilmington Trust, N.A. on July 1, 2011. Rest assured, Wilmington Trust, N.A. remains part of the M&T Bank Corporation family of companies.

All the features and terms associated with your deposit accounts that now reside at Wilmington Trust, N.A., including any accounts through our OnBank division, remain the same and certainly no action is required on your part. In the future, you may receive communications from us that reference the Wilmington Trust, N.A. name.

...

Michael N. Trayder

Vice President M&T Telephone Banking Center

 

 

2