NetBank, Inc. Reports Earnings of $.02 per Share For Fourth Quarter 2005; Highly Competitive Mortgage Market Pressures Full-Year Results to Breakeven Level

Key points to consider in analyzing year-over-year resultsinclude:

-- Further Traction Within the Retail Banking Segment. The retail banking segment contributed pre-tax income of $19.1 million, compared with a pre-tax loss of $11.1 million a year ago, which included a $29.0 million Commercial Money Center (CMC) provision.

-- Negative Mortgage Performance. The company's conforming and non-conforming mortgage operations reported pre-tax losses of $7.0 million and $10.8 million respectively, compared with pre-tax income of $7.2 million and $13.9 million respectively. The decline in profitability within both channels was due mainly to competitive margin pressure, not production volumes.

-- Earning Asset Growth. The bank's average earning assets rose to $4.6 billion, representing an increase of $214 million or 4.9%.

-- Capital Constraints. The mortgage-related losses hindered the company's ability to generate additional capital through retained earnings. As a result, management was unable to further leverage the bank's balance sheet toward its target of $6.0 billion in assets or to fund other key strategic initiatives.

-- Customer and Deposit Growth: Total customers grew to 285,669, representing an increase of 15,242 or 5.6%, while deposits rose to $2.8 billion, up $154 million or 5.8%.

During the year, the company repurchased 571,391 shares of itscommon stock at a weighted average share price of $9.07. Managementhas approval to buy up to 1,092,573 additional shares under standingauthorizations from the board. No shares were repurchased during thefourth quarter.

Following the close of the quarter, the company's board ofdirectors declared a cash dividend of $.02 per share. The dividend ispayable to shareholders of record on February 20, 2006, and will bedisbursed on March 15, 2006.

Management Commentary

"Last year proved especially challenging for us and others in theindustry," said Douglas K. Freeman, chairman and chief executiveofficer. "As we had reported throughout the year, our mortgageoperations were under pressure due to a highly competitive pricingenvironment. This pressure, although not surprising, was simply moreirrational than anticipated, particularly within the non-conformingbusiness where our revenue margins dropped an average of 64 basispoints during the year. Our mortgage operations went from a positivepre-tax contribution of $21.1 million a year ago to a pre-tax loss of$17.7 million this year. That's a $38.8 million swing inprofitability.

"Several other macro issues also impacted the bank's performance.One, the flat yield curve took a toll on our interest spread, whichfell 23 basis points over the course of the year. Two, we continue tosee a number of new entrants in the online banking space who areadvertising extremely aggressive rates to attract deposits. So, wefaced the dilemma of optimizing the trade-off between interest spreadand customer growth.

"In spite of these challenges, we continued to make real progresstoward diversifying the company's income and reducing its overalldependency on mortgage earnings. The mere fact we were able to offsetthe $17.7 million pre-tax loss in our mortgage operations and keepbottom line performance at the breakeven level speaks directly to howfar we have come in the past few years."

Banking Segment Performance

Table 1 below details results in the company's banking segment.The segment recorded pre-tax income of $10.6 million, an increase of$8.1 million from the previous quarter. The improvement is comprisedof two factors. One, bank marketing expenses returned to more normallevels following a peak in the third quarter when several promotionalcampaigns converged. This drop is reflected in the $1.6 milliondecrease in the segment expense line. Two, net servicing resultsgenerated $6.7 million in income. This positive performance was basedon an improving environment for mortgage servicing right valuations,which resulted in the recovery of prior impairment expenses.
Table 1

RETAIL BANKING
($ in 000s, Unaudited)

2005 2005
4th Qtr 3rd Qtr Change
------------ ------------ ----------
Net interest income $ 23,205 $ 23,094 $ 111
Provision for credit losses 3,645 2,646 999
----------- ----------- ---------
Net interest income after
provision 19,560 20,448 (888)
Gain on sales of loans 333 - 333
Fees, charges and other income 3,600 3,663 (63)
----------- ----------- ---------
Total revenues 23,493 24,111 (618)
Total expenses 19,617 21,168 (1,551)
----------- ----------- ---------
Pre-tax income before net
servicing results 3,876 2,943 933
Net servicing results 6,683 (446) 7,129
----------- ----------- ---------
Pre-tax income $ 10,559 $ 2,497 $ 8,062
=========== =========== =========

