NetBank, Inc. Reports Results for Fourth Quarter 2006

Anticipated Restructuring Costs and Heightened Non-Conforming Provision Expense Contribute to Loss of $1.86 Per Share


ATLANTA, Feb. 21, 2007 (PRIME NEWSWIRE) -- NetBank, Inc. (Nasdaq:NTBK), a diversified financial services provider and parent company of NetBank(r) (www.netbank.com), today reported preliminary, unaudited financial results for the year ended December 31, 2006. The company recorded an after-tax loss of $86.3 million or $1.86 per share during the fourth quarter, compared with net income of $895,000 or $.02 per share during the same quarter a year ago. The company recorded a net loss of $202 million or $4.36 per share for the full year, compared with a net loss of $180,000 or $.00 per share for 2005.

The results set forth in this press release are preliminary and unaudited. As previously reported, the company recently engaged Porter Keadle Moore, LLP ("PKM") to replace Ernst & Young LLP as its independent auditor. These preliminary results are subject to potential adjustments, which may be material, arising from subsequent events or the audit of the company's financial statements for the year ended December 31, 2006 by PKM. The company currently believes that the 2006 audit, and related auditor attestation regarding the company's internal control over financial reporting, will be completed in June 2007 and expects to file its Annual Report on Form 10-K for the 2006 fiscal year with the SEC on or before June 30, 2007, although no assurance can be given.

Key items worth noting include the following. All comparisons are on a sequential quarter basis unless noted otherwise.



  * Accelerated Repurchase Activity. As previously announced,
    repurchase requests in the non-conforming mortgage channel rose
    sharply following management's decision to close the business and
    accelerated further at the end of the year. Provisions for the
    non-conforming channel were $30.3 million, an increase of $25.7
    million from last quarter. Overall, provisions for the financial
    intermediary segment were $32.0 million versus $12.2 million the
    prior quarter. Management believes the worst of the non-conforming
    loan repurchase problem is now behind the company given the
    accelerated repurchase requests already received relative to the
    limited non-conforming production over the second half of 2006.

  * Restructuring and Shutdown Costs. During the quarter, the company
    exited several lines of business at a total cost of $21.3 million,
    in line with the company's prior projections. Restructuring costs
    related to the company's exit of FTI/QuickPost; its RV, boat and
    aircraft financing unit; its insurance operation; its auto lending
    unit; and the consolidation of its indirect conforming mortgage
    regional operating centers totaled $12.8 million. Shutdown costs
    related to the discontinuation of the company's non-conforming
    mortgage operation totaled $8.5 million.

  * Generation of Deferred Tax Asset. As reported earlier, the
    company generated a significant deferred tax asset during the
    quarter. We recorded a valuation allowance for the asset totaling
    $23.4 million or $0.50 per share.

  * Impairment of Goodwill. As previously disclosed, management
    recorded a partial impairment charge related to goodwill and
    intangibles on the company's ATM and merchant processing business
    during the quarter. The company recorded $9.7 million, or $0.21
    per share, in goodwill and intangibles impairment associated with
    this business. The remaining goodwill and intangibles of $18.1
    million is consistent with the pricing ranges the company recently 
    observed when marketing the business for sale.

  * Impact on Tangible Book Value Lessened. Book value declined by
    $1.94 per share from $6.26 on September 30, 2006 to $4.32 on
    December 31, 2006. However, the impact on the company's tangible
    book value was less. Tangible book value declined by $1.60 per
    share from $5.10 on September 30, 2006 to $3.50 on December 31,
    2006. On an after-tax basis, the reported loss included the $9.7
    million write down related to the company's ATM and merchant 
    processing business mentioned above that did not negatively impact
    tangible book value. (Details related to amounts excluded from tangible
    book value are provided in the attached Reconciliation of Non-GAAP
    Financial Measures.)

Management Commentary

"Last year, we were at a crossroads as a company," said Steven F. Herbert, chief executive officer. "Market and economic pressures combined with our poor financial performance demanded dramatic changes.

"I'm proud of the fact that, in the span of 90 days, we were able to substantially execute a restructuring plan designed to stabilize the company's operating profile and capital position. During the quarter, we sold, exited or shut down our non-conforming mortgage operation; our RV, boat and aircraft financing business; FTI and the QuickPost service; and NetInsurance. We consolidated two of our indirect conforming mortgage operating centers into our Columbia facility, and during December, we substantially effected a shut down of our auto lending unit.

