NTBK Net.B@NK Common Stock (MM)

NetBank, Inc. (Nasdaq: NTBK), a diversified financial services provider and parent company of NetBank(R) (www.netbank.com), today reported financial results for the second quarter of 2005. The company recorded net income of $2.3 million or $.05 per share, compared with net income of $8.5 million or $.18 per share during the same period a year ago. On a year-to-date basis, net income stands at $296,000 or $.01 per share, versus $17.9 million or $.38 per share during the first half of 2004. The majority of the company's operations reported stable or improving conditions. Highlights on a sequential quarter basis include: -- Consistent Bank Spread. The banking segment posted an after-provision net interest margin of 182 basis points (bps), in line with 188 bps a quarter ago. -- Continued strength in business finance. The business finance operation contributed $3.5 million in pre-tax profitability, slightly off last quarter's record $3.6 million. -- Better mortgage production and sales volumes. Total mortgage production rose to $3.5 billion, an increase of $679 million or 24.5%, while sales rebounded to $3.1 billion, an increase of $378 million or 13.7%. -- Improved mortgage margins. The mortgage operations posted an aggregate pre-tax margin of 16 bps, an improvement of 34 bps. The company bought 147,665 shares of its stock at an average price of $8.46 per share during the quarter. Under existing authorizations, management may repurchase up to 1,092,573 more shares. Following quarter-end, the company's board of directors approved a dividend of $.02 per share. The dividend is payable to shareholders of record on August 15, 2005, and will be disbursed on September 15, 2005. Management Commentary "This quarter shaped up close to our expectations," said Douglas K. Freeman, chairman and chief executive officer. "Pricing pressures within our mortgage operations eased somewhat from the highly competitive levels we had seen over the previous six months. This incremental improvement allowed us to restore our conforming channel to profitability and to move our non-conforming channel toward break-even." "Throughout the quarter, we had cited the potential for negative net servicing results as a significant risk to earnings," said Steven F. Herbert, chief finance executive. "The decline in long-term rates through the end of June exacerbated already high prepayment speeds and led to additional impairment expense. This expense was mitigated at the bottom line in part due to positive net hedge gains and market-driven changes to certain of our valuation assumptions." "The consistent performance we have seen within the banking segment so far this year clearly shows the success we're having in diversifying the company's income across more stable lines of business," Freeman concluded. "Although we believe we can make further progress in key areas over the second half of the year, we expect business conditions to remain challenging." Banking Segment Performance Table 1 below details results in the company's banking segment. Pre-tax income totaled $3.4 million, an increase of $810,000 or 31.0% from the previous quarter. Growth in average earning assets contributed to the improved performance. Average earnings assets were up $191 million or 4.4% on strong production within the company's business finance and auto lending operations. Banking segment results also benefited from a narrower loss of $2.3 million on the servicing asset, versus $3.6 million last quarter. As mentioned above, prepayment speeds within the servicing portfolio remain stubbornly high and were further affected by the declining rate environment at the end of the quarter. These pressures were partly offset by net hedge gains and a recovery of previous impairment expenses. -0- *T Table 1 RETAIL BANKING ($ in 000s, Unaudited) 2005 2005 2nd Qtr 1st Qtr Change ------------- ------------- ------------ Net interest income $ 22,820 $ 22,542 $ 278 Provision for credit losses 2,316 2,336 (20) ------------- ------------- ------------ Net interest income after provision 20,504 20,206 298 Gains on sales of loans - 501 (501) Fees, charges and other income 3,597 3,327 270 ------------- ------------- ------------ Total revenues 24,101 24,034 67 Total expenses 18,380 17,845 535 ------------- ------------- ------------ Pre-tax income before net servicing results 5,721 6,189 (468) Net servicing results (2,294) (3,572) 1,278 ------------- ------------- ------------ Pre-tax income $ 3,427 $ 2,617 $ 810 ============= ============= ============ Average earning