<<U.S. regulators close NextCard's NextBank
(UPDATE: Adds details, paragraphs 3-7, 9-10)
By Andrew Clark
WASHINGTON, Feb 7 (Reuters) - The U.S. Office of the Comptroller of the Currency on Thursday closed Phoenix, Arizona-based NextBank, owned by struggling online credit card pioneer NextCard Inc. (NasdaqNM:NXCD - news), after required changes in its accounting for loan losses left it short of capital.
The Federal Deposit Insurance Corp. has been appointed receiver of the bank, which had assets of $700 million and total deposits of $554 million. Some $29 million of those deposits are uninsured, the FDIC said.
The closure of NextBank also represents another major blow for NextCard, which used the bank for its core business of instant, online credit card offers. NextCard officials could not immediately be reached for comment.
The company said in October U.S. regulators were requiring it to boost loan loss reserves, limit some kinds of lending and reclassify as loan losses some losses previously attributed to fraud. The changes left NextBank below minimum capital levels.
The OCC said it had stepped in after NextCard informed it that the bank could not be recapitalized or sold and that liquidation of its assets would not cover its liabilities.
``The OCC found that the bank would be unlikely to be able to pay its obligations or meet the demands of its depositors in the normal course of business,'' the agency said.
``The bank failed to achieve profitability, and the $300 million in capital that had been provided by the bank's parent company ... was dissipated through credit losses and high operating expenses,'' it said.
NextCard has previously said it was looking to put itself up for sale as losses grew and its stock tumbled. The company's shares, which have traded as high as $12.75 in the last year, closed at 14 cents on Thursday.
The FDIC said it had been unable to find a buyer for the bank's deposits and would begin paying out its insured depositors on Monday. NextBank had no branches and solicited only certificates of deposit of $100,000 or more.
The agency said it was still evaluating the bank's assets and had not yet estimated how much the fourth bank failure this year would end up costing federal deposit insurance funds. >>
Surely, someone can come up with one of those "priceless" tag lines for this fiasco. |
