NetBank, Inc. Reports Third Quarter Results

Reorganization Charges Drive Loss of $1.58 Per Share


ATLANTA, Nov. 8, 2006 (PRIMEZONE) -- NetBank, Inc. (Nasdaq:NTBK), parent company of NetBank(r) (www.netbank.com) and a leading mortgage lender, today reported financial results for the quarter ended September 30, 2006. The company recorded an after-tax loss of $73.3 million or $1.58 per share for the period, compared with an after-tax loss of $1.4 million or $.03 per share during the same quarter a year ago. On a year-to-date basis, the company recorded an after-tax loss of $116 million or $2.50 per share, versus a net loss of $1.1 million or $.02 per share during the first nine months of 2005.

Book value declined by $1.22 per share from $7.48 on June 30, 2006 to $6.26 on September 30, 2006. However, the impact on the company's tangible book value was substantially less. Tangible book value declined $.70 per share from $5.80 on June 30, 2006 to $5.10 on September 30, 2006. On an after-tax basis, the reported loss included a $19.5 million expense of non-deductible goodwill and a $2.4 million expense of deductible goodwill, both of which did not negatively impact tangible book value. In addition, the company sold certain on-balance sheet investments allocated as economic hedges of its mortgage servicing rights ("MSRs") during the quarter. The unrealized loss on these securities was already deducted from tangible book value on June 30 through other comprehensive loss included in the equity section of the balance sheet. Thus, the realized loss on those securities did not impact tangible book value. (Details related to amounts excluded from tangible book value are provided in the attached Reconciliation of Non-GAAP Financial Measures.)

The company's after-tax loss increased by $42.0 million on a quarter-over-quarter basis. Key trends worth noting include the following. All comparisons are on a sequential quarter basis unless noted otherwise.


  -- Decreased Earning Assets. The bank's average earning assets
     were down $348 million to $4.0 billion. The primary drivers of
     the decrease were the sale of $336 million of investment
     securities and $27.4 million of home equity loans during the
     quarter.

  -- Lower Net Interest Margin. The banking segment's net interest
     margin fell by 0.14% to 1.46% due to continuation of the flat
     yield curve, lower average asset balances and higher deposit
     costs.

  -- Flat Mortgage Production and Sales. Mortgage production in all
     channels remained soft due to lower origination volumes across
     the industry. Production totaled $2.4 billion, a decrease of $143
     million or 5.5%. Sales were down as a result. Sales across all
     channels totaled $2.4 billion, a decrease of $66.8 million or
     2.7%.

  -- Lower Mortgage Repurchase Expense. Although mortgage repurchase
     demands improved from last quarter, they remained at an elevated
     level. As a result, provision expense totaled $12.2 million this
     quarter, a decrease of $8.1 million from last quarter.

The board of directors determined earlier this year that the company needed to make significant changes to its operating plan to return to profitability and protect capital. As part of that effort, the board of directors voluntarily entered into a supervisory agreement with the bank's regulators at the Office of Thrift Supervision ("OTS") after the close of the third quarter. Under the agreement, the board will work with management to develop and execute a written, multi-year plan based upon the change in strategy. The board and management are in the process of finalizing this plan, which centers largely on the tactical initiatives management already has underway to refocus the business on its banking and conforming mortgage competencies. Additional details on this agreement can be found later in this release under the heading "Regulatory Matters."

Unusual Charges

Current quarter results include the following unusual charges.


 -- Mortgage Servicing Rights Sale. As reported earlier, the
    company sold most of its MSRs associated with conventional,
    agency-eligible loans in two, separate transactions during
    the quarter that resulted in an after-tax loss of $19.3 million.
    The company also elected to liquidate $336 million of investment
    securities that it held as an economic on-balance sheet hedge
    resulting in an after-tax loss of $8.7 million on the sale of
    those securities. The charges related to these transactions
    equated to an after-tax loss of $28.1 million or $.61 per share.

 -- Impairment of Goodwill. Management expensed goodwill on two of
    the company's business units during the quarter. The company
    recorded $19.5 million, or $.42 per share, in after-tax goodwill
    impairment associated with its non-conforming mortgage business.
    It also recorded after-tax impairment of $2.4 million, or $.05
    per share, on a portion of the goodwill related to its ATM and
    merchant processing business.

Management Commentary

"This quarter's results reflect a company in transition," said Steven F. Herbert, chief executive officer. "It was very noisy with a number of unusual charges related to the steps we are taking to narrow our lines of business and refocus on our core banking and conforming mortgage operations. Our immediate focus is on stabilizing the company's operating profile, preserving capital and returning to profitability as quickly as possible. With that in mind, we moved quickly to execute on needed changes.

"During the quarter, we completed the sale of the majority of our MSR portfolio. Earlier this week, we announced transactions that are facilitating the exit of our non-conforming mortgage and RV, boat and aircraft financing operations. We have also made the decision to move forward with several other initiatives that are essential to our action plan. They include: implementing a plan to shut down FTI and the QuickPost service; completing a sale of our NetInsurance operation; consolidating our indirect, conforming mortgage loan operations into a central location; and downsizing our management team to reflect the more streamlined organization we are becoming.