assets $ 4,496,414 $ 4,305,234 $ 191,180 Average UPB underlying MSRs $14,593,781 $13,175,247 $1,418,534 Operations to average earning assets Net interest income after provision 1.82% 1.88% (0.06%) Gain on sale, fees, charges and other income 0.32% 0.36% (0.04%) ------------- ------------- ------------ Banking revenues 2.14% 2.24% (0.10%) Total expenses 1.64% 1.66% (0.02%) ------------- ------------- ------------ Pre-tax income before net servicing results 0.50% 0.58% (0.08%) ============= ============= ============ Net servicing results to average UPB underlying MSRs (0.06%) (0.11%) 0.05% *T Additional banking segment highlights appear below. All comparisons are on a sequential quarter basis unless noted otherwise. -- Deposits rose to $2.8 billion, an increase of $201 million or 7.7%. -- The business finance operation turned in another exceptional quarter. Both profitability and production remained near record highs. Pre-tax income totaled $3.5 million, while production edged upward to $46.5 million. -- Auto loan production soared to a record $132 million, an increase of $44.5 million or 50.9%. Margins remained compressed, though, due to pricing competition from captive finance companies and additional provision loads for older loans. Financial Intermediary Segment Performance Table 2 below details results in the company's financial intermediary segment. Pre-tax income totaled $1.6 million, compared with a loss of $5.4 million in the previous quarter. The increase resulted from improvements in revenue and expense margins within the company's mortgage operations. The overall pre-tax margin for the segment equaled 16 bps, versus -18 bps a quarter ago. -0- *T Table 2 FINANCIAL INTERMEDIARY ($ in 000s, Unaudited) 2005 2005 2nd Qtr 1st Qtr Change ------------- ------------- ------------ Net interest income $ 7,959 $ 8,171 $ (212) Gain on sales of loans 28,810 23,301 5,509 Other income 1,253 813 440 Net Beacon credit services results (122) (664) 542 Net MG Reinsurance results 841 864 (23) ------------- ------------- ------------ Total revenues 38,741 32,485 6,256 Salary and employee benefits 20,883 22,674 (1,791) Occupancy & Depreciation expense 7,494 7,076 418 Other expenses 8,753 8,088 665 ------------- ------------- ------------ Total expenses 37,130 37,838 (708) ------------- ------------- ------------ Pre-tax income (loss) $ 1,611 $ (5,353) $ 6,964 ============= ============= ============ Production $ 3,455,499 $ 2,776,609 $ 678,890 Sales (includes inter- company sales) $ 3,138,302 $ 2,760,463 $ 377,839 Total revenues to sales 1.23% 1.18% 0.05% Total expenses to production 1.07% 1.36% (0.29%) ------------- ------------- ------------ Pre-tax margin 0.16% (0.18%) 0.34% ============= ============= ============ *T Additional financial intermediary segment highlights appear below. All comparisons are on a sequential quarter basis unless noted otherwise. -- Conforming mortgage production grew by $444 million or 20.7%, while conforming sales climbed by $280 million or 13.6%. The conforming pre-tax margin was 17 bps, up from 2 bps. -- Non-conforming mortgage production increased by $235 million or 37.3%, while non-conforming sales rose by $98.2 million or 14.0%. The non-conforming pre-tax margin was 3 bps, versus -92 bps earlier. Transaction Processing Segment Performance Table 3 below details results in the company's transaction processing segment. Pre-tax income totaled $899,000, a decrease of $115,000 or 11.3% from the previous quarter. The decline was centered primarily in the servicing operation where both revenue and fee income fell. Performance in this operation should rebound next quarter as the operation takes on direct servicing of the 14,000-loan servicing portfolio the company acquired in March. -0- *T Table 3 TRANSACTION PROCESSING ($ in 000s, Unaudited) 2005 2005 2nd Qtr 1st Qtr Change ------------- ------------- ------------ Total revenue $ 6,680 $ 6,742 $ (62) Total expenses 5,781 5,728 53 ------------- ------------- ------------ Pre-tax income $ 899 $ 1,014 $ (115) ============= ============= ============ *T Additional transaction processing segment highlights appear below. All comparisons are on a sequential quarter basis unless noted otherwise. -- Our ATM network now totals 8,268 machines, an increase of 44 machines. More than 6.7 million transactions were processed over the network, an increase in volume of 6.8%. -- Credit and debit transactions through our merchant processing terminals totaled $69.0 million, an increase of $2.4 million. Next Quarter Earnings Outlook Analyst estimates for the company's