Average earning assets $ 4,741,288 $ 4,832,728 $ (91,440)
Average unpaid principal balance
(UPB) underlying MSRs $13,440,944 $13,976,998 $(536,054)

Operations to average earning
assets
Net interest income after
provision 1.65% 1.69% (0.04%)
Gain on sale, fees, charges and
other income 0.33% 0.30% 0.03%
----------- ----------- ---------
Banking revenues 1.98% 1.99% (0.01%)
Total expenses 1.65% 1.75% (0.10%)
----------- ----------- ---------
Pre-tax income before net
servicing results 0.33% 0.24% 0.09%
=========== =========== =========

Net servicing results to average
UPB underlying MSRs 0.20% (0.01%) 0.21%

Additional banking segment highlights appear below. Allcomparisons are on a sequential quarter basis unless noted otherwise.

-- Total deposits fell to $2.8 billion, a decrease of $212 million or 7.0%. The decline was centered in brokered certificate of deposit funds. Management elected to let these funds run off based on the availability of more attractive funding sources.

-- Our business finance operation reported pre-tax income of $2.7 million, a decrease of $571,000 or 17.7%. Results were affected by increased provision expenses of $625,000 related to a few problem credits and higher production volumes. Production set a new quarterly record of $56.6 million.

-- Pre-tax income from our auto lending operation fell to $80,000, a drop of $92,000 or 53.5%. The operation experienced a spike in defaults in advance of the more stringent bankruptcy laws that went into effect during the quarter. The company recorded $308,000 in charge-offs attributable to this change. Management continues to moderate the channel's production based on the company's current balance sheet needs. Quarterly production totaled $74.8 million, a decrease of $43.7 million or 36.9%.

Financial Intermediary Segment Performance

Table 2 below details results in the company's financialintermediary segment. The segment recorded a pre-tax loss of $7.9million, compared with a pre-tax loss of $3.9 million in the previousquarter. Total production was off by $498 million or 13.2% to $3.3billion. Sales declined to $3.4 billion, a decrease of $330 million or8.9%. The segment's pre-tax margin totaled a negative 27 basis points(bps).

Most of the loss for the segment was centered in thenon-conforming channel, which experienced significant pricing pressurethroughout the quarter. Non-conforming results went from pre-taxincome of $301,000 last quarter to a pre-tax loss of $5.3 million thisquarter. This change was driven by a 78 bps drop in the non-conformingrevenue margin.
Table 2
FINANCIAL INTERMEDIARY
($ in 000s, Unaudited)

2005 2005
4th Qtr 3rd Qtr Change
----------- ----------- ----------
Net interest income $ 5,032 $ 6,901 $ (1,869)
Gain on sales of loans 26,805 27,034 (229)
Other income 905 683 222
Net Beacon credit services results (73) (303) 230
Net MG Reinsurance results 848 812 36
---------- ---------- ---------
Total revenues 33,517 35,127 (1,610)
Salary and employee benefits 23,986 21,776 2,210
Occupancy and depreciation expense 7,719 7,987 (268)
Other expenses 9,686 9,281 405
---------- ---------- ---------
Total expenses 41,391 39,044 2,347
---------- ---------- ---------
Pre-tax loss $ (7,874) $ (3,917) $ (3,957)
========== ========== =========

Production $3,266,622 $3,764,981 $(498,359)
Sales (includes intercompany sales) $3,358,508 $3,688,402 $(329,894)

Total revenues to sales 1.00% 0.95% 0.05%
Total expenses to production 1.27% 1.04% 0.23%
---------- ---------- ---------
Pre-tax margin (0.27%) (0.09%) (0.18%)
========== ========== =========

Additional financial intermediary segment highlights appear below.All comparisons are on a sequential quarter basis unless notedotherwise.