"We currently estimate that these actions will be completed before year-end, and that one-time fourth quarter charges for all of them will total about $14 million to $15 million after tax. While we had hoped for more favorable outcomes, our plan fully contemplated the potential for the types of one-time, adverse impacts to tangible book value that we have seen.

"We are also considering options for our auto lending and ATM and merchant processing businesses. We estimate that a worst-case, one-time charge related to the options we are considering for the auto business would be about $1 million after tax. Given that most of the value of the ATM business is reflected as intangibles, tangible book value would be positively impacted if we were to move forward with any of the options being considered.

"So all-in it was a challenging quarter," Herbert concluded. "But it's exciting to be on the path forward again. I believe we have been able to implement our plan quickly and successfully. We remain on track to complete most of the changes before year end. Effectively all of it should be done by the end of the first quarter. And while we may not see the full benefits of our plan for a couple more quarters, I expect to see a significant improving trend in our operating profile going forward."

Retail Banking Segment Performance

Table 1 below details results in the company's Retail Banking segment. The segment reported a pre-tax loss of $1.7 million, compared to income of $788,000 from last quarter. Excluding QuickPost expenses, the decline is a result of the return to more normal provision expense levels from last quarter, as well as continued pressure on net interest income due to the flat yield curve and a smaller average asset base. This quarter we recorded a $2.4 million provision for credit losses compared to $972,000 in the previous quarter. The previous quarter's lower provision expense level was a result of a $1.9 million reduction in provision expense related to the sale of home equity loans held by the bank.

QuickPost expenses leveled off during the quarter at $3.3 million. While the company believes QuickPost is a useful service, NetBank can't afford losses at the current level. Management has decided to shut down this product as part of its effort to return to profitability. Excluding QuickPost, the segment's overall expense ratio remained relatively flat at 164 bps.


 Table 1
                            RETAIL BANKING
                        ($ in 000s, Unaudited)

                                   2006          2006
                               3rd Quarter   2nd Quarter      Change
                                ----------    ----------    ---------
 Net interest income            $   16,878    $   18,306    $  (1,428)
 Provision for credit losses         2,410           972        1,438
                                ----------    ----------    ---------
    Net interest income
     after provision                14,468        17,334       (2,866)
 (Loss) gain on sales of loans         (33)          308         (341)
 Fees, charges and other income      3,477         3,650         (173)
                                ----------    ----------    ---------
  Total retail banking revenues     17,912        21,292       (3,380)
  Total retail banking expenses     16,334        17,310         (976)
                                ----------    ----------    ---------
  Pre-tax retail banking
   operations                        1,578         3,982       (2,404)
  Net QuickPost, PowerPost &
   NetServ Results                  (3,301)       (3,194)        (107)
                                ----------    ----------    ---------
  Pre-tax net (loss) income     $   (1,723)   $      788    $  (2,511)
                                ==========    ==========    =========

 Average earning assets         $3,975,800    $4,324,185    $(348,385)

 Operations to average earning
  assets excluding QuickPost

 Net interest income
  after provision                     1.46%         1.60%       (0.14%)
 Gain on sale, fees, charges
  and other income                    0.35%         0.37%       (0.02%)
                                ----------    ----------    ---------
 Total retail banking revenues        1.81%         1.97%       (0.16%)
 Total retail banking expenses        1.64%         1.60%        0.04%
                                ----------    ----------    ---------
    Pre-tax retail banking
     operations                       0.17%         0.37%       (0.20%)
                                ==========    ==========    =========

Additional performance drivers behind Retail Banking segment performance include the following. All comparisons are on a sequential quarter basis unless noted otherwise.


 -- The company's business finance operation remains a consistently
    profitable contributor. Pre-tax earnings for the quarter were flat
    at $3.2 million. Its production was off by $19.3 million or 33%
    to $39.2 million as competition from other lenders increased.

 -- Our auto lending business recorded pre-tax earnings of $410,000,
    a 79% increase over the previous quarter due to prudent expense
    management.

Financial Intermediary Segment Performance

Table 2 below details results in the company's Financial Intermediary segment. The segment reported a pre-tax loss of $39.5 million this quarter compared with a loss of $22.9 million last quarter. The challenging mortgage market continues to weigh on the segment's performance, as did some of the unusual charges outlined earlier in this release.

As discussed above, management chose to expense goodwill on the company's non-conforming mortgage business. We had been exploring our options with respect to exiting the business and concluded that the existing level of goodwill no longer accurately reflected the value of the operation's brand and other market intangibles. Subsequently, the company decided to shut down its non-conforming mortgage operation during the fourth quarter.

We saw a decrease in the demand for mortgage repurchases from last quarter, but they remained at an elevated level during the current quarter. Management continues to believe the issue is both market-driven and systemic, and is focused on taking the necessary steps to address it. We have been evaluating ways to improve internal processes and are currently in the process of centralizing our indirect, conforming mortgage operating centers. The company's regional operating centers in Jacksonville, Portland and St. Louis are being consolidated into the Columbia, S.C. facility. Management believes that by centralizing our operations, we can improve communication and better ensure improved loan quality.


