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Virtual Bank and Three Other Banks Closed by Regulators

POSTED ON BY

Update: Sabadell United Bank has decided to continue Virtual Bank. Please refer to this post for more details.

Four bank were closed by regulators this Thursday and Friday. That brings the total number of bank failures this year to 68. At this time last year there had been 118 bank failures. Pennsylvania had its first bank failure of 2011. The other three failures came from the typical bank failure states of Georgia, Florida and Illinois.

The failed Florida bank was Lydian Private Bank. Those who follow internet banks should recognize this name. Its the parent of Virtual Bank. I first reported on Virtual Bank and its internet savings account and CDs when I first started this blog in 2005. I'm sorry to see its closure.

The FDIC arranged for Sabadell United Bank, N.A. to acquire Lydian. All deposits were assumed by Sabadell United, so no one lost any money.

One potential loss will be if anyone was waiting for Virtual Bank to pay the refer-a-friend bonus. Virtual Bank has long offered customers $20 when they refer someone who opens a savings account. The new customer also would get a $20 bonus. When ING Direct acquired NetBank back in 2007, ING Direct did not honor NetBank new-account bonuses.

Another potential loss will be if Sabadell United refuses to honor the Virtual Bank existing CD rates and terms. Virtual Bank CD holders will be free to do a penalty free early withdrawal, but they won't be able to find rates anywhere close to those old long-term CDs.

Lydian Private Bank was one of the few failed banks this year with over $1 billion in assets. The other three failed banks this week were small with under $200 million in assets.

The FDIC was able to find buyers for all the failed banks, and all of the buyers agreed to assume all deposits except for some Cede & Co. deposits. So no one with regular deposits will lose any money including those with deposits above the FDIC limit.

Finally, there was a rare Thursday bank closure this week. Public Savings Bank in Huntingdon Valley, PA was closed on Thursday. Why Thursday? This Philly.com article gives the following reason:

The FDIC took the unusual step of closing the bank on a Thursday instead of a Friday, as is typical, because of the bank's close connection to an Orthodox Jewish community, according to an FDIC spokeswoman.

Below is the summary of this week's bank failures.

65th Bank Failure of 2011 (1st in Pennsylvania) (Aug 18th)

  • FDIC Press Release
  • Closed Bank: Public Savings Bank, Huntingdon Valley, PA
  • Size: 1 branch, $46.8 million in assets, $45.8 million in deposits
  • Acquiring Bank: Capital Bank, N.A., Rockville, MD
  • Possible Uninsured Deposits: All deposit accounts, excluding the Cede & Co. deposits, have been assumed by Capital Bank, N.A.
  • Rate Changes: Current rates will be reviewed by the new bank and may be lowered (FDIC Q&A)
  • Estimated Cost to Deposit Insurance Fund: $11.0 million
  • Enforcement Action: FDIC 5/12/11 Consent Order
  • Financial Ratings: 1 star at Bankrate.com, ? star at BauerFinancial, 1 star & Texas Ratio of 300.76% at DepositAccounts.com (see financial rating note)

66th Bank Failure of 2011 (10th in Florida) (Aug 19th)

  • FDIC Press Release
  • Closed Bank: Lydian Private Bank (including its division Virtual Bank), Palm Beach, FL
  • Size: 5 branches, $1.70 billion in assets, $1.24 billion in deposits
  • Acquiring Bank: Sabadell United Bank, N.A., Miami, FL
  • Possible Uninsured Deposits: All deposit accounts, including brokered deposits, has been assumed by Sabadell United Bank, N.A.
  • Rate Changes: Current rates will be reviewed by the new bank and may be lowered (FDIC Q&A)
  • Estimated Cost to Deposit Insurance Fund: $293.2 million
  • Enforcement Action: OTS 9/16/10 C&D Order
  • Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, 1 star & Texas Ratio of 147.33% at DepositAccounts.com (see financial rating note)

