NetBank, Inc. Reports Financial Results for Third Quarter; Loss of $.03 per Share Based on $3.5 Million Provision Related to Previously Identified Issues on a Limited Group of Loans

These results include a provision of $3.5 million, pre-tax, or$.05 per share, after-tax. This additional provision relates to alimited group of conforming mortgages the company has mentioned inrecent releases. The company believes certain misrepresentations mayhave been made by one or more of the parties involved during the loanapplication process. These loans have an outstanding balance ofapproximately $13 million. They were previously sold by the company todifferent investors. Although none of the loans has been returned todate, management believes it is prudent to record a reserve under thecircumstances.

The $3.5 million provision is based on a review of the underlyingproperty values in a foreclosure and liquidation scenario. Managementbelieves the actual loss related to these loans, if any, could be lesssince the company may have recourse to pursue recovery from the titleinsurance company and other parties to the origination. These sourceswere purposely excluded from management's assessment since theyinvolve varying degrees of uncertainty.

Other significant drivers behind third quarter results appearbelow. Comparisons are on a sequential quarter basis unless notedotherwise.

-- Net Interest Margin Compression - The banking segment's risk-adjusted net interest margin fell 13 basis points (bps) to 169 bps due to the flattening of the yield curve in recent months.

-- Better Leverage - The banking segment's average earning assets rose by $336 million or 7.5% to $4.8 billion.

-- Positive Servicing Asset Performance - Servicing asset performance went from a loss of $2.3 million to pre-tax income of $130,000 as higher rates and improving valuations for mortgage servicing rights led to prior impairment expense recovery.

-- Higher Loan Production and Sales - Total mortgage production increased by $309 million or 9.0% to $3.8 billion, while total sales grew by $550 million or 17.5% to $3.7 billion.

-- Additional Repurchase Activity - Routine loan repurchase activity ran higher than expected in the conforming mortgage channel. Management booked additional provisions to replenish reserves and increased provision assumptions for current production.

The company did not repurchase any of its common shares thisquarter. Management opted to deploy capital in other strategicinitiatives. These include asset growth within the bank's loan andinvestment portfolio and the acquisition of approximately 30conforming mortgage branches by the company's direct conformingmortgage lender, Market Street Mortgage.

The company's board of directors approved a dividend of $.02 pershare to shareholders of record on November 25, 2005. The dividendwill be disbursed on December 15, 2005.

Management Commentary

"Our results today include a provision of $3.5 million related tosome concerns we have with a limited group of related loans," saidDouglas K. Freeman, chairman and chief executive officer. "We becameaware of some potential appraisal and underwriting problems with theseloans after the close of the quarter. We disclosed the issue and ourprocess for assessing any potential exposure in October. To completethe process, we found it necessary to move back our announcement ofthird quarter results and the filing of our 10-Q until now. We feltthis was the right decision for our shareholders since we knew theoutcome of our review could impact the quarterly results if we deemedit prudent to record provisions against these specific loans, whichour review ultimately led us to do."

"Looking at the quarter apart from the special provision, we faceda number of challenges. Our banking and mortgage operations wereconfronted with difficult operating environments. The bank's netinterest margin has come under pressure as the disproportionateincreases in short- and long-term rates during the year have created aflatter yield curve. This same interest rate environment has also keptpricing competition in the mortgage industry at elevated levels sincelenders are increasingly concerned with declining origination volumes.This pressure was compounded in our conforming mortgage channel byincreased repurchase activity. The number of returned loans ran higherthan our projections, which prompted us to book additional provisionsto account for the difference. Although we expect the repurchasevolume to moderate somewhat, we believe the heightened activity isindicative of a larger industry trend where investors have becomeincreasingly assertive in returning loans.

"Beyond these pressures, there were a number of positivedevelopments that clearly reflect our company's strong fundamentalsand the steady traction we are seeing with our revenue diversificationefforts," Freeman concluded. "Our customer and deposit growth trendsshowed improvement over the quarter. We continued to build leverage atthe bank by growing earning assets. Our servicing asset provided ameaningful offset and demonstrated how it can serve as a natural,counter-cyclical hedge to our mortgage origination businesses during arising interest rate environment. And last, our retail mortgagechannel surpassed the $1 billion mark in quarterly production for thefirst time ever."