-- Conforming mortgage production totaled $2.5 billion, a decrease of $422 million or 14.7%. Conforming sales slowed to $2.5 billion, a decline of $297 million or 10.5%.

-- Non-conforming production totaled $807 million, a decrease of $76.1 million or 8.6%. Non-conforming sales slowed to $815 million, a decline of $32.8 million or 3.9%.

Transaction Processing Segment Performance

Table 3 below details results in the company's transactionprocessing segment. Pre-tax income totaled $704,000, an increase of$205,000 from the previous quarter. The increase was centered in theservicing factory where income was up 39.6%.
Table 3
TRANSACTION PROCESSING
($ in 000s, Unaudited)

2005 2005
4th Qtr 3rd Qtr Change
------- ------- ------
Total revenue $6,822 $6,634 $188
Total expenses 6,118 6,135 (17)
------ ------ ----
Pre-tax income $ 704 $ 499 $205
====== ====== ====

Additional transaction processing segment highlights appear below.All comparisons are on a sequential quarter basis unless notedotherwise.

-- The ATM and merchant processing operation acquired the servicing rights to more than 1,100 new machines in November 2005. The company's network of ATMs now stands at 9,649, an increase of 1,204 or 14.3%.

First Quarter Earnings Outlook

The company's first quarter results are presently tracking belowcurrent quarter earnings. The banking and mortgage businesses areshowing only slight improvements relative to the results reportedtoday. Although pricing pressures within the mortgage industry appearto be easing, any improvement in margins will affect new productionand be recorded in mostly subsequent quarters as this production isdelivered into the capital markets.

The material difference between the two quarters will likely occurwithin the servicing asset. The servicing asset contributed pre-taxincome of $6.7 million in the current quarter based mainly on therecovery of prior impairment expenses. Based on present marketconditions, the servicing asset is not likely to generate a recoveryin the first quarter. Given the volatile nature of the servicingasset, the potential for negative servicing results also exists as asignificant risk.

Current analyst estimates for the first quarter range from a lossof $.01 to income of $.08 per share. Management believes this range istoo optimistic given the outlook provided above.

Supplemental Financial Data

Management has updated the quarterly financial data available onits Web site. This data provides further detail on the performance ofthe company's different business channels over the past five quarters.It is intended to supplement the information in this announcement andto give interested parties a better understanding of the company'soperations and financial trends.

Interested parties can find this quarterly supplement on thecompany's Web site at www.netbankinc.com. The material is accessiblethrough the link titled "Financial Data" under "Investor Relations."

Within this same area, the company posts a monthly statisticalreport, which is intended to give individuals a means of tracking thecompany's performance intra-quarter. The monthly report is publisheddirectly to the Web site around the 20th of the following month.

Conference Call Information

Management has scheduled a conference call to discuss today'sreported results with investors, financial analysts and otherinterested parties. The call will be held today at 10 a.m. EST.Interested parties may dial in or listen via an audiocast on thecompany's Web site.
Call Title: NetBank, Inc. Earnings Announcement
Call Leader: Douglas K. Freeman
Passcode: NetBank
Toll-Free: 888-889-1959
International: +1-773-756-0455
One-Week Replay: 888-568-0906

About NetBank, Inc.

NetBank, Inc. (Nasdaq: NTBK) operates with a revolutionarybusiness model through a diverse group of complementary financialservices businesses that leverage technology for more efficient andcost-effective delivery of services. Its primary areas of operationinclude personal and small business banking, retail and wholesalemortgage 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 areforward-looking statements that reflect management's currentexpectations, assumptions, and estimates of future performance andeconomic conditions. Such statements are made in reliance upon thesafe harbor provisions of Section 27A of the Securities Act of 1933and Section 21E of the Securities Exchange Act of 1934.

Forward-looking statements in this press release include but arenot limited to: Management's belief that first quarter 2006 resultsare tracking below fourth quarter 2005 earnings; 2) performance in thebanking and mortgage segments is showing slight improvement todaycompared with performance in fourth quarter 2005; and 3) thelikelihood that net servicing results will not include the benefit ofan impairment expense recovery in the first quarter of 2006.

