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2nd UPDATE: US Federal Regulators Close NetBank
September 28, 2007: 04:58 PM EST
(Updates with more details, comment from analyst)
By Damian Paletta
Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- Federal regulators closed NetBank Inc.
(NTBK), a $2.5 billion thrift based in Alpharetta, Ga., on Friday
partly due to significant mortgage-related losses the company
sustained in 2006 and 2007.
NetBank marked the largest bank to fail since since the early 1990s,
which marked the end of the savings and loan crisis. The Office of
Thrift Supervision closed NetBank at 3 p.m. EDT, the federal regulator
said, and the company was immediately taken into receivership by the
Federal Deposit Insurance Corp.
The OTS said weak underwriting standards, failed business strategies,
and a lack of proper controls forced NetBank to suffer significant
losses starting in 2006.
"They had significant problems with respect to loan underwriting, poor
documentation, and a high amount of early payment defaults," OTS
spokesman Kevin Petrasic said. "All of those factors led to fairly
significant losses that increased substantially in 2007."
The OTS said NetBank's board of directors unsuccessfully tried to
orchestrate a private sale of the company.
"These efforts were unsuccessful, and the institution had no remaining
prospects for raising capital and achieving profitability," the OTS
said.
NetBank doesn't have branches, and its business model is based on
interacting with customers over the Internet.
Bank failures have become very rare because of recent strong
performance by the U.S. banking industry. But problems, particularly
related to mortgage lending, has put pressure on many financial
institutions, particularly smaller banks. For example, the FDIC said
last month that loans at least 90 days past due rose in the second
quarter by $11.4 billion, or 36%, compared with the second quarter of
2006.
"A couple of years ago, it was almost impossible for a bank to fail,"
said Jaret Seiberg, a financial services policy analyst at the
Stanford Group Co. " Today, that's no longer true."
For example, when Pittsburgh-based Metropolitan Savings Bank closed in
February, it marked the first bank failure since June 2004. And
Metropolitan Savings Bank held just $15.8 million of deposits, making
it one of the country's smallest financial institutions.
NetBank's closure marks the first bank to close since the recent U.S.
housing boom deflated. Critics have said that weak underwriting
standards have led to record number of homeowners entering the
foreclosure process. But NetBank's rare Internet-based business
strategy made it a unique financial institution and it's problems
aren't expected to mirror issues facing other mortgage lenders,
analysts say.
As of June 30, NetBank had close to $2.3 billion in total deposits and
1,229 employees, according to FDIC records. This was down from $2.7
billion in deposits and 2,343 employees on June 30, 2006.
The FDIC said ING Bank agreed to assume $1.5 billion of NetBank's
deposits and that NetBank customers would automatically become
customers of ING. ING assumed the deposits for a 1% premium and
purchased $724 million of assets, the FDIC said.
"Starting on the morning of Monday, October 1, customers will have
full access to their insured deposits via the Internet and for the
foreseeable future should continue to utilize NetBank's current Web
site to transact banking business," the FDIC said.
The FDIC also said, though, that NetBank had $109 million in 1,500
deposit accounts that exceeded the federal deposit insurance limit.
Earlier this month, a deal to sell NetBank to Jacksonville, Fla.-based
EverBank Financial Corp. fell through, according to a report in the
Florida Times-Union.
But the FDIC said Friday it had entered into a loan purchase agreement
with EverBank to purchase certain mortgages held by NetBank. For
example, EverBank plans to purchase $700 million in NetBank mortgages.
"The FDIC will retain the remaining $1.1 billion in assets for later
disposition, including NetBank's leasing division, NetBank Business
Finance, which will continue operations," the FDIC said. "Loan
customers should continue to make payments as usual."
NetBank's stock price traded around $15 a share in 2004, but it
declined and then fell below $5 a share in early 2007. Shares of
NetBank fell to $0.07, down $0.01, on Friday.
http://money.cnn.com/news/newsfeeds/articles/djf500/200709281658DOWJONESDJONLINE000790_FORTUNE5.htm
---------------------------------------
Welcome to the ING DIRECT family
On September 28th, ING DIRECT acquired NetBank's personal and business
savings, checking, IRAs and CD Customers. We want to welcome you to
ING DIRECT - the nation's largest direct bank and fourth largest
thrift (part of Netherlands-based ING Groep NYSE: ING).
We're looking forward to helping you save your money.
1. Who is ING DIRECT?
2. What does this mean for me?
3. What do I need to do?
4. How do I access my money?
5. Is my money safe?
6. If I have a question(s), who should I contact?
7. Once my account(s) is transferred to ING DIRECT, will I receive
additional information?
8. Will the interest rate change on my account(s)?
9. Can I open a new account?
1. Who is ING DIRECT?
Since launching in the U.S. in 2000, ING DIRECT, the operating name of
ING Bank, fsb, a federally chartered savings bank, has become the
nation's largest direct bank. More than 5.5 million Americans have
entrusted their savings with ING DIRECT, building the bank to $55
billion in deposits, $23 billion in mortgage loans and $75 billion in
assets.
ING DIRECT is a part of ING, one of the largest financial services
companies in the world. ING has over 112,000 employees operating in 50
countries with banking and insurance assets exceeding $600 billion.
2. What does this mean for me?
As a former NetBank Customer, your deposit account(s) will be
transitioned to ING DIRECT and you'll have access to the great bank
products and Customer service for which ING DIRECT has come to be
known. We anticipate a seamless transition for NetBank's Customers
into the ING DIRECT family.
3. What do I need to do?
As of right now, nothing. Simply access and manage your accounts the
same way you always have as a NetBank Customer. We will contact you
within the next 60 days to inform you of any updates and provide you
with all the information you will need, including a detailed welcome
kit.
http://www.ingdirect.com/netbank/
September 28, 2007: 04:58 PM EST
(Updates with more details, comment from analyst)
By Damian Paletta
Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- Federal regulators closed NetBank Inc.
