Net.B@NK Common Stock (MM) (NASDAQ:NTBK)
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NetBank, Inc. (Nasdaq: NTBK), a diversified financial
services provider and parent company of NetBank(R) (www.netbank.com),
today reported financial results for the quarter ended March 31, 2006.
The company recorded a net loss of $11.0 million or $.24 per share for
the period, compared with a net loss of $2.0 million or $.04 per share
during the same quarter a year ago.
Key trends worth noting include the following. All comparisons are
to fourth quarter 2005 results unless identified otherwise.
-- A Decline in Earning Assets at the Bank. Average earning
assets totaled $4.6 billion, a decrease of $132 million or
2.8%. Management has fully leveraged the company's existing
capital base and is moderating asset growth until current
capital pressures ease.
-- Seasonally Low Mortgage Production and Sales. Mortgage
production fell due to seasonal factors. Production across all
channels totaled $2.8 billion, a decline of $451 million or
13.8%. Sales were down in consequence. Sales totaled $2.9
billion, a decrease of $464 million or 13.8%.
-- Highly Competitive Mortgage Pricing. Mortgage pricing
competition remained aggressive in the indirect channels
throughout the quarter as lenders attempted to gain market
share through lower pricing. This competition put additional
pressure on the pre-tax margin in our Financial Intermediary
segment, driving it from -8 basis points (bps) last quarter to
-18 bps this quarter.
-- Negative Net Servicing Results. There was a $12.7 million
swing in net servicing results. These results went from a
pre-tax contribution of $6.9 million a quarter ago to a
pre-tax loss of $5.8 million in the current quarter. Prior
quarter results benefited from a significant recovery of past
impairment expense and better hedge performance. Hedge
performance came under pressure this quarter as the margin
between mortgage rates and swaps compressed sharply.
-- Expensing of Stock Awards. The company adopted SFAS 123(R),
effective January 1, 2006, and is now recognizing expenses
related to stock options for the first time. Expenses are
recorded over the vesting period. This practice applies to new
grants as well as any unvested portion of historical ones.
These expenses totaled $1.6 million, pre-tax, in the first
quarter. Stock award grants are extended to certain employees
as part of the company's employee compensation and retention
efforts. The grants are generally comprised of options and
shares that vest over a specific period of time.
The company has revised its financial reporting format. Results in
this announcement as well as any related supplemental data conform to
the new format. The servicing asset is now reported as a separate
segment. It had been presented as part of the Retail Banking segment
previously. The company also changed how it accounts for overhead
expenses. Overhead expenses that are considered direct or attributable
to a line of business are booked within that business, while indirect
and general corporate overhead expenses that relate to multiple lines
of business are pooled and reported within the Other/Corporate
Overhead segment. Management announced its plan to revise the
company's financial reporting format at our analyst-investor meeting
in March. The revisions are intended to provide more transparency and
to further clarify our financial results. Prior period segment data
has been adjusted to conform to current classifications.
Management Commentary
"We are very disappointed with first quarter results but believe
they have to be considered in context with prevailing market
conditions and the progress we have made over the past few years
against our long-term strategic objectives," said Douglas K. Freeman,
Chairman and Chief Executive Officer.
"In 2003, our income was highly dependent on earnings from our
wholesale and correspondent mortgage channels. We recognized then that
these businesses are highly cyclical and have the potential to incur
operating losses during rising interest rate environments when
mortgage origination volumes decline. So, we laid out a strategic plan
to improve performance at the bank and to diversify into other
businesses that complemented or ran counter cyclical to the indirect
mortgage operations.
"We have fundamentally improved the long-term earnings prospect of
the company by building out the bank, our retail mortgage franchise
and our ATM and payment processing businesses," Freeman continued.
"But, we are now facing a kind of perfect storm of market and economic
conditions that has put pressure on our businesses across the board.
Simply put, we have not yet had the time or opportunity to attain the
level of diversification that would enable us to better mitigate and
limit the bottom line impact of the interest rate and mortgage pricing
pressures we are seeing today.
