NetBank; The First Bank Casulty of the Lending Crisis

by benborden

While nearly 150 mortgage companies have shut down in the last 10 months because of soaring delinquencies and defaults, NetBank, seems to be the first FDIC insured bank casualty of the current credit crisis. In an futile attempt to avoid a shutdown, back in May 2007, NetBank shed parts of it lending lending business to Ever Bank and shutdown their third-party mortgage origination business. Taken over by Federal regulators, the Federal Deposit Insurance Corp. has been appointed as a receiver for the Alpharetta, Ga.-based NetBank and oversee the banks $2.5 Billion in assets. Online rival ING (NYSE:ING) will be taking over most of NetBanks operations.

This is important in the sense that NetBank is the first FDIC insured bank to cease lending operations and actually close altogether. Some mortgage banks have been claiming that because they are a bank and have deposits that they are not as susceptible to the Subprime mortgage defaults and bankruptcy because they have these deposits. NetBank proves that is not the case. Its been reported that the NetBank closure is the largest Savings and Loan closure since the end of the Savings and Loan Crisis of the late 1980’s, early 1990’s.

In other related news, just this morning Citigroup (NYSE: C) is reporting a 60 percent drop in earnings as it takes a $3 Billion write downs in under performing mortgage securities. Citigroup also moved out its earnings call 4 days from October 15th to October 19th. Watch this as this news could move Citigroup to a new 52 week low. More news to come on this.

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