NetBank, formerly named Atlanta Internet Bank (1996) and Net.B@nk (1998), was a

direct bank A direct bank (sometimes called a branch-less bank or virtual bank) is a bank that offers its services only via the Internet, email, and other electronic means, often including telephone, online chat, and mobile check deposit. A direct bank has no ...

. Netbank suffered from

bank failure A bank failure occurs when a bank is unable to meet its obligations to its depositors or other creditors because it has become insolvent or too illiquid to meet its liabilities. A bank usually fails economically when the market value of its assets ...

and was closed by regulators on September 28, 2007. It deposits were acquired by

ING Group The ING Group ( nl, ING Groep) is a Dutch multinational banking and financial services corporation headquartered in Amsterdam. Its primary businesses are retail banking, direct banking, commercial banking, investment banking, wholesale bankin ...

and the Netbank.com domain name was acquired by Axos Financial.

History

The company was founded in February 1996 as Atlanta Internet Bank, one of the first

s 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. On July 29, 1997, NetBank Inc, completed its

initial public offering An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investment ...

, raising $42 million. In 1998, the company changed its name to Net.B@nk. In 1999, during the

dot-com bubble The dot-com bubble (dot-com boom, tech bubble, or the Internet bubble) was a stock market bubble in the late 1990s, a period of massive growth in the use and adoption of the Internet. Between 1995 and its peak in March 2000, the Nasdaq Compo ...

, NetBank's stock price per share ranged from $3.50 to $83. In March 2001, the bank acquired deposit accounts from

CompuBank CompuBank, N.A. was a financial company engaged primarily in retail banking, mortgage banking, business finance and providing ATM and merchant processing services. CompuBank was founded in 1998 by banking veteran Frank Goldberg and launched on th ...

. In July 2001, the bank acquired Market Street Mortgage. In 2002, the bank acquired Resource Bancshares Mortgage Group. Douglas K. Freeman was appointed CEO of the company as of March 31, 2002 and was appointed chairman as of January 29, 2003. In November 2003, NetBank began offering

vehicle insurance Vehicle insurance (also known as car insurance, motor insurance, or auto insurance) is insurance for cars, trucks, motorcycles, and other road vehicles. Its primary use is to provide financial protection against physical damage or bodily injury r ...

through sister company NetInsurance and began offering direct consumer auto loans through Florida auto dealerships. In December 2003, NetBank acquired Financial Technologies Inc., a provider of ATMs and retail transaction processing services. In July 2004, NetBank acquired the assets of Beacon Credit Services, a provider of recreational vehicle, boat, and aircraft financing. NetBank reported a loss in 2005 as a result of a provision for bad loans. In 2006, Netbank began offering check deposit services via

The UPS Store The UPS Store (formerly Mail Boxes Etc.) is a subsidiary of United Parcel Service which provides, according to its website, shipping, shredding, printing, fax, passport photos, personal and business mailboxes, and notary services. Histor ...

. 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. In November 2006, the company's independent auditor,

Ernst & Young Ernst & Young Global Limited, trade name EY, is a multinational professional services partnership headquartered in London, England. EY is one of the largest professional services networks in the world. Along with Deloitte, KPMG and Pricewaterh ...

, resigned. For the full year 2006, the company reported a $202 million loss. On May 1, 2007, the company sold NetBank Payment Systems, its ATM and merchant-servicing operation. On May 21, 2007, NetBank reached an agreement to sell its core banking operation to

EverBank EverBank, now TIAA Bank, is an American diversified financial services company providing banking, mortgages, and investment, investing services. It is based in Jacksonville, Florida, U.S. It operates through standard banking offices and through i ...

. 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. On May 15, 2007, NetBank received a warning from the

NASDAQ The Nasdaq Stock Market () (National Association of Securities Dealers Automated Quotations Stock Market) is an American stock exchange based in New York City. It is the most active stock trading venue in the US by volume, and ranked second ...

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. 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. On July 3, 2007, NetBank Inc. received a deficiency notice from the

because its stock for the previous 30 consecutive business days failed to close above the minimum bid price of $1 per share. On August 3, it was delisted from the Nasdaq. On September 28, 2007, the

Office of Thrift Supervision The Office of Thrift Supervision (OTS) was a List of federal agencies in the United States, United States federal agency under the United States Department of the Treasury, Department of the Treasury that chartered, supervised, and regulated all ...

(OTS) announced that it had closed NetBank in conjunction with the

Federal Deposit Insurance Corporation The Federal Deposit Insurance Corporation (FDIC) is one of two agencies that supply deposit insurance to depositors in American depository institutions, the other being the National Credit Union Administration, which regulates and insures cred ...

. The shutdown was the biggest failure of a

savings and loan association A savings and loan association (S&L), or thrift institution, is a financial institution that specializes in accepting savings deposits and making mortgage and other loans. The terms "S&L" or "thrift" are mainly used in the United States; simi ...

since the savings and loan crisis in the 1980s. It was also the biggest bank failure in Georgia. All of its customers, including its $1.4 billion in FDIC-insured deposits, as well as some loan assets, were sold to

for $14 million. Customers with balances exceeding the FDIC limit received 50% of the excess balance and became creditors in the bank's receivership for the remainder. In November 2007, NetBank Inc., parent of the savings-and-loan, filed for

bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor ...

protection and announced intentions to liquidate, including selling its real estate in

Columbia, South Carolina Columbia is the capital of the U.S. state of South Carolina. With a population of 136,632 at the 2020 census, it is the second-largest city in South Carolina. The city serves as the county seat of Richland County, and a portion of the city ...

as well as its

captive insurance Captive insurance is an alternative to self-insurance in which a parent group or groups create a licensed insurance company to provide coverage for itself. The main purpose of doing so is to avoid using traditional commercial insurance companies, ...

subsidiary M.G. Reinsurance Inc. Federal savings and loan associations are prohibited from filing for bankruptcy protection and must be liquidated by the FDIC. 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.

References

External links

Netbank: The Conservative Internet Entrepreneurs (teaching case)
{{DEFAULTSORT:Netbank 1996 establishments in Georgia (U.S. state) 1997 initial public offerings 2007 disestablishments in Georgia (U.S. state) Banks disestablished in 2007 Bank failures in the United States Banks established in 1996 Defunct banks of the United States Defunct companies based in Georgia (U.S. state) Online financial services companies of the United States Online banks Banks based in Georgia (U.S. state) Companies that filed for Chapter 11 bankruptcy in 2007