NetBank Sells Parts of Its Operations
Monday May 21, 9:54 am ET
NetBank Sells Significant Assets to EverBank, Closing Third-Party Mortgage Origination Unit
ATLANTA (AP) -- Online financial services firm NetBank Inc. said Monday it plans to sell a significant portion of its assets to EverBank, a privately held financial services firm, and would shut down its third-party mortgage origination business.
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NetBank did not disclose the sale price, but said it came at a discount to the current value of the assets and liabilities included in the deal. Net Bank expects to record a loss from the divestiture of between $60 million and $70 million and said the deal would allow it to fulfill its deposit liabilities.
The company cited "extreme financial pressure for more than a year due to a difficult mortgage origination market" and "a flat yield curve" among other factors," NetBank said in a news release. A "flat yield curve" refers to banks' elevated cost of borrowing and relatively low interest rates charged for loans on that money, the combination of which cuts or eliminates banks' profit on lending.
The deal, set to close by the end of June, includes NetBank's held-for-investment loan portfolio, all the assets and liabilities of its small business equipment leasing and financing operation, $2.5 billion in core and brokered deposits and the NetBank brand and related trademarks and service marks.
NetBank Chief Executive Steven F. Herbert said that despite a restructuring plan the company undertook last year, it remains vulnerable to the current mortgage environment and those operations continue to struggle. Bank earnings have also fallen as the company reduced debt to keep risk in line with regulatory guidelines, Herbert said.
"By transferring the deposit relationships and resolving the chief concern of regulators, we are now positioned to move forward with other restructuring initiatives, such as the shutdown of our third-party mortgage origination business," Herbert said in a statement.
Although the company will retain its mortgage servicing operation and its retail prime mortgage franchise, Herbert said it would continue to evaluate their future, as well as that of the company as a whole.
Last week, the bank received a warning from the Nasdaq Stock Market because it is late in filing its most recent quarterly report.