# O **NEWS RELEASE**

+-------------------------------------+--------------------------------+
| ## Comptroller of the Currency      | ##### NR 2002-09               |
|                                     |                                |
| Administrator of National Banks     |                                |
+-------------------------------------+--------------------------------+

FOR IMMEDIATE RELEASE Contact: Robert M. Garsson

February 7, 2002 (202) 874-5770

**OCC Closes NextBank and Appoints FDIC Receiver**

WASHINGTON \-- NextBank NA, Phoenix, Arizona, was closed today by the
Office of the Comptroller of the Currency (OCC) and the Federal Deposit
Insurance Corporation (FDIC) was appointed receiver.

The OCC acted after finding that the bank was operating in an unsafe and
unsound manner and had experienced a substantial dissipation of assets
and earnings through unsafe and unsound practices. The OCC also found
that NextBank's unsafe and unsound practices were likely to deplete all
or substantially all of the bank's capital, and that there was no
reasonable prospect for the bank to become adequately capitalized
without federal assistance. In addition, the OCC found that the bank
would be unlikely to be able to pay its obligations or meet the demands
of its depositors in the normal course of business.

After being acquired by NextCard Inc. on September 16, 1999, NextBank
pursued a strategy of marketing credit cards solely through the
Internet. However, the OCC found that the bank's risk management
policies and procedures were inadequate and the bank's assets were of
lower credit quality than initially projected in the bank's business
plan. The bank failed to identify the extent of its credit quality
problem or to implement effective corrective measures.

At the OCC's insistence, the board of directors of the bank adopted a
detailed board resolution on October 26, 2000 that was designed to
correct these deficiencies, but the bank was unable to implement the
resolution. The bank failed to achieve profitability, and the \$300
million in capital that had been provided by the bank's parent company,
NextCard, Inc., was dissipated through credit losses and high operating
expenses.

During the bank's most recent examination, the OCC determined that the
bank was classifying some delinquent accounts sold into a securitization
trust as fraud losses, although the delinquencies were actually
attributable to credit quality problems. These assets were being
repurchased by the bank at par, a practice that constituted sale of
assets with recourse.

This finding, together with significant accounting adjustments and the
need for additional loan loss reserves, resulted in the bank becoming
significantly undercapitalized. The OCC issued a Prompt Corrective
Action Directive on November 15, 2001 that required NextBank to restore
Tier 1 capital

-more-

to at least 12 percent of risk-weighted assets or commit to sell or
liquidate the bank at no cost to the FDIC.

NextCard, Inc. made efforts to find a buyer for the bank and holding
company, but was unsuccessful. On January 12, 2002, NextCard notified
the OCC that it was not possible to prepare and submit a Capital
Restoration Plan, and said liquidation of the bank's assets would not
raise enough money to retire in full the bank's existing and anticipated
liabilities. In light of these findings, the OCC determined that it was
necessary to close the bank and appoint the FDIC as receiver to protect
the interests of the bank's insured depositors.

As of December 31, 2001, NextBank had total assets of approximately
\$700 million and total deposits of approximately \$550 million.
NextBank was an Internet-only bank, and had no branch operations.

The FDIC will release information about the resolution of the bank.

  -----------------------------------------------------------------------
  \# \# \#

  The OCC charters, regulates and examines approximately 2,200 national
  banks and 52 federal branches of foreign banks in the U.S., accounting
  for more than 54 percent of the nation's banking assets. Its mission is
  to ensure a safe and sound and competitive national banking system that
  supports the citizens, communities and economy of the United States.
  -----------------------------------------------------------------------