"The final item remaining to be checked off our 'to do' list is the completion of the sale of our ATM and merchant processing business. We have a non-binding letter of intent in place and we are optimistic that a definitive agreement will be reached soon and the deal will close by the end of the first quarter. I am also pleased that we can check off 'engage an audit firm' which wasn't on our original list of things to do.

"When we began this process, I likened it to driving through a tunnel. We had a roadmap, but we went in not knowing exactly what things would look like on the other side. Now that we've emerged, we're evaluating our next steps. As we announced earlier this month, we are exploring longer-term strategic alternatives to drive shareholder value. We may also need to consider some different scenarios to proactively manage our risk-based capital.

"I'd be remiss if I didn't thank our associates for all the hard work they have done since last October. That work has moved us closer to our goal of restoring profitability and stabilizing book value. While we evaluate our next steps, our operating priorities will continue to be moving our indirect conforming mortgage operation back toward breakeven as quickly as possible and generating cost-effective deposit growth at the bank."

Retail Banking Segment Performance

Table 1 below details results in the company's Retail Banking segment. The segment reported a pre-tax loss of $5.3 million, versus a loss of $1.7 million last quarter. Excluding expenses and restructuring costs for QuickPost, the decline is a result of a loss on the sale of a pool of auto loans. Exclusive of restructuring charges, the segment's expenses were down $1.0 million from the previous quarter.

The bank's average earning assets fell to $4.2 billion for the year, representing a decrease of $424 million or 9.2% from a year ago.



    Table 1

                            RETAIL BANKING
                        ($ in 000s, Unaudited)
                                                                                   
                                   2006          2006                     
                               4th Quarter   3rd Quarter     Change
                                ----------    ----------    ---------
 Net interest income            $   16,063    $   16,878    $    (815)
 Provision for credit losses         2,043         2,410         (367)
                                ----------    ----------    ---------
   Net interest income
    after provision                 14,020        14,468         (448)
 Loss on sales of loans             (1,856)          (33)      (1,823)
 Fees, charges and other income      3,720         3,477          243
                                ----------    ----------    ---------
   Total retail banking revenues    15,884        17,912       (2,028)
   Total retail banking expenses    15,399        16,334         (935)
   Restructuring costs -
    Online Bank                        629             -          629
                                ----------    ----------    ---------
   Pre-tax retail banking
    operations                        (144)        1,578       (1,722)
   Net QuickPost, PowerPost
    & NetServ results               (3,252)       (3,301)          49
   Restructuring costs -
    QuickPost, PowerPost &
    NetServ                          1,920             -        1,920
                                ----------    ----------    ---------
    Pre-tax net loss            $   (5,316)   $   (1,723)   $  (3,593)
                                ==========    ==========    =========
 Average earning assets         $3,724,980    $3,975,800    $(250,820)

 Operations to average earning
  assets excluding QuickPost
 Net interest income after
  provision                           1.50%         1.46%        0.04%
 Gain on sale, fees, charges
  and other income                    0.20%         0.35%       (0.15%)
                                ----------    ----------    ---------
 Total retail banking revenues        1.70%         1.81%       (0.11%)
 Total retail banking expenses        1.72%         1.64%        0.08%
                                ----------    ----------    ---------
    Pre-tax retail banking
     operations                     (0.02)%        0.17%       (0.19%)
                                ==========    ==========    =========

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 continues to deliver
    consistently positive results. Pre-tax earnings for the quarter
    were flat at $3.1 million. Production was up $5.1 million, or
    13.2%, to $44.3 million.

  * Our auto lending business recorded a pre-tax loss of $709,000
    compared to earnings of $410,000 last quarter. The decline was due
    to restructuring costs as management commenced the closing of that
    operation.

Financial Intermediary Segment Performance

Table 2 below details results in the company's Financial Intermediary segment. The segment reported a pre-tax loss of $58.3 million this quarter compared with a loss of $39.5 million last quarter. The majority of the operating loss was centered in the company's discontinued non-conforming operation, which recorded a pre-tax loss of $44.0 million.

The company's conforming mortgage operations reported a pre-tax loss of $14.8 million, compared with a loss of $14.7 million last quarter. Conforming production fell by 28% to $1.5 billion due primarily to a drop in production during the quarter as management implemented a number of procedural and cultural changes within the indirect channel aimed at addressing the repurchase issues.

During the quarter, the company's regional operating centers in Jacksonville, Fla., and Portland, Ore., were consolidated into the Columbia, S.C., facility. Management elected to continue operating the center located in St. Louis, Mo., based on its improved performance following the implementation of procedural and cultural changes throughout the channel. Maintaining the St. Louis center also provides a separate facility that can serve as a back up or overflow operation.



