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Online bank NetBank closed by U.S. regulators

FDIC to oversee customers' access to insured funds

By Robert Schroeder, MarketWatch

WASHINGTON (MarketWatch) --

U.S. banking regulators shut down a Georgia-based online bank on Friday due to high levels of mortgage-related losses.

The Office of Thrift Supervision closed down NetBank Inc. (NTBK:

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NTBK, , ) , a thrift with $2.5 billion in assets, and appointed the Federal Deposit Insurance Corp. as receiver.

The OTS said the bank experienced significant losses beginning in 2006 due to defaults on loans sold, weak underwriting, poor documentation, a lack of proper controls and failed business strategies.

It was only the second bank failure in the past three years.

The FDIC said ING Bank has agreed to assume $1.5 billion of the failed bank's insured deposits.

NetBank had about $109 million in 1,500 deposit accounts that exceeded the federal deposit insurance limit of $100,000. Those customers will become creditors of NetBank's receivership, the FDIC said.

FDIC Chairman Sheila Bair said NetBank customers should have confidence that they will have access to insured funds "in a timely and orderly manner."

The bank did not have any physical branches and was an Internet-only institution, the FDIC said. Depositors of NetBank will automatically become depositors of ING Bank, the regulator said.

The president of the American Bankers Association said the expected losses from the FDIC's insurance fund amount to only two-tenths of 1 percent of the $52 billion fund.

"Insured depositors should know that their money is safe," said ABA president Edward Yingling in a statement.

From MarketWatch.com

Dow 5000

Online bank NetBank closed by U.S. regulators

FDIC to oversee customers' access to insured funds

U.S. banking regulators shut down a Georgia-based online bank on Friday due to high levels of mortgage-related losses.