2007-12-28 / Business

Child of Carolina First liquidates

By John Temple Ligon Temple@TheColumbiaStar.com

About the time of its initial public offering in July 1997, technologybased NetBank of Atlanta noted South Carolina's Mack I. Whittle Jr., as a member of its board of directors. Whittle was president and CEO at Carolina First, beginning in 1986. And at NetBank, he was titled a Class I director, meaning he was to serve an initial term expiring at the 1998 annual meeting of shareholders.

Soon after the Internet gained in popularity in the early 1990s, technology was offering new models on which banks could operate. In Columbia, for example, Affinity Technology Group began as an idea under a different name in the early spring of 1993.

The idea behind Affinity was a closed loop loan scoring system with a patent application pending. The patent is still in the courts. The Fourth Circuit Court of Appeals heard Affinity patent arguments in early December, and Affinity stock doubled in price last week. The court's decision, though, is yet to be delivered.

Whittle was also an early director at Affinity, and his bank Carolina First was an early investor. Affinity's average stock price in the first two weeks after its initial public offering in the spring of 1996 was above $20 a share. In the past year it has been as low as a nickel.

In 1999, NetBank's stock traded above $60 per share.

On September 30, 1999, Whittle's Carolina First reportedly owned 2,415,000 shares of Net- Bank worth about $55 million, but Carolina First could not sell its shares, all restricted, until July 31, 2000. Whittle, however, could sell his shares earlier, and just in the month of June 2000, before his bank could sell, he sold in orderly sequence 150,000 shares for a one- month take of almost $2 million.

In late September of this year, NetBank filed for bankruptcy protection under Chapter 11. More recently, late November, NetBank announced it expected to liquidate its assets. NetBank also expects its shareholders will receive nothing for their holdings.

As of the end of last June, according to the FDIC, NetBank had $2.5 billion of assets and $2.3 billion of deposits.

NetBank is the country's largest bank to fail in 14 years.

In 2001, NetBank acquired Columbia- based Resource Bancshares Mortgage Group, a leading provider of mortgage banking services. It shifted its core business to mortgages, and it brought in Columbia's Douglas K. Freeman from RBMG. Freeman's background was in mortgages, not banking.

Then NetBank got caught in the sub- prime lending mess and is going down with it.

How much money Whittle made selling his shares in NetBank is hard to determine now that the company is liquidating. Most financial reporting resources don't disclose as much once liquidation is declared.

How much money Carolina First made (or lost) on NetBank is also unknown, for now. As a shareholder owned corporation, its record is public record.

Carolina First originally had almost 20 percent of NetBank, but Carolina First realized if Net- Bank went under while Carolina First had more than 10 percent of the stock, it could cost Carolina First dearly. Carolina First reduced its ownership to about 8 percent. Under such cautionary movement, Carolina First lost less than was first possible with almost 20 percent of the stock.

Carolina First Bank has a new child, Vista Farms, aka Green Diamond. Carolina First is listed as a partner of Columbia Venture with Burroughs & Chapin and others. As the only bank among the partners, presumably Carolina First is the bank behind Vista Farms, but how much money Carolina First has in Vista Farms is unknown while the deal is still alive.

As a publicly held corporation, though, Carolina First will eventually offer full disclosure, as it will on the history of Net- Bank and Affinity.

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