Dedicated to Deposits: Deals, Data, and Discussion

NetBank Closed - FDIC Named Receiver, NetBank Depositors Now Under ING Direct

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FDIC just released news that NetBank was closed today by the Office of Thrift Supervision, and the FDIC was named receiver. The FDIC has "approved the assumption of the insured deposits of NetBank, Alpharetta, Georgia, by ING Bank, fsb, Wilmington, Delaware."

It looks like NetBank customers who had deposits under the FDIC limits should be fine. These deposits are now held under ING Direct. Here's what the FDIC states:
Over the weekend, customers can access their money by writing checks, or by using their debit or ATM cards. Checks drawn on the bank that did not clear before today will be honored up to the insured limit. Starting on the morning of Monday, October 1, customers will have full access to their insured deposits via the Internet and for the foreseeable future should continue to utilize NetBank's current Website to transact banking business.

NetBank customers who had deposits over the FDIC limits may be able to get some of it back. Here's what is said about them:
NetBank had approximately $109 million in 1,500 deposit accounts that exceeded the federal deposit insurance limit. While these customers will have access to their insured deposits, they will become creditors of the receivership for the amount of their uninsured funds.

In addition to continued access to their insured deposits, depositors of NetBank with deposits in excess of the insurance limits will also receive an immediate payment of 50 percent of their uninsured balance from the FDIC as receiver.

More details about the closure is available at this FDIC page. The FDIC has a pretty extensive Q&A page. For those who have more than $100K ($250K for IRA) but may still be FDIC insured, the accounts may require review by an FDIC Claim Agent. I guess this would be case if the depositor used POD beneficiaries to increase their coverage. It'll be interesting know how long this takes and if any claims are denied due to wrong POD paperwork.

For those NetBank customers with deposits under $100K, they should not have any problems. According to the FDIC, internet access and online bill pay are currently not available, but are suppose to be later in the weekend. Customers can continue to use personal checks and ATM cards. Those with NetBank CDs may withdraw your funds from any transferred account without an early withdrawal penalty until you enter into a new deposit agreement with the ING DIRECT.

I think this might be the first internet-only bank that has failed. There was only one other bank this year to have failed, and it was a very small brick-and-mortar bank in Pennsylvania. It'll be interesting to see how smoothly the FDIC will be able to handle this for the NetBank customers.

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Comments
32 comments.
Comment #1 by Anonymous posted on
Anonymous
Wow. This is the first financial institution I've ever dealt with that has failed. I haven't had an account with NetBank in the past couple of years ... maybe it's a good thing that I didn't qualify for any of the generous bonuses NetBank was offering lately because I wasn't a first-time customer.

It's interesting that depositors get top priority with respect to the bank's assets. I'm amazed that FDIC is immediately paying 50% of uninsured deposits. Interesting also that you can pull your money out of CD's with no penalty during the transition to ING.

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Comment #2 by Anonymous posted on
Anonymous
Nextbank was an internet-only bank that failed in 2002.

Notice the coincidence: Nextbank and NetBank -- just one letter difference.

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Comment #3 by Anonymous posted on
Anonymous
And Lincoln was killed in Ford's Theater, while Kennedy was killed in a Ford Lincoln -- spooky!

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Comment #4 by Anonymous posted on
Anonymous
There goes my idea for NeBank.

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Comment #5 by Anonymous posted on
Anonymous
I am feeling a small pang of guilt right now. I really soaked them when they were handing out $50 gift cards for every $2k CD you bought. Oh, well, I'll get over it.

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Comment #6 by wimpyVO2max (anonymous) posted on
wimpyVO2max
Why does "internet-only" matter? Banks default because of lending practices, not whether or not the transactions are handled by a human teller. I can hear it now -- "No, I don't use one of those internet banks. They are too risky." Aargh!

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Comment #7 by Anonymous posted on
Anonymous
Look at it another way:
27 banks have failed since 2000. Only 2 of them have been internet banks. B&M banks fail thirteen times more often than internet banks!

(Yes, I know the fallacy.)

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Comment #8 by Anonymous posted on
Anonymous
Nothing like kicking a depositor when their down by switching them to ING...Yeah, I'm still sore about their quick rate drops...lol

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Comment #9 by wimpyVO2max (anonymous) posted on
wimpyVO2max
I'm with you anonymous. Over on another forum someone said they only use big banks like BAC and WFC "because they are safer." Aargh #2!

