bank net.b nk . for the online service of commonwealth bank see commonwealth bank . for the current netbank brand see bofi federal bank . netbank inc. traded as nasdaq ntbk industry finance fate closed by the office of thrift supervision . most of the deposits acquired by ing direct founded 1996 defunct 2007 headquarters alpharetta georgia united states key people steven f. herbert ceo products retail banking mortgage banking business finance website www.netbank.com netbank formerly named atlanta internet bank 1996 and net.b nk 1998 1 was a financial company engaged primarily in retail banking mortgage banking business finance and providing atm and merchant processing services . netbank was founded in february 1996 and completed its initial public offering of stock in july 1997 . it was one of the pioneers of the internet banking industry and recognized as one of the first direct banks in the united states . its headquarters was in suite 100 of the royal centre three in alpharetta georgia . 2 netbank was closed on september 28 2007 by the office of thrift supervision ots in conjunction with the federal deposit insurance corporation fdic . fdic insured deposits were acquired by another virtual bank ing direct . several shareholders have filed class action lawsuits against netbank claiming misrepresentation of the company value during the restructuring period . in 2012 the netbank name and domain were sold to bofi federal bank by capital one which had acquired them as part of the ing direct usa purchase . 3 bofi created a new unrelated bank using the netbank name and domain aimed at the unbanked . 4 contents 1 history 1.1 beginning 1.2 growth 1.3 decline 2 business model 2.1 retail banking 2.2 financial intermediary 2.3 transaction processing 3 criticism 4 see also 5 references 6 external links history edit beginning edit netbank was founded in 1996 as one of the nation s first internet only banks . using a new business model netbank paid higher interest rates for computer savvy customers in exchange for not having physical bank branches . this model made sense and the bank early on paid very nice interest rates . netbank made its money from a mortgage and lending operation . the majority of home loans were offered through traditional channels and a small percentage of loans were offered through the same internet channels as the banking offerings . netbank obtained customers by offering some sort of sign on bonus . a 50 bonus was a common bonus . netbank signed many agreements with other companies to promote itself and the companies would offer gift certificate or credit to their loyalty programs i.e. frequent flyer programs equivalent to around 50 . these customer acquisition programs proved beneficial and netbank gained many customers in this manner . growth edit starting in the early 2000s netbank acquired a number of financial related companies to diversify and improve the bottom line . in 2000 netbank added the following products and services online safe deposit boxes for safe storage of electronic records individual retirement accounts and expanded customer support online chat and 24x7 availability . in 2001 netbank acquired resource bancshares mortgage group a leading provider of mortgage banking services . an online currency program was launched . and netbank acquired market street mortgage a leading provider of home mortgage to american consumers . the same year also brought a change in management to netbank . a new ceo douglas k. freeman was appointed to head and manage the company . freeman came from rbmg and had a background in mortgages rather than banking . in 2003 netbank added a number of business and product lines netbank expanded into automobiles by offering auto insurance through sister company netinsurance and direct consumer auto loans through florida auto dealerships . netbank also acquired what became netbank payment systems a provider of off premises atm and merchant processing services . a number of atms were acquired in this acquisition . finally netbank also launched a small business banking program . in 2004 netbank continued adding new product lines and acquired additional companies . netbank acquired the assets of beacon credit services a leading provider of rv boat and aircraft financing . they added business credit cards internet payroll services prepaid visa gift cards and expanded financial planning services . in response to customer concerns about mailing in deposits netbank launched financial technologies inc fti whose primary product was quickpost where deposits are shipped overnight from ups stores to netbank for processing . netbank reached the peak of the operation at the end of 2004 and through 2005 . the rapid expansion into multiple lines of businesses may have proved to be too much too soon for netbank and it started to lose money in 2005 . in 2005 netbank suffered some setbacks due to the cyclical nature of the mortgage industry and did not add any businesses or products to their line instead choosing to preserve capital until the mortgage curve righted itself and they could resume earning profit from the mortgage businesses . they also introduced a tiered deposit system where they paid the highest interest rates to people who also were customers of their other products home or auto loan savings account or cd and the lowest interest rate to people that only had a savings or checking account . the intent was to better cross sell the products and help transition the banking customers to the other platforms . many customers were turned off by the tiered system because netbank s auto loan rates were higher than other banks and many people didn t choose to have autoloans through netbank . decline edit in 2006 netbank recognized that there were some significant operating deficiencies and started to restructure the company in an effort to resume profitability . they shuttered a number of businesses and sold off most