  Table 2

                        FINANCIAL INTERMEDIARY
                        ($ in 000s, Unaudited)

                                   2006          2006
                               4th Quarter   3rd Quarter     Change
                                ----------    ----------    ---------
 Net interest income            $   (3,150)   $    2,408    $  (5,558)
 Gain on sales of loans             10,311         5,927        4,384
 Loss on sale of MSRs                  (60)          (96)          36
 Other income                          481           245          236
 Net Beacon credit services
  results                             (126)         (103)         (23)
 Net MG Reinsurance results            788           898         (110)
                                ----------    ----------    ---------
   Total revenues                    8,244         9,279       (1,035)
 Salary and employee benefits       10,225        11,136         (911)
 Occupancy and depreciation
  expense                            4,596         5,110         (514)
 Other expenses                      6,673         6,992         (319)
 Restructuring-related costs           981             -          981
                                ----------    ----------    ---------
   Total expenses                   22,475        23,238         (763)
                                ----------    ----------    ---------
   Pre-tax loss from continuing
    operations                     (14,231)      (13,959)        (272)
                                ----------    ----------    ---------
   Loss from discontinued
    operations                     (44,035)      (25,580)     (18,455)
                                ----------    ----------    ---------
   Pre-tax loss from financial
    intermediary segment        $  (58,266)   $  (39,539)   $ (18,727)
                                ==========    ==========    =========

 Production - continuing
  operations                    $1,461,458    $2,026,938    $(565,480)
 Production - discontinued
  operations                    $  173,207    $  412,716    $(239,509)
 Sales - continuing operations  $1,531,728    $1,992,825    $(461,097)
 Sales - discontinued
  operations                    $  242,095    $  435,066    $(192,971)

 Total revenues to sales -
  continuing operations               0.54%         0.47%        0.07%
 Total expenses to production -
  continuing operations               1.54%         1.15%        0.39%
                                ----------    ----------    ---------
   Pre-tax margin - continuing
    operations                       (1.00%)       (0.68%)      (0.32%)
                                ==========    ==========    =========

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 $1.5 billion, a decrease of $565
     million or 28% due to seasonal factors and management's decision
     to slow production as it implemented the changes mentioned above.
     Conforming sales fell by 23% to $1.5 billion. The channel's
     revenue margin improved to 54 bps.

   * Gain on sales of loans in the conforming channel improved to
     $10.3 million, an increase of $4.4 million or 73.9%, due to
     improvements in net hedge results.

Transaction Processing Segment Performance

Table 3 below details results in the company's Transaction Processing segment. The segment recorded a pre-tax loss of $9.5 million, compared to a loss of $2.4 million the previous quarter.

The loss was driven primarily by management's decision to record a partial impairment charge related to goodwill and intangibles on the company's ATM and merchant processing business, as mentioned earlier in this release. The company began marketing the business for sale during the quarter and now has a non-binding letter of intent in place. Management elected to write down the carrying value of the underlying ATM and merchant processing contracts based on the pricing ranges it observed during the marketing effort.



 Table 3

                        TRANSACTION PROCESSING
                        ($ in 000s, Unaudited)

                                  2006          2006
                              4th Quarter   3rd Quarter      Change
                               ----------    ----------    ----------
 Total revenue                 $    5,754    $    5,517    $      237
 Total expenses                    15,243         7,894         7,349
                               ----------    ----------    ----------
    Pre-tax loss               $   (9,489)   $   (2,377)   $   (7,112)
                               ==========    ==========    ==========

Servicing Asset Segment Performance

Table 4 below details results in the company's Servicing Asset segment. The segment reported a pre-tax loss of $2.3 million compared with a pre-tax loss of $51.3 million last quarter. The improvement was a result of the company's sale of the majority of its mortgage servicing rights at the end of the third quarter. Since the sale closed on the last day of the third quarter, the full effect wasn't seen until the fourth quarter. The sale enabled the company to eliminate significant earnings volatility going forward, and it will no longer have the same exposure to impairment and hedge-related losses.