third quarter earnings presently range from $.05 to $.10. Management considers this range reasonable but is biased toward the low end. Based on prevailing business conditions, management believes third quarter results will be similar to those being reported today. A number of variables could push earnings lower. The main risks include the potential for: 1) a highly competitive pricing environment within the conforming and/or non-conforming mortgage channels; and 2) significant negative net servicing results. Supplemental Financial Data Management has updated the quarterly financial data available on its Web site. This data provides further detail on the performance of the company's different business channels over the past five quarters. It is intended to supplement the information in this announcement and to give interested parties a better understanding of the company's operations and financial trends. Interested parties can find this quarterly supplement on the company's Web site at www.netbankinc.com. The material is accessible through the link titled "Financial Data" under "Investor Relations." Within this same area, the company posts a monthly statistical report, which is intended to give individuals a means of tracking the company's performance during a quarter. The monthly report is published directly to the Web site around the 20th of each month. Conference Call Information Management has scheduled a conference call to discuss second quarter results with investors, financial analysts and other interested parties. The call will be held today at 10 a.m. EDT. *T Call Title: NetBank, Inc. Earnings Announcement Call Leader: Douglas K. Freeman Passcode: NetBank Toll-Free: 888-809-8965 International: +1-210-234-0005 One-Week Replay: 800-294-2481 *T The company will audiocast the call on the NetBank, Inc. Web site within the "Investor Relations" area. Individuals who cannot participate in the live call may e-mail their questions to mshepherd@netbank.com. Questions must be received before 8:30 a.m. EDT for inclusion in the discussion. About NetBank, Inc. NetBank, Inc. (Nasdaq: NTBK) operates with a revolutionary business model through a diverse group of complementary financial services businesses that leverage technology for more efficient and cost-effective delivery of services. Its primary areas of operation include personal and small business banking, retail and wholesale mortgage lending, and transaction processing. For more information, please visit www.netbankinc.com. Forward-Looking Statements Statements in this press release that are not historical facts are forward-looking statements that reflect management's current expectations, assumptions, and estimates of future performance and economic conditions. Such statements are made in reliance upon the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements in this press release include but are not limited to: 1) management's intention to purchase additional shares of the company's common stock; 2) further progress in diversifying the company's income sources; 3) deposit growth remaining at current levels; 4) continued record performance within the Business Finance operation; 5) higher loan production and improving margins within the auto lending operation; 6) a rebound in revenue and fee income levels within the servicing operation; and 7) the likelihood that third quarter results will be comparable to those of the second quarter. These forward-looking statements are subject to a number of risks and uncertainties that may cause actual results and future trends to differ materially from those expressed in or implied by such forward-looking statements. The company's consolidated results of operations and such forward-looking statements could be affected by many factors, including but not limited to: 1) the evolving nature of the market for internet banking and financial services generally; 2) the public's perception of the internet as a secure, reliable channel for transactions; 3) the success of new products and lines of business considered critical to the company's long-term strategy, such as small business banking and transaction processing services; 4) potential difficulties in integrating the company's operations across its multiple lines of business; 5) the cyclical nature of the mortgage banking industry generally; 6) a possible decline in asset quality; 7) changes in general economic or operating conditions that could adversely affect mortgage loan production and sales, mortgage servicing rights, loan delinquency rates and/or loan defaults; 