These forward-looking statements are subject to a number of risksand uncertainties that may cause actual results and future trends todiffer materially from those expressed in or implied by suchforward-looking statements. The company's consolidated results ofoperations and such forward-looking statements could be affected bymany factors, including but not limited to: 1) the evolving nature ofthe market for internet banking and financial services generally; 2)the public's perception of the internet as a secure, reliable channelfor transactions; 3) the success of new products and lines of businessconsidered critical to the company's long-term strategy, such as smallbusiness banking and transaction processing services; 4) potentialdifficulties in integrating the company's operations across itsmultiple lines of business; 5) the cyclical nature of the mortgagebanking industry generally; 6) a possible decline in asset quality; 7)changes in general economic or operating conditions that couldadversely affect mortgage loan production and sales, mortgageservicing rights, loan delinquency rates and/or loan defaults; 8) thepossible adverse effects of unexpected changes in the interest rateenvironment; 9) adverse legal rulings, particularly in the company'slitigation over leases originated by Commercial Money Center, Inc.;and 10) increased competition and regulatory changes.

Further information relating to these and other factors that mayimpact the company's results of operations and such forward-lookingstatements are disclosed in the company's filings with the SEC,including under the caption "Item 1. Business--Risks Relating toNetBank's Business" in its Annual Report on Form 10-K for the yearended December 31, 2004. Except as required by the securities laws,the company disclaims any intention or obligation to update or reviseany forward-looking statements, whether as a result of newinformation, future events or otherwise.
NetBank, Inc.
Consolidated Statements of Operations
For the Year Ended December 31,
(Unaudited and in 000's except per share data)

2005
---------------------------------
Retail Financial Transaction
banking intermediary processing
---------------------------------- --------- ------------ -----------

Interest income:
Loans and leases $112,096 $102,790 $ 34
Investment securities 35,081 4 -
Short-term investments 1,686 454 -
Inter-segment 76,217 2,626 (94)
---------------------------------- -------- -------- -------
Total interest income 225,080 105,874 (60)

Interest expense:
Deposits 70,483 - -
Other borrowed funds 54,339 6,251 32
Inter-segment 8,881 70,963 6
---------------------------------- -------- -------- -------
Total interest expense 133,703 77,214 38
---------------------------------- -------- -------- -------
Net interest income 91,377 28,660 (98)
Provision for credit losses 10,943 104 -
---------------------------------- -------- -------- -------
Net interest income after
provision for credit losses 80,434 28,556 (98)

Non-interest income:
Mortgage servicing fees 42,037 3,875 5,430
Amortization of MSRs (45,036) (353) -
Recovery (impairment) of MSRs 14,055 - -
(Loss) gain on derivatives (841) (39) -
Gain on sales of investment
securities 4,675 - -
Service charges and fees 10,852 50 9,668
Gain on sales of loans and MSRs 834 109,347 -
Other income 3,520 2,995 3,734
Intersegment servicing/processing
fees - - 14,135
---------------------------------- -------- -------- -------
Total non-interest income 30,096 115,875 32,967

Non-interest expense:
Salaries and benefits 21,109 92,099 9,500
Customer service 12,154 7 1,442
Marketing costs 7,232 5,494 279
Data processing 10,330 4,878 2,356
Depreciation and amortization 8,252 11,243 3,692
Office expenses 3,358 6,652 2,485
Occupancy 4,175 19,236 1,427
Travel and entertainment 745 4,350 573
Professional fees 2,951 9,968 2,258
Prepaid lost interest from
curtailments 4,234 55 -
Other 6,535 2,202 5,741
Inter-segment servicing/processing
fees 10,355 3,780 -
---------------------------------- -------- -------- -------
Total non-interest expense 91,430 159,964 29,753
---------------------------------- -------- -------- -------
Income before income taxes $ 19,100 $(15,533) $ 3,116
======== ======== =======


2005 2004
------------------------ --------
Other / Consolidated Consolidated
eliminations NetBank, Inc. NetBank, Inc.
------------ ------------- -------------