(NTBK), a $2.5 billion thrift based in Alpharetta, Ga., on Friday
partly due to significant mortgage-related losses the company
sustained in 2006 and 2007.
NetBank marked the largest bank to fail since since the early 1990s,
which marked the end of the savings and loan crisis. The Office of
Thrift Supervision closed NetBank at 3 p.m. EDT, the federal regulator
said, and the company was immediately taken into receivership by the
Federal Deposit Insurance Corp.
The OTS said weak underwriting standards, failed business strategies,
and a lack of proper controls forced NetBank to suffer significant
losses starting in 2006.
"They had significant problems with respect to loan underwriting, poor
documentation, and a high amount of early payment defaults," OTS
spokesman Kevin Petrasic said. "All of those factors led to fairly
significant losses that increased substantially in 2007."
The OTS said NetBank's board of directors unsuccessfully tried to
orchestrate a private sale of the company.
"These efforts were unsuccessful, and the institution had no remaining
prospects for raising capital and achieving profitability," the OTS
said.
NetBank doesn't have branches, and its business model is based on
interacting with customers over the Internet.
Bank failures have become very rare because of recent strong
performance by the U.S. banking industry. But problems, particularly
related to mortgage lending, has put pressure on many financial
institutions, particularly smaller banks. For example, the FDIC said
last month that loans at least 90 days past due rose in the second
quarter by $11.4 billion, or 36%, compared with the second quarter of
2006.
"A couple of years ago, it was almost impossible for a bank to fail,"
said Jaret Seiberg, a financial services policy analyst at the
Stanford Group Co. " Today, that's no longer true."
For example, when Pittsburgh-based Metropolitan Savings Bank closed in
February, it marked the first bank failure since June 2004. And
Metropolitan Savings Bank held just $15.8 million of deposits, making
it one of the country's smallest financial institutions.
NetBank's closure marks the first bank to close since the recent U.S.
housing boom deflated. Critics have said that weak underwriting
standards have led to record number of homeowners entering the
foreclosure process. But NetBank's rare Internet-based business
strategy made it a unique financial institution and it's problems
aren't expected to mirror issues facing other mortgage lenders,
analysts say.
As of June 30, NetBank had close to $2.3 billion in total deposits and
1,229 employees, according to FDIC records. This was down from $2.7
billion in deposits and 2,343 employees on June 30, 2006.
The FDIC said ING Bank agreed to assume $1.5 billion of NetBank's
deposits and that NetBank customers would automatically become
customers of ING. ING assumed the deposits for a 1% premium and
purchased $724 million of assets, the FDIC said.
"Starting on the morning of Monday, October 1, customers will have
full access to their insured deposits via the Internet and for the
foreseeable future should continue to utilize NetBank's current Web
site to transact banking business," the FDIC said.
The FDIC also said, though, that NetBank had $109 million in 1,500
deposit accounts that exceeded the federal deposit insurance limit.
Earlier this month, a deal to sell NetBank to Jacksonville, Fla.-based
EverBank Financial Corp. fell through, according to a report in the
Florida Times-Union.
But the FDIC said Friday it had entered into a loan purchase agreement
with EverBank to purchase certain mortgages held by NetBank. For
example, EverBank plans to purchase $700 million in NetBank mortgages.
"The FDIC will retain the remaining $1.1 billion in assets for later
disposition, including NetBank's leasing division, NetBank Business
Finance, which will continue operations," the FDIC said. "Loan
customers should continue to make payments as usual."
NetBank's stock price traded around $15 a share in 2004, but it
declined and then fell below $5 a share in early 2007. Shares of
NetBank fell to $0.07, down $0.01, on Friday.
http://money.cnn.com/news/newsfeeds/articles/djf500/200709281658DOWJONESDJONLINE000790_FORTUNE5.htm
---------------------------------------
Welcome to the ING DIRECT family
On September 28th, ING DIRECT acquired NetBank's personal and business
savings, checking, IRAs and CD Customers. We want to welcome you to
ING DIRECT - the nation's largest direct bank and fourth largest
thrift (part of Netherlands-based ING Groep NYSE: ING).
We're looking forward to helping you save your money.
1. Who is ING DIRECT?
2. What does this mean for me?
3. What do I need to do?
4. How do I access my money?
5. Is my money safe?
6. If I have a question(s), who should I contact?
7. Once my account(s) is transferred to ING DIRECT, will I receive
additional information?
8. Will the interest rate change on my account(s)?
9. Can I open a new account?
1. Who is ING DIRECT?
Since launching in the U.S. in 2000, ING DIRECT, the operating name of
ING Bank, fsb, a federally chartered savings bank, has become the
nation's largest direct bank. More than 5.5 million Americans have
entrusted their savings with ING DIRECT, building the bank to $55
billion in deposits, $23 billion in mortgage loans and $75 billion in
assets.
ING DIRECT is a part of ING, one of the largest financial services
companies in the world. ING has over 112,000 employees operating in 50
countries with banking and insurance assets exceeding $600 billion.
2. What does this mean for me?
As a former NetBank Customer, your deposit account(s) will be
transitioned to ING DIRECT and you'll have access to the great bank
products and Customer service for which ING DIRECT has come to be
known. We anticipate a seamless transition for NetBank's Customers
into the ING DIRECT family.
3. What do I need to do?
As of right now, nothing. Simply access and manage your accounts the
same way you always have as a NetBank Customer. We will contact you
within the next 60 days to inform you of any updates and provide you
with all the information you will need, including a detailed welcome
kit.
http://www.ingdirect.com/netbank/
