Utah bank of Montco's Advanta Corp. fails

Regulators closed the Utah bank owned by Montgomery County's bankrupt Advanta Corp., in the third-costliest U.S. bank failure this year, the Federal Deposit Insurance Corp. said yesterday.

The closing will cost the deposit-insurance fund about $635.6 million, the difference between the market value of Advanta Bank Corp.'s assets and the bank's $1.5 billion in deposits. The bank had listed its assets as $1.6 billion on Dec. 31, but in liquidation they were worth much less.

Because the FDIC was unable to find a financial institution to take over Advanta Bank's operations, checks for insured deposits will be mailed on Monday, the FDIC said.

Advanta Bank was one of seven closed yesterday, bringing the total for the year to 37. The others were three in Georgia and one each in Alabama, Ohio, and Minnesota. Advanta Bank was the only one for which the FDIC found no buyer.

When Advanta Corp. filed for bankruptcy in November, after freezing its small-business customers' credit cards in May, it excluded Advanta Bank and warned that the subsidiary might end up being taken over by the FDIC.

Advanta Bank, which was established in 1991 and did not have a branch network, gathered many of its deposits from brokers nationwide by offering high rates on certificates of deposit.

It was Advanta Corp.'s main asset, but its value was wiped out by mounting losses on loans. The bank started last year with $378.6 million in equity, but finished it with negative $41 million in equity.

Employment at the bank fell from 763 to 124 last year.

In a last-ditch effort to save itself, the bank filed a complaint last weekend in U.S. Bankruptcy Court in Wilmington to compel its parent company, Advanta Corp., to carry its consolidated 2009 operating loss back five years for tax purposes. That would have generated an estimated $54 million federal tax refund, most of which would have flowed to Advanta Bank under a tax-sharing agreement.

Advanta Corp. refused.