Lights out:
Online Bank Fails, and Regulators Shut It
By THE ASSOCIATED PRESS
Published: September 29, 2007
WASHINGTON, Sept. 28 (AP) — NetBank Inc., an online bank with $2.5 billion in assets, was shut down by the government on Friday because of an unsustainable level of mortgage defaults.
It was the largest thrift to fail since the end of the savings and loan crisis more than 14 years ago. Federal regulators appointed the Federal Deposit Insurance Corporation as a receiver for NetBank, which is based in Alpharetta, Ga.
While dozens of mortgage companies have closed because of soaring defaults on home loans made to borrowers with weak, or subprime, credit, those problems previously had occurred among nonbank lenders like New Century Financial Corporation. NetBank is federally regulated.
The F.D.I.C. said Friday that $1.5 billion of NetBank’s insured deposits would be assumed by ING Bank, part of the Dutch financial giant ING Groep.
The F.D.I.C. said NetBank had $2.5 billion in total assets and $2.3 billion in deposits as of June 30.
NetBank had reached a deal to sell its deposit accounts and other assets to privately held EverBank of Jacksonville, Fla., but EverBank announced this month that the deal had fallen through.
In July, EverBank completed its acquisition of NetBank’s mortgage servicing business, and the F.D.I.C. said Friday that EverBank would purchase about $700 million in mortgage loans.
The F.D.I.C. insures bank deposits of up to $100,000.
NetBank had $109 million in deposit accounts that exceeded the F.D.I.C. limit. Those customers will become creditors in NetBank’s receivership, the F.D.I.C. said.
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