 Table 2
                        FINANCIAL INTERMEDIARY
                        ($ in 000s, Unaudited)

                                   2006           2006
                               3rd Quarter    2nd Quarter    Change
                               -----------    -----------   ---------
 Net interest income            $    3,948    $    4,781    $    (833)
 Gain on sales of loans              4,396        10,586       (6,190)
 Loss on sale of MSRs                  (96)         (152)          56
 Other income                          272           895         (623)
 Net Beacon credit services
  results                             (103)       (6,332)       6,229
 Net MG Reinsurance results            898           597          301
                                ----------    ----------    ---------
    Total revenues                   9,315        10,375       (1,060)

 Salary and employee benefits       14,061        18,022       (3,961)
 Occupancy and depreciation
  expense                            6,464         6,108          356

 Other expenses                      8,824         9,145         (321)

 Goodwill impairment                19,505            --       19,505
                                ----------    ----------    ---------
    Total expenses                  48,854        33,275       15,579
                                ----------    ----------    ---------
    Pre-tax loss                $  (39,539)   $  (22,900)   $ (16,639)
                                ==========    ==========    =========

 Production                     $2,439,654    $2,582,727    $(143,073)
 Sales (includes
  intercompany sales)           $2,427,891    $2,494,743    $ (66,852)


 Total revenues to sales              0.38%         0.42%       (0.04)%
 Total expenses to production         2.00%         1.29%        0.71%
                                ----------    ----------    ---------
    Pre-tax margin                   (1.62%)       (0.87%)      (0.75%)
                                ==========    ==========    =========

Additional performance drivers behind Financial Intermediary segment performance include the following. All comparisons are on a sequential quarter basis unless noted otherwise.


 -- Conforming production totaled $2.0 billion, a decrease of
    $76.9 million or 3.7% due to seasonal factors. Conforming
    sales remained flat at $2.0 billion. The channel's revenue
    margin fell to 43 bps, a decline of 50 bps, as a result of
    decreased gain on sale margins.

 -- Non-conforming production fell by 13.8% to $413 million as
    management continued to narrow the focus of the operation and
    reduced capacity accordingly. Non-conforming sales fell in turn
    to $435 million, a decrease of 19.1%.

Transaction Processing Segment Performance

Table 3 below details results in the company's Transaction Processing segment. The segment recorded a pre-tax loss of $2.4 million, compared to income of $631,000 the previous quarter. The loss is a result of a $2.4 million after-tax impairment to a portion of goodwill that management elected to take during the quarter. As the number of ATMs in our network, along with our total number of merchant processing contracts, has decreased, management felt the existing level of goodwill no longer accurately reflected the value of the operation's brand and other market intangibles.


 Table 3

                        TRANSACTION PROCESSING
                        ($ in 000s, Unaudited)

                                     2006          2006
                                 3rd Quarter   2nd Quarter   Change
                                 -----------   -----------   -------
 Total revenue                   $     5,517   $     5,173   $   344
 Total expenses                        7,894         4,542     3,352
                                 -----------   -----------   -------
   Pre-tax (loss) income         $    (2,377)  $       631   $(3,008)
                                 ===========   ===========   =======

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 ATMs in our network dropped by 3.7% to 8,427
    machines. The ATMs that dropped from the network were inactive
    locations. The total number of ATM transactions processed during
    the quarter rose again, this time by 2.5% to 7.8 million.

 -- The total number of merchant processing terminals in deployment
    declined by 10.3% to 1,956. The decline represents inactive
    terminals that we no longer report in our POS portfolio.

Servicing Asset Segment Performance

Table 4 below details results in the company's Servicing Asset segment. The segment reported a pre-tax loss of $51.3 million compared with a pre-tax loss of $16.7 million last quarter. The loss was primarily centered in the company's sale of the majority of its mortgage servicing rights as reported earlier in this release. As a result of the sale, the company eliminated significant earnings volatility going forward, and will no longer have the same exposure to impairment and hedge-related losses.


 Table 4
                            SERVICING ASSET
                        ($ in 000s, Unaudited)

                                  2006           2006
                               3rd Quarter    2nd Quarter     Change
                               ----------     -----------    --------
 Net interest income             $    395      $    887      $   (492)
 Servicing fees                     7,095         9,700        (2,605)
 Loss on sale of MSRs             (29,702)           --       (29,702)
 Other income                         102            35            67
                                 --------      --------      --------
    Total revenue                 (22,110)       10,622       (32,732)
 Amortization of MSRs               6,981         9,890        (2,909)
 Subservicing fees paid             2,345         2,409           (64)
 Other expenses                       543           716          (173)
                                 --------      --------      --------
    Total expenses                  9,869        13,015        (3,146)
                                 --------      --------      --------
    Pre-tax servicing margin      (31,979)       (2,393)      (29,586)
                                 --------      --------      --------
    (Loss) on hedges               (4,357)       (4,764)          407
    Impairment                     (1,474)       (9,517)        8,043
    Loss on sale of securities    (13,461)           --       (13,461)
                                 --------      --------      --------
    Net hedge results             (19,292)      (14,281)       (5,011)
                                 --------      --------      --------
    Pre-tax loss                 $(51,271)     $(16,674)     $(34,597)
                                 ========      ========      ========

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 balance of the MSRs in our portfolio declined
    by 20.3% to $10.2 billion as a result of the MSR sale. Since the
    sale closed on the final day of the quarter, the full effect
    won't be seen until the fourth quarter.