 Table 4

                           SERVICING ASSET
                        ($ in 000s, Unaudited)

                                   2006        2006
                                 4th Qtr     3rd Qtr      Change
                                 --------    --------    --------
 Net interest income             $    750    $    395    $    355
 Servicing fees                     2,139       7,095      (4,956)
 Loss on sale of MSRs                 532     (29,702)     30,234
 Other income                         126         102          24
                                 --------    --------    --------
    Total revenue                   3,547     (22,110)     25,657
 Amortization of MSRs               2,539       6,981      (4,442)
 Subservicing fees paid               882       2,345      (1,463)
 Other expenses                       108         543        (435)
                                 --------    --------    --------
    Total expenses                  3,529       9,869      (6,340)
                                 --------    --------    --------
    Pre-tax servicing margin           18     (31,979)     31,997
                                 --------    --------    --------
    Loss on hedges                   (851)     (4,357)      3,506
    (Impairment)                   (1,534)     (1,474)        (60)
    Loss on sale of securities        110     (13,461)     13,571
                                 --------    --------    --------
    Net hedge results              (2,275)    (19,292)     17,017
                                 --------    --------    --------
    Net pre-tax loss             $ (2,257)   $(51,271)   $ 49,014
                                 ========    ========    ========

First Quarter Earnings Outlook

Analyst estimates for first quarter results currently range from a loss of $0.08 to a loss of $0.24. Management is presently biased to the lower end of the range and cautions there is still key downside risk related to:



 * Moving our indirect conforming mortgage operation back to breakeven

 * Our inability to recognize tax benefits until we return to
   profitability

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. 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:         1-888-677-1895
   International:    +1-210-795-9306
   One-Week Replay:  1-800-879-5513 or +1-402-220-4734

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.

Preliminary, Unaudited Financial Information

While the company believes that the preliminary, unaudited information set forth in this release has been prepared in accordance with accounting principles generally accepted in the United States, or "GAAP," and that all adjustments necessary for a fair presentation thereof have been made, the company can give no assurance that all adjustments are final or that all adjustments necessary for a fair presentation of the financial results in accordance with GAAP have been identified. All results included in this press release shall be considered preliminary until the audit of the company's financial statements for the year ended December 31, 2006 is completed and the company files its 2006 Form 10-K.

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) The company's expectation that it's 2006 Form 10-K will be filed with the SEC by the end of June 2007; 2) Management's belief that the worst of the non-conforming loan repurchase problem is now behind the company; 3) A definitive agreement regarding the sale of the company's ATM and merchant processing business being reached and the deal closing by the end of the first quarter; 4) A decision by management to undertake additional capital management strategies.

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, as well as Exhibit 99.2 to its Current Report on Form 8-K filed with the SEC on January 3, 2007. 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)

                                    December 31,        September 30,
                                                  2006
                                    --------------------------------
 Shareholders equity                  $229,007             $290,598
 Goodwill and intangibles               43,724               53,849
                                      --------             --------
 Tangible equity                      $185,283             $236,749
 Outstanding shares                     52,982               46,397
                                      --------             --------
 Tangible book value                  $   3.50             $   5.10
                                      ========             ========



                             NetBank, Inc.
                 Consolidated Statements of Operations
                    For the year ended December 31,
                    (In 000s except per share data)
                              (Unaudited)

                                         2006
                -------------------------------------------------------
                                                                Other/
                 Retail   Financial   Transaction  Servicing  Corporate
                Banking  Intermediary  Processing     Asset    overhead
 ---------------------------------------------------------------------
 Interest income:
 Loans and
  leases        $117,553   $ 66,052    $    48    $      -   $     584
 Investment
  securities      26,593          6          -           -           -
 Short-term
  investments      1,131        748      1,007       1,027           -
 Inter-segment    91,777        262          -       9,025    (101,064)
 ---------------------------------------------------------------------
  Total interest
   income        237,054     67,068      1,055      10,052    (100,480)

 Interest expense:
 Deposits         96,838          -          -           -           -
 Other borrowed
  funds           47,799        841        588         308       2,681
 Inter-segment    20,248     59,996        373       7,387    (101,582)
 ---------------------------------------------------------------------
  Total interest
   expense       164,885     60,837        961       7,695     (98,901)
 ---------------------------------------------------------------------
 Net interest
  income          72,169      6,231         94       2,357      (1,579)
 Provision for
  credit losses    8,424        112          -           -           -
 ---------------------------------------------------------------------
 Net interest
  income after
  provision for
  credit losses   63,745      6,119         94       2,357      (1,579)

 Non-interest
  income:
 Mortgage
  servicing fees      14      2,107      5,994      29,534           -
 Amortization
  of MSRs              -       (147)         -     (29,957)          -
 (Impairment)
  recovery of
  MSRs                 -          -          -      (8,914)          -
 Losses on
  derivatives        153          -          -     (16,562)          -
 (Loss) gain on
  sales of
  investment
  securities           -          -          -     (13,461)          -
 Service charges
  and fees        11,450         (1)     8,521           -           -
 Gain on sales
  of loans        (1,581)    53,407          -           -        (470)
 Loss on sales
  of MSRs              -       (455)         -     (29,702)          -
 Other income      4,183      2,155      1,470         822        (933)
 Intersegment
  servicing/
  processing fees      -          -     10,613           -     (10,613)
 ---------------------------------------------------------------------
  Total non-
   interest
   income         14,219     57,066     26,598     (68,240)    (12,016)