Interest income:
Loans and leases $ 970 $ 215,890 $210,260
Investment securities - 35,085 20,838
Short-term investments - 2,140 1,065
Inter-segment (78,749) - -
---------------------------- -------- --------- --------
Total interest income (77,779) 253,115 232,163

Interest expense:
Deposits - 70,483 47,044
Other borrowed funds 1,949 62,571 45,573
Inter-segment (79,850) - -
---------------------------- -------- --------- --------
Total interest expense (77,901) 133,054 92,617
---------------------------- -------- --------- --------
Net interest income 122 120,061 139,546
Provision for credit losses - 11,047 34,777
---------------------------- -------- --------- --------
Net interest income after
provision for credit losses 122 109,014 104,769

Non-interest income:
Mortgage servicing fees - 51,342 51,015
Amortization of MSRs - (45,389) (39,298)
Recovery (impairment) of
MSRs - 14,055 (7,305)
(Loss) gain on derivatives - (880) 4,785
Gain on sales of investment
securities - 4,675 7,780
Service charges and fees - 20,570 17,568
Gain on sales of loans and
MSRs 858 111,039 115,574
Other income (372) 9,877 10,629
Intersegment
servicing/processing fees (14,135) - -
---------------------------- -------- --------- --------
Total non-interest income (13,649) 165,289 160,748

Non-interest expense:
Salaries and benefits 2,466 125,174 125,864
Customer service 29 13,632 12,530
Marketing costs 229 13,234 9,255
Data processing 1 17,565 18,705
Depreciation and
amortization 406 23,593 20,024
Office expenses 137 12,632 11,331
Occupancy 97 24,935 21,896
Travel and entertainment 178 5,846 5,245
Professional fees 2,637 17,814 16,370
Prepaid lost interest from
curtailments - 4,289 5,356
Other 613 15,091 12,611
Inter-segment
servicing/processing fees (14,135) - -
---------------------------- -------- --------- --------
Total non-interest expense (7,342) 273,805 259,187
---------------------------- -------- --------- --------
Income before income taxes $ (6,185) 498 6,330
========
Income tax expense (678) (2,110)
--------- --------
Net (loss) income $ (180) $ 4,220
========= ========

Net (loss) income per common and
potential common shares outstanding:
Basic $ (0.00) $ 0.09
Diluted $ (0.00) $ 0.09

Weighted average common and potential
common shares outstanding:
Basic 46,193 46,862
Diluted 46,193 47,214


NetBank, Inc.
Consolidated Statements of Operations
For the Three Months Ended December 31,
(Unaudited and in 000's except per share data)


2005
----------------------------------------------
Retail Financial Transaction Other /
banking intermediary processing eliminations
--------------------- --------- ------------ ----------- ------------

Interest income:
Loans and leases $ 29,289 $ 27,352 $ 7 $ 191
Investment securities 8,915 1 - -
Short-term
investments 432 151 - -
Inter-segment 23,791 75 (74) (23,792)
--------------------- -------- ----------- ---------- -----------
Total interest
income 62,427 27,579 (67) (23,601)

Interest expense:
Deposits 21,491 - - -
Other borrowed funds 15,528 614 - 593
Inter-segment 2,290 21,706 - (23,996)
--------------------- -------- ----------- ---------- -----------
Total interest
expense 39,309 22,320 - (23,403)
--------------------- -------- ----------- ---------- -----------
Net interest income 23,118 5,259 (67) (198)
Provision for credit
losses 3,645 13 - -
--------------------- -------- ----------- ---------- -----------
Net interest income
after provision for
credit losses 19,473 5,246 (67) (198)

Non-interest income:
Mortgage servicing
fees 10,298 943 1,355 -
Amortization of MSRs (10,556) 40 - -
Recovery of MSRs 10,831 - - -
Loss on derivatives (731) - - -
Gain on sales of
investment
securities 493 - - -
Service charges and
fees 2,803 13 2,615 -
Gain on sales of
loans and MSRs 333 27,624 - 260
Other income 832 669 708 (91)
Intersegment
servicing/processing
fees - - 3,653 (3,653)
--------------------- -------- ----------- ---------- -----------
Total non-interest
income 14,303 29,289 8,331 (3,484)