Regulatory Matters

The board determined earlier in the year that the company needed to alter its business strategy given the losses it was sustaining and directed management to outline the steps necessary to return to profitability and preserve capital. The board ultimately approved these steps once presented and appointed a new CEO to see the initiatives through. The company's new chairman along with the new CEO outlined the initiatives to the OTS in detail upon their appointment in early October. The OTS responded favorably to this effort, and, as part of that discussion, indicated that it would require a more formal framework to further document the company's objectives during this transitional period.

The company's board of directors subsequently entered into a supervisory agreement to proactively address the bank's recent financial performance and the impact that losses have had on the bank's capital position over the past several quarters. The agreement sets forth specific strategies and actions the board will take to improve the bank's performance and to ensure proper practices in critical areas of operation and compliance. The board believes execution of such an agreement is prudent at this stage in the company's development as a sign of its commitment to effective oversight.

Under the agreement, the board has charged management with preparing and executing a written, multi-year business plan designed to 1) remedy the bank's underperforming lines of business; 2) to increase the percentage of core deposits versus brokered funds; and 3) to reduce the level of loan repurchases in the company's indirect mortgage operations. The initiatives management already has underway to exit all businesses that are not essential to the company's banking and conforming mortgage operations form the backbone of the plan. Management is also focused on lowering operational costs and reducing overhead so it can improve the competitiveness of the bank's deposit rates in the marketplace and resume meaningful deposit growth. The company has already begun to orchestrate changes in executive management and is in the process of making additional staffing adjustments to streamline operations and cut costs.

The board will monitor and report to the OTS on the bank's adherence to the business plan. The board also agreed to seek prior approval and to modify the bank's business plan before engaging in any new activity or operation not contemplated in the approved version of the plan.

The agreement went into effect on November 6 and will remain in force until the board and the OTS are satisfied with the bank's progress in resolving the underlying performance issues.

Fourth Quarter Earnings Outlook

The fourth quarter will be another transitional quarter as we make the remaining necessary changes. The current analyst estimates for the company's fourth quarter results range from a loss of $.07 per share to a loss of $.28 per share. Given our current outlook, we are presently biased toward the lower end of the range. There are some risks to the downside, but we fully expect to see marked improvement over third quarter results. We will provide meaningful guidance as we move the through the quarter.

Supplemental Financial Data

The company posts additional financial information directly to its Web site. We publish a report that breaks out quarterly results by line of business within each segment. The data is presented in a five-quarter format where current quarter results are shown alongside 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.

You 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. EST. Interested parties may dial in or listen via an audiocast on the company's Web site.


 Call Title:        NetBank, Inc. Earnings Announcement
 Call Leader:       Steven F. Herbert
 Pass Code:         NetBank
 Domestic:          888-889-1959
 International:     +1-773-756-0814
 One-Week Replay:   800-294-7483 or +1-203-369-3234

About NetBank, Inc.

NetBank, Inc. (Nasdaq:NTBK) is a financial holding company that operates a family of businesses focused primarily on consumer and small business banking as well as conforming mortgage lending. The company's businesses have a shared value proposition of providing consumers in select markets a superior combination of price, service and experience through skilled associates and advanced technology systems. Retail brands include NetBank and Market Street Mortgage. For more information, please visit www.netbankinc.com.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the SEC, including tangible book value and tangible book value per share for the third quarter of 2006. Tangible book value is defined as total shareholders' equity reduced by recorded goodwill and other intangible assets. Tangible book value per share is defined tangible book value divided by total common shares outstanding. These non-GAAP financial measures exclude from total shareholders' equity our recorded goodwill and other intangible assets. Management believes that these non-GAAP financial measures, when considered together with the GAAP financial measures, provide information may be helpful for those investors who seek to evaluate our total stockholders' equity without giving effect to goodwill and other intangible assets. Management also believes that these non-GAAP financial measures enhance the ability of investors to analyze the company's business trends and to better understand the company's financial condition. In addition, the company may utilize non-GAAP financial measures as a guide in its forecasting, budgeting, and long-term planning process and to measure operating performance for some management compensation purposes. Any analysis of non-GAAP financial measures should be used only in conjunction with amounts presented in accordance with GAAP, including total shareholders' equity and goodwill and other intangible assets.