 Non-interest
  expense:
 Salaries and
  benefits        19,744     52,347      9,647           -      27,863
 Customer service 10,248          -        365           -         143
 Marketing costs   5,757      4,831        293           -         455
 Data processing  10,733      2,512      2,057           -       2,492
 Depreciation and
  amortization     6,951      7,446      3,799           -       3,003
 Office expenses   8,673      4,075      1,886           -        (763)
 Occupancy         4,112     12,126      1,001           -       6,827
 Travel and
  entertainment      723      1,577        332           -         867
 Professional
  fees             2,492      4,413      1,450          12       4,650
 Prepaid lost
  interest from
  curtailments        -          21          -       1,915           -
 Impairment of
  goodwill            -       6,358     13,337           -           -
 Other            10,095     11,235      2,262          58     (13,043)
 Restructuring
  and other
  associated
  costs            2,549        981          -           -       9,299
 Inter-segment
  servicing/
  processing fees    453       (519)         -       8,139     (10,613)
 ---------------------------------------------------------------------
  Total non-
   interest
   expense        82,530    107,403     36,429      10,124      31,180
 ---------------------------------------------------------------------
 (Loss) income
  before income
  taxes         $ (4,566)  $(44,218)   $(9,737)   $(76,007)  $ (44,775)


                                             Consolidated NetBank, Inc.
                                                 2006          2005
                                              ---------      ---------
 Interest income:
 Loans and leases                             $ 184,237      $ 187,773
 Investment securities                           26,599         35,085
 Short-term investments                           3,913          2,140
 Inter-segment                                        -              -
                                              ---------      ---------
  Total interest income                         214,749        224,998

 Interest expense:
 Deposits                                        96,838         70,483
 Other borrowed funds                            52,217         62,445
 Inter-segment                                  (13,578)       (14,579)
                                              ---------      ---------
  Total interest expense                        135,477        118,349
                                              ---------      ---------
 Net interest income                             79,272        106,649
 Provision for credit losses                      8,536         11,047
                                              ---------      ---------
 Net interest income after provision
  for credit losses                              70,736         95,602

 Non-interest income:
 Mortgage servicing fees                         37,649         50,414
 Amortization of MSRs                           (30,104)       (45,389)
 (Impairment) recovery of MSRs                   (8,914)        14,055
 Losses on derivatives                          (16,409)          (880)
 (Loss) gain on sales of investment securities  (13,461)         4,675
 Service charges and fees                        19,970         20,570
 Gain on sales of loans                          51,356         81,458
 Loss on sales of MSRs                          (30,157)          (622)
 Other income                                     7,697          9,891
 Intersegment servicing/processing fees               -              -
                                              ---------      ---------
  Total non-interest income                      17,627        134,172

 Non-interest expense:
 Salaries and benefits                          109,601        104,164
 Customer service                                10,756         13,632
 Marketing costs                                 11,336         12,260
 Data processing                                 17,794         17,435
 Depreciation and amortization                   21,199         20,918
 Office expenses                                 13,871          9,758
 Occupancy                                       24,066         19,601
 Travel and entertainment                         3,499          4,232
 Professional fees                               13,017         16,982
 Prepaid lost interest from curtailments          1,936          4,289
 Impairment of goodwill                          19,695              -
 Other                                           10,607         10,216
 Restructuring and other associated costs        12,829              -
 Inter-segment servicing/processing fees         (2,540)        (5,355)
                                              ---------      ---------
  Total non-interest expense                    267,666        228,132
                                              ---------      ---------
 (Loss) income before income taxes             (179,303)         1,642
 Income tax benefit (expense)                    48,749         (1,497)
                                              ---------      ---------
 Net (loss) income from
  continuing operations                       $(130,554)     $     145
 (Loss) from discontinued operations,
  net of income tax                             (71,437)          (325)
                                              ---------      ---------
 Net loss                                     $(201,991)     $    (180)
                                              =========      =========
 Net loss per common and potential
  common shares outstanding:
    Basic                                     $   (2.82)     $    0.00
    Basic EPS from discontinued operations    $   (1.54)         (0.00)
                                              ---------      ---------
    Basic EPS                                 $   (4.36)     $    0.00
                                              ---------      ---------
    Diluted                                   $   (2.82)     $    0.00
    Diluted EPS from discontinued operations  $   (1.54)         (0.00)
                                              ---------      ---------
    Diluted EPS                               $   (4.36)     $    0.00
                                              ---------      ---------
 Weighted average common and potential
  common shares outstanding:
   Basic                                         46,343         46,193
   Diluted                                       46,343         46,193

