Regulators Close Troubled NetBank
American Banker |
By Joe Adler

WASHINGTON — The Office of Thrift Supervision announced on Friday that it had closed NetBank. The shutdown marked the biggest failure of a depository institution since the savings and loan crisis.

The OTS appointed the Federal Deposit Insurance Corp. as the conservator for the $2.5 billion-asset Alpharetta, Ga., thrift, which had about $2.3 billion of deposits as of June 30.

NetBank, which had suffered a high mortgage exposure and failed bids to sell off nonperforming units, was the largest institution to fail in 15 years. Meritor Savings Bank of Philadelphia failed in December 1992 with $4.1 billion of assets and $2.9 billion of deposits.

The thrift, which specialized in Internet banking, was shut due to “early payment defaults on loans sold, weak underwriting, poor documentation, a lack of proper controls, and failed business strategies,” the OTS said.

“As a result, the OTS executed a formal enforcement action with NetBank in 2006 directing the institution to correct its operating deficiencies and enhance its capital position,” the OTS said. “While the institution continued to operate in excess of minimum capital standards, the actions taken to address these problems were unsuccessful and it became clear that high operating expenses combined with continuing losses were jeopardizing the institution’s viability.”

The OTS said it shut the thrift after NetBank’s efforts to sell to EverBank Financial Corp. fell through last week.

“The institution had no remaining prospects for raising capital and achieving profitability,” the OTS said. “Accordingly, the OTS exercised its authority under the Home Owners’ Loan Act to appoint the FDIC as receiver of the institution.”