8) the possible adverse effects of unexpected changes in the interest rate environment; 9) adverse legal rulings, particularly in the company's litigation over leases originated by Commercial Money Center, Inc.; and 10) increased competition and regulatory changes. Further information relating to these and other factors that may impact the company's results of operations and such forward-looking statements are disclosed in the company's filings with the SEC, including under the caption "Item 1. Business--Risks Relating to NetBank's Business" in its Annual Report on Form 10-K for the year ended December 31, 2004. Except as required by the securities laws, the company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. -0- *T NetBank, Inc. Consolidated Statements of Operations For the Three Months Ended June 30, (Unaudited and in 000's except per share data) 2005 ------------ ------------- ------------ Retail Financial Transaction banking intermediary processing ------------- ------------- ------------ Interest income: Loans and leases $ 27,549 $ 25,224 $ 9 Investment securities 8,878 1 - Short-term investments 416 100 - Inter-segment 16,934 150 (1) ----------------------------- ------------- ------------- ------------ Total interest income 53,777 25,475 8 Interest expense: Deposits 15,598 - - Other borrowed funds 13,179 2,267 11 Inter-segment 2,245 15,153 6 ----------------------------- ------------- ------------- ------------ Total interest expense 31,022 17,420 17 ----------------------------- ------------- ------------- ------------ Net interest income 22,755 8,055 (9) Provision for credit losses 2,316 14 - ----------------------------- ------------- ------------- ------------ Net interest income after provision for credit losses 20,439 8,041 (9) Non-interest income: Mortgage servicing fees 10,556 1,365 1,271 Amortization of MSRs (11,343) (173) - Recovery (impairment) of MSRs (1,700) - - Gain (loss) on derivatives 1,944 (99) - Gain on sales of investment securities 1,705 - - Service charges and fees 2,729 6 2,357 Gain on sales of loans and MSRs - 29,781 - Other Income 952 772 1,105 Intersegment servicing/processing fees - - 3,435 ----------------------------- ------------- ------------- ------------ Total non-interest income 4,843 31,652 8,168 Non-interest expense: Salaries and benefits 5,362 21,560 2,263 Customer service 2,968 7 417 Marketing costs 1,121 1,091 95 Data processing 2,508 1,295 609 Depreciation and amortization 2,096 2,866 936 Office expenses 883 1,636 456 Occupancy 901 4,677 352 Travel and entertainment 197 1,009 140 Professional fees 683 2,437 599 Prepaid lost interest from curtailments 1,045 14 - Other 1,611 536 1,393 Inter-segment servicing/processing fees 2,480 954 - ----------------------------- ------------- ------------- ------------ Total non-interest expense 21,855 38,082 7,260 ----------------------------- ------------- ------------- ------------ Income (loss) before income taxes $ 3,427 $ 1,611 $ 899 ============= ============= ============ 2004 ------------- ------------- ------------ Other / Consolidated Consolidated Eliminations NetBank, Inc. NetBank, Inc. ----------------------------- ------------- ------------- ------------ Interest income: Loans and leases $ 324 $ 53,106 $ 54,582 Investment securities - 8,879 3,905 Short-term investments - 516 190 Inter-segment (17,083) - - ----------------------------- ------------- ------------- ------------ Total interest income (16,759) 62,501 58,677 Interest expense: Deposits - 15,598 10,684 Other borrowed funds 504 15,961 11,494 Inter-segment (17,404) - - ----------------------------- ------------- ------------- ------------ Total interest expense (16,900) 31,559 22,178 ----------------------------- ------------- ------------- ------------ Net interest income 141 30,942 36,499 Provision for credit losses - 2,330 1,666 ----------------------------- ------------- ------------- ------------ Net interest income after provision for credit losses 141 28,612 34,833 Non-interest income: Mortgage servicing fees - 13,192 10,624 Amortization of MSRs - (11,516) (9,847) Recovery (impairment) of MSRs - (1,700) 5,813 Gain (loss) on derivatives - 1,845 (2,743) Gain on sales of investment securities - 1,705 - Service charges and fees - 5,092 6,014 Gain on sales of loans and MSRs 151 29,932 33,899 Other Income (138) 2,691 2,826 Intersegment servicing/processing fees (3,435) - - ----------------------------- ------------- ------------- ------------ Total non-interest income (3,422) 41,241 46,586 Non-interest expense: Salaries and benefits 909 30,094 32,155 