NetBank

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NetBank, Inc.
FormerlyAtlanta Internet Bank (1996) and Net.B@nk (1998)
Company type
Public company
Nasdaq: NTBK (1997-2007)
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FateClosed by the Office of Thrift Supervision. Most of the deposits were acquired by ING Group.
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Headquarters
Alpharetta, Georgia
,
United States
Key people
Steven F. Herbert, CEO
ProductsRetail banking
Mortgage loans
Vehicle insurance
ServicesOnline banking
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NetBank, formerly named Atlanta Internet Bank (1996) and Net.B@nk (1998), was an American direct bank that operated between 1996 and 2007. Netbank suffered from bank failure and was closed by regulators on September 28, 2007.

Its deposits were acquired by ING Group and the Netbank.com domain name was acquired by Axos Financial.

History

Foundation and IPO

The company was founded in February 1996 as Atlanta Internet Bank, one of the first direct banks in the United States. Using a business model typical of direct banks, NetBank paid higher than average interest rates in exchange for not having physical bank branches.[1]

On July 29, 1997, NetBank Inc, completed its initial public offering, raising $42 million.[2]

In 1998, the company changed its name to Net.B@nk.[3]

In 1999, during the dot-com bubble, NetBank's stock price per share ranged from $3.50 to $83.[4]

2000-2006 Growth and acquisitions

In March 2001, the bank acquired deposit accounts from CompuBank.[5]

In July 2001, the bank acquired Market Street Mortgage.[6]

In 2002, the bank acquired Resource Bancshares Mortgage Group.[7] Douglas K. Freeman was appointed CEO of the company as of March 31, 2002 and was appointed chairman as of January 29, 2003.[8]

In November 2003, NetBank began offering vehicle insurance through sister company NetInsurance and began offering direct consumer auto loans through Florida auto dealerships.[9] In December 2003, NetBank acquired Financial Technologies Inc., a provider of ATMs and retail transaction processing services.[10]

In July 2004, NetBank acquired the assets of Beacon Credit Services, a provider of recreational vehicle, boat, and aircraft financing.[11][12]

NetBank reported a loss in 2005 as a result of a provision for bad loans.[13]

In 2006, Netbank began offering check deposit services via The UPS Store.[14]

2006 - 2007 Lead up to failure

In 2006, NetBank lowered its documentation and underwriting standards to increase loan production. NetBank sold many of its loans to other investors, with the loans being partially recourse to NetBank. In 2006, NetBank was forced to repurchase $182 million in bad loans that it sold previously.[1]

In November 2006, the company's independent auditor, Ernst & Young, resigned.[15]

For the full year 2006, the company reported a $202 million loss.[16]

On May 1, 2007, the company sold NetBank Payment Systems, its ATM and merchant-servicing operation.[17]

On May 21, 2007, NetBank reached an agreement to sell its core banking operation to EverBank.[18] All accounts were to have been transferred by September 15, 2007, but the deal depended on NetBank coming up with some cash, which it expected to realize from the sale of other investments. NetBank was unable to sell those investments, and on September 17, 2007, EverBank terminated the agreement.[15]

On May 15, 2007, NetBank received a warning from the NASDAQ because it was late in filing its quarterly report. NetBank received a similar notice from Nasdaq in March 2007 because it did not file its 2006 annual report on time as a result of the resignation of its auditor.[15]

In February 2007, NetBank hired Porter Keadle Moore LLP as its new independent auditor and said it planned to file the annual and quarterly reports by the end of June 2007.[19][20]

On July 3, 2007, NetBank Inc. received a deficiency notice from the NASDAQ because its stock for the previous 30 consecutive business days failed to close above the minimum bid price of $1 per share.[21] On August 3, it was delisted from the Nasdaq.

2007 - Closure and aftermath

On September 28, 2007, the Office of Thrift Supervision (OTS) announced that it had closed NetBank in conjunction with the Federal Deposit Insurance Corporation.[22] The shutdown was the biggest failure of a savings and loan association since the savings and loan crisis in the 1980s.[23] It was also the biggest bank failure in Georgia.[24] All of its customers, including its $1.4 billion in FDIC-insured deposits, as well as some loan assets, were sold to ING Group for $14 million.[25][26]

Customers with balances exceeding the FDIC limit received 50% of the excess balance and became creditors in the bank's receivership for the remainder.[27]

In November 2007, NetBank Inc., parent of the savings-and-loan, filed for bankruptcy protection and announced intentions to liquidate, including selling its real estate in Columbia, South Carolina as well as its captive insurance subsidiary M.G. Reinsurance Inc. Federal savings and loan associations are prohibited from filing for bankruptcy protection and must be liquidated by the FDIC.[28]

A class action lawsuit was filed by former shareholders against certain officers and directors of the company alleging that they inflated the stock price by making misleading statements. The lawsuits were settled in November 2011 for $12.5 million.[29]