Banking Segment Performance

Table 1 below details results in the company's banking segment.Pre-tax income totaled $3.1 million, representing a decrease of$354,000 or 10.3% on a quarter-over-quarter basis. Segment resultswere largely driven by two forces. The retail bank saw decliningprofitability due to margin compression and higher operating expenses.These factors are evident in the 13-basis-point decrease in thesegment's risk-adjusted net interest margin and the 11-basis-pointrise in the segment's operating expense ratio. Expenses were up mostlydue to a peak in marketing costs as several campaigns culminatedduring the quarter.

Servicing asset results provided significant offset and helped tomitigate lower profitability at the retail bank and other channelswithin the segment. Servicing results contributed pre-tax income of$130,000 versus a loss of $2.3 million last quarter. As interest ratesmoved higher, prepayment speed expectations lessened and promotedhigher valuations for mortgage servicing rights. Based on theseimproving fundamentals, the company was able to recover a portion ofprior impairment expenses.

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

2005 2005
3rd Qtr 2nd Qtr Change
------------ ------------ ------------
Net interest income $ 23,094 $ 22,820 $ 274
Provision for credit losses 2,646 2,316 330
------------ ------------ ------------
Net interest income after
provision 20,448 20,504 (56)
Gains on sales of loans - - -
Fees, charges and other income 3,663 3,597 66
------------ ------------ ------------
Total revenues 24,111 24,101 10
Total expenses 21,168 18,380 2,788
------------ ------------ ------------
Pre-tax income before net
servicing results 2,943 5,721 (2,778)
Net servicing results 130 (2,294) 2,424
------------ ------------ ------------
Pre-tax income (loss) $ 3,073 $ 3,427 $ (354)
============ ============ ============

Average earning assets $ 4,832,728 $ 4,496,414 $ 336,314
Average UPB underlying MSRs $13,976,998 $14,593,781 $ (616,783)

Operations to average earning
assets
Net interest income after
provision 1.69% 1.82% (0.13%)
Gain on sale, fees, charges and
other income 0.30% 0.32% (0.02%)
------------ ------------ ------------
Banking revenues 1.99% 2.14% (0.15%)
Total expenses 1.75% 1.64% 0.11%
------------ ------------ ------------
Pre-tax income before net
servicing results 0.24% 0.50% (0.26%)
============ ============ ============

Net servicing results to
average UPB underlying MSRs 0.00% (0.06%) 0.06%

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

-- Total deposits rose to $3.0 billion, an increase of $214 million or 7.6%. The growth was spread across retail and small business customers, mortgage escrow accounts and brokered funds.

-- Average earning assets grew by $336 million or 7.5% to $4.8 billion.

-- Our business finance operation reported pre-tax income of $3.2 million, a decrease of $275,000 or 7.9%. The decline was centered mainly in provision expense, which had been running at near-record lows for the past several quarters. Production declined by $1.1 million or 2.3% but remained robust at $45.5 million.

-- Auto loan production was impacted by a strategic decision to increase pricing. Production fell to $119 million, a decline of $13.3 million or 10.1%. However, the channel's profitability improved by $130,000 or 310% to $172,000.

Financial Intermediary Segment Performance

Table 2 below details results in the company's financialintermediary segment. The segment recorded a net loss of $4.5 million,pre-tax, compared with pre-tax income of $1.6 million a quarter ago.As discussed in greater detail above, these results reflect the impactof heightened provision in the conforming mortgage channel. Repurchaseactivity in this channel ran higher than expected during the quarter.This elevated activity prompted the company to book additionalprovisions for past production and to adjust its provision assumptionsfor current production. This heightened expense was in addition to the$3.5 million reserve the company booked on the group of related loansdescribed earlier.

The collective effect of these provisions shows up in the29-basis-point decline in the revenue margin reported for the quarter.Provision is taken as a direct charge against gain on sale income.Operating expenses within the segment remained in check during thequarter. Total production improved by $309 million, providing thelending operations with better leverage over their expenses.