"Although our overall strategic plan remains directionally
correct, we cannot advance all of our initiatives and generate
sufficient shareholder return under the current business climate,"
Freeman concluded. "We have begun to actively narrow our focus to
those initiatives that generate the best return on a risk-adjusted
capital basis or to those that carry the greatest long-term strategic
significance. Our recently announced plan to sell our servicing
platform and asset is part of that process. These efforts should allow
us to improve short-term results and keep our franchise value intact."
Banking Segment Performance
Table 1 below details results in the company's Retail Banking
segment. Pre-tax income totaled $1.7 million, an increase of $648,000
from last quarter. The segment's risk-adjusted interest margin rose 15
bps to 156 bps. This additional spread helped to offset the impact of
a decline in earning assets. Total earning assets fell by $132 million
to $4.6 billion. Assets are likely to remain at the current level or
show additional contraction until existing capital pressures ease or
the company frees up capital from other lines of business to support
additional asset growth at the bank.
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Table 1
RETAIL BANKING
($ in 000s, Unaudited)
2006 2005
1st Quarter 4th Quarter Change
----------- ----------- ----------
Net interest income $ 20,969 $ 20,383 $ 586
Provision for credit losses 2,999 3,645 (646)
----------- ----------- ----------
Net interest income after provision 17,970 16,738 1,232
Gain on sales of loans - 333 (333)
Fees, charges and other income 3,631 3,678 (47)
----------- ----------- ----------
Total revenues 21,601 20,749 852
Total expenses 19,916 19,712 204
----------- ----------- ----------
Pre-tax income 1,685 1,037 648
=========== =========== ==========
Average earning assets $4,609,654 $4,741,288 $(131,634)
Operations to average earning
assets
Net interest income after provision 1.56% 1.41% 0.15%
Gain on sale, fees, charges and
other income 0.32% 0.34% (0.02%)
----------- ----------- ----------
Banking revenues 1.88% 1.75% 0.13%
Total expenses 1.73% 1.66% 0.07%
----------- ----------- ----------
Pre-tax income before net servicing
results 0.15% 0.09% 0.06%
=========== =========== ==========
*T
Additional performance drivers behind Retail Banking segment
performance include the following. All comparisons are on a sequential
quarter basis unless noted otherwise.
-- Deposits increased to $2.8 billion, up $31.5 million or 4.5%
on an annualized basis.
-- Our business finance operation continued to perform well.
Pre-tax income totaled $3.0 million, an increase of $365,000
or 13.6%. The channel's lease portfolio grew by $15.0 million
and accounted for most of the additional income. Production
eased to $51.4 million, down 5.2 million or 9.2%.
-- Pre-tax income from our auto lending business improved
slightly but was still inconsequential at $54,000. Management
continues to limit production in this channel since its
risk-adjusted returns, given current market conditions, remain
below other lines of business.
Financial Intermediary Segment Performance
Table 2 below details results in the company's Financial
Intermediary segment. The segment reported a pre-tax loss of $4.4
million, compared with a pre-tax loss of $1.7 million a quarter ago.
As expected, seasonal factors weighed on performance and contributed
to the broader loss at the bottom line. Pricing competition heated up
and origination volumes declined industry wide as they typically do
each year during the winter months. The segment's pre-tax margin
dropped an additional 10 bps to -18 bps. Production and sales both
declined by 13.8%. Production totaled $2.8 billion, while sales
totaled $2.9 billion.
Segment results also include a reversal of $2.0 million in
reserves. The company disclosed concerns over a limited group of loans
in November 2005 after it learned that misrepresentations may have
been made when the loans were originated. The company booked reserves
of $3.5 million then as a matter of prudence. Our follow-up
investigation showed that we had clear title to the properties and
that the reserve more than covered any potential exposure. A number of
those loans have since paid in full and no longer pose a concern.
Management adjusted the level of reserve against the remaining loans
accordingly.
