Headlines:
Mortgage Woes Hurt NetBank's Earnings LML Patent Lawsuit To Be Heard in '06 VeriSign ID Security System for U.S. Bank Fiserv Unit Offers Launder Detection Bisys Posts Solid Fiscal First Quarter
Mortgage Woes Hurt NetBank's Earnings
NetBank Inc.'s third-quarter earnings fell 74% year over year, to $4 million, or 9 cents a share.
The mortgage business, which has generated about 70% of the Atlanta company's income this year, remained a weakness. Its nearly 60% quarter-to-quarter earnings decline was partially offset by another strong showing from banking and transaction processing operations, NetBank said.
"The countercyclicality we have been building is now starting to pay off," chairman and chief executive Douglas K. Freeman said in an interview Tuesday.
He said the goal is to get an equal contribution to profits from each of the company's three business units - the mortgage business, the Internet bank, and the transaction processing unit - within three to six years.
Third-quarter revenue for its Internet bank was $27.4 million, up 28% from the second quarter. Pretax income rose 77%, to a record $7.1 million.
The transaction processing unit, which includes merchant processing and NetBank's automated teller machine network, had revenue of $7.1 million, up 9% from the second quarter. The unit's pretax income was just over $1 million after a $769,000 loss in the second quarter.
Pretax income for the ATM network and merchant processing rose 77%, to $722,000.
NetBank first reported transaction processing income separately in the first quarter. It began building the segment in December when it bought Financial Technologies Inc., and expanded it in February by buying select assets of Electronic Cash Systems Inc.
The mortgage business had revenue of $44.8 million, down 13.5% from the second quarter, and its profits fell 59.8%, to $4.9 million.
"This year is turning out to be even more difficult than we had expected in the mortgage business," Mr. Freeman said.
It was anticipated that 2003 mortgage volume and profit margins would both fall by about 50%. Volume has dropped only 41%, but the margins have fallen 88%. The pretax profit margin for mortgages was 0%, against 0.49% for the second quarter.
With refinancing down industrywide, competition for the remaining business has become intense, Mr. Freeman said. "Some people are bidding the prices down" to the point where margins reach zero, he said.
It may be another year before the mortgage business picks up, the CEO said. "That has really impacted our profitability."
LML Patent Lawsuit To Be Heard in '06
LML Patent Corp. announced that its check-conversion patent infringement lawsuit against three vendors is to go to trial in April 2006.
The unit of LML Payment Systems Inc. of Vancouver, British Columbia, filed the suit in July against TeleCheck Services Inc., a unit of First Data Corp. of Greenwood Village, Colo.; Electronic Clearing House Inc. of Camarillo, Calif. (and its Xpresschex Inc. unit); and the Nova Information Systems Inc. unit of U.S. Bancorp.
LML says its patents, the earliest of which dates back to 1996, are critical components for any systems used at the point of sale for converting checks to automated clearing house transactions.
The case is to be heard in U.S. District Court for the District of Delaware, in April 2006.
"We look forward to our day in court," said Patrick H. Gaines, LML Payment's president and chief executive, in a press release Monday.
VeriSign ID Security System for U.S. Bank
VeriSign Inc. of Mountain View, Calif., said U.S. Bancorp of Minneapolis has licensed its unified authentication technology to provide additional online security for its commercial clients.
VeriSign introduced the system in September. It includes software as well as portable hardware, including bank tokens and smart cards with digital credentials, one-time passwords, and other security features.
The product will be linked to U.S. Bancorp's current directory and identity management systems, VeriSign said Tuesday in announcing the contract.
Judy Lin, a VeriSign executive vice president and the general manager of its security services unit, said in an interview that the technology has applications in corporate and consumer banking, and that its one-time password algorithm can be used in mobile devices such as cell phones and personal digital assistants.
Banks and vendors have stepped up their security efforts this year to fight rising identity theft.
Wells Fargo & Co. is introducing digital credentials in conjunction with Identrus LLC, the bank-owned vendor of signature technology, and the software maker Adobe Systems Inc.
America Online Inc., a unit of Time Warner Inc., is selling its customers a device from RSA Security Inc. of Bedford, Mass., that generates a supplemental log-in password.
Fiserv Unit Offers Launder Detection
Fiserv CBS Worldwide, the international core banking unit of Fiserv Inc., is offering its foreign customers software from Mantas Inc. to detect money laundering
Greg Green, the unit's chief operations officer, said its clients are becoming more concerned and have been pushing for such software.
Simon Moss, Mantas' chief executive, said the deal will give it access to smaller foreign banks. Until now, he said, its only customers abroad were large financial companies with U.S. operations, including Citigroup Inc. and the London investment banking unit of Barclays Bank PLC.
Mr. Moss said spotting money launderers is like "finding a needle in a stack of needles." Banks use its software to discern unusual patterns in seemingly innocuous activities.
The Fiserv unit is offering Mantas Behavior Detection Platform 4.0 and Mantas Anti-Money Laundering Solution 4.0. Both were designed with international risk management regulations in mind.
Eventually Fiserv will also offer them in the United States, Mr. Green said.
Mantas is based in Herndon, Va. The Fiserv unit is based in Lake Mary, Fla., and its parent in Brookfield, Wis.
Bisys Posts Solid Fiscal First Quarter
Bisys Group Inc. credited investment gains and a restructuring for a 274% increase in earnings for the fiscal first quarter.
The New York outsourcing company also said its insurance group had positive revenue growth for the first time in more than a year.
In June the company had to restate its earnings dating back to 2001 to correct sales-commission overestimates for the insurance business.
The writedown, including lower earnings and balance-sheet adjustments, was more than $100 million.
Bisys announced Tuesday net income of $21.7 million for the three months that ended Sept. 30. Revenue rose 13% year over year, to $268 million. Pro-forma net income rose 2.1%, to $19.4 million.
President and chief executive Russ Fradin said the investment services unit landed several new customers during the quarter.