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

2005 2005
3rd Qtr 2nd Qtr Change
------------ ------------ ------------
Net interest income $ 6,901 $ 7,959 $ (1,058)
Gain on sales of loans 27,034 28,810 (1,776)
Other income 107 1,081 (974)
Net Beacon credit services
results (303) (122) (181)
Net MG Reinsurance results 812 841 (29)
------------ ------------ ------------
Total revenues 34,551 38,569 (4,018)
Salary and employee benefits 21,776 20,883 893
Occupancy & Depreciation
expense 7,987 7,494 493
Other expenses 9,281 8,581 700
------------ ------------ ------------
Total expenses 39,044 36,958 2,086
------------ ------------ ------------
Pre-tax (loss) income $ (4,493) $ 1,611 $ (6,104)
============ ============ ============

Production $ 3,764,981 $ 3,455,499 $ 309,482
Sales (includes intercompany
sales) $ 3,688,402 $ 3,138,302 $ 550,100

Total revenues to sales 0.94% 1.23% (0.29%)
Total expenses to production 1.04% 1.07% (0.03%)
------------ ------------ ------------
Pre-tax margin (0.10%) 0.16% (0.26%)
============ ============ ============

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

-- Conforming mortgage production totaled $2.9 billion, an increase of $292 million or 11.3%. Nearly all of this increase came through the company's retail mortgage channel. Conforming sales accelerated to $2.8 billion, a jump of $502 million or 21.5%.

-- Non-conforming production grew by $18.0 million or 2.1% to $883 million, while non-conforming sales totaled $847 million, an increase of $47.6 million or 6.0%. Revenue margins remained relatively consistent at 168 bps. But, the higher sales volume allowed the channel to return to profitability for the first time in three quarters.

Transaction Processing Segment Performance

Table 3 below details results in the company's transactionprocessing segment. Pre-tax income totaled $499,000, a decrease of$400,000 or 44% on a quarter-over-quarter basis. The decline iscomprised of two primary components. One, the servicing factoryrecorded additional provision on a limited number of aging items. Two,revenue within our ATM and merchant processing business fell becauseof seasonally lighter transaction volumes and hurricane-relateddisruptions. Our machines, along with those of other providers, wereaffected by connectivity issues following the widespread power andtelephone outages in the hardest hit regions of the Gulf Coast. Weexpect both of these trends to reverse going forward.

Table 3
TRANSACTION PROCESSING
($ in 000s, Unaudited)

2005 2005
3rd Qtr 2nd Qtr Change
------------ ------------ ------------
Total revenue $ 6,634 $ 6,680 $ (46)
Total expenses 6,135 5,781 354
------------ ------------ ------------
Pre-tax income $ 499 $ 899 $ (400)
============ ============ ============

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

-- The company added 177 ATMs to its network during the quarter. Within the past two weeks, the company has acquired a portfolio of more than 1,100 new ATM relationships, which brings the total number of machines in its network to approximately 9,600.

Next Quarter Earnings Outlook

Analyst estimates for the company's fourth quarter earningscurrently range from $.03 to $.09. Management is biased toward the lowend of this range. Management is concerned with further net interestmargin compression at the bank given the prevailing interest rateenvironment today. Mortgage originations also reach seasonal lowsduring this period, and declining volumes could lead to strongerpricing pressures across the industry. The potential for significantnegative net servicing results still exists.

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 during a quarter. The monthly report ispublished directly to the Web site around the 20th of each 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 4:30 p.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: 800-310-4931

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: 1) The suggestion that the company could recover anypotential losses on the limited group of loans that may be returned inthe future due to apparent misrepresentations made during theapplication process; 2) The belief that mortgage repurchase activitywithin the conforming channel will decline from third quarter levels;3) Any suggestion the company will fully achieve each of the long-termgoals presented as part of management's revenue diversificationstrategy; 4) The servicing asset's ability to behave countercyclically to the company's mortgage operations and provide continuedearnings offset when needed; 5) The retail mortgage channel's abilityto post quarterly production above the $1 billion mark on anyconsistent basis; and 6) Any suggestion that the valuation of mortgageservicing rights will continue to improve.

