WASHINGTON - An online bank with $2.5 billion in assets was shut down by the government on Friday because of an unsustainable level of mortgage defaults.

The federal Office of Thrift Supervision said it appointed the Federal Deposit Insurance Corp. as a receiver for Alpharetta, Ga.-based NetBank Inc. The FDIC said $1.5 billion in insured deposits will be assumed by ING Bank, part of Dutch financial giant ING Groep NV.

NetBank, which had no physical branches, "sustained significant losses in 2006 primarily due to early payment defaults on loans sold, weak underwriting, poor documentation, a lack of proper controls, and failed business strategies," the OTS said in a statement.

The FDIC said NetBank had $2.5 billion in total assets and $2.3 billion in deposits as of June 30.

The last major thrift to be closed by regulators was Superior Bank of Hinsdale, Ill. It had total assets of $1.9 billion and was shut down in July 2001.

NetBank had reached a deal to sell its deposit accounts and other assets to privately held EverBank of Jacksonville, Fla., but EverBank announced this month that the deal fell through.

EverBank in July completed its acquisition of NetBank's mortgage servicing business, and the FDIC said Friday that EverBank will purchase about $700 million in mortgage loans.

"Customers of NetBank should have confidence and security knowing that they will have access to their insured funds in a timely and orderly manner," FDIC Chairman Sheila Bair said in a prepared statement.

The FDIC insures bank deposits of up to $100,000

NetBank had $109 million in deposit accounts that exceeded the FDIC limit. Those customers will become creditors in NetBank's receivership, the FDIC said.