Customer service 4 3,396 3,111 Marketing costs 59 2,366 2,164 Data processing - 4,412 4,675 Depreciation and amortization 112 6,010 4,833 Office expenses 27 3,002 2,791 Occupancy 22 5,952 5,373 Travel and entertainment 44 1,390 1,386 Professional fees 1,096 4,815 5,003 Prepaid lost interest from curtailments - 1,059 1,896 Other (57) 3,483 4,589 Inter-segment servicing/processing fees (3,434) - - ----------------------------- ------------- ------------- ------------ Total non-interest expense (1,218) 65,979 67,976 ----------------------------- ------------- ------------- ------------ Income (loss) before income taxes $ (2,063) 3,874 13,443 ============= Income tax expense (1,549) (4,976) ------------- ------------ Net income $ 2,325 $ 8,467 ============= ============ Net income per common and potential common shares outstanding: Basic $ 0.05 $ 0.18 Diluted $ 0.05 $ 0.18 Weighted average common and potential common shares outstanding: Basic 46,116 46,790 Diluted 46,492 47,169 *T -0- *T NetBank, Inc. Consolidated Statements of Operations For the Six Months Ended June 30, Unaudited and in 000's except per share data) 2005 ------------- ------------- ------------ Retail Financial Transaction banking intermediary processing ----------------------------- ------------- ------------- ------------ Interest income: Loans and leases $ 54,276 $ 46,225 $ 19 Investment securities 17,665 2 - Short-term investments 725 170 - Inter-segment 30,000 2,428 6 ----------------------------- ------------- ------------- ------------ Total interest income 102,666 48,825 25 Interest expense: Deposits 28,814 - - Other borrowed funds 24,403 3,747 31 Inter-segment 4,219 28,773 6 ----------------------------- ------------- ------------- ------------ Total interest expense 57,436 32,520 37 ----------------------------- ------------- ------------- ------------ Net interest income 45,230 16,305 (12) Provision for credit losses 4,652 29 - ----------------------------- ------------- ------------- ------------ Net interest income after provision for credit losses 40,578 16,276 (12) Non-interest income: Mortgage servicing fees 20,686 2,069 2,699 Amortization of MSRs (21,872) (272) - Recovery (impairment) of MSRs (1,020) - - Gain (loss) on derivatives (866) (78) - Gain on sales of investment securities 4,182 - - Service charges and fees 5,205 38 4,600 Gain on sales of loans and MSRs 501 53,914 - Other Income 1,869 1,683 2,254 Intersegment servicing/processing fees - - 6,891 ----------------------------- ------------- ------------- ------------ Total non-interest income 8,685 57,354 16,444 Non-interest expense: Salaries and benefits 10,611 44,988 4,687 Customer service 5,638 7 866 Marketing costs 2,262 2,710 142 Data processing 5,161 2,459 1,167 Depreciation and amortization 4,161 5,386 1,842 Office expenses 1,404 3,237 1,074 Occupancy 1,789 9,279 742 Travel and entertainment 339 1,922 286 Professional fees 1,574 4,513 1,015 Prepaid lost interest from curtailments 2,055 28 - Other 3,179 999 2,698 Inter-segment servicing/processing fees 5,046 1,844 - ----------------------------- ------------- ------------- ------------ Total non-interest expense 43,219 77,372 14,519 ----------------------------- ------------- ------------- ------------ Income (loss) before income taxes $ 6,044 $ (3,742) $ 1,913 ============= ============= ============ 2004 ------------ ------------- ----------- Other / Consolidated Consolidated eliminations NetBank, Inc. NetBank, Inc. ----------------------------- ------------- ------------- ------------ Interest income: Loans and leases $ 439 $ 100,959 $ 102,621 Investment securities - 17,667 7,871 Short-term investments - 895 370 Inter-segment (32,434) - - ----------------------------- ------------- ------------- ------------ Total interest income (31,995) 119,521 110,862 Interest expense: Deposits - 28,814 22,502 Other borrowed funds 807 28,988 20,112 Inter-segment (32,998) - - ----------------------------- ------------- ------------- ------------ Total interest expense (32,191) 57,802 42,614 ----------------------------- ------------- ------------- ------------ Net interest income 196 61,719 68,248 Provision for credit losses - 4,681 3,513 ----------------------------- ------------- ------------- ------------ Net interest income after provision for credit losses 196 57,038 64,735 Non-interest income: Mortgage servicing fees - 25,454 23,633 Amortization of MSRs - (22,144) (18,923) Recovery (impairment) of MSRs - (1,020) 4,643 Gain (loss) on derivatives - (944) (1,542) Gain on sales of investment securities - 4,182 3,169 Service