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 Nine Months Ended September 30,
(Unaudited and in 000's except per share data)

2005
--------------------------------------
Retail Financial Transaction
Banking Intermediary Processing
----------------------------------------------------------------------

Interest income:
Loans and leases $ 82,807 $ 75,438 $ 27
Investment securities 26,166 3 -
Short-term investments 1,254 303 -
Inter-segment 52,426 2,551 (20)
----------------------------------------------------------------------
Total interest income 162,653 78,295 7

Interest expense:
Deposits 48,992 - -
Other borrowed funds 38,811 5,637 32
Inter-segment 6,591 49,257 6
----------------------------------------------------------------------
Total interest expense 94,394 54,894 38
----------------------------------------------------------------------
Net interest income 68,259 23,401 (31)
Provision for credit losses 7,298 91 -
----------------------------------------------------------------------
Net interest income after
provision for credit losses 60,961 23,310 (31)

Non-interest income:
Mortgage servicing fees 32,315 2,356 4,075
Amortization of MSRs (34,480) (393) -
Recovery (impairment) of MSRs 3,224 - -
(Loss) gain on derivatives (110) (39) -
Gain on sales of investment
securities 4,182 - -
Service charges and fees 8,049 37 7,053
Gain on sales of loans and MSRs 501 81,723 -
Other income 2,688 2,326 3,026
Intersegment
servicing/processing fees - - 10,482
----------------------------------------------------------------------
Total non-interest income 16,369 86,010 24,636

Non-interest expense:
Salaries and benefits 15,894 67,467 6,985
Customer service 8,819 7 1,271
Marketing costs 5,332 3,974 224
Data processing 7,754 3,515 1,836
Depreciation and amortization 6,191 8,416 2,749
Office expenses 2,658 4,858 1,785
Occupancy 2,981 14,287 1,075
Travel and entertainment 535 3,139 414
Professional fees 2,257 7,379 1,610
Prepaid lost interest from
curtailments 3,297 48 -
Other 4,829 1,649 4,244
Inter-segment
servicing/processing fees 7,666 2,816 -
----------------------------------------------------------------------
Total non-interest expense 68,213 117,555 22,193
----------------------------------------------------------------------
(Loss) income before income
taxes 9,117 (8,235) 2,412
======================================


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

Interest income:
Loans and leases $ 779 $ 159,051 $ 160,102
Investment securities - 26,169 13,568
Short-term investments - 1,557 684
Inter-segment (54,957) - -
--------------------------------------------------------- ------------
Total interest income (54,178) 186,777 174,354

Interest expense:
Deposits - 48,992 34,364
Other borrowed funds 1,356 45,836 33,625
Inter-segment (55,854) - -
--------------------------------------------------------- ------------
Total interest expense (54,498) 94,828 67,989
--------------------------------------------------------- ------------
Net interest income 320 91,949 106,365
Provision for credit losses - 7,389 3,982
--------------------------------------------------------- ------------
Net interest income after
provision for credit losses 320 84,560 102,383

Non-interest income:
Mortgage servicing fees - 38,746 38,058
Amortization of MSRs - (34,873) (28,422)
Recovery (impairment) of MSRs - 3,224 (10,388)
(Loss) gain on derivatives - (149) 5,730
Gain on sales of investment
securities - 4,182 5,417
Service charges and fees - 15,139 13,052
Gain on sales of loans and MSRs 598 82,822 93,968
Other income (281) 7,759 9,005
Intersegment
servicing/processing fees (10,482) - -
--------------------------------------------------------- ------------
Total non-interest income (10,165) 116,850 126,420

Non-interest expense:
Salaries and benefits 2,303 92,649 94,812
Customer service 19 10,116 9,407
Marketing costs 167 9,697 6,974
Data processing - 13,105 13,888
Depreciation and amortization 337 17,693 14,714
Office expenses 121 9,422 8,409
Occupancy 68 18,411 16,277
Travel and entertainment 135 4,223 3,662
Professional fees 2,030 13,276 10,719
Prepaid lost interest from
curtailments - 3,345 4,174
Other 34 10,756 10,791
Inter-segment
servicing/processing fees (10,482) - -
--------------------------------------------------------- ------------
Total non-interest expense (5,268) 202,693 193,827
--------------------------------------------------------- ------------
(Loss) income before income
taxes (4,577) (1,283) 34,976
============
Income tax benefit (expense) 208 (13,100)
------------ ------------
Net (loss) income $ (1,075) $ 21,876
============ ============

Net (loss) income per common and potential
common shares outstanding:
Basic $ (0.02) $ 0.47
Diluted $ (0.02) $ 0.46