Non-interest expense:
Salaries and benefits 5,215 24,632 2,515 163
Customer service 3,335 - 171 10
Marketing costs 1,900 1,520 55 62
Data processing 2,576 1,363 520 1
Depreciation and
amortization 2,061 2,827 943 69
Office expenses 700 1,794 700 16
Occupancy 1,194 4,949 352 29
Travel and
entertainment 210 1,211 159 43
Professional fees 694 2,589 648 607
Prepaid lost interest
from curtailments 937 7 - -
Other 1,706 553 1,497 579
Inter-segment
servicing/processing
fees 2,689 964 - (3,653)
--------------------- -------- ----------- ---------- -----------
Total non-interest
expense 23,217 42,409 7,560 (2,074)
--------------------- -------- ----------- ---------- -----------
Income (loss) before
income taxes $ 10,559 $ (7,874) $ 704 $ (1,608)
======== =========== ========== ===========

2005 2004
----------- --------
Consolidated Consolidated
NetBank, NetBank,
Inc. Inc.
--------------------------------------------------------- ------------

Interest income:
Loans and leases $ 56,839 $ 50,158
Investment securities 8,916 7,270
Short-term investments 583 381
Inter-segment - -
--------------------------------------------- -------- --------
Total interest income 66,338 57,809

Interest expense:
Deposits 21,491 12,680
Other borrowed funds 16,735 11,948
Inter-segment - -
--------------------------------------------- -------- --------
Total interest expense 38,226 24,628
--------------------------------------------- -------- --------
Net interest income 28,112 33,181
Provision for credit losses 3,658 30,795
--------------------------------------------- -------- --------
Net interest income after provision for
credit losses 24,454 2,386

Non-interest income:
Mortgage servicing fees 12,596 12,957
Amortization of MSRs (10,516) (10,876)
Recovery of MSRs 10,831 3,083
Loss on derivatives (731) (945)
Gain on sales of investment securities 493 2,363
Service charges and fees 5,431 4,516
Gain on sales of loans and MSRs 28,217 21,606
Other income 2,118 1,624
Intersegment servicing/processing fees - -
--------------------------------------------- -------- --------
Total non-interest income 48,439 34,328

Non-interest expense:
Salaries and benefits 32,525 31,052
Customer service 3,516 3,123
Marketing costs 3,537 2,281
Data processing 4,460 4,817
Depreciation and amortization 5,900 5,310
Office expenses 3,210 2,922
Occupancy 6,524 5,619
Travel and entertainment 1,623 1,583
Professional fees 4,538 5,651
Prepaid lost interest from curtailments 944 1,182
Other 4,335 1,820
Inter-segment servicing/processing fees - -
--------------------------------------------- -------- --------
Total non-interest expense 71,112 65,360
--------------------------------------------- -------- --------
Income (loss) before income taxes 1,781 (28,646)
Income tax (expense) benefit (886) 10,990
-------- --------
Net income (loss) $ 895 $(17,656)
======== ========

Net income (loss) per common and potential common shares
outstanding:
Basic $ 0.02 $ (0.38)
Diluted $ 0.02 $ (0.38)

Weighted average common and potential common shares
outstanding:
Basic 46,168 46,563
Diluted 46,480 46,563


NetBank, Inc.
Condensed Consolidated Balance Sheet
As of December 31,
(Unaudited and in 000's except per share data)