charges and fees - 9,843 10,037 Gain on sales of loans and MSRs 337 54,752 66,213 Other Income (227) 5,579 5,801 Intersegment servicing/processing fees (6,891) - - ----------------------------- ------------- ------------- ------------ Total non-interest income (6,781) 75,702 93,031 Non-interest expense: Salaries and benefits 1,531 61,817 63,082 Customer service 9 6,520 6,024 Marketing costs 107 5,221 4,423 Data processing - 8,787 9,166 Depreciation and amortization 224 11,613 9,616 Office expenses 107 5,822 5,471 Occupancy 43 11,853 10,507 Travel and entertainment 93 2,640 2,562 Professional fees 1,703 8,805 7,913 Prepaid lost interest from curtailments - 2,083 3,268 Other (44) 6,832 7,259 Inter-segment servicing/processing fees (6,890) - - ----------------------------- ------------- ------------- ------------ Total non-interest expense (3,117) 131,993 129,291 ----------------------------- ------------- ------------- ------------ Income (loss) before income taxes $ (3,468) 747 28,475 ============= Income tax expense (451) (10,614) ------------- ------------ Net income $ 296 $ 17,861 ============= ============ Net income per common and potential common shares outstanding: Basic $ 0.01 $ 0.38 Diluted $ 0.01 $ 0.38 Weighted average common and potential common shares outstanding: Basic 46,241 47,020 Diluted 46,538 47,568 *T -0- *T NetBank, Inc. Condensed Consolidated Balance Sheet As of June 30, (Unaudited and in 000's except per share data) 2005 ------------- ------------- ------------ Retail Financial Transaction Banking Intermediary Processing ------------- ------------- ------------ Assets Cash and cash equivalents: Cash and due from banks $ 111,766 $ 11,396 $ (675) Cash equivalents and fed funds 48,465 17,669 1,145 ------------- ------------- ------------ Total cash, cash equivalents and fed funds 160,231 29,065 470 Investment securities available for sale-at fair value 659,090 3 - Stock of Federal Home Loan Bank of Atlanta-at cost 66,172 - - Loans held for sale 4,714 1,383,796 - Loan and lease receivables-net of allowance for losses of $25,792 and $46,033, respectively 2,176,474 8,849 - Mortgage servicing rights 175,529 1,054 - Accrued interest receivable 9,450 4,223 - Furniture, equipment and capitalized software 11,929 31,135 1,983 Goodwill and other intangibles 1,614 49,334 30,211 Due from servicers and investors 24,723 1,790 - Inter-segment receivables 1,125,345 963 913 Unsettled trades receivables 26,171 - - Other assets 37,937 58,003 5,754 ------------- ------------- ------------ Total assets $ 4,479,379 $ 1,568,215 $ 39,331 ============= ============= ============ Liabilities Deposits $ 2,795,601 $ - $ - Other borrowed funds 1,323,819 146,957 (1) Inter-segment payables 222,548 931,456 2,790 Subordinated debt - - - Accrued interest payable 12,361 878 - Loans in process - 61,473 - Representations and warranties - 19,037 - Accounts payable and accrued liabilities 31,239 120,671 4,486 ------------- ------------- ------------ Total liabilities 4,385,568 1,280,472 7,275 ------------- ------------- ------------ Minority interests in affiliates - 560 - Shareholders' equity Preferred stock, no par (10,000 shares authorized, none outstanding) - - - Common stock, $.01 par (100,000 shares authorized, 52,820 and 52,820 shares issued, respectively) - - - Additional paid-in capital - - - Retained earnings - - - Accumulated other comprehensive loss, net of tax - - - Treasury stock, at cost (6,522 and 6,147 shares, respectively) - - - Unearned compensation - - - Allocated equity 93,811 287,183 32,056 ------------- ------------- ------------ Total shareholders' equity 93,811 287,183 32,056 ------------- ------------- ------------ Total liabilities, minority interests and shareholders' equity $ 4,479,379 $ 1,568,215 $ 39,331 ============= ============= ============ 2004 ------------- ------------- ------------ Other & Eliminations NetBank, Inc. NetBank, Inc. ------------- ------------- ------------ Assets Cash and cash equivalents: Cash and due from banks $ (3,379) $ 119,108 $ 17,855 Cash equivalents and fed funds - 67,279 79,430 ------------- ------------- ------------ Total cash, cash equivalents and fed funds (3,379) 186,387 97,285 Investment securities available for sale-at fair value - 659,093 439,038 Stock of Federal Home Loan Bank of Atlanta-at cost - 66,172 89,861 Loans held for sale (15) 1,388,495 1,786,452 Loan and lease receivables- net of allowance for losses of $25,792 and $46,033, respectively (4,234) 2,181,089 2,332,340 Mortgage servicing rights - 176,583 200,320 Accrued interest receivable - 13,673 13,925 