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Table 2
FINANCIAL INTERMEDIARY
($ in 000s, Unaudited)
2006 2005
1st Quarter 4th Quarter Change
----------- ----------- ----------
Net interest income $ 6,693 $ 7,746 $ (1,053)
Gain on sales of loans 22,450 26,805 (4,355)
Other income 524 905 (381)
Net Beacon Credit Services results (286) (79) (207)
Net MG Reinsurance results 881 856 25
----------- ----------- ----------
Total revenues 30,262 36,233 (5,971)
Salary and employee benefits 18,294 19,351 (1,057)
Occupancy and depreciation expense 6,235 6,598 (363)
Other expenses 10,172 11,987 (1,815)
----------- ----------- ----------
Total expenses 34,701 37,936 (3,235)
----------- ----------- ----------
Pre-tax loss $ (4,439) $ (1,703) $ (2,736)
=========== =========== ==========
Production $2,815,262 $3,266,622 $(451,360)
Sales (includes intercompany sales) $2,894,307 $3,358,508 $(464,201)
Total revenues to sales 1.05% 1.08% (0.03%)
Total expenses to production 1.23% 1.16% 0.07%
----------- ----------- ----------
Pre-tax margin (0.18%) (0.08%) (0.10%)
=========== =========== ==========
*T
Additional performance drivers behind Financial Intermediary
segment performance include the following. All comparisons are on a
sequential quarter basis unless noted otherwise.
-- The margin pressures on the conforming side of our business
have been more pronounced in our indirect channels. We
continue to see more consistent and stable performance within
our retail franchise, Market Street Mortgage. Market Street
Mortgage has been able to gain market share over the past few
years by building strong relationships with builders and
focusing on the specific needs of minority and first-time
homebuyers. Although Market Street Mortgage's production was
down from last quarter due to seasonality, its production was
up by $157 million or 25% when compared with production in the
same period a year ago.
-- The gain on sale margin within the non-conforming channel
showed marked improvement. It rose 25 bps to 115 bps. Although
this is clearly a move in the right direction, the gain on
sale margin still remains well below historic norms or even
last year's high of 169 bps.
Transaction Processing Segment Performance
Table 3 below details results in the company's Transaction
Processing segment. Pre-tax income totaled $1.5 million, an increase
of $85,000 from last quarter. Although performance appears relatively
consistent at the bottom line, the underlying drivers are different.
Reduced interchange fees and heightened competition for merchant
contracts as they come up for renewal have put pressure on revenue
within our ATM and debit-credit processing operation. However, this
pressure was more than offset by a decrease in operating expenses
within our servicing factory.
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Table 3
TRANSACTION PROCESSING
($ in 000s, Unaudited)
2006 2005
1st 4th
Quarter Quarter Change
-------- -------- ------
Total revenue $ 6,225 $ 6,744 $(519)
Total expenses 4,727 5,331 (604)
-------- -------- ------
Pre-tax income $ 1,498 $ 1,413 $ 85
======== ======== ======
*T
Additional performance drivers behind Transaction Processing
segment performance include the following. All comparisons are on a
sequential quarter basis unless noted otherwise.
-- The number of loans serviced by our servicing factory fell by
4,871 to 117,993 as the size of the company's servicing asset
continues to contract.
-- The company's network of ATMs and debit-credit processing
terminals remained flat. We had 9,582 ATMs and 2,328
debit-credit processing terminals in operation at quarter-end.
-- We signed Navy Federal Credit Union as a client for
QuickPost(SM), our deposit- and payment-forwarding service.
Navy Federal has 2.6 million members and ranks as the largest
credit union in the world. We expect to roll the service out
to Navy Federal's members later this year.