2005
-------------------------------------------------

Retail Financial Transaction Other &
Banking Intermediary Processing Eliminations
----------- ------------ ----------- -------------
Assets
Cash and cash
equivalents:
Cash and due
from banks $ 88,937 $ 42,088 $ 424 $ (4,783)
Cash
equivalents
and fed funds 8,270 14,073 1,247 -
---------- ---------- ------- -----------
Total cash,
cash equivalents
and fed funds 97,207 56,161 1,671 (4,783)
Investment
securities
available for
sale-at fair value 626,075 2 - -
Stock of Federal
Home Loan Bank of
Atlanta-at cost 67,049 - - -
Loans held for
sale 2,123 1,231,810 - (15)
Loan and lease
receivables-net
of allowance for
losses of
$27,601 and
$24,462,
respectively 2,191,580 35,636 - (2,853)
Mortgage servicing
rights 201,097 783 - -
Accrued interest
receivable 10,031 6,667 - -
Furniture,
equipment and
capitalized
software 19,144 31,579 1,631 2,066
Goodwill and other
intangibles 1,311 49,512 34,009 265
Due from servicers
and investors 22,857 3,700 - -
Inter-segment
receivables 1,210,877 704 1,598 (1,213,179)
Other assets 36,757 44,995 6,887 (3,335)
---------- ---------- ------- -----------
Total assets $4,486,108 $ 1,461,549 $ 45,796 $ (1,221,834)
========== ========== ======= ===========


Liabilities
Deposits $2,798,997 $ - $ - $ (5,150)
Other borrowed
funds 1,348,240 - - -
Inter-segment
payables 212,620 1,012,291 7,868 (1,232,779)
Subordinated debt - - - 32,477
Accrued interest
payable 17,311 33 - 251
Loans in process - 34,060 - -
Unsettled Trades - - - -
Representations
and warranties - 20,668 - -
Accounts payable
and accrued
liabilities 33,545 85,605 6,327 (1,600)
---------- ---------- ------- -----------
Total liabilities 4,410,713 1,152,657 14,195 (1,206,801)
---------- ---------- ------- -----------

Minority interests
in affiliates - 676 - -

Shareholders'
equity
Preferred stock,
no par
(10,000 shares
authorized, none
outstanding) - - - -
Common stock, $.01
par (100,000
shares authorized,
52,820 and 52,820
shares issued,
respectively) - - - 528
Additional paid-in
capital - - - 432,140
Retained earnings - - - 39,005
Accumulated other
comprehensive
loss, net of tax - - - (7,965)
Treasury stock, at
cost (6,424 and
6,292 shares,
respectively) - - - (62,276)
Unearned
compensation - - - (1,253)
Allocated equity 75,395 308,216 31,601 (415,212)
---------- ---------- ------- -----------
Total
shareholders'
equity 75,395 308,216 31,601 (15,033)

----------- ------------ ----------- -------------
Total liabilities,
minority
interests and
shareholders'
equity $4,486,108 $ 1,461,549 $ 45,796 $ (1,221,834)
========== ========== ======= ===========


2005 2004
------------ ----------


NetBank, NetBank,
Inc. Inc.
------------ ------------
Assets
Cash and cash equivalents:
Cash and due from banks $ 126,666 $ 129,319
Cash equivalents and fed funds 23,590 20,983
---------- ----------
Total cash, cash equivalents and fed
funds 150,256 150,302
Investment securities available for sale-at
fair value 626,077 700,295
Stock of Federal Home Loan Bank of Atlanta-
at cost 67,049 60,128
Loans held for sale 1,233,918 1,173,779
Loan and lease receivables-net of allowance
for losses of
$27,601 and $24,462, respectively 2,224,363 2,095,832
Mortgage servicing rights 201,880 172,819
Accrued interest receivable 16,698 11,513
Furniture, equipment and capitalized
software 54,420 51,438
Goodwill and other intangibles 85,097 79,195
Due from servicers and investors 26,557 52,441
Inter-segment receivables - -
Other assets 85,304 74,439
---------- ----------
Total assets $ 4,771,619 $ 4,622,181
========== ==========


Liabilities
Deposits $ 2,793,847 $ 2,639,441
Other borrowed funds 1,348,240 1,311,491
Inter-segment payables - -
Subordinated debt 32,477 11,857
Accrued interest payable 17,595 10,309
Loans in process 34,060 27,820
Unsettled trades - 50,543
Representations and warranties 20,668 22,676
Accounts payable and accrued liabilities 123,877 133,562
---------- ----------
Total liabilities 4,370,764 4,207,699
---------- ----------