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) Projected fourth quarter restructuring actions being completed by the end of the year; 2) The one-time charges related to projected fourth quarter restructuring actions totaling $14 million to $15 million; 3) Worst-case, one-time charges related to possible options being considered for the company's auto business being about $1 million after tax; 4) Tangible book value being positively impacted by any options being considered for company's ATM business; 5) Completion of the company's restructuring plan by the end of the first quarter 2007; 6) The prospect of a significant improvement trend in the company's operating profile going forward; 7) Management's belief that consolidating our indirect, conforming mortgage operations will lead to improved communication and further ensure loan quality.

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 and Quarterly Reports on Form 10-Q for the quarters ended June 30, 2006 and September 30, 2006. 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.


             Reconciliation of Non-GAAP Financial Measures
                        ($ in 000s, Unaudited)

                                September 30,    June 30,
                                    2006           2006
                                  --------       --------
 Shareholders' equity             $290,598       $346,799
 Goodwill and intangibles           53,849         77,778
                                  --------       --------
 Tangible equity                  $236,749       $269,021
 Outstanding shares                 46,397         46,360
                                  --------       --------
 Tangible book value              $   5.10       $   5.80
                                  ========       ========



                             NetBank, Inc.
                 Consolidated Statements of Operations
                For the nine months ended September 30,
            (Unaudited and in 000's except per share data)

                                    2006
               ------------------------------------------------------
                                                              Other/
               Retail   Financial    Transaction  Servicing Corporate
               banking  intermediary  processing    Asset    overhead
 --------------------------------------------------------------------

 Interest income:
 Loans and 
  leases       $90,106    $73,840       $     27    $    --    $  470
 Investment
  securities    22,623          5             --         --        --
 Short-term
  investments      680        529             --         --        --
 Inter-segment  69,850        182             --      8,312   (78,344)
 --------------------------------------------------------------------
  Total interest
   income      183,259     74,556             27      8,312   (77,874)

 Interest
  expense:
 Deposits       69,567         --             --         --        --
 Other borrowed
  funds         41,055      2,797             --        155     1,978
 Inter-segment  16,487     55,483            284      6,549   (78,803)
 --------------------------------------------------------------------
  Total interest
   expense     127,109     58,280            284      6,704   (76,825)
 --------------------------------------------------------------------
 Net interest
  income        56,150     16,276           (257)     1,608    (1,049)
 Provision for
  credit losses  6,381        102             --         --        --
 --------------------------------------------------------------------
 Net interest
  income after
  provision for
  credit losses 49,769     16,174           (257)     1,608    (1,049)

 Non-interest
  income:
 Mortgage
  servicing fees    10      2,125          3,965     27,396        --
 Amortization
  of MSRs           --        (94)            --    (27,418)       --
 (Impairment)
  recovery of
  MSRs              --         --             --     (7,380)       --
 Losses on
  derivatives       --         --             --    (15,819)       --
 (Loss) gain on
  sales of
  investment
  securities        --         --             --    (13,461)       --
 Service charges
  and fees       8,890         --          6,430         --        --
 Gain on sales
  of loans         276     40,966             --         --      (409)
 Loss on sales
  of MSRs           --       (394)            --    (29,702)       --
 Other income    3,307      1,686          1,455        165      (652)
 Intersegment
  servicing/
  processing 
  fees              --         --          9,343         --    (9,343)
 --------------------------------------------------------------------
  Total
   non-interest
   income       12,483     44,289         21,193    (66,219)  (10,404)

 Non-interest
  expense:
 Salaries and
  benefits      14,985     52,742          7,370         --    21,363
 Customer
  service        8,169          8            256         --       113
 Marketing
  costs          4,281      4,641            232         --       381
 Data processing 8,233      2,030          1,607         --     2,083
 Depreciation
  and
  amortization   5,212      7,319          2,865         --     2,182
 Office
  expenses       6,671      4,813          1,381         --      (642)
 Occupancy       3,213     11,802            749         --     5,048
 Travel and  
  entertainment    603      2,134            283         --       657
 Professional
  fees           1,888      3,211          1,124         --     3,547
 Prepaid lost
  interest from
  curtailments      --         18            --       1,836        --
 Impairment of
  goodwill          --     25,863          3,682         --        --
 Other           7,897     10,584          1,635         46    (9,697)
 Inter-segment
  servicing/
  processing
  fees             350      1,736             --      7,257    (9,343)
 --------------------------------------------------------------------
  Total non-
   interest
   expense      61,502    126,901         21,184      9,139    15,692
 --------------------------------------------------------------------
 Loss before
  income taxes  $  750  $ (66,438)     $    (248) $ (73,750) $(27,145)
 ====================================================================


                                       2006                2005
                                    ------------       ------------
                                    Consolidated       Consolidated
                                    NetBank, Inc.      NetBank, Inc.
 ------------------------------------------------      ------------

 Interest income:
 Loans and leases                    $ 164,443         $ 159,051
 Investment securities                  22,628            26,169
 Short-term investments                  1,209             1,557
 Inter-segment                              --                --
 ---------------------------------------------         ---------
  Total interest income                188,280           186,777
                                                    