References

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  1. ^ a b Page Module:Citation/CS1/styles.css has no content."SAFETY AND SOUNDNESS: Material Loss Review of NetBank, FSB (OIG-08-032)" (PDF). United States Department of the Treasury. April 23, 2008.
  2. ^ Page Module:Citation/CS1/styles.css has no content."NETBANK INC (NTBK) IPO". NASDAQ.
  3. ^ Page Module:Citation/CS1/styles.css has no content."Atlanta Internet Bank to become Net.B@nk". American City Business Journals. August 10, 1998.
  4. ^ Page Module:Citation/CS1/styles.css has no content.Molis, Jim (October 11, 1999). "Net bank stocks buckle down for the long haul". American City Business Journals.
  5. ^ Page Module:Citation/CS1/styles.css has no content."NetBank acquires CompuBank deposit accounts". American City Business Journals. March 30, 2001.
  6. ^ Page Module:Citation/CS1/styles.css has no content."NetBank completes Market Street Mortgage acquisition". American City Business Journals. July 2, 2001.
  7. ^ Page Module:Citation/CS1/styles.css has no content."NetBank, Inc. FORM 8-K". U.S. Securities and Exchange Commission. April 5, 2002.
  8. ^ Page Module:Citation/CS1/styles.css has no content."NETBANK, INC. Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934". U.S. Securities and Exchange Commission. March 28, 2003.
  9. ^ Page Module:Citation/CS1/styles.css has no content."NetBank Launches Homeowners Insurance Through Sister Company NetInsurance, Inc.; Consumers Now Have Easy Access to Insurance Products for the Home and Auto from Top Providers" (Press release). Business Wire. November 10, 2003.
  10. ^ Page Module:Citation/CS1/styles.css has no content."NetBank, Inc. Completes Acquisition of Financial Technologies, Inc.; Acquisition is Part of Company's Revenue Diversification Strategy" (Press release). Business Wire. December 8, 2003.
  11. ^ Page Module:Citation/CS1/styles.css has no content."NetBank, Inc. Completes Deal with Beacon Credit Services" (Press release). Business Wire. July 2, 2004.
  12. ^ Page Module:Citation/CS1/styles.css has no content."NetBank to buy Beacon Credit Services". American City Business Journals. June 11, 2004.
  13. ^ Page Module:Citation/CS1/styles.css has no content."NetBank, Inc. Reports Financial Results for Third Quarter; Loss of $.03 per Share Based on $3.5 Million Provision Related to Previously Identified Issues on a Limited Group of Loans" (Press release). Business Wire. November 14, 2005.
  14. ^ Page Module:Citation/CS1/styles.css has no content."Financial Technologies, Inc. Adds ebank to QuickPost Deposit and Payment Forwarding Service" (Press release). Globe Newswire. March 9, 2006.
  15. ^ a b c Page Module:Citation/CS1/styles.css has no content."IN RE NETBANK, INC. SECURITIES LITIGATION" (PDF). July 3, 2008.
  16. ^ Page Module:Citation/CS1/styles.css has no content."NetBank annual loss reaches $202 million". American City Business Journals. February 21, 2007.
  17. ^ Page Module:Citation/CS1/styles.css has no content."Payment Alliance International Acquires NetBank Payment Systems" (PDF) (Press release). Payment Alliance International. May 7, 2007.
  18. ^ Page Module:Citation/CS1/styles.css has no content."NetBank Reaches Agreement With EverBank for Sale of Select Assets and Assumption of Deposit Liabilities" (Press release). GlobeNewswire. May 21, 2007.
  19. ^ Page Module:Citation/CS1/styles.css has no content.Wolfe, Daniel (February 22, 2007). "Despite Revamp, NetBank Will Stay in Red This Quarter". American Banker.
  20. ^ Page Module:Citation/CS1/styles.css has no content."NetBank warned of delisting". American City Business Journals. March 23, 2007.
  21. ^ Page Module:Citation/CS1/styles.css has no content."NetBank, Inc. Receives NASDAQ Deficiency Notice" (Press release). Globe Newswire. July 9, 2007.
  22. ^ Page Module:Citation/CS1/styles.css has no content."FDIC: Bank Closing Information for NetBank". Federal Deposit Insurance Corporation. September 28, 2007.
  23. ^ Page Module:Citation/CS1/styles.css has no content."Online Bank Fails and Regulators Shut It". The New York Times. Associated Press. September 29, 2007.
  24. ^ Page Module:Citation/CS1/styles.css has no content.Rauch, Joe (August 10, 1998). "NetBank closed by feds in 2007". American City Business Journals.
  25. ^ Page Module:Citation/CS1/styles.css has no content."ING DIRECT Acquires Deposits of NetBank" (Press release). Business Wire. September 28, 2007.
  26. ^ Page Module:Citation/CS1/styles.css has no content."ING wins from online bank failure". BBC. September 30, 2007.
  27. ^ Page Module:Citation/CS1/styles.css has no content.Rosencrance, Linda (October 1, 2007). "FDIC shuts down NetBank". Computer World.
  28. ^ Page Module:Citation/CS1/styles.css has no content.Stempel, Jonathan (November 26, 2007). "NetBank says to liquidate in bankruptcy". Reuters.
  29. ^ Page Module:Citation/CS1/styles.css has no content.Palmer, Roxanne (November 9, 2011). "Judge Clears $12.5M Deal In NetBank Investors' Suit". Law360.

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