NetBank
NetBank was an American branchless bank that operated from 1996 until regulators closed it in 2007.
Last updated August 31, 2026
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Overview
NetBank was an American direct bank and savings-and-loan institution that operated from 1996 to 2007. It began as Atlanta Internet Bank in February 1996, when branchless banking was still an emerging business model. The institution sought to compete with conventional banks by operating without a large physical branch network, allowing it to offer relatively attractive deposit rates and conduct much of its business through digital and remote channels. In 1998, it adopted the stylized name Net.B@nk, later generally known as NetBank. The company completed an initial public offering on July 29, 1997, raising $42 million. During the late-1990s technology boom, its shares experienced substantial volatility, reflecting investor enthusiasm for Internet-based financial services. NetBank subsequently expanded beyond basic online deposits. It acquired deposit accounts from CompuBank in 2001, bought Market Street Mortgage later that year, and acquired Resource Bancshares Mortgage Group in 2002. These transactions increased its mortgage and lending exposure and broadened the institution's business beyond its original direct-bank proposition. During the early and middle 2000s, NetBank added a range of adjacent financial services. Through sister company NetInsurance, it began offering vehicle insurance in 2003 and also entered direct consumer auto lending through Florida dealerships. It acquired Financial Technologies Inc., an ATM and retail transaction-processing provider, in December 2003, and purchased the assets of Beacon Credit Services in 2004, adding financing for recreational vehicles, boats, and aircraft. In 2006, it began offering check-deposit services through The UPS Store. These initiatives reflected an effort to build a wider financial-services platform around the bank. The expansion was accompanied by worsening credit and governance problems. In 2005, NetBank reported a loss connected with a provision for bad loans. In 2006, it lowered documentation and underwriting standards in an effort to increase loan production. It sold many loans to outside investors while retaining partial recourse obligations, and was subsequently required to repurchase $182 million of previously sold loans that had become impaired. The bank reported a $202 million loss for 2006. Its independent auditor, Ernst & Young, resigned in November 2006, contributing to delayed regulatory filings and growing market concern. NetBank attempted to dispose of noncore operations and sell its core banking business in 2007. It sold NetBank Payment Systems in May and reached an agreement to sell the core operation to EverBank, but the transaction depended on NetBank raising cash through other asset sales. Those sales did not materialize, and EverBank terminated the agreement on September 17, 2007. NetBank also received repeated Nasdaq compliance notices concerning late filings and, later, its share price. Its stock was delisted on August 3, 2007. On September 28, 2007, the Office of Thrift Supervision closed NetBank in coordination with the Federal Deposit Insurance Corporation. The bank's approximately $1.4 billion of FDIC-insured deposits and certain loan assets were transferred to ING Group for $14 million. Customers with balances above the FDIC insurance limit received only part of their excess immediately and became creditors for the remainder. The parent company filed for bankruptcy protection in November 2007 and planned to liquidate remaining assets, although federal savings-and-loan institutions themselves are handled through regulatory receivership rather than ordinary bankruptcy. NetBank's collapse made it the largest savings-and-loan failure since the 1980s savings-and-loan crisis and the largest bank failure in Georgia at that time. A shareholder class action alleging misleading statements by officers and directors was settled in 2011 for $12.5 million.
History
NetBank originated in February 1996 as Atlanta Internet Bank, one of the earliest American direct banks. Its operating model avoided the cost of a traditional branch network and used remote channels to attract deposits, including by offering interest rates that could be more competitive than those of conventional institutions. The company went public in July 1997, raising $42 million, and changed its name to Net.B@nk in 1998. Its shares became highly volatile during the dot-com period. The institution pursued expansion through acquisitions and adjacent services. It acquired CompuBank deposit accounts and Market Street Mortgage in 2001, followed by Resource Bancshares Mortgage Group in 2002. These transactions made mortgage lending an important part of the business. In 2003, NetBank added vehicle insurance through sister company NetInsurance and began offering consumer auto loans through Florida dealerships. It also acquired Financial Technologies Inc., expanding into ATMs and retail transaction processing. In 2004, the assets of Beacon Credit Services added recreational-vehicle, boat, and aircraft financing. NetBank later introduced check-deposit services through The UPS Store. Credit quality deteriorated as the company expanded its lending. NetBank recorded a loss in 2005 because of provisions for bad loans. In 2006, it relaxed documentation and underwriting standards to stimulate loan production. The institution sold many loans to investors but retained partial recourse, leaving it exposed when those loans performed poorly. It was forced to repurchase $182 million in bad loans sold previously and reported a $202 million loss for 2006. Ernst & Young resigned as independent auditor in November 2006. NetBank appointed Porter Keadle Moore LLP as its replacement auditor in February 2007 and indicated that it intended to bring its delayed filings up to date. NetBank's financial deterioration also triggered market and regulatory pressure. Nasdaq issued notices over delayed annual and quarterly reports and later over the company's share price. NetBank sold its payment-systems business on May 1, 2007, and agreed on May 21 to sell its core banking operation to EverBank. The proposed transfer depended on NetBank raising cash through sales of other investments. When those sales failed to provide the required funds, EverBank terminated the agreement on September 17. The Office of Thrift Supervision closed NetBank on September 28, 2007, acting with the FDIC. ING Group acquired the bank's approximately $1.4 billion of insured deposits and selected loan assets for $14 million. Depositors whose balances exceeded federal insurance limits received only part of the excess and became creditors in the receivership for the balance. The failure was described as the largest savings-and-loan failure since the 1980s crisis and the largest bank failure in Georgia at that time. In November 2007, NetBank's parent company sought bankruptcy protection and announced plans to liquidate remaining assets, including real estate and a captive insurance subsidiary. The NetBank.com domain was later acquired by Axos Financial. A former-shareholder class action concerning alleged misleading statements by company officers and directors ended in a $12.5 million settlement in November 2011.
