For all the talk about internet banks being doomed to failure, San Diego-based Bank of Internet USA is doing pretty well.
Since it opened eight months ago, the strictly online bank has gained $100 million in assets and 2,700 accounts from all over the country.
It has provided $73 million in loans, much of which goes toward home and apartment loans.
The 20- to 30-year-old age range has not been the bank's primary customer pool as might be expected, say bank officials.
Realizing the tendency of seniors to prefer a bank they can walk into, Bank of Internet USA, or BofI, has special accounts for customers 50 and older. The checking accounts have no fees and earn interest on all deposited funds.
The bank competes with traditional brick and mortar banks by allowing its customers to use any ATM and reimbursing ATM fees charged by other banks.
The bank probably can't do much to attract those that insist on being able to walk into their bank and know their teller's name. But bank President Gary Evans says most people care more about being able to transfer money, check their balances or pay bills at 10 p.m. on a Sunday.
BofI isn't the only internet bank to achieve rapid growth.
First Internet Bank of Indiana was the first state-chartered, FDIC-insured institution to operate solely via the Internet. It has grown to more than $215 million in assets since it opened in 1999.
Texas-based American Bank had a $10 million public stock offering last year. It posted net income of $429,200 or $0.12 per share, an increase of $547,000 over the same period last year. The company primarily attributes this to an increase of $127.2 million of earning assets.
Increased consumer confidence in online security has contributed to the success of internet banks.
"People are learning and hearing more about the internet. We have had customers, particularly seniors, who look at our account application online and call and ask us to fill it out. They're not quite comfortable yet," said President and CEO Gary Evans. "I bet that by the time they renew the CD, they will be very comfortable. Time is the key."
Brick and mortar banks have been competing with Internet banks and pushing their online products.
San Diego National Bank is testing two online banking products, e-personal banker and e-business banker. The products allow customers access to their San Diego National accounts and pay their bills online.
"We expect them to do very well in terms of customers wanting them," said Karen Brassfield, the bank's executive vice president and chief administrative officer. "It's certainly a growing aspect of the way banks provide service. People want multiple ways to transact financial business. Online banking is another delivery channel."
San Diego-based First National Bank recently introduced its online banking, which allows customers to look at their First National accounts, pay bills, transfer funds between accounts and check account histories. The bank is in the process of upgrading the Web site to allow customers to apply for some loans online.
Beverly Hills-based City National Bank started an aggregation product last month that allows customers to consolidate their online account information from various financial organizations and access them all on City National's site. Users can make transactions among the various accounts.
City National launched its real-time business online cash management product in January. The product e-mails or pages users if their accounts dip below a certain level and allows them to view the front and back of cleared checks online and demand account statements.
City National officials say that while technology is an important part of banking, it serves only as a supplement to personal relationships.