Servicing Asset Segment Performance
Table 4 below details results in the company's Servicing Asset
segment. The segment reported a pre-tax loss of $5.8 million, compared
with pre-tax income of $6.9 million a quarter ago. The difference is
centered in net hedge results. In the fourth quarter, an improving
environment for mortgage servicing rights led to net hedge gains of
$10.6 million, pre-tax. In contrast, the company's net hedge results
came under significant pressure during the first quarter as the spread
between mortgage rates and mortgage swaps declined by 19 bps. This
compression affected the industry as a whole and drove our net
hedge results to a pre-tax loss of $3.1 million.
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Table 4
SERVICING ASSET
($ in 000s, Unaudited)
2006 2005
1st 4th
Quarter Quarter Change
-------- -------- ---------
Net interest income $ 326 $ 21 $ 305
Servicing fees 10,601 10,296 305
Other income 28 36 (8)
-------- -------- ---------
Total revenue 10,955 10,353 602
Amortization of MSRs 10,547 10,556 (9)
Subservicing fees paid 2,503 2,565 (62)
Other expenses 623 952 (329)
-------- -------- ---------
Total expenses 13,673 14,073 (400)
-------- -------- ---------
Pre-tax servicing margin (2,718) (3,720) 1,002
-------- -------- ---------
Loss on hedges (6,698) (238) (6,460)
Recovery 3,611 10,831 (7,220)
-------- -------- ---------
Net hedge results (3,087) 10,593 (13,680)
-------- -------- ---------
Net pre-tax income (loss) $(5,805) $ 6,873 $(12,678)
======== ======== =========
*T
Additional performance drivers behind Servicing Asset segment
performance include the following. All comparisons are on a sequential
quarter basis unless noted otherwise.
-- The average unpaid principal balance related to the company's
mortgage servicing rights totaled $13.1 billion, a decrease of
$294 million or 2.2%.
-- Management recently announced its intention to sell the
company's servicing platform and the bulk of its servicing
asset as part of its ongoing effort to optimize performance
from a risk-adjusted return on capital perspective. We
originally pursued the servicing asset as a natural macro
hedge against our mortgage origination businesses, but we have
not yet achieved the scale we targeted. Management believes
the asset needs to be at least $25 billion in size to serve as
an effective hedge and to generate the type of risk-adjusted
return the company requires today.
Second Quarter Earnings Outlook
Management expects performance across its operating segments to
remain under pressure as many of the business conditions that impacted
first quarter results persist. Results in the company's indirect
mortgage channels are showing improvement as pricing competition has
eased from first quarter levels. We believe this improvement should
help to drive the company's earnings back toward the break-even mark.
However, the risk for renewed pricing pressures in these channels
along with the potential for negative net servicing results could
cause results to fall below this mark. Analyst estimates for second
quarter results range from income of $.04 to a loss of $.05 at
present. We are currently biased to the downside of this range.
Supplemental Financial Data
The company posts additional financial information directly to its
Web site. We publish a report that decomposes quarterly results by
line of business within each segment. The data is presented in a
five-quarter format where current quarter results are shown along side
results from the most recent four quarters. This report is designed to
give interested parties a more granular look at the company's results
and to make it easier for them to monitor performance trends.
The quarterly data posted this morning includes the current
five-quarter trend along with quarterly information from 2004. All of
the material conforms to the new financial reporting format mentioned
earlier in this release. The 2004 data is intended to provide
additional historical perspective under the revised financial
reporting format.
Interested parties can access this material at www.netbankinc.com.
Go to the "Investor Relations" area and click on the "Financial Data"
link. Within this same area, we post a monthly report that shows key
operating statistics for the company's major lines of business.
Management also uses this report to update the company's quarterly
earnings guidance as needed. The company publishes this report around
the 20th of each month and files it simultaneously with the Securities
Exchange Commission under Form 8-K.
Conference Call Information
Management has scheduled a conference call to discuss today's
reported results with investors, financial analysts and other
interested parties. The call will be held today at 10 a.m. EDT.
Interested parties may dial in or listen via an audiocast on the
company's Web site.