businesses that were not shuttered . some of the shuttered companies included fti payroll and finance services non auto rv boat and aircraft loans and the subprime non conforming mortgage companies . the large network of atms were sold off to other companies . the independent auditor ernst and young resigned in 2006 . during the same year netbank s mortgage operations suffered greatly . netbank normally originated loans and resold the loans to other financial institutions on the open markets . some of the loans that netbank sold did not meet the underwriting guidelines and netbank was forced to repurchase these loans from the other banks . since the loans that did not meet the underwriting guidelines were often past due loans netbank was forced to repurchase a large number of failed loans that it had written . this loss of capital was very harmful to the company s equity position and was the first clue to the bank s poor financial position . in 2007 netbank finally recognized that the restructuring attempt was unsuccessful and the company announced an intention to shut down the company starting in spring 2007 . in may 2007 netbank reached an agreement to sell its core banking operation to everbank . 5 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 proved unable to sell those investments 6 and on september 17 2007 everbank terminated the agreement . 7 on may 1 2007 the atm and merchant servicing operation netbank payment systems inc was sold to pai atm services llc a subsidiary of payment alliance international inc. on may 15 2007 the listed holding company netbank inc. received a warning from the nasdaq stock market because it was late in filing its most recent quarterly report . netbank received a similar notice from nasdaq in march 2007 because it did not file its 2006 annual report on time . the report was delayed because the company needed to find a new independent auditor following the resignation of ernst & young llp in november . netbank hired porter keadle moore llp as its new independent auditor in february . netbank said it planned to file the annual and quarterly reports by the end of june 2007 . 8 on july 3 2007 netbank inc. received a deficiency notice from the nasdaq stock market because its stock for the previous 30 consecutive business days failed to close above the minimum bid price of 1 per share . 9 on august 3 it was delisted from the nasdaq . on september 28 2007 the office of thrift supervision ots announced that it had closed netbank . 10 the shutdown marked the biggest failure of a savings and loan association since the savings and loan crisis in the 1980s . 11 1.4 billion in fdic insured deposits as well as some loan assets were sold to ing direct for 14 million . 12 13 14 ing direct also took on 104 000 netbank customers as part of the deal . 15 customers with balances exceeding the fdic limit have received 50 % of the excess balance and became creditors in the bank s receivership for the remainder . 16 netbank inc. parent of the savings and loan filed for chapter 11 reorganization bankruptcy protection and announced intentions to sell columbia south carolina real estate it owns as well as its captive reinsurance subsidiary m.g. reinsurance inc. 17 federal savings and loan associations are prohibited from filing for bankruptcy protection and must be liquidated by the fdic . 17 business model edit the closed netbank s former business model had several strategies retail and business banking financial intermediary and transaction processing . all of the bank s operations and assets were located within the united states of america . retail banking edit the retail banking segment consisted of personal and small business banking operations . the major products and services offered through the retail banking segment included individual and small business deposit accounts mortgages home equity loans and lines of credit auto loans business equipment financing financial planning and investment services online bill payment and visa check and credit cards . netbank through its internet banking operations operated as an fdic insured federally chartered thrift institution serving approximately 286 thousand customers throughout the united states and in more than 90 foreign countries . netbank delivered its products and services through remote delivery channels such as the internet telephone and atms that are available 24 hours a day and seven days a week . it did not maintain a branch network to support its banking business . the branchless model provided an opportunity to operate with less overhead expense than traditional branch banks . customers initially relied on direct deposit and first class mail to make deposits into their accounts supplemented later by quickpost free deposit drop off at ups stores for overnight delivery to netbank and atm deposits . financial intermediary edit netbank also offered several loan products through the financial intermediary segment of business . these products and services included additional mortgages for both conforming and nonconforming products home equity loans and lines of credit rv boat and aircraft loans and netbank offered an automated mortgage underwriting service . transaction processing edit netbank provided a variety of financial related processing services to merchants community banks and other organizations . the company acquired an atm and merchant transaction processing operation . during netbank s peak years the company operated approximately 8 000 atms across the country which the company made available to its banking customers on a surcharge free basis . the network of atms ranked as the second largest bank operated atm network in the country in 2003 . criticism edit one of the downsides to having no physical branches was the risk of deposits getting lost damaged or delayed in the mail . several people complained about netbank losing or delaying payments to the account for a variety