Weighted average common and potential
common shares outstanding:
Basic 46,201 46,962
Diluted 46,201 47,431



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

2005
--------------------------------------
Retail Financial Transaction
Banking Intermediary Processing
----------------------------------------------------------------------

Interest income:
Loans and leases $ 28,531 $ 29,213 $ 8
Investment securities 8,501 1 -
Short-term investments 529 133 -
Inter-segment 22,426 123 (26)
----------------------------------------------------------------------
Total interest income 59,987 29,470 (18)

Interest expense:
Deposits 20,178 - -
Other borrowed funds 14,408 1,890 1
Inter-segment 2,372 20,484 -
----------------------------------------------------------------------
Total interest expense 36,958 22,374 1
----------------------------------------------------------------------
Net interest income 23,029 7,096 (19)
Provision for credit losses 2,646 62 -
----------------------------------------------------------------------
Net interest income after
provision for credit losses 20,383 7,034 (19)

Non-interest income:
Mortgage servicing fees 11,629 287 1,376
Amortization of MSRs (12,608) (121) -
Recovery (impairment) of MSRs 4,244 - -
Gain on derivatives 756 39 -
Gain on sales of investment
securities - - -
Service charges and fees 2,844 (1) 2,453
Gain on sales of loans and MSRs - 27,809 -
Other income 819 643 772
Intersegment
servicing/processing fees - - 3,591
----------------------------------------------------------------------
Total non-interest income 7,684 28,656 8,192

Non-interest expense:
Salaries and benefits 5,283 22,479 2,298
Customer service 3,181 - 405
Marketing costs 3,070 1,264 82
Data processing 2,593 1,056 669
Depreciation and amortization 2,030 3,030 907
Office expenses 1,254 1,621 711
Occupancy 1,192 5,008 333
Travel and entertainment 196 1,217 128
Professional fees 683 2,866 595
Prepaid lost interest from
curtailments 1,242 20 -
Other 1,650 651 1,546
Inter-segment
servicing/processing fees 2,620 971 -
----------------------------------------------------------------------
Total non-interest expense 24,994 40,183 7,674
----------------------------------------------------------------------
(Loss) income before income
taxes $ 3,073 $ (4,493) $ 499
======================================


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

Interest income:
Loans and leases $ 340 $ 58,092 $ 57,481
Investment securities - 8,502 5,697
Short-term investments - 662 314
Inter-segment (22,523) - -
--------------------------------------------------------- ------------
Total interest income (22,183) 67,256 63,492

Interest expense:
Deposits - 20,178 11,862
Other borrowed funds 549 16,848 13,513
Inter-segment (22,856) - -
--------------------------------------------------------- ------------
Total interest expense (22,307) 37,026 25,375
--------------------------------------------------------- ------------
Net interest income 124 30,230 38,117
Provision for credit losses - 2,708 469
--------------------------------------------------------- ------------
Net interest income after
provision for credit losses 124 27,522 37,648

Non-interest income:
Mortgage servicing fees - 13,292 12,727
Amortization of MSRs - (12,729) (9,499)
Recovery (impairment) of MSRs - 4,244 (15,031)
Gain on derivatives - 795 7,272
Gain on sales of investment
securities - - 2,248
Service charges and fees - 5,296 4,713
Gain on sales of loans and MSRs 261 28,070 27,755
Other income (54) 2,180 3,204
Intersegment
servicing/processing fees (3,591) - -
--------------------------------------------------------- ------------
Total non-interest income (3,384) 41,148 33,389

Non-interest expense:
Salaries and benefits 772 30,832 31,730
Customer service 10 3,596 3,383
Marketing costs 60 4,476 2,551
Data processing - 4,318 4,722
Depreciation and amortization 113 6,080 5,098
Office expenses 14 3,600 2,938
Occupancy 25 6,558 5,770
Travel and entertainment 42 1,583 1,100
Professional fees 327 4,471 2,806
Prepaid lost interest from
curtailments - 1,262 906
Other 77 3,924 3,532
Inter-segment
servicing/processing fees (3,591) - -
--------------------------------------------------------- ------------
Total non-interest expense (2,151) 70,700 64,536
--------------------------------------------------------- ------------
(Loss) income before income
taxes $ (1,109) (2,030) 6,501
============
Income tax benefit (expense) 659 (2,486)
------------ ------------
Net (loss) income $ (1,371) $ 4,015
============ ============