*T
Call Title: NetBank, Inc. Earnings Announcement
Call Leader: Douglas K. Freeman
Passcode: NetBank
Toll-Free: 888-889-1959
International: +1-773-756-0455
One-Week Replay: 800-294-5098 or 402-220-9782
*T
About NetBank, Inc.
NetBank, Inc. (Nasdaq: NTBK) operates 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) Fundamental improvement in the company's long-term
earnings prospects; 2) The ability for management to improve
short-term results or protect the company's overall value by narrowing
its focus to initiatives that generate better return on risk-adjusted
capital; 3) Management's belief that the company's future exposure to
potential losses on the pool of loans identified in November 2005 is
less today than before; and 4) Reduced pricing competition within the
mortgage industry that might lead to improving income margins or
earnings.
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 1A. Risks Factors" in its Annual
Report on Form 10-K for the year ended December 31, 2005. 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.
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NetBank, Inc.
Consolidated Statements of Operations
For the three months ended March 31,
(Unaudited and in 000's except per share data)
2006
---------------------------------------------
Retail Financial Transaction Servicing
banking intermediary processing Asset
---------------------- -------- ------------ ------------ ----------
Interest income:
Loans and leases $31,394 $ 26,416 $ 7 $ -
Investment securities 8,413 1 - -
Short-term investments 389 157 - -
Inter-segment 23,595 57 - 2,344
---------------------- -------- ------------ ------------ ----------
Total interest income 63,791 26,631 7 2,344
Interest expense:
Deposits 21,897 - - -
Other borrowed funds 15,975 521 - 4
Inter-segment 4,950 19,165 88 2,014
---------------------- -------- ------------ ------------ ----------
Total interest
expense 42,822 19,686 88 2,018
---------------------- -------- ------------ ------------ ----------
Net interest income 20,969 6,945 (81) 326
Provision for credit
losses 2,999 58 - -
---------------------- -------- ------------ ------------ ----------
Net interest income
after provision for
credit losses 17,970 6,887 (81) 326
Non-interest income:
Mortgage servicing
fees 3 559 1,456 10,601
Amortization of MSRs - (57) - (10,547)
Recovery (impairment)
of MSRs - - - 3,611
(Loss) gain on
derivatives - - - (6,698)
Gain on sales of
investment securities - - - -
Service charges and
fees 2,543 (2) 2,357 -
Gain on sales of loans
and MSRs - 23,362 - -
Other income 1,085 800 499 28
Intersegment
servicing/processing
fees - - 3,363 -
---------------------- -------- ------------ ------------ ----------
Total non-interest
income 3,631 24,662 7,675 (3,005)
Non-interest expense:
Salaries and benefits 4,571 19,106 2,597 -
Customer service 3,270 - 59 -
Marketing costs 1,338 2,050 55 -
Data processing 2,586 699 543 -
Depreciation and
amortization 1,770 2,457 961 -
Office expenses 1,301 1,853 493 -
Occupancy 1,273 3,865 270 -
Travel and
entertainment 187 726 115 -
Professional fees 883 1,003 464 -
Prepaid lost interest
from curtailments - 7 - 608
Other 2,616 3,483 539 15
Inter-segment
servicing/processing
fees 121 739 - 2,503
---------------------- -------- ------------ ------------ ----------
Total non-interest
expense 19,916 35,988 6,096 3,126
---------------------- -------- ------------ ------------ ----------
Income before income
taxes $ 1,685 $ (4,439) $ 1,498 $ (5,805)
======== ============ ============ ==========
Income tax benefit
Net loss
Net loss per common and potential common
shares outstanding:
Basic and diluted
Weighted average common and potential common
shares outstanding:
Basic and diluted
2006 2005
------------------------ ------------
Other/ Consolidated Consolidated
Corporate NetBank, NetBank,
overhead Inc. Inc.