 Interest expense:                                  
 Deposits                               69,567            48,992
 Other borrowed funds                   45,985            45,836
 Inter-segment                              --                --
 ---------------------------------------------         ---------
  Total interest expense               115,552            94,828
 ---------------------------------------------         ---------
 Net interest income                    72,728            91,949
 Provision for credit losses             6,483             7,389
 ---------------------------------------------         ---------
 Net interest income after provision                
  for credit losses                     66,245            84,560
                                               
 Non-interest income:
 Mortgage servicing fees                33,496            38,746
 Amortization of MSRs                  (27,512)          (34,873)
 (Impairment) recovery of MSRs          (7,380)            3,224
 Losses on derivatives                 (15,819)             (149)
 (Loss) gain on sales of investment                  
  securities                           (13,461)            4,182
 Service charges and fees               15,320            15,139
 Gain on sales of loans                 40,833            83,270
 Loss on sales of MSRs                 (30,096)             (448)
 Other income                            5,961             7,759
 Intersegment servicing/processing fees     --                --
 ---------------------------------------------         ---------
  Total non-interest income              1,342           116,850

 Non-interest expense:
 Salaries and benefits                  96,460            92,649
 Customer service                        8,546            10,116
 Marketing costs                         9,535             9,697
 Data processing                        13,953            13,105
 Depreciation and amortization          17,578            17,693
 Office expenses                        12,223             9,422
 Occupancy                              20,812            18,411
 Travel and entertainment                3,677             4,223
 Professional fees                       9,770            13,276
 Prepaid lost interest from                           
  curtailments                           1,854             3,345
 Impairment of goodwill                 29,545                --
 Other                                  10,465            10,756
 Inter-segment servicing/processing                   
  fees                                      --                --
 ---------------------------------------------         ---------
  Total non-interest expense           234,418           202,693
 ---------------------------------------------         ---------
 Loss before income taxes             (166,831)           (1,283)
 Income tax benefit                     51,163               208
                                     ---------         ---------
 Net loss                            $(115,668)        $  (1,075)
                                     =========         =========

 Net loss per common and potential 
  common shares outstanding:
 Basic                               $   (2.50)        $   (0.02)
 Diluted                             $   (2.50)        $   (0.02)

 Weighted average common and potential 
  common shares outstanding:
 Basic                                  46,316            46,201
 Diluted                                46,316            46,201


                            NetBank, Inc.
                Consolidated Statements of Operations
               For the three months ended September 30,
            (Unaudited and in 000's except per share data)

                                    2006
               ------------------------------------------------------
                                                              Other/
               Retail   Financial    Transaction  Servicing Corporate
               banking  intermediary  processing    Asset    overhead
 --------------------------------------------------------------------
 Interest income:
 Loans and 
  leases       $28,384    $23,556       $     13    $    --    $  217
 Investment
  securities     6,119          2             --         --        --
 Short-term
  investments      173        187             --         --        --
 Inter-segment  23,584         71             --      2,875   (26,530)
 --------------------------------------------------------------------
  Total interest
   income       58,260     23,816             13      2,875   (26,313)

 Interest
  expense:
 Deposits       24,554         --             --         --        --
 Other borrowed                          
  funds         11,030      1,235             --         61       698
 Inter-segment   5,801     18,318             94      2,419   (26,632)
 --------------------------------------------------------------------
  Total interest                         
   expense      41,385     19,553             94      2,480   (25,934)
 --------------------------------------------------------------------
 Net interest                            
  income        16,875      4,263            (81)       395      (379)
 Provision for                           
  credit losses  2,410         (3)            --         --        --
 --------------------------------------------------------------------
 Net interest                         
  income after
  provision for
  credit losses 14,465      4,266            (81)       395      (379)
                                       
 Non-interest                          
  income:                              
 Mortgage                              
  servicing fees     4        587          1,296      7,095        --
 Amortization                          
  of MSRs           --        (80)            --     (6,981)       --
 (Impairment)                          
  recovery of                          
  MSRs              --         --             --     (1,474)       --
 (Loss) gain on                        
  derivatives       --         --             --     (4,357)       --
 Loss on sales                         
  of investment                        
  securities        --         --             --    (13,461)       --
 Service charges                       
  and fees       3,256          1          2,267         --        --
 (Loss) gain on                        
  sales of loans   (32)     5,276             --         --       (54)
 Loss on sales                         
  of MSRs           --        (95)            --    (29,702)       --
 Other income    1,168        526            403        102      (342)
 Intersegment                          
  servicing/                           
  processing                           
  fees              --         --          2,867         --    (2,867)
 --------------------------------------------------------------------
  Total non-
   interest
   income        4,396      6,215          6,833    (48,778)   (3,263)
                                       
