After a string of divestitures and a bad fourth quarter that kept getting worse, the online banking company NetBank Inc. is now considering selling itself.
One of the pioneers in online banking, NetBank has tried to expand beyond its original vision of offering full-service banking through the Internet to boost its returns. However, the mortgage servicing and subprime operations into which it diversified proved to be volatile, and NetBank has pared away many of its businesses in recent quarters.
But the Atlanta company said reverting to its banking roots would not produce sufficient returns, and it is now considering other strategic alternatives.
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Steven Herbert, NetBank's chief executive, said in an interview Wednesday that there has been some interest from other companies that "believe there's some unrealized potential value inside the company."
And given the weak results for last year, "it would make sense for us to explore with those individuals that see additional unrealized value in the franchise and great opportunity for how those opportunities might come together for us," he said.
Matthew Shepherd, a spokesman for NetBank, said that even healthy results for its banking and conforming mortgage operations would not have been enough to support the company in the long term.
"It's clear to us, and I think it's clear to investors, that to take the company to the next level, you would need to have additional capital. If we fix the business and get back to profitability, it's still pretty modest profitability from an operating profile standpoint," he said. "We would be dependent on very favorable mortgage conditions to drive substantial mortgage earnings to really give us the capital that we would need in the short term to take the company to the next level. So, absent that, you would look at other alternatives, either a transaction or other possibilities."
The company had previously said that it expects to post a loss of 74 cents to 87 cents for the fourth quarter, but on Wednesday it warned investors that it would report results "well below" that estimate.
In November, NetBank reported a loss of $73.3 million for the third quarter. It is scheduled to release its fourth-quarter results Feb. 21.
In December, NetBank said that it had been forced to repurchase more mortgages in early default than it had expected, and that the extra purchases would lead to a $26 million fourth-quarter charge.
This problem, which has bedeviled the mortgage industry for much of the past year but was particularly acute at NetBank, was part of the reason for its fourth-quarter departure from the subprime origination business.
Last month NetBank raised $23.7 million in a discounted
The filing also said that NetBank had recorded a $9.7 million writedown of goodwill for NetBank Payment Systems Inc., the ATM and merchant processing business it has been trying to sell. Mr. Shepherd said that after shopping the unit around, his company realized it had to write down the unit's market value.
NetBank is close to a sale of the automated teller machine unit, he said, though he would not name the potential buyer or buyers. "For us to take the writedown at this point is an indicator that we do believe we can get a deal done at the pricing we've seen, and that we're inclined to do so."
The network, which had 8,303 ATMs at yearend, was acquired in a 2003 diversification drive but is not a core part of NetBank's banking operations, Mr. Shepherd said. "There was an opportunity to leverage that for the bank, but we did not acquire it specifically to support the bank."
NetBank customers typically access their cash by using their debit cards to make purchases and asking the merchant for cash back, he said, and the lack of an ATM network is not expected to detract from customer service.
"We continually poll our customers in looking at whether that is a hindrance. Are our customers complaining about that? It's just not an issue," he said.
Chris Musto, an analyst with Keynote Systems Inc. in San Mateo, Calif., said NetBank's background could attract a foreign bank that wants to move into the United States, he said.
"NetBank has over 10 years experience operating an Internet-centered banking business, which is more than just about anyone," Mr. Musto said. "There's probably some intellectual property there. There's probably some institutional knowledge, probably a customer list there. All of those things could be valuable to someone beyond simply the fact that there's assets and accounts."
NetBank's shares closed Wednesday down 2.87% from Tuesday, at $3.72.
