CNN reported on a small business that had about $1 million in deposits in a NetBank account. Only $100K was FDIC insured. Seems like the business owner should have been more careful. According to this FDIC Q&A, the business should be able to expect at least 50% of the uninsured deposits back.
Since NetBank was based in the Atlanta area, The Atlanta Journal Constitution newspaper has had several articles on this. Here's a timeline of NetBank's history. According to this AJC article, NetBank is Georgia's largest failed bank (with about $2.5 billion in total assets), and it was the 58th-largest U.S. bank failure.
The FDIC has a list of recent bank failures. A reader pointed out that in 2002, NextBank was another internet-only bank that failed. So NetBank isn't the first. It's interesting how similar the names are.
I found it interesting that the Wall Street Journal article blamed the NetBank sign-up bonuses and high interest rates as part of the reasons for the problems:
NetBank's model relied on paying high interest rates and $50 signing bonuses on core deposits such as savings accounts to entice customers. It was a costly way to attract deposits that are relatively easy to come by at brick-and-mortar banks. Constrained by the model, the company diversified into riskier but potentially lucrative subprime loans but, according to federal regulators, was undone by its sloppy underwriting.
They did have nice bonuses, but the money market and checking interest rates were low compared to other internet banks.
A reader commented in my last NetBank post how he just recently receieved the two $75 bonuses with the last one being credited to his account late last week. So it's nice to see NetBank followed through on these all the way to its closure. For those who haven't received these bonuses yet, I have no idea what your chances are in receiving credit now.
For all the official information on this NetBank closure, please refer to this FDIC page.