 Non-interest                          
  expense:                             
 Salaries and                          
  benefits       4,839     14,827          2,190         --     5,922
 Customer                              
  service        2,517          8            111         --        38
 Marketing                             
  costs          1,206      1,076             85         --        84
 Data processing 2,976        606            488         --       646
 Depreciation                          
  and                                  
  amortization   1,725      2,426            961         --       784
 Office                                
  expenses       2,913      1,378            422         --      (193)
 Occupancy         989      4,154            218         --     1,659
 Travel and                            
  entertainment    155        579             65         --       199
 Professional                          
  fees             550        965            312         --     1,194
 Prepaid lost                          
  interest from                        
  curtailments      --          8             --        529        --
 Impairment of                         
  goodwill          --     19,505          3,682         --        --
 Other           2,603      4,077            595         14    (3,943)
 Inter-segment                      
  servicing/
  processing
  fees             111        411             --      2,345    (2,867)
 --------------------------------------------------------------------
  Total non-
   interest
   expense      20,584     50,020          9,129      2,888     3,523
 --------------------------------------------------------------------
 Loss before
  income taxes $(1,723)  $(39,539)     $  (2,377)  $(51,271)  $(7,165)
 ====================================================================


                                       2006                2005
                                    ----------          ----------
                                    Consolidated       Consolidated
                                    NetBank, Inc.      NetBank, Inc.
 ----------------------------------------------------- -------------
 Interest income:
 Loans and leases                     $ 52,170           $58,092
 Investment securities                   6,121             8,502
 Short-term investments                    360               662
 Inter-segment                              --                --
 ----------------------------------------------------- -------------
  Total interest income                 58,651            67,256

 Interest expense:
 Deposits                               24,554            20,178
 Other borrowed funds                   13,024            16,848
 Inter-segment                              --                --
 ----------------------------------------------------- -------------
  Total interest expense                37,578            37,026
 ----------------------------------------------------- -------------
 Net interest income                    21,073            30,230
 Provision for credit losses             2,407             2,708
 ----------------------------------------------------- -------------
 Net interest income after provision 
  for credit losses                     18,666            27,522

 Non-interest income:
 Mortgage servicing fees                 8,982            13,292
 Amortization of MSRs                   (7,061)          (12,729)
 (Impairment) recovery of MSRs          (1,474)            4,244
 (Loss) gain on derivatives             (4,357)              795
 Loss on sales of investment         
  securities                           (13,461)               --
 Service charges and fees                5,524             5,296
 (Loss) gain on sales of loans           5,190            28,308
 Loss on sales of MSRs                 (29,797)             (238)
 Other income                            1,857             2,180
 Intersegment servicing/processing fees     --                --
 ----------------------------------------------------- -------------
  Total non-interest income            (34,597)           41,148

 Non-interest expense:
 Salaries and benefits                  27,778            30,832
 Customer service                        2,674             3,596
 Marketing costs                         2,451             4,476
 Data processing                         4,716             4,318
 Depreciation and amortization           5,896             6,080
 Office expenses                         4,520             3,600
 Occupancy                               7,020             6,558
 Travel and entertainment                  998             1,583
 Professional fees                       3,021             4,471
 Prepaid lost interest from        
  curtailments                             537             1,262
 Impairment of goodwill                 23,187                --
 Other                                   3,346             3,924
 Inter-segment servicing/processing fees    --                --
 ----------------------------------------------------- -------------
  Total non-interest expense            86,144            70,700
 ----------------------------------------------------- -------------
 Loss before income taxes             (102,075)           (2,030)
 Income tax benefit                     28,794               659
 ----------------------------------------------------- -------------
 Net loss                             $(73,281)          $(1,371)
 ===================================================== =============

 Net loss per common and potential 
  common shares outstanding:
 Basic                                  $(1.58)           $(0.03)
 Diluted                                $(1.58)           $(0.03)

 Weighted average common and potential 
  common shares outstanding:
 Basic                                  46,362            46,119
 Diluted                                46,362            46,119

                             NetBank, Inc.
                 Condensed Consolidated Balance Sheet
                       (Unaudited and in 000's)

                                 September 30, June 30,  September 30,
                                    2006         2006        2005
                                 -------------------------------------
 Assets 
 Cash and cash equivalents:
  Cash and due from banks         $  347,980     $ 72,807    $189,930
  Cash equivalents and fed funds      21,995       22,948     112,390
                                 -------------------------------------
  Total cash, cash equivalents and
   fed funds                         369,975       95,755     302,320
 Investment securities available
  for sale-at fair value             252,546      574,590     681,420
 Stock of Federal Home Loan Bank
  of Atlanta-at cost                  36,507       46,002      69,952
 Loans held for sale                 946,475      972,004   1,459,717
 Loan and lease receivables-net
  of allowance for losses          1,910,770    2,011,325   2,145,023
 Mortgage servicing rights - net      39,076      203,406     193,798
 Accrued interest receivable          16,555       16,416      16,113
 Furniture, equipment and
  capitalized software - net          48,261       51,644      49,004
 Goodwill and other intangibles -
  net                                 53,849       77,778      81,131
 Due from servicers and investors    113,624       15,641      26,837
 Other assets                         61,770       77,444      89,998
                                 -------------------------------------
 Total assets                     $3,849,408   $4,142,005  $5,115,313
                                 =====================================