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Comment #10 by Anonymous posted on
Anonymous
I wonder how ING is going to absorb all those NetBank checking account holders. Interesting how you still can't get a paper checking account at ING, but you can now have an ING paper checking account if you were a former NetBank customer. Is ING going to stop accepting paper checks and transition all the NetBank checking accounts to Electric Orange, or are they going to create a new type of checking product to serve these folks?

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Comment #11 by Anonymous posted on
Anonymous
I believe in the cochroach theory; when you see one ****roach their are others. This is not good for stock market or other banks.

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Comment #12 by Anonymous posted on
Anonymous
Does anyone have any idea about Umbrella Bank? Any hints of trouble with them???

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Comment #13 by Anonymous posted on
Anonymous
I had a NetBank CD for $15k, and they should be paying me a $100 bonus for opening the account (per the drugstore.com promotion). I know FDIC will insure the $15k, but do you think I can still get the $100? It seems to me I should, as it was part of the terms of the account.

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Comment #14 by Anonymous posted on
Anonymous
"I had a NetBank CD for $15k, and they should be paying me a $100 bonus for opening the account (per the drugstore.com promotion). I know FDIC will insure the $15k, but do you think I can still get the $100? It seems to me I should, as it was part of the terms of the account."

LOL. Do you really think the FDIC is going to "insure" a bank promotion? Consider yourself lucky to be seeing your $15K again.

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Comment #15 by Anonymous posted on
Anonymous
On a more serious note, why is PenFed going all out to attract deposits when its competitors are all lowering rates and hence effectively turning away depositors? Is PenFed making or losing money in recent years? I'm concerned because I have deposits way above the 100K limit (all with single ownership).

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Comment #16 by Anonymous posted on
Anonymous
If you're concerned, you should really take some steps to protect yourself.

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Comment #17 by Anonymous posted on
Anonymous
"I'm concerned because I have deposits way above the 100K limit (all with single ownership)."

What about "All Depositors Insured to $100,000" don't you get?

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Comment #18 by Bill in California (anonymous) posted on
Bill in California
I bought a new home four years ago and got a fixed rate 5.65% loan from Netbank. I knew something was up three months ago when they sold the loan(or the servicing rights) to CountryWide. I am glad they did, although CountryWide is a bit on the bubble themselves, but I bet they are one of the survivors of the housing correction.
The problems with Netbanks sub-prime loans was covered in several articles in the financial news. This is a prime example of why we all need to be vigilant about our finances, where we keep our money and how much we keep in any one place in regards to FDIC insurance.

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Comment #19 by Anonymous posted on
Anonymous
Is there any easy way to see safety rankings for banks (e.g. ING, Virtualbank, AmTrust Direct, PenFed, IndyMac, Flagstar, SalemFive) I like high rates, but I don't want the hassle if my bank fails.

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Comment #20 by Anonymous posted on
Anonymous
"Is there any easy way to see safety rankings for banks (e.g. ING, Virtualbank, AmTrust Direct, PenFed, IndyMac, Flagstar, SalemFive) I like high rates, but I don't want the hassle if my bank fails."

Here you go:
Bankrate Safety Ratings

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Comment #21 by Anonymous posted on
Anonymous
I have 15k cd in netbank, what happen to the interest? is it fdic pay the interest upto 9/28/07?
Thank you

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Comment #22 by Anonymous posted on
Anonymous
Safety ratings aren't worth much.

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Comment #23 by Anonymous posted on
Anonymous
"On a more serious note, why is PenFed going all out to attract deposits when its competitors are all lowering rates and hence effectively turning away depositors? Is PenFed making or losing money in recent years? I'm concerned because I have deposits way above the 100K limit (all with single ownership)."

In 2006, PenFed's profits were $109million. As of June 30, their 2007 profit is $54million.

As of Dec 31,2006, total deposits and total equity were $8.2billion and $922million. As of Jun 30, 2007, they were $9.2billion and $979million. So, basically equity exceeds 10% of deposits.

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Comment #24 by SVG (anonymous) posted on
SVG
 

Anon,


>>On a more serious note, why is PenFed going all out to attract deposits<<

Perhaps PenFed is just doing what it can for its members. CUs are not after profit. Their goals is to provide service to its members. I'd say, providing 6% APY certificates is a very nice service !


>>So, basically equity exceeds 10% of deposits.<<

I don't worry about my deposits at PenFed at all.

It will be nice if they start 6.01% 'Reward Checking' type of account that a few of the CUs around the nation have started.