                             NetBank, Inc.
                 Consolidated Statements of Operations
                For the three months ended December 31,
                    (In 000s except per share data)
                              (Unaudited)

                                         2006
                -------------------------------------------------------
                                                                Other/
                 Retail   Financial   Transaction  Servicing  Corporate
                Banking  Intermediary  Processing     Asset    overhead
 ---------------------------------------------------------------------
 Interest income:
 Loans and
  leases        $27,447    $ 11,737     $    21    $     -    $    114
 Investment
  securities      3,970           1           -          -           -
 Short-term
  investments       451         219       1,007      1,027           -
 Inter-segment   21,927          80           -        713     (22,720)
 ---------------------------------------------------------------------
  Total interest
   income        53,795      12,037       1,028      1,740     (22,606)

 Interest expense:
 Deposits        27,271           -           -          -           -
 Other borrowed
  funds           6,744          92         588        153         703
 Inter-segment    3,761      14,699          89        838     (22,779)
 ---------------------------------------------------------------------
  Total interest
   expense       37,776      14,791         677        991     (22,076)
 ---------------------------------------------------------------------
 Net interest
  income         16,019      (2,754)        351        749        (530)
 Provision for
  credit losses   2,043          10           -          -           -
 ---------------------------------------------------------------------
 Net interest
  income after
  provision for
  credit losses  13,976      (2,764)        351        749        (530)

 Non-interest
  income:
 Mortgage
  servicing fees      4         514       2,029      2,138           -
 Amortization
  of MSRs             -         (53)          -     (2,539)          -
 (Impairment)
  recovery of
  MSRs                -           -           -     (1,534)          -
 (Loss) gain on
  derivatives       153           -           -       (743)          -
 Loss on sales of
  investment
  securities          -           -           -          -           -
 Service charges
  and fees        2,560          (1)      2,091          -           -
 (Loss) gain on
  sales of loans (1,857)     10,618           -          -         (61)
 Loss on sales
  of MSRs             -         (61)          -          -           -
 Other income       876         472          15        657        (281)
 Intersegment
  servicing/
  processing fees     -           -       1,270          -      (1,270)
 ---------------------------------------------------------------------
  Total non-
   interest
   income         1,736      11,489       5,405     (2,021)     (1,612)

 Non-interest
  expense:
 Salaries and
  benefits        4,759      10,506       2,277          -       6,500
 Customer
  service         2,079           -         109          -          30
 Marketing costs  1,476         863          61          -          74
 Data processing  2,500         575         450          -         409
 Depreciation and
  amortization    1,739       1,682         934          -         821
 Office expenses  2,002         792         505          -        (121)
 Occupancy          899       2,972         252          -       1,779
 Travel and
  entertainment     120         275          49          -         210
 Professional
  fees              604       1,570         326         12       1,103
 Prepaid lost
  interest from
  curtailments        -           3           -         79           -
 Impairment of
  goodwill            -           -       9,655          -           -
 Other            2,198       2,781         627         12      (3,346)
 Restructuring
  and other
  associated
  costs           2,549         981           -          -       9,299
 Inter-segment
  servicing/
  processing fees   103         (44)          -        882      (1,270)
 ---------------------------------------------------------------------
  Total non-
   interest
   expense       21,028      22,956      15,245        985      15,488
 ---------------------------------------------------------------------
 (Loss) income
  before income
  taxes         $(5,316)   $(14,231)    $(9,489)   $(2,257)   $(17,630)

                                             Consolidated NetBank, Inc.
                                             -------------------------
                                                2006           2005
 ------------------------------------------------------      ---------
 Interest income:
 Loans and leases                             $  39,319      $  49,096
 Investment securities                            3,971          8,916
 Short-term investments                           2,704            583
 Inter-segment                                        -              -
 ------------------------------------------------------      ---------
  Total interest income                          45,994         58,595

