NetBank
From Wikipedia, the free encyclopedia
| NetBank, Inc. | |
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| Type | Public (Nasdaq: NTBK) |
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| Founded | 1996 |
| Headquarters | Atlanta, Georgia, USA |
| Key people | Steven F. Herbert, CEO |
| Industry | Finance |
| Products | retail banking, mortgage banking, business finance and merchant processing services |
| Revenue | $274.303M FY2005 |
| Employees | 1,536 (2007) |
| Website | www.netbank.com |
NetBank, sometimes called NetB@nk, is 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 is one of the pioneers of the Internet banking industry, and NetBank is recognized as one of the first successful internet-only banks.
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[edit] Basic strategies
NetBank’s business model has three basic strategies: Retail banking, Financial intermediary and Transaction processing. All of the bank’s operations and assets are located within the United States of America.
[edit] Retail banking
The retail banking segment is comprised of personal and small business banking operations, an automobile financing unit and a business financing unit. NetBank, through its Internet banking operations, operates as an FDIC-insured, federally chartered thrift institution that currently serves approximately 286 thousand customers throughout the United States and in more than 90 foreign countries. NetBank delivers 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 does not maintain a branch network to support its banking business. The branchless model provides it with an opportunity to operate with less overhead expense than traditional branch banks. Customers rely on pre-paid first class mail envelopes provided by Netbank to make deposits to their accounts.
NetBank offers a full line of deposit and loan products, including checking and savings accounts, a small business banking program, online bill payment, auto loans, and financial planning services. The business finance operation generally provides leasing and other equipment or facility-related funds to small- and mid-sized companies across the United States. These business customers generally have annual revenues in the $200,000 to $5 million range.
While NetBank was the first Internet bank to generate a profit in 2003, recent times have been rough for NetBank. Netbank has shown losses in 2004, 2005, and 2006. They have started to spin-off some of the previous acquisitions into new markets to focus on the Internet banking division.
[edit] Financial intermediary
The financial intermediary segment houses mortgage and specialty lending operations. The bulk of the business in this segment relates to mortgage lending, including both conforming and non-conforming products. NetBank obtain mortgage loans by originating loans directly with consumers or through a nationwide network of brokers. The bank also buys closed loans from a network of correspondent banks, thrifts and independent mortgage companies. The vast majority of these loans are held for sale on the bank’s balance sheet prior to sale into the secondary market. This approach reduces the bank's exposure to credit and interest rate risk because the loans are held for short periods of time.
The Company has diversified the operations of the segment through acquisition to include the origination of loans for recreational vehicles (RVs), boats and personal aircraft. The loans are either retained by the retail banking segment to meet the bank’s investment needs or sold to investors in the capital markets under the same intermediary strategy it employs in its mortgage businesses.
[edit] Transaction processing
The transaction processing segment includes ATM and merchant processing business, mortgage servicing division and a number of start-up operations that deliver banking or item clearing functionality to other financial institutions or merchants. The segment was established in 2003 when NetBank decided to leverage many of the core business competencies residing in the retail banking and financial intermediary segments and market them on a business-to-business basis, thereby providing additional revenue generating opportunity from existing business activity. In late 2003, NetBank acquired an ATM and merchant transaction processing operation. This business operates 9,649 ATMs across the country. The network of ATMs currently ranks as the second largest bank-operated ATM network in the United States.
[edit] Criticism
The inherent risk of deposits not posting to an account due to mail delays, damage and other factors outside Netbank's control are obvious. The rather innovative QuickPost deposit option introduced in 2005 that allowed customers to submit paper deposits by placing them in a designated UPS envelope and dropping them off at any of the 3,800 The UPS Store® locations nationwide has been discontinued in 2006.
There is also quite a number of complaints to be found in which customers state Netbank had frozen their accounts for security reasons. Such complaints frequently report of Netbank customer representatives making statements to the effect that since Netbank does not have a face-to-face relation with its customers increased security measures were necessary. Netbank does not release any information pertaining to what exactly flags an account for review, however, since the rectification process involves a multitude of personal documents such as several forms of official identification, utility bills and other documentation providing proof of residence being sent to Netbank as notarized copy, flagged accounts will generally not be accessible to a customer for at least five days.
Netbank has also repeatedly been criticized frequently for making statements like:"Netbank has the nation's second largest ATM network". In 2006 however, a California law firm considered a class-action lawsuit against Netbank as more and more customers come forward asking for ATM fees refunded that should not have been charged according to Netbanks advertising.
Researching Netbank on consumer sites like epinions.com however will quickly show the most problematic downisde of a no-mortar bank, access to funds deposited to Netbank accounts. By far the largest number of complaints concern the inability of Netbank customers to access funds exceeding the withdrawal limit of their ATM or Visa Debit Card issued by Netbank. Personal Visa Debit Cards issued by Netbank have a daily withdrawal limit of USD 700.00. This effectively limits Netbank customer's access to their funds regardless of necessity and situation. A Netbank customer with no other deposit accounts will have to face the fact that regardless of the situation he or she will not be able to access more funds than provided through an ATM or Visa Debit Card. Many reports of emergency situations effecting the need to access funds in a fast way make statements to the regard that Netbank is either unwilling or unable to grant its customers fast access to their funds unless the fee-based certified check service is utilized.
Consumer reporting sites like consumeraffairs.com, complaints.com and ripoffreport.com see an increase in customer complaints concerning Netbank and their practices. Frequent complaints include deposits taking longer than usual to post, overeagerness to lock customer accounts for security reasons, ATM fees and limited access to funds.
[edit] References
United States Securities and Exchange Commission: NetBank, Inc. Annual Report 2005.
