NetBank Reports Leasing Business (Republic ) Down 12%

 (Loan Production "flat"----  The commercial equipment leasing business had production of    $39 million, a decrease of $5.2 million or 12% )

( related stories: http://www.leasingnews.org/Conscious-Top%20Stories/Republic_Leasing_Main.htm  )

ATLANTA----NetBank, Inc. (Nasdaq:NTBK), parent company of the country's first commercially successful Internet bank, NetBank(R) (www.netbank.com),  reported earnings for the first quarter of 2004.

   Net income totaled $9.4 million or $.20 per share for the first quarter, compared to $10.7 million or $.22 per share for the same period a year ago. Based on the company's strong financial position, the board of directors declared a dividend of $.02 per share payable to shareholders of record on May 15, 2004. The dividend will be disbursed on June 15, 2004.  

   Deposits totaled $2.6 billion, a quarter-over-quarter increase of $106 million or 17% on an annualized basis. Growth was centered in small business accounts and escrow funds for our mortgage servicing operations. Small business deposits grew by $6.6 million during the quarter or 100% on an annualized basis. The $47 million decrease in retail deposits was primarily in single-service or non-core CD account relationships. The bank continues to refine its pricing to attract and retain multi-product relationships that produce value for both the customer and the bank. Although overall retail deposits declined, average balances in core transactional accounts increased over the quarter. The average retail checking balance at quarter-end was $2,210, an increase of $147. The average retail money market balance totaled $15,858, up $81.  

    Updates on other key performance statistics include the following:

     --  The indirect auto lending operation generated $87 million in
        loans, an increase of $32 million or 59% from last quarter
    --  The commercial equipment leasing business had production of
        $39 million, a decrease of $5.2 million or 12%
    --  The core servicing portfolio grew to $13.1 billion, up $670
        million or 5% from last quarter and up $5.3 billion or 68% 
        from a year ago

   There have been no material changes in our litigation over leases originated by Commercial Money Center, Inc. (CMC). Based on legal expenses and unrealized income, the CMC matter affected first quarter earnings by $1.3 million, pre-tax, or $.02 per share, after tax. Our case against the CMC sureties remains strong, and we are in the process of amending our complaint to pursue fraud and unfair trade claims that would entitle us to treble damages. The sureties are Illinois Union Insurance Company, an affiliate of ACE INA Group (NYSE:ACE); Safeco Insurance Company, an affiliate of Safeco (Nasdaq:SAFC); and Royal Indemnity Company, an affiliate of Royal and Sun Alliance Group (NYSE:RSA). 

 Additional highlights of the quarter include:

    --  Banking segment results comprised 30% of earnings
    --  A quarter-over-quarter increase in bank deposits of $106
        million or 17% on an annualized basis
    --  Average earning assets at the bank of $4.2 billion, a $339
        million increase from last quarter, fueled mostly by the
        retention of select company-originated loans and leases
    --  Total loan production of $3.3 billion, essentially flat from
        the previous quarter
    --  Total loan sales of $3.8 billion, a quarter-over-quarter
        decrease of $185 million
    --  An annualized balance sheet turn of 3.3 times

   Management repurchased 672,100 shares of the company's common stock during the quarter. The average price paid per share was $12.26. The board of directors has subsequently increased the buy back authorization by one million shares. Along with shares still available under previous authorizations, management currently has approval to repurchase approximately 1.3 million shares. Purchases may be made in the open market or through private transactions.

   With this quarter's earnings announcement, the company introduced a revised financial format to break out results within its transaction processing operations as a segment. The mortgage segment was renamed "Financial Intermediary" to better reflect the scope of activity envisioned within this segment. In addition to mortgages and mortgage-backed securities, the company plans to originate and deliver non-mortgage assets into the capital markets as part of this operation. Financial results related to the company's mortgage servicing portfolio were moved into the banking segment since the company views its mortgage servicing rights (MSRs) as a strategic, long-term asset. The actual servicing operation was placed into the transaction processing segment since it services loans for third parties as well as intra-company businesses.