------------------------------- ----------- ------------ ------------
Interest income:
Loans and leases $ 98 $ 57,915 $ 47,853
Investment securities - 8,414 8,788
Short-term investments - 546 379
Inter-segment (25,996) - -
------------------------------- ----------- ------------ ------------
Total interest income (25,898) 66,875 57,020
Interest expense:
Deposits - 21,897 13,216
Other borrowed funds 620 17,120 13,027
Inter-segment (26,217) - -
------------------------------- ----------- ------------ ------------
Total interest expense (25,597) 39,017 26,243
------------------------------- ----------- ------------ ------------
Net interest income (301) 27,858 30,777
Provision for credit losses - 3,057 2,351
------------------------------- ----------- ------------ ------------
Net interest income after
provision for credit losses (301) 24,801 28,426
Non-interest income:
Mortgage servicing fees - 12,619 12,262
Amortization of MSRs - (10,604) (10,628)
Recovery (impairment) of MSRs - 3,611 680
(Loss) gain on derivatives - (6,698) (2,789)
Gain on sales of investment
securities - - 2,477
Service charges and fees - 4,898 4,751
Gain on sales of loans and MSRs 618 23,980 24,820
Other income (221) 2,191 2,888
Intersegment
servicing/processing fees (3,363) - -
------------------------------- ----------- ------------ ------------
Total non-interest income (2,966) 29,997 34,461
Non-interest expense:
Salaries and benefits 8,566 34,840 31,723
Customer service 24 3,353 3,124
Marketing costs 151 3,594 2,855
Data processing 716 4,544 4,375
Depreciation and amortization 680 5,868 5,603
Office expenses (219) 3,428 2,820
Occupancy 1,568 6,976 5,901
Travel and entertainment 227 1,255 1,250
Professional fees 996 3,346 3,990
Prepaid lost interest from
curtailments - 615 1,024
Other (2,956) 3,697 3,349
Inter-segment
servicing/processing fees (3,363) - -
------------------------------- ----------- ------------ ------------
Total non-interest expense 6,390 71,516 66,014
------------------------------- ----------- ------------ ------------
Income before income taxes $ (9,657) (16,718) (3,127)
===========
Income tax benefit 5,767 1,098
------------ ------------
Net loss $ (10,951) $ (2,029)
============ ============
Net loss per common and potential common
shares outstanding:
Basic and diluted $ (0.24) $ (0.04)
Weighted average common and potential common
shares outstanding:
Basic and diluted 46,262 46,366
*T
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NetBank, Inc.
Condensed Consolidated Balance Sheet
As of March 31,
(Unaudited and in 000's)
March 31, December March 31,
31,
2006 2005 2005
----------- ----------- -----------
Assets
Cash and cash equivalents:
Cash and due from banks $ 151,609 $ 126,666 $ 144,933
Cash equivalents and fed
funds 26,599 23,590 23,695
----------- ----------- -----------
Total cash, cash equivalents
and fed funds 178,208 150,256 168,628
Investment securities available
for sale-at fair value 606,959 626,077 741,108
Stock of Federal Home Loan Bank of
Atlanta-at cost 54,359 67,049 71,054
Loans held for sale 974,430 1,233,918 1,119,856
Loan and lease receivables-net of
allowance for losses 2,192,073 2,224,363 2,122,998
Mortgage servicing rights 212,094 201,880 210,253
Accrued interest receivable 16,849 16,698 12,259
Furniture, equipment and
capitalized software 54,053 54,420 49,115
Goodwill and other intangibles 84,918 85,097 80,517
Due from servicers and investors 20,699 26,557 22,683
Unsettled trades - - 75,000
Other assets 74,209 85,304 81,544
----------- ----------- -----------
Total assets $4,468,851 $4,771,619 $4,755,015
=========== =========== ===========
Liabilities
Deposits $2,826,267 $2,793,847 $2,591,488