Disclosure: I'm a member of PenFed, therefore I am a part owner of PenFed.

- SVG

 

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Comment #25 by Curtis (anonymous) posted on
Curtis
Wow, I just squeaked by with two $75 deals on this one. I opened both a NetBank checking and MMA about two months ago. After keeping the appropriate amounts in each account for 30 days to qualify for the bonuses, I pulled out most of the funds (all except $500 in the MMA to avoid a monthly fee), and was planning to keep them open only long enough to avoid the early account closure fee.

I received the checking bonus right away, but not the MMA bonus. So a few weeks ago I sent a customer service message through the site. I had seen the notice about the EverBank deal going south, and my friend Dave told me I'd never see the second bonus. I figured he probably was right.

Then, on Wednesday this week I received an e-mail back from NetBank confirming that I had qualified for the MMA bonus, and that the funds would post to my account on 9/28. No mention of the fact that THE BANK WAS ABOUT TO FAIL!!! So surprise of surprises today when I see this post. Immediately, I logged in, and sure enough the bonus was credited. Guess I helped squeeze the last bit of blood out of that stone. I don't really feel remorseful, either.

I suppose the early account closure fees still apply, eh? I'm tempted to just pull all the rest of my money out while I can, but don't want to have to pay stupid fees.

Oddly, I have not received any word from either NetBank or ING on this. I have accounts with both, and I figure I should've received an e-mail or something from one or t'other.

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Comment #26 by Anonymous posted on
Anonymous
I noticed interest has posted for my Netbank MM account today (Sunday). It's dated 9/29.

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Comment #27 by Anonymous posted on
Anonymous
ING DIRECT NEWS....
==============
ING DIRECT Acquires Deposits of NetBank
Nation’s Largest Direct Bank Acquires Deposits and Customers of the Nation’s Oldest Direct Bank September 28, 2007, Wilmington, DE –

ING DIRECT, the nation’s largest direct bank and fourth largest thrift (part of Netherlands-based ING Groep NYSE: ING), today announced it will acquire $1.4 billion in deposits and 104,000 new customers of Netbank for $14 million.

Headquartered in Alpharetta, GA and established in 1996, Netbank was the nation’s oldest Internet bank serving retail and business customers in all 50 states.

The acquisition further strengthens ING DIRECT’s position as the leading direct bank which aims to meet the financial needs of “Main Street, USA.” “ING DIRECT has a passionate focus on delivering a first-rate, technology-enhanced customer experience and we want to ensure the early adopters remain at the forefront of branch-free online banking,” stated Arkadi Kuhlmann, CEO of ING DIRECT. “The acquisition of Netbank’s customer relationships is part of ING DIRECT’s goal to broaden its reach and inspire Americans to become a nation of savers. We anticipate a seamless transition for Netbank’s customers into the ING DIRECT family,” added Arkadi.

Since its inception in 2000, more than 5.5 million Americans have entrusted their savings with ING DIRECT, building the bank to $57 billion in deposits, $23 billion in mortgage loans and $75 billion in assets.

The transaction was approved and closed today by the Federal Deposit Insurance Corporation (FDIC).

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Comment #28 by Anonymous posted on
Anonymous
The web site says full functionality was to be restored by 5:00pm Sunday, but it's 7:30 and the Bill Pay function is still missing - I've had everything on autopilot for years and confess I'm more than a little worried about the transition time, not to mention being unable to see what's going on. My deposits are well within the safety limits, but the bill pay feature has me very very concerned.

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Comment #29 by Anonymous posted on
Anonymous
"Anonymous said...
There goes my idea for NeBank.

7:31 PM, September 28, 2007"


Anon, that struck me as really hilarious. Thanks for the smile :)

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Comment #30 by Anonymous posted on
Anonymous
I called ING Direct and they have no information available on the bonuses. Account transition information will be coming soon in a Welcome kit in the mail.

I had opened the 3 accounts in August, funded early Sept so I hadn't reached my 30 day mark.
I think I'll keep my money there until at least the 30 day mark and then see where we are.

My understanding is they're responsible only for principal and accrued interest as of the "date of failure", so I don't think they're required to pay us "future" bonuses, but since ING paid $14 million for us, they don't want 104,000 ****ed off people either.

Curious: the netbank promo site is still up.

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Comment #31 by Anonymous posted on
Anonymous
The "6-month 4.50% Introductory Rate" on the Money Market account appears to have suddenly changed to ING's default 4.30%.

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