 Liabilities

 Deposits                         $2,728,316   $2,721,937  $3,007,143
 Other borrowed funds                654,033      867,619   1,444,018
 Subordinated debt                    32,477       32,477      32,477
 Accrued interest payable             24,049       21,223      16,684
 Loans in process                     31,843       41,153      59,122
 Representations and warranties       21,550       21,688      21,275
 Accounts payable and accrued
  liabilities                         65,633       88,471     132,250
                                 -------------------------------------
  Total liabilities                3,557,901    3,794,568   4,712,969
                                 -------------------------------------

 Minority interests in affiliates        909          638         561

 Shareholders' equity

 Preferred stock, no par                  --           --          --
 Common stock, $.01 par                  528          528         528
 Additional paid-in capital          434,303      433,809     432,202
 Retained (deficit) earnings         (78,661)      (5,282)     39,180
 Accumulated other comprehensive
  loss, net of tax                    (3,310)     (19,673)     (6,092)
 Treasury stock, at cost             (62,262)     (62,583)    (62,628)
 Unearned compensation                    --           --      (1,407)
                                 -------------------------------------
  Total shareholders' equity         290,598      346,799     401,783
                                 -------------------------------------
 Total liabilities, minority
  interests and shareholders'
  equity                          $3,849,408   $4,142,005  $5,115,313
                                 =====================================



                      NetBank, Inc. Consolidated
                 Selected Financial and Operating Data
            (Unaudited and in 000's except per share data)

                                            Quarter Ended
                               ---------------------------------------
                               September 30,  June 30,   September 30,
                               -------------  --------   -------------
                                  2006          2006         2005
                               -------------  --------   -------------
 Consolidated:

   Net loss                      $   (73,281) $   (31,436) $   (1,371)
   Total assets                  $ 3,849,408  $ 4,142,005  $5,115,313
   Total equity                  $   290,598  $   346,799  $  401,783
   Shares outstanding                 46,397       46,360      46,358
   Return on average equity           (86.00%)     (34.39%)     (1.35%)
   Return on average assets            (7.06%)      (2.79%)     (0.11%)
   Book value per share          $      6.26  $      7.48  $     8.67
   Tangible book value per share $      5.10  $      5.80  $     6.92

 NetBank, FSB:

   Deposits                      $ 2,734,080  $ 2,726,334  $3,007,928
   Customers                         268,769      275,632     282,575

   Estimated Capital Ratios:
   Tier 1 core capital ratio            6.38%        6.77%       6.09%
   Total risk-based capital ratio      10.13%       10.79%      10.21%

   Asset quality numbers:
   CMC Lease portfolio           $    25,505  $    25,615  $   26,435
   Non-performing loan and lease
    receivables                        7,300        6,227       6,481
                                 -----------  -----------  -----------
   Total non-performing loan and
    lease receivables                 32,805       31,842      32,916
   Non-performing loans held for
    sale(a)                           50,418       32,896      27,432
                                 -----------  -----------  -----------
   Total non-performing loans
    and leases                        83,223       64,738      60,348
   Repossessed assets(b)              13,357       10,528       7,963
                                 -----------  -----------  -----------
   Total non-performing assets   $    96,580  $    75,266  $   68,311

   Allowance for credit losses
    (ALLL)                       $    26,477  $    27,371  $   26,730
   Net charge-offs of loan and
    lease receivables            $    (3,301) $    (3,004) $   (1,770)

   Asset quality ratios:
   Total non-performing assets /
    average assets                      2.33%        1.67%       1.35%
   ALLL / total non-performing
    loan and lease receivables         80.71%       85.96%      81.21%
   Net annualized charge-offs /
    total assets                        0.34%        0.29%       0.14%

 Mortgage Banking:

  Production Activity:
   Retail                        $   779,963  $   975,201  $1,089,137
   Correspondent                     833,138      703,166   1,025,626
   Wholesale                         392,350      401,107     692,828
   RMS                                21,487       24,360      74,180
                                 -----------  -----------  -----------
  Total Agency-eligible            2,026,938    2,103,834   2,881,771
   Non-conforming                    412,716      478,893     883,210
                                 -----------  -----------  -----------
  Total                          $ 2,439,654  $ 2,582,727  $3,764,981
                                 ===========  ===========  ===========
  Sales Activity:
  Third party sales              $ 2,419,711  $ 2,494,743  $3,631,112
  Intercompany sales                   8,180           --      57,290
                                 -----------  -----------  -----------
  Total sales                    $ 2,427,891  $ 2,494,743  $3,688,402
                                 ===========  ===========  ===========
  Pipeline:
  Locked conforming mortgage
   loan pipeline                 $   610,853  $   962,059  $ 1,053,315

  UPB of loans serviced:         $14,960,710  $15,465,530  $18,470,922

 (a) 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.

 (b) Repossessed assets are carried at net realizable value.


            

Coordonnées