67th Bank Failure of 2011 (17th in Georgia) (Aug 19th)

  • FDIC Press Release
  • Closed Bank: First Southern National Bank, Statesboro, GA
  • Size: 1 branch, $164.6 million in assets, $159.7 million in deposits
  • Acquiring Bank: Heritage Bank of the South, Albany, GA
  • Possible Uninsured Deposits: All deposit accounts, excluding the Cede & Co. deposits, have been assumed by Heritage Bank of the South
  • Rate Changes: Current rates will be reviewed by the new bank and may be lowered (FDIC Q&A)
  • Estimated Cost to Deposit Insurance Fund: $39.6 million
  • Enforcement Action: OCC 11/30/10 Consent Order
  • Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, 1 star & Texas Ratio of 297.39% at DepositAccounts.com (see financial rating note)

68th Bank Failure of 2011 (7th in Illinois) (Aug 19th)

  • FDIC Press Release
  • Closed Bank: First Choice Bank, Geneva, IL
  • Size: 1 branch, $141.0 million in assets, $137.2 million in deposits
  • Acquiring Bank: Inland Bank & Trust, Oak Brook, IL
  • Possible Uninsured Deposits: All deposit accounts, excluding the Cede & Co. deposits, have been assumed by Inland Bank & Trust
  • Rate Changes: Current rates will be reviewed by the new bank and may be lowered (FDIC Q&A)
  • Estimated Cost to Deposit Insurance Fund: $31.0 million
  • Enforcement Action: FDIC 7/29/10 Consent Order
  • Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, 1 star & Texas Ratio of 222.05% at DepositAccounts.com (see financial rating note)

Financial Ratings Notes: 0 star is lowest at BauerFinancial, 1 star is lowest at Bankrate.com & DepositAccounts.com, Texas Ratios over 100% is considered at risk. Ratings are based on March 2011 data.

References:



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Comments
11 Comments.
Comment #1 by tightwad posted on
tightwad
Virtual bank was my first plunge into internet banking. Seems like a lifetime ago.

2
Comment #2 by scottj posted on
scottj
Sad... did a few good CD's with Virtual over the years. Forgot that I even still had their Emoneymarket with a little over $100 in case they offered anything good again, guess it's time to close

3
Comment #3 by Anonymous posted on
Anonymous
First Southern used to have one of the best reward checking accounts in Georgia. Sadly, as their financial situation deteriorated they dropped the rate - before they closed it was down to 1%. Had an account there but I closed it about 2 weeks before they were shut down. They had a good run but fell fast and pretty hard.

2
Comment #4 by rav posted on
rav
Has anyone yet heard about the new rates being paid by Sabadell on Virtual Bank accounts (eMoneyMarket in my case)?  The Virtual Bank rates page has been taken down, and Sabadell doesn't seem to have a rates page on their website.  If you have the info, please post.  If not, I'm planning to phone them on Monday once customer service is open.


Thanks!

1
Comment #5 by GEORGIA (anonymous) posted on
GEORGIA
25 percent keep up the good work

1
Comment #6 by Anonymous posted on
Anonymous
I have heard that VirtualBank will continue operating as VirtualBank.
Actually the purcahse seems to be great news for VirtualBank and its customers!

 

1
Comment #7 by Anonymous posted on
Anonymous
I have heard that VirtualBank will continue operating as VirtualBank.
Actually the purcahse seems to be great news for VirtualBank and its customers!

 

1
Comment #8 by Anonymous posted on
Anonymous
I have heard that VirtualBank will continue operating as VirtualBank.
Actually the purcahse seems to be great news for VirtualBank and its customers!

 

1
Comment #10 by Anonymous posted on
Anonymous
do we really need a repeat of 7 and 8 come on

1
Comment #13 by Anonymous posted on
Anonymous
You may be sorry VirtualBank closed, but many of us who had dealt with this unethical institution are happy to see its demise!

1