Furniture, equipment and capitalized software 2,139 47,186 53,796 Goodwill and other intangibles 265 81,424 69,574 Due from servicers and investors - 26,513 37,902 Inter-segment receivables (1,127,221) - - Unsettled trades receivables - 26,171 - Other assets 287 101,981 55,271 ------------- ------------- ------------ Total assets $ (1,132,158) $ 4,954,767 $ 5,175,764 ============= ============= ============ Liabilities Deposits $ (3,501) $ 2,792,100 $ 2,448,485 Other borrowed funds - 1,470,775 2,058,975 Inter-segment payables (1,156,794) - - Subordinated debt 32,477 32,477 11,857 Accrued interest payable 210 13,449 9,884 Loans in process - 61,473 51,968 Representations and warranties - 19,037 22,278 Accounts payable and accrued liabilities (589) 155,807 141,418 ------------- ------------- ------------ Total liabilities (1,128,197) 4,545,118 4,744,865 ------------- ------------- ------------ Minority interests in affiliates - 560 389 Shareholders' equity Preferred stock, no par (10,000 shares authorized, none outstanding) - - - Common stock, $.01 par (100,000 shares authorized, 52,820 and 52,820 shares issued, respectively) 528 528 528 Additional paid-in capital 432,192 432,192 432,029 Retained earnings 41,618 41,618 59,888 Accumulated other comprehensive loss, net of tax (488) (488) (1,975) Treasury stock, at cost (6,522 and 6,147 shares, respectively) (63,236) (63,236) (59,639) Unearned compensation (1,525) (1,525) (321) Allocated equity (413,050) - - ------------- ------------- ------------ Total shareholders' equity (3,961) 409,089 430,510 ------------- ------------- ------------ Total liabilities, minority interests and shareholders' equity $ (1,132,158) $ 4,954,767 $ 5,175,764 ============= ============= ============ *T -0- *T NetBank, Inc. Consolidated Selected Financial and Operating Data (Unaudited and in 000's except per share data) Quarter Ended June 30, March 31, June 30, ------------ ------------ -------------- 2005 2005 2004 ------------ ------------ -------------- Consolidated: Net income (loss) $ 2,325 $ (2,029) $ 8,467 Total assets $ 4,954,767 $ 4,755,015 $ 5,175,764 Total equity $ 409,089 $ 402,260 $ 430,510 Shares outstanding 46,298 46,237 46,673 Return on average equity 2.29% -1.99% 7.84% Return on average assets 0.19% -0.17% 0.70% Book value per share $ 8.84 $ 8.70 $ 9.22 Tangible book value per share $ 7.08 $ 6.96 $ 7.73 NetBank, FSB: Deposits $ 2,794,220 $ 2,592,680 $ 2,448,726 Customers (not in 000s) 268,849 270,246 276,317 Estimated Capital Ratios: Tier 1 (core) capital ratio 6.17% 6.42% 6.86% Total risk-based capital ratio 10.36% 10.93% 12.43% Asset quality numbers: CMC Lease portfolio $ 26,960 $ 31,294 $ 82,514 Non-performing loan and lease receivables 5,056 5,789 2,630 ------------ ------------ -------------- Total non-performing loan and lease receivables 32,016 37,083 85,144 Non-performing loans held for sale (1) 22,859 36,443 32,081 ------------ ------------ -------------- Total non-performing loans and leases 54,875 73,526 117,225 Repossessed assets (2) 7,102 6,330 4,743 ------------ ------------ -------------- Total non-performing assets $ 61,977 $ 79,856 $ 121,968 Allowance for credit losses (ALLL) $ 25,792 $ 25,075 $ 46,033 Net (charge-offs) of loan and lease receivables $ (1,613) $ (1,738) $ (224) Asset quality ratios: Total non-performing assets / average assets 1.27% 1.72% 2.53% ALLL / total non-performing loan and lease receivables 80.56% 67.62% 54.06% Net annualized charge-offs / total assets 0.13% 0.15% 0.02% Mortgage Banking: Production Activity: Retail $ 843,914 $ 637,522 $ 724,535 Correspondent 1,009,951 859,109 1,350,933 Wholesale 681,865 608,546 897,743 RMS 54,540 41,249 52,396 ------------ ------------ -------------- Total Agency-eligible 2,590,270 2,146,426 3,025,607 Non-conforming 865,229 630,183 877,830 ------------ ------------ -------------- Total $ 3,455,499 $ 2,776,609 $ 3,903,437 ============ ============ ============== Sales Activity: Third party sales $ 3,084,829 $ 2,722,062 $ 3,083,412 Sales to the retail bank 53,473 38,401 349,935 ------------ ------------ -------------- Total sales $ 3,138,302 $ 2,760,463 $ 3,433,347 ============ ============ ============== Pipeline: Locked conforming mortgage loan pipeline $ 1,200,719 $ 917,450 $ 1,111,256 UPB of loans serviced: $18,483,938 $18,698,781 $ 17,549,546 (1) Held for sale assets are carried at the lower of cost or market (LOCOM). LOCOM adjustments, under GAAP, are direct reductions of the assets' carrying values and are not considered allowances. (2) Repossessed assets are carried at net realizable value. *T