Other borrowed funds 1,056,692 1,348,240 1,506,858
Subordinated debt 32,477 32,477 32,477
Accrued interest payable 17,301 17,595 9,853
Loans in process 29,448 34,060 47,937
Unsettled Trades - - -
Representations and warranties 16,234 20,668 22,031
Accounts payable and accrued
liabilities 105,402 123,877 141,592
----------- ----------- -----------
Total liabilities 4,083,821 4,370,764 4,352,236
----------- ----------- -----------
Minority interests in affiliates 613 676 519
Shareholders' equity
Preferred stock, no par - - -
Common stock, $.01 par 528 528 528
Additional paid-in capital 433,109 432,140 432,132
Retained earnings 27,173 39,005 40,553
Accumulated other comprehensive
loss, net of tax (13,430) (7,965) (6,738)
Treasury stock, at cost (62,963) (62,276) (64,020)
Unearned compensation - (1,253) (195)
----------- ----------- -----------
Total shareholders' equity 384,417 400,179 402,260
----------- ----------- -----------
Total liabilities, minority
interests and shareholders'
equity $4,468,851 $4,771,619 $4,755,015
=========== =========== ===========
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NetBank, Inc. Consolidated
Selected Financial and Operating Data
(Unaudited and in 000's except per share data)
Quarter Ended
March 31, December 31, March 31,
------------ ------------ ------------
2006 2005 2005
------------ ------------ ------------
Consolidated:
Net income (loss) $ (10,951) $ 895 $ (2,029)
Total assets $ 4,468,851 $ 4,771,619 $ 4,755,015
Total equity $ 384,417 $ 400,179 $ 402,260
Shares outstanding 46,320 46,396 46,237
Return on average equity (11.17%) 0.89% (1.99%)
Return on average assets (0.89%) 0.07% (0.17%)
Book value per share $ 8.30 $ 8.63 $ 8.70
Tangible book value per
share $ 6.47 $ 6.79 $ 6.96
NetBank, FSB:
Deposits $ 2,827,509 $ 2,796,029 $ 2,592,680
Customers 282,961 285,669 270,898
Estimated Capital Ratios:
Tier 1 core capital ratio 6.83% 6.51% 6.42%
Total risk-based capital
ratio 10.31% 10.32% 10.93%
Asset quality numbers:
CMC Lease portfolio $ 25,762 $ 26,054 $ 31,294
Non-performing loan and
lease receivables 6,214 6,995 5,789
------------ ------------ ------------
Total non-performing loan
and lease receivables 31,976 33,049 37,083
Non-performing loans held
for sale (1) 40,499 49,255 36,443
------------ ------------ ------------
Total non-performing loans
and leases 72,475 82,304 73,526
Repossessed assets (2) 10,806 8,200 6,330
------------ ------------ ------------
Total non-performing assets $ 83,281 $ 90,504 $ 79,856
Allowance for credit losses
(ALLL) $ 28,302 $ 27,601 $ 25,075
Net charge-offs of loan and
lease receivables $ (2,356) $ (2,786) $ 1,738
Asset quality ratios:
Total non-performing assets
/ average assets 1.69% 1.78% 1.72%
ALLL / total non-performing
loan and lease receivables 88.51% 83.52% 67.62%
Net annualized charge-offs
/ total assets 0.21% 0.23% -0.15%
Mortgage Banking:
Production Activity:
Retail $ 794,628 $ 934,184 $ 637,522
Correspondent 917,284 904,354 859,109
Wholesale 456,542 568,789 608,546
RMS 41,574 52,185 41,249
------------ ------------ ------------
Total Agency-eligible 2,210,028 2,459,512 2,146,426
Non-conforming 605,234 807,110 630,183
------------ ------------ ------------
Total $ 2,815,262 $ 3,266,622 $ 2,776,609
============ ============ ============
Sales Activity:
Third party sales $ 2,887,567 $ 3,302,059 $ 2,722,062
Intercompany sales 7,211 56,449 38,401
------------ ------------ ------------
Total sales $ 2,894,778 $ 3,358,508 $ 2,760,463
============ ============ ============
Pipeline:
Locked conforming mortgage
loan pipeline $ 842,835 $ 929,205 $ 917,450
UPB of loans serviced: $16,286,000 $17,107,575 $18,698,781
(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