- 2011
Shareholder class action settlement
[1]A former-shareholder lawsuit concerning alleged misleading statements is settled for $12.5 million.
- 2007
Nasdaq delisting and regulatory closure
[1]NetBank is delisted in August and closed by regulators on September 28.
- 2006
Major losses and auditor resignation
[1]The bank reports a $202 million loss for the year, while Ernst & Young resigns as independent auditor.
- 2002
Resource Bancshares Mortgage Group acquired
[1]NetBank acquires Resource Bancshares Mortgage Group and deepens its mortgage operations.
- 2001
Deposit and mortgage expansion
[1]NetBank acquires CompuBank deposit accounts and Market Street Mortgage.
- 1998
Name changes to Net.B@nk
[1]The company adopts the Net.B@nk name.
- 1997
Initial public offering
[1]NetBank Inc. completes an IPO on July 29 and raises $42 million.
- 1996
Atlanta Internet Bank is founded
[1]The institution is established in February as Atlanta Internet Bank, an early American direct bank.
Products and positioning
A technology-oriented, branchless American bank that used remote distribution and a lower physical-overhead model to compete for deposits, while later expanding into mortgage lending and adjacent consumer and payment services.
Retail banking · 1996
Direct deposit accounts
NetBank's original core offering was branchless banking. Customers accessed deposit services through remote and electronic channels rather than a conventional branch network. The lower physical-infrastructure model supported the bank's effort to attract deposits with comparatively high interest rates.
Lending · 2001
Mortgage lending
Mortgage lending became a major part of NetBank after its acquisitions of Market Street Mortgage and Resource Bancshares Mortgage Group. The mortgage strategy increased loan production and broadened the company beyond online deposits, but also exposed it to credit losses and loan-repurchase obligations.
Consumer finance · 2003
Consumer auto loans
NetBank entered direct consumer auto lending in 2003, distributing loans through Florida automobile dealerships. The offering formed part of the institution's broader attempt to extend its direct-finance model into consumer credit.
Insurance · 2003
Vehicle insurance
Through sister company NetInsurance, NetBank began offering vehicle insurance in 2003. The service complemented its auto-finance activities and represented an expansion into related financial products.
Specialty lending · 2004
Specialty recreational financing
The acquisition of Beacon Credit Services assets in 2004 added financing for recreational vehicles, boats, and aircraft. These products extended NetBank's lending portfolio into specialized consumer and asset-finance categories.
Payment services · 2003
ATM and retail transaction processing
Financial Technologies Inc. supplied ATM and retail transaction-processing capabilities acquired by NetBank in 2003. The operation was later associated with NetBank Payment Systems, which the company sold in 2007.
Controversies
2011
Former-shareholder class action settlement
Former shareholders filed a class action alleging that certain officers and directors inflated the company's stock price through misleading statements. The litigation was settled in November 2011 for $12.5 million.
2007
Bank failure and regulatory closure
Regulators closed NetBank after its losses, funding difficulties, compliance problems, and failed sale process left the institution unable to continue independently.
2006
Underwriting deterioration and loan repurchases
NetBank lowered documentation and underwriting standards to increase loan production, then had to repurchase $182 million in previously sold bad loans. The episode contributed to substantial losses and was part of the institution's wider financial deterioration.
Brand decisions
2007
Proposed sale of core banking operation to EverBankM&ABackground
NetBank needed liquidity and attempted to sell its core banking operation after disposing of selected noncore assets.
Action taken
NetBank agreed to sell the core banking operation to EverBank, subject to its ability to raise cash through other investment sales.
Aftermath
The required asset sales did not occur, and EverBank terminated the agreement on September 17. NetBank was closed by regulators eleven days later.
2007
Transfer of deposits and selected assets to ING GroupM&ABackground
The FDIC and the Office of Thrift Supervision arranged a resolution after NetBank's closure.
Action taken
ING Group acquired NetBank's approximately $1.4 billion in FDIC-insured deposits and some loan assets.
Aftermath
The transaction allowed insured customers to be transferred while customers with uninsured excess balances became receivership creditors for the unpaid remainder.
Purchase price. $14 million (September 28, 2007)
2006
Relaxation of lending standardsStrategyBackground
NetBank sought to increase loan production while operating in a deteriorating credit environment.
Action taken
The bank lowered documentation and underwriting standards and sold many loans to investors with partial recourse retained by NetBank.
Aftermath
NetBank was forced to repurchase $182 million in bad loans and reported a $202 million loss for 2006.
Bad loans repurchased. $182 million (2006)
Recent events
Netbank introduces payments service for digital commerce[2]
Reported:
Netbank introduced a service that enables international payment firms to support transactions in the Philippines.
Sources2 sources
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