NetBank Inc., which has been reconsidering and disposing of business lines this year, announced two more divestitures Monday, and its chief executive said there were still more to come in the next five months.
The Alpharetta, Ga., company said it had agreed to transfer the salespeople and other employees of its nonconforming loan unit, Meritage Mortgage, to Lime Financial Services of Lake Oswego, Ore. NetBank also said it agreed to sell certain assets of Beacon Credit Services, which finances aircraft, boats, and recreational vehicles, to the unit's management.
Neither move will bring any material gains, but the arrangement with Lime will spare NetBank from having to pay some severance and other shutdown costs, the company said. Despite several acquisitions of subprime lenders by Wall Street firms this year, the CEO, Steven F. Herbert, said its discussions with investment banks about Meritage came to naught.
Last month NetBank said it sold the servicing rights on $8.5 billion of mortgages - or 70% of its servicing portfolio - to two separate buyers and took a higher-than-expected $19.3 million loss.
The sale of Beacon assets and the transfer of employees to Lime will both be completed by Nov. 15. NetBank executives said the company still expects to pay up to $7.5 million in the fourth quarter to meet remaining disposition costs.
In an interview, Mr. Herbert said the company was "looking at all underperforming and ancillary businesses" as it planned more divestitures it hoped to complete by the second quarter of 2007.
He said the dispositions were part of a plan to return NetBank to its "roots and core competencies" - online banking and conforming mortgages.
Christopher Marinac, an analyst at FIG Partners LLC in Atlanta, said it "was probably an understatement" to say NetBank had a rocky road behind it - it "has no business being in the nonconforming business when spreads are so thin," he said. NetBank still has life insurance and wealth management segments it could trim, Mr. Marinac said.
Meritage probably lacked the necessary scale to attract Wall Street firms, which have rushed in recent months to boost their own origination businesses by buying origination outfits, he said.
Mr. Herbert said NetBank met with multiple Wall Street firms to discuss a sale of its nonconforming business, but "nothing really developed from those conversations."
Douglas Freedman stepped down last month as CEO and chairman amid concerns about the company's future. "The board felt like I was the guy to execute the needed dramatic changes and plan that was put before them," Mr. Herbert said. (The new chairman is Thomas H. Muller Jr.)
Mr. Marinac said he had "learned to never say never" when predicting NetBank's future, but the two moves "are a step in the right direction," he said.
NetBank is scheduled to report its third-quarter earnings Wednesday.
