NetBankFeds shut down Georgia bank.Sun Sep 30, 2007 17:00Feds shut down Georgia bank.
Feds shut down NetBank after big subprime defaults
Federal regulator have shut down Georgia-based NetBank because of subprime mortgage defaults the $2.5 billion online bank has suffered since last year.
The Federal Deposit Insurance Corp. said that Netherlands-based ING Bank, part of financial giant ING Groep, will assume $1.5 billion of NetBank's insured deposits
and that its customers would automatically be transferred to
ING. ING will also acquire $724 million in assets.
NetBank, based in the Atlanta suburb of Alpharetta, filed for
bankruptcy protection. It operated exclusively online.
The FDIC explained its action here, and offered more information for customers in a press release.
NetBank sustained significant losses last year "primarily due
to early payment defaults on loans sold, weak underwriting,
poor documentation, a lack of proper controls, and failed
business strategies," the Office of Thrift Supervision said
in a statement.
The Associated Press, Dow Jones Newswires, Atlanta
Journal-Constitution and Financial Times have more.
NetBank, sometimes called NetB@nk, was a financial company engaged primarily in retail banking, mortgage banking, business finance and providing ATM and merchant processing services. NetBank was founded in February 1996 and completed its initial public offering of stock in July 1997. It was one of the pioneers of the Internet banking industry, and recognized as one of the first internet-only banks.
Netbank was closed on September 28, 2007 by the Office of Thrift Supervision in conjunction with the Federal Deposit Insurance Corporation (FDIC). Several shareholders have filed class action lawsuits against Netbank claiming misrepresentation of the company value during the restructuring period. They claim that the stated book value of the company was nowhere near complete and that there were a number of issues that NetBank did not disclose to the investors as required by SEC guidelines.
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