Net (loss) income per common and potential
common shares outstanding:
Basic $ (0.03) $ 0.09
Diluted $ (0.03) $ 0.09

Weighted average common and potential
common shares outstanding:
Basic 46,119 46,846
Diluted 46,119 47,156



NetBank, Inc.
Condensed Consolidated Balance Sheet
As of September 30,
(Unaudited and in 000's except per share data)

2005
--------------------------------------
Retail Financial Transaction
Banking Intermediary Processing
----------------------------------------------------------------------
Assets
Cash and cash equivalents:
Cash and due from banks $ 144,771 $ 47,310 $ 65
Cash equivelants and fed
funds 93,110 18,378 902
----------------------------------------------------------------------
Total cash, cash
equivalents and fed funds 237,881 65,688 967
Investment securities available
for sale-at fair value 681,418 2 -
Stock of Federal Home Loan Bank
of Atlanta-at cost 69,952 - -
Loans held for sale 71,490 1,388,036 -
Loan and lease receivables-net
of allowance for losses of
$26,730 and $45,306,
respectively 2,118,786 29,814 -
Mortgage servicing rights 192,342 1,456 -
Accrued interest receivable 10,339 5,774 -
Furniture, equipment and
capitalized software 12,875 32,299 1,752
Goodwill and other intangibles 1,462 49,387 30,017
Due from servicers and
investors 24,699 2,138 -
Inter-segment receivables 1,325,869 327 794
Other assets 22,790 63,828 5,520
----------------------------------------------------------------------
Total assets $ 4,769,903 $ 1,638,749 $ 39,050
======================================

Liabilities
Deposits $3,009,457 $- $-
Other borrowed funds 1,407,618 36,400 -
Inter-segment payables 211,503 1,133,114 2,726
Subordinated debt - - -
Accrued interest payable 16,048 408 -
Loans in process - 59,122 -
Representations and warranties - 21,275 -
Accounts payable and accrued
liabilities 30,531 100,274 4,732
----------------------------------------------------------------------
Total liabilities 4,675,157 1,350,593 7,458
----------------------------------------------------------------------

Minority interests in
affiliates - 561 -

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) - - -
Additional paid-in capital - - -
Retained earnings - - -
Accumulated other comprehensive
(loss) income, net of tax - - -
Treasury stock, at cost (6,462
and 6,073 shares,
respectively) - - -
Unearned compensation - - -
Allocated equity 94,746 287,595 31,592
----------------------------------------------------------------------
Total shareholders' equity 94,746 287,595 31,592
----------------------------------------------------------------------
Total liabilities, minority
interests and shareholders'
equity $ 4,769,903 $ 1,638,749 $ 39,050
======================================


2005 2004
------------------------- ------------
Other / NetBank, NetBank,
Eliminations Inc. Inc.
--------------------------------------------------------- ------------
Assets
Cash and cash equivalents:
Cash and due from banks $ (2,216) $ 189,930 $ 220,300
Cash equivelants and fed
funds - 112,390 9,110
--------------------------------------------------------- ------------
Total cash, cash
equivalents and fed funds (2,216) 302,320 229,410
Investment securities available
for sale-at fair value - 681,420 312,602
Stock of Federal Home Loan Bank
of Atlanta-at cost - 69,952 61,446
Loans held for sale 191 1,459,717 1,291,137
Loan and lease receivables-net
of allowance for losses of
$26,730 and $45,306,
respectively (3,577) 2,145,023 2,088,899
Mortgage servicing rights - 193,798 171,993
Accrued interest receivable - 16,113 11,059
Furniture, equipment and
capitalized software 2,078 49,004 52,628
Goodwill and other intangibles 265 81,131 78,992
Due from servicers and
investors - 26,837 110,112
Inter-segment receivables (1,326,990) - -
Other assets (2,140) 89,998 79,993
--------------------------------------------------------- ------------
Total assets $(1,332,389) $ 5,115,313 $ 4,488,271
========================= ============