Minority interests in affiliates 676 455

Shareholders' equity
Preferred stock, no par
(10,000 shares authorized, none
outstanding) - -
Common stock, $.01 par (100,000 shares
authorized,
52,820 and 52,820 shares issued,
respectively) 528 528
Additional paid-in capital 432,140 432,132
Retained earnings 39,005 43,849
Accumulated other comprehensive loss, net
of tax (7,965) (1,136)
Treasury stock, at cost (6,424 and 6,292
shares, respectively) (62,276) (61,087)
Unearned compensation (1,253) (259)
Allocated equity - -
---------- ----------
Total shareholders' equity 400,179 414,027

------------ ------------
Total liabilities, minority interests and
shareholders' equity $ 4,771,619 $ 4,622,181
========== ==========


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

Quarter Ended
December 31, September 30, December 31,
------------ ------------ ------------
2005 2005 2004
----------- ----------- -----------
Consolidated:

Net income (loss) $ 895 $ (1,371) $ (17,656)
Total assets $ 4,771,619 $ 5,115,313 $ 4,622,181
Total equity $ 400,179 $ 401,783 $ 414,027
Shares outstanding 46,396 46,358 46,528
Return on average equity 0.89% (1.35%) (16.59%)
Return on average assets 0.07% (0.11%) (1.48%)
Book value per share $ 8.63 $ 8.67 $ 8.90
Tangible book value per
share $ 6.79 $ 6.92 $ 7.20

NetBank, FSB:

Deposits $ 2,796,029 $ 3,007,928 $ 2,642,288
Customers 285,669 282,575 270,427

Estimated Capital Ratios:
Tier 1 core capital ratio 6.51% 6.09% 6.73%
Total risk-based capital
ratio 10.32% 10.21% 11.30%

Asset quality numbers:
CMC Lease portfolio $ 26,054 $ 26,435 $ 31,527
Non-performing loan and
lease receivables 6,995 6,481 5,518
----------- ----------- -----------
Total non-performing loan
and lease receivables 33,049 32,916 37,045
Non-performing loans held
for sale (1) 49,255 27,432 36,253
----------- ----------- -----------
Total non-performing loans
and leases 82,304 60,348 73,298
Repossessed assets (2) 8,200 7,963 5,799
----------- ----------- -----------
Total non-performing assets $ 90,504 $ 68,311 $ 79,097

Allowance for credit losses
(ALLL) $ 27,601 $ 26,730 $ 24,461
Net charge-offs of loan and
lease receivables $ (2,786) $ (1,770) $ (51,639)

Asset quality ratios:
Total non-performing assets
/ average assets 1.78% 1.35% 1.66%
ALLL / total non-performing
loan and lease receivables 83.52% 81.21% 66.03%
Net annualized charge-offs /
total assets 0.23% 0.14% 4.47%

Mortgage Banking:

Production Activity:
Retail $ 934,184 $ 1,089,137 $ 613,313
Correspondent 904,354 1,025,626 1,075,388
Wholesale 568,789 692,828 627,019
RMS 52,185 74,180 33,694
----------- ----------- -----------
Total Agency-eligible 2,459,512 2,881,771 2,349,414
Non-conforming 807,110 883,210 772,451
----------- ------------ -----------
Total $ 3,266,622 $ 3,764,981 $ 3,121,865
=========== ============ ===========

Sales Activity:
Third party sales $ 3,302,059 $ 3,631,112 $ 3,106,956
Intercompany sales 56,449 57,290 56,918
----------- ----------- -----------
Total sales $ 3,358,508 $ 3,688,402 $ 3,163,874
=========== =========== ===========

Pipeline:
Locked conforming mortgage
loan pipeline $ 929,205 $ 1,053,315 $ 754,876

UPB of loans serviced: $17,107,575 $18,470,922 $16,706,702

(1) Held for sale assets are carried at the lower of cost or
market (LOCOM). LOCOM adjustments, under GAAP, are direct reductions
of the assets' carrying values and are not considered allowances.

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