 Interest expense:
 Deposits                                        27,271         21,491
 Other borrowed funds                             8,280         16,579
 Inter-segment                                   (3,392)        (4,548)
 ------------------------------------------------------      ---------
  Total interest expense                         32,159         33,522
 ------------------------------------------------------      ---------
 Net interest income                             13,835         25,073
 Provision for credit losses                      2,053          3,658
 ------------------------------------------------------      ---------
 Net interest income after provision
  for credit losses                              11,782         21,415

 Non-interest income:
 Mortgage servicing fees                          4,685         12,337
 Amortization of MSRs                            (2,592)       (10,516)
 (Impairment) recovery of MSRs                   (1,534)        10,831
 (Loss) gain on derivatives                        (590)          (731)
 Loss on sales of investment securities               -            493
 Service charges and fees                         4,650          5,431
 (Loss) gain on sales of loans                    8,700         24,361
 Loss on sales of MSRs                              (61)          (174)
 Other income                                     1,739          2,135
 Intersegment servicing/processing fees               -              -
 ------------------------------------------------------      ---------
  Total non-interest income                      14,997         44,167

 Non-interest expense:
 Salaries and benefits                           24,042         28,278
 Customer service                                 2,218          3,516
 Marketing costs                                  2,474          3,360
 Data processing                                  3,934          4,429
 Depreciation and amortization                    5,176          5,406
 Office expenses                                  3,178          2,504
 Occupancy                                        5,902          5,233
 Travel and entertainment                           654          1,237
 Professional fees                                3,615          4,367
 Prepaid lost interest from curtailments             82            944
 Impairment of goodwill                           9,655              -
 Other                                            2,272          3,107
 Restructuring and other associated costs        12,829              -
 Inter-segment servicing/processing fees           (329)        (1,419)
 ------------------------------------------------------      ---------
  Total non-interest expense                     75,702         60,962
 ------------------------------------------------------      ---------
 (Loss) income before income taxes              (48,923)         4,620
 Income tax benefit (expense)                     3,513         (2,298)
                                              ---------      ---------
 Net (loss) income from continuing
  operations                                  $ (45,410)     $   2,322
 Loss from discontinued operations,
  net of income tax                             (40,913)        (1,427)
                                              ---------      ---------
 Net (loss) income                            $ (86,323)     $     895
                                              =========      =========
 Net (loss) income per common and
  potential common shares outstanding:
   Basic                                      $   (0.98)     $    0.05
   Basic EPS from discontinued operations     $   (0.88)         (0.03)
                                              ---------      ---------
   Basic EPS                                  $   (1.86)     $    0.02
                                              ---------      ---------
   Diluted                                    $   (0.98)     $    0.05
   Diluted EPS from discontinued operations   $   (0.88)         (0.03)
                                              ---------      ---------
 Diluted EPS                                  $   (1.86)     $    0.02
                                              ---------      ---------
 Weighted average common and potential
  common shares outstanding:
   Basic                                         46,425         46,168
   Diluted                                       46,425         46,480

                             NetBank, Inc.
                 Condensed Consolidated Balance Sheet
                   (In 000s except per share data)
                            (Unaudited)

                                   Dec. 31,    Sept. 30,     Dec. 31,
                                     2006         2006         2005
                                  ----------   ----------   ----------
  Assets
  Cash and cash equivalents:
   Cash and due from banks        $  607,600   $  347,980   $  126,666
   Cash equivalents and fed funds     22,712       21,995       23,590
                                  ----------   ----------   ----------
   Total cash, cash equivalents
    and fed funds                    630,312      369,975      150,256
 Investment securities available
  for sale-at fair value             294,280      252,546      626,077
 Stock of Federal Home Loan
  Bank of Atlanta-at cost             36,507       36,507       67,049
 Loans held for sale                 720,715      946,475    1,233,918
 Loan and lease receivables-net of
  allowance for losses             1,759,097    1,910,770    2,224,363
 Mortgage servicing rights - net      35,579       39,076      201,880
 Accrued interest receivable          12,281       16,555       16,698
 Furniture, equipment and
  capitalized software - net          38,962       48,261       54,420
 Goodwill and other
  intangibles - net                   43,724       53,849       85,097
 Due from servicers and investors     16,630      113,624       26,557
 Stock subscription receivable        25,350            -            -
 Other assets                         74,016       61,770       85,304
                                  ----------   ----------   ----------
 Total assets                     $3,687,453   $3,849,408   $4,771,619
                                  ==========   ==========   ==========
 Liabilities
 Deposits                         $2,615,636   $2,728,316   $2,793,847
 Other borrowed funds                657,515      654,033    1,348,240
 Subordinated debt                    32,477       32,477       32,477
 Accrued interest payable             33,443       24,049       17,595
 Loans in process                     20,712       31,843       34,060
 Representations and warranties       14,741       21,550       20,668
 Restructuring-related liabilities    11,637            -            -
 Accounts payable and
  accrued liabilities                 71,375       65,633      123,877
                                  ----------   ----------   ----------
   Total liabilities               3,457,536    3,557,901    4,370,764
                                  ----------   ----------   ----------

