NetBank to cut 120 jobs

About 120 NetBank Inc. employees in Columbia are losing their jobs and another 200 face an uncertain future as the online lender struggles to satisfy the demands of investors and federal regulators.

The move was announced Monday as part of the Alpharetta, Ga.-based company’s deal to sell its mortgage origination and direct banking operations — what most people see when they think of banks — to EverBank, a privately-held Jacksonville, Fla.-based lender.

About 60 Columbia NetBank employees, who perform originations and direct banking, will be hired by EverBank.

“I hoped for a better outcome when I took over as CEO seven months ago,” chief executive Steven Herbert said during a conference call with analysts.

Analysts who track the company declined to comment after the call.

In March, when Herbert talked about focusing NetBank on core banking and mortgage activities, he likened the company’s journey back to profitability with traveling through a tunnel.

On Monday, Herbert all but conceded that instead of seeing a light at the end of that tunnel, he now faces the glare of an oncoming train.

Speaking of the company’s strategy that was in place before he was promoted to NetBank’s top job, Herbert said, if it were to survive, the company had to make some hard choices that involved risks.

“What we were doing was not working,” Herbert said of the past few years. “We needed to make some changes.”

But the company reported in March a $168 million loss for 2006, and that cash situation has not improved. Federal banking regulators were worried, Herbert said.

“They made it pretty clear that if we did not take action to resolve our deposit issue,” he said, “they also were not going to hesitate to step in.”

That is how Herbert came to the decision to sell off a significant portion of NetBank — virtually all its assets — at a steep discount. It was not an easy choice, he said, but as regulatory pressures increased, it was his only choice.

When the deal with EverBank is completed in the summer, NetBank will record a $50 million to $70 million loss on the sale, which means EverBank is buying the business for a bargain compared with what the business is worth.

“I made the decision that needed to be made, and I’m comfortable with that,” Herbert told the analysts. “I’ve poured my whole heart and soul to do the very best for you.”

Wall Street’s reaction was quick.

NetBank shares opened trading Monday at $1.70 and quickly dropped. Three hours later, by the time analysts had finished listening to Herbert, NetBank’s stock had fallen by nearly 50 percent.

By the end of trading Monday, NetBank’s stock had lost two-thirds of its value, plummeting to 58 cents a share.

At the height of the tech stock boom in 1999, NetBank shares traded in the $60 range.

Following the bust, NetBank’s share price steadily dropped, dipping below $20 a share by the start of 2000.

NetBank shares held in the $10 range until 2006, when the price started dropping again in October.

As the nation’s housing market slumped, demand for NetBank’s mortgages also declined.

In the midst of this, NetBank’s outside auditor quit, leaving the company in the prickly position of trying to close its 2006 books while searching for a replacement.

The delay in reporting, aside from putting the company’s stock at risk to be delisted by NASDAQ, made it virtually impossible to find a potential buyer for the entire company.

“Our choices were significantly limited,” Herbert said.

Reach Werner at (803) 771-8509.