2006 - 2007 Lead up to failure
In 2006, NetBank lowered its documentation and underwriting standards to increase loan production. NetBank sold many of its loans to other investors, with the loans being partially recourse to NetBank. In 2006, NetBank was forced to repurchase $182 million in bad loans that it sold previously.[14]
In November 2006, the company's independent auditor, Ernst & Young, resigned.
For the full year 2006, the company reported a $202 million loss.[15]
On May 1, 2007, the company sold NetBank Payment Systems, its ATM and merchant-servicing operation.[16]
On May 21, 2007, NetBank reached an agreement to sell its core banking operation to EverBank.[17] 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 was unable to sell those investments, and on September 17, 2007, EverBank terminated the agreement.
On May 15, 2007, NetBank received a warning from the NASDAQ because it was late in filing its quarterly report. NetBank received a similar notice from Nasdaq in March 2007 because it did not file its 2006 annual report on time as a result of the resignation of its auditor.[18]
In February 2007, NetBank hired Porter Keadle Moore LLP as its new independent auditor and said it planned to file the annual and quarterly reports by the end of June 2007.[19][20]
On July 3, 2007, NetBank Inc. received a deficiency notice from the NASDAQ because its stock for the previous 30 consecutive business days failed to close above the minimum bid price of $1 per share.[21] On August 3, it was delisted from the Nasdaq.