   All segment tables within this release report results under the revised format to provide quarter-over-quarter comparisons. The company also updated the supplemental data that it posts to the Web site to conform to the new format. 

   Management Commentary 

   "This quarter's results show the progress we're making in diversifying the company's revenue and only hint at the potential that lies ahead," said Douglas K. Freeman, chairman and chief executive officer. "We continue to work toward a balanced business model with counter-cyclical levers and stable, annuity-like income sources. Our banking segment reported impressive results that allowed us to manage through the difficult environment that we faced in our conforming mortgage operation as volumes declined and pricing pressures increased."

   "The quarter shaped up fairly close to our expectations," said Steven F. Herbert, chief finance executive. "Profitability in our financial intermediary operations came under significant pressure as rates moved higher early in the quarter and mortgage lock activity diminished. Secondary market margins were also affected by aggressive pricing behavior within the correspondent channel. Improving fundamentals within the banking segment and an abatement of impairment charges within the servicing portfolio partially mitigated those challenges."

   "We've shared publicly that our goal is to reach a point over the next few years where our earnings are comprised of equal contributions from our three primary operating segments -- banking, financial intermediary and transaction processing," Freeman concluded. "There is still a lot of work to be done, especially in executing our vision within our transaction processing operations. But, this quarter's solid results and a more varied earnings contribution mix between the segments should further encourage our investors and associates. It clearly indicates that we're gaining traction." 

   Banking Segment 

  Pre-tax income, before gains on securities and net servicing results, grew to $3.5 million, an increase of $2.7 million or 330% from the previous quarter. This dramatic improvement resulted from two primary factors. Revenues rose by $1.6 million, driven mostly by growth of $339 million in the bank's earnings assets. And, expenses fell by $1.0 million, representing a return to more normalized levels from last quarter's high.

   At the bottom line, segment results were affected by a $2.1 million loss, pre-tax, related to the company's mortgage servicing asset and a $3.2 million gain, pre-tax, on the sale of certain securities in the bank's investment portfolio. The sale was part of the company's proactive asset-liability management strategy. The company holds only saleable assets on its balance sheet that management routinely analyzes from a best execution standpoint. Assets are sold at opportune times to mitigate inherent risks.

    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 major subsidiaries include NetBank(R) (www.netbank.com), the country's first commercially successful Internet bank; RBMG, Inc., a wholesale mortgage lender that generates residential mortgages through a nationwide network of independent brokers and correspondent lenders; Market Street Mortgage Corporation, a retail residential mortgage lender that conducts business in 39 states; Meritage Mortgage Corporation, a wholesale mortgage lender that originates non-conforming residential mortgages through a nationwide network of independent brokers; Republic Leasing Company, Inc., a wholesale originator and servicer of commercial business equipment leases; NetInsurance, Inc., an online insurance agency representing some of the nation's leading insurance companies; and NetBank Payment Systems, Inc., a provider of ATM and merchant processing services to small institutions and non-bank retail businesses. NetBank is a Member FDIC. NetBank, RBMG(R), Market Street Mortgage(R) and Meritage(R) are Equal Housing Lenders.  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 major subsidiaries include NetBank(R) (www.netbank.com), the country's first commercially successful Internet bank; RBMG, Inc., a wholesale mortgage lender that generates residential mortgages through a nationwide network of independent brokers and correspondent lenders; Market Street Mortgage Corporation, a retail residential mortgage lender that conducts business in 39 states; Meritage Mortgage Corporation, a wholesale mortgage lender that originates non-conforming residential mortgages through a nationwide network of independent brokers; Republic Leasing Company, Inc., a wholesale originator and servicer of commercial business equipment leases; NetInsurance, Inc., an online insurance agency representing some of the nation's leading insurance companies; and NetBank Payment Systems, Inc., a provider of ATM and merchant processing services to small institutions and non-bank retail businesses. NetBank is a Member FDIC. NetBank, RBMG(R), Market Street Mortgage(R) and Meritage(R) are Equal Housing Lenders. 

CONTACT:NetBank, Inc. Matthew Shepherd, 678-942-2683 mshepherd@netbank.com

Full Press Release Available at:
http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=NTBK&script=
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