 Minority interests in affiliates        910          909          676

 Shareholders' equity
 Preferred stock, no par                   -            -            -
 Common stock, $.01 par                  528          528          528
 Common stock subscribed                  65            -            -
 Additional paid-in capital          457,905      434,303      432,140
 Retained (deficit) earnings        (165,136)     (78,661)      39,005
 Accumulated other comprehensive
  loss, net of tax                    (2,959)      (3,310)      (7,965)
 Treasury stock, at cost             (61,396)     (62,262)     (62,276)
 Unearned compensation                     -            -       (1,253)
                                  ----------   ----------   ----------
   Total shareholders' equity        229,007      290,598      400,179
                                  ----------   ----------   ----------
 Total liabilities, minority
  interests and shareholders'
  equity                          $3,687,453   $3,849,408   $4,771,619
                                  ==========   ==========   ==========


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

                                           Quarter Ended
                             -----------------------------------------
                             December 31,  September 30,   December 31,
                             -----------    -----------    -----------
                                 2006          2006           2005
                             -----------    -----------    -----------
 Consolidated:

    Net (loss) income        $   (86,323)   $   (73,281)   $       895
    Total assets             $ 3,687,453    $ 3,849,408    $ 4,771,619
    Total equity             $   229,007    $   290,598    $   400,179
    Shares outstanding            52,982         46,397         46,396
    Return on average equity     (110.42%)       (86.06%)         0.89%
    Return on average assets       (8.55%)        (7.06%)         0.07%
    Book value per share     $      4.32    $      6.26    $      8.63
    Tangible book value per
     share                   $      3.50    $      5.10    $      6.79

 NetBank, FSB:

    Deposits                 $ 2,620,841    $ 2,734,080    $ 2,796,029
    Customers                    248,229        268,769        285,669

    Estimated Capital Ratios:
    Tier 1 core capital ratio       4.83%          6.38%          6.51%
    Total risk-based capital
     ratio                          9.07%         10.13%         10.32%

    Asset quality numbers:
    CMC Lease portfolio      $    25,423    $    25,505    $    26,054
    Non-performing loan and
     lease receivables             7,716          7,300          6,995
                             -----------    -----------    -----------
    Total non-performing loan
     and lease receivables        33,139         32,805         33,049
    Non-performing loans held
     for sale (a)                 91,138         50,418         49,255
                             -----------    -----------    -----------
    Total non-performing loans
     and leases                  124,277         83,223         82,304
    Repossessed assets (b)        14,285         13,357          8,200
                             -----------    -----------    -----------
    Total non-performing
     assets                  $   138,562    $    96,580    $    90,504

    Allowance for credit
     losses (ALLL)           $    28,042    $    26,477    $    27,601
    Net charge-offs of loan
     and lease receivables   $    (4,081)   $    (3,301)   $    (2,786)

    Asset quality ratios:
    Total non-performing assets/
     average assets                 3.43%          2.33%          1.78%
    ALLL/total non-performing
     loan and lease receivables    84.62%         80.71%         83.52%
    Net annualized charge-
     offs/total assets              0.44%          0.34%          0.23%

 Mortgage Banking:

    Production Activity:
    Retail                   $   679,055    $   779,963    $   934,184
    Correspondent                506,248        833,138        904,354
    Wholesale                    265,524        392,350        568,789
    RMS                           10,631         21,487         52,185
                             -----------    -----------    -----------
    Total Agency-eligible      1,461,458      2,026,938      2,459,512
    Non-conforming               173,207        412,716        807,110
                             -----------    -----------    -----------
    Total                    $ 1,634,665    $ 2,439,654    $ 3,266,622
                             ===========    ===========    ===========

    Sales Activity:
    Third party sales        $ 1,773,823    $ 2,419,711    $ 3,302,059
    Intercompany sales                 -          8,180         56,449
                             -----------    -----------    -----------
    Total sales              $ 1,773,823    $ 2,427,891    $ 3,358,508
                             ===========    ===========    ===========
    Pipeline:
    Locked conforming mortgage
     loan pipeline           $   520,044    $   610,853    $   929,205

    UPB of loans serviced:   $13,665,809    $14,960,710    $17,107,575

 (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.


            

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