Liabilities
Deposits $(2,314) $3,007,143 $2,744,709
Other borrowed funds - 1,444,018 1,065,294
Inter-segment payables (1,347,343) - -
Subordinated debt 32,477 32,477 11,857
Accrued interest payable 228 16,684 10,004
Loans in process - 59,122 47,562
Representations and warranties - 21,275 22,339
Accounts payable and accrued
liabilities (3,287) 132,250 148,699
--------------------------------------------------------- ------------
Total liabilities (1,320,239) 4,712,969 4,050,464
--------------------------------------------------------- ------------

Minority interests in
affiliates - 561 450

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) 528 528 528
Additional paid-in capital 432,202 432,202 431,712
Retained earnings 39,180 39,180 62,918
Accumulated other comprehensive
(loss) income, net of tax (6,092) (6,092) 1,420
Treasury stock, at cost (6,462
and 6,073 shares,
respectively) (62,628) (62,628) (58,931)
Unearned compensation (1,407) (1,407) (290)
Allocated equity (413,933) - -
--------------------------------------------------------- ------------
Total shareholders' equity (12,150) 401,783 437,357

--------------------------------------------------------- ------------
Total liabilities, minority
interests and shareholders'
equity $(1,332,389) $ 5,115,313 $ 4,488,271
========================= ============



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

Quarter Ended
September September
30, June 30, 30,
------------ ------------ ------------
2005 2005 2004
------------ ------------ ------------
Consolidated:

Net (loss) income $ (1,371) $ 2,325 $ 4,015
Total assets $ 5,115,313 $ 4,954,767 $ 4,488,271
Total equity $ 401,783 $ 409,089 $ 437,357
Shares outstanding 46,358 46,298 46,747
Return on average equity (1.35%) 2.29% 3.70%
Return on average assets (0.11%) 0.19% 31.00%
Book value per share $ 8.67 $ 8.84 $ 9.36
Tangible book value per share $ 6.92 $ 7.08 $ 7.67

NetBank, FSB:

Deposits $ 3,007,928 $ 2,794,220 $ 2,744,858
Customers 282,575 268,849 162,654

Estimated Capital Ratios:
Tier 1 core capital ratio 6.09% 6.42% 6.95%
Total risk-based capital
ratio 10.21% 10.93% 11.91%

Asset quality numbers:
CMC Lease portfolio $ 26,435 $ 26,960 $ 81,993
Non-performing loan and lease
receivables 6,481 5,056 4,052
------------ ------------ ------------
Total non-performing loan and
lease receivables 32,916 32,016 86,045
Non-performing loans held for
sale (1) 27,432 22,859 43,889
------------ ------------ ------------
Total non-performing loans
and leases 60,348 54,875 129,934
Repossessed assets (2) 7,963 7,102 6,776
------------ ------------ ------------
Total non-performing assets $ 68,311 $ 61,977 $ 136,710

Allowance for credit losses
(ALLL) $ 26,730 $ 25,792 $ 45,306
Net charge-offs of loan and
lease receivables $ (1,770) $ (1,613) $ (1,195)

Asset quality ratios:
Total non-performing assets /
average assets 1.35% 1.27% 2.62%
ALLL / total non-performing
loan and lease receivables 81.21% 80.56% 52.65%
Net annualized charge-offs /
total assets 0.14% 0.13% 0.11%

Mortgage Banking:

Production Activity:
Retail $ 1,089,137 $ 843,914 $ 609,545
Correspondent 1,025,626 1,009,951 1,174,625
Wholesale 692,828 681,865 714,615
RMS 74,180 54,540 41,532
------------ ------------ ------------
Total Agency-eligible 2,881,771 2,590,270 2,540,317
Non-conforming 883,210 865,229 808,559
------------ ------------ ------------
Total $ 3,764,981 $ 3,455,499 $ 3,348,876
============ ============ ============

Sales Activity:
Third party sales $ 3,631,112 $ 3,084,829 $ 3,639,337
Intercompany sales 57,290 53,473 137,968
------------ ------------ ------------
Total sales $ 3,688,402 $ 3,138,302 $ 3,777,305
============ ============ ============

Pipeline:
Locked conforming mortgage
loan pipeline $ 1,053,315 $ 1,200,719 $ 1,088,434

UPB of loans serviced: $18,470,922 $18,483,938 $17,217,391

(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.