ATLANTA, April 17, 2006 (PRIMEZONE) -- NetBank, Inc. (Nasdaq:NTBK), a diversified financial services provider and parent company of NetBank(r) (www.netbank.com), held its annual analyst-investor meeting on Friday, March 31, and is today providing a summary of the main topics discussed at the meeting and in follow-up conversations with institutional and individual investors.
"We instituted our annual analyst-investor meeting in 2003 when we introduced our long-term strategic plan to diversify the company's income away from highly cyclical mortgage income," says Douglas K. Freeman, chairman and chief executive officer. "These annual meetings have allowed us to engage in a frank dialogue with our analysts and investors on the opportunities and challenges facing our company. Since beginning this process, we have shown measurable progress toward our stated financial and operational goals, especially within our banking, retail conforming mortgage and transaction processing businesses.
"This year we had less positive progress to report," Freeman continued. "Over the past year, we have seen several adverse market and economic factors materialize that have seriously impeded our ability to execute our strategy as originally articulated in the timeframe we had planned. These pressures include the unprecedented margin compression we have seen with conventional conforming and non-conforming mortgages, the flat yield curve and capital constraints stemming from lower quarterly earnings and the ongoing litigation over the Commercial Money Center lease receivables.
"Although many of these pressures will diminish in time, we believe it may be necessary to refocus or narrow some of our operating segments," Freeman concluded. "This would allow us to minimize our exposure to short-term operating losses and to preserve those businesses with greater future earnings power and franchise value. The most important take-away from our analyst-investor meeting was management's resolve to move quickly and purposefully to position the company for greater long-term success."
Major themes and lines of questioning at the meeting and afterward include:
-- The company's commitment to certain businesses, including its
servicing asset, non-conforming mortgage channel, auto, RV and
boat lending operations, and other smaller initiatives;
-- The prospects for higher customer and deposit growth at the
online bank;
-- The status of the CMC litigation and timeframe for resolution; and
-- Salary increases for a limited number of executive officers.
Management shared that it is actively reviewing the capital allocations to lines of business that have been performing below target or that may require greater investment to reach the right scale. The company may shrink or exit certain operations. The underlying capital would be redeployed into strategic areas with greater or more stable long-term profitability prospects. Management did not provide a specific timeframe for decisions on this front but said portions of its ongoing analysis will soon be complete.
Management spoke to its marketing strategy at the online bank and its belief that the bank can continue to attract customers from select segments based on a combination of high deposit rates, varied products, and a convenient experience that incorporates the Internet, ATMs and other remote service delivery channels. Management pointed out that the earnings pressure the company has experienced recently has impacted the bank's customer and deposit growth. The company has reigned in its marketing spend and been less aggressive with deposit rates in order to optimize profitability at the bank. When the current earnings pressures ease, more emphasis can be placed on bank marketing.
Management covered the CMC litigation in detail. This investment pre-dates the implementation of the company's current strategic plan and income diversification efforts. Management reiterated the rationale behind seeing the litigation through: 1) the company's case remains strong; 2) the majority of the pre-trial legal fees have already been incurred; and 3) the dollars at stake are significant from a capital perspective. Management detailed the amounts due from each of the three sureties and calculated the amount the company could receive given several different recovery scenarios. It estimates the company's tangible book value would be improved by $.50 given a 50% recovery and by $.92 given a 75% recovery. No guidance could be offered on when the matter will be resolved.
Management responded to questions about the salary increases announced in February for a limited number of executive officers. The Compensation Committee of the company's board of directors approved base salary increases for certain executive positions following a market study that it regularly commissions. The study indicated the company was well below market for these positions, and the committee elected to take steps to keep the company competitive in its ability to retain executive talent.
The analyst-investor meeting was open to the public and included detailed presentations on the company's overall strategic plan, financial performance model, and tactical initiatives within its three operating segments -- Banking, Financial Intermediary and Transaction Processing. The presentations and related question-and-answer sessions were streamed live over the company's Web site at www.netbankinc.com. An archive of the audiocast and copies of the presentations will remain available on the site within the "Investor Relations" section until April 30.
About NetBank, Inc.
NetBank, Inc. (Nasdaq:NTBK) operates with a revolutionary business model through a diverse group of complementary financial services businesses that leverage technology for more efficient and cost-effective delivery of services. Its primary areas of operation include personal and small business banking, retail and wholesale mortgage lending, and transaction processing. For more information, please visit www.netbankinc.com.
Forward-Looking Statements
Statements in this press release that are not historical facts are forward-looking statements that reflect management's current expectations, assumptions, and estimates of future performance and economic conditions. Such statements are made in reliance upon the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements in this press release include but are not limited to: 1) Management's decision to shrink or exit certain businesses and redeploy capital into areas with greater or more stable profitability prospects; 2) Increased marketing spend at the online bank if current earnings pressures ease; and 3) Any suggestion the company could settle the CMC litigation at the 50% or 75% level.
These forward-looking statements are subject to a number of risks and uncertainties that may cause actual results and future trends to differ materially from those expressed in or implied by such forward-looking statements. The company's consolidated results of operations and such forward-looking statements could be affected by many factors, including but not limited to: 1) the evolving nature of the market for internet banking and financial services generally; 2) the public's perception of the internet as a secure, reliable channel for transactions; 3) the success of new products and lines of business considered critical to the company's long-term strategy, such as small business banking and transaction processing services; 4) potential difficulties in integrating the company's operations across its multiple lines of business; 5) the cyclical nature of the mortgage banking industry generally; 6) a possible decline in asset quality; 7) changes in general economic or operating conditions that could adversely affect mortgage loan production and sales, mortgage servicing rights, loan delinquency rates and/or loan defaults; 8) the possible adverse effects of unexpected changes in the interest rate environment; 9) adverse legal rulings, particularly in the company's litigation over leases originated by Commercial Money Center, Inc.; and 10) increased competition and regulatory changes.
Further information relating to these and other factors that may impact the company's results of operations and such forward-looking statements are disclosed in the company's filings with the SEC, including under the caption "Item 1. Business-Risks Relating to NetBank's Business" in its Annual Report on Form 10-K for the year ended December 31, 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.