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The Most Successful Internet Company?

San Diego, CA (September 21, 2002) David A's teenage daughter's trembling voice conveyed her fear. She was stuck with a dead battery at the mall that had just closed. It was very dark, and there were only a few people in the parking lot. They were quickly scurrying to their cars and driving away. She explained in a wavering voice that she had called the tow truck to help her but that she didn't have enough cash to pay him and her debit card didn't have enough behind it to pay either.

Dave would usually have jumped in his car and made the thirty minute drive to help her out. But that wasn't his only option.

Instead, he jumped on his computer, logged onto the Bank of Internet USA web site, and with a few click of his mouse, transferred the money into his daughter's account. Now her debit card could pay the tow truck driver and she'd be home shortly.

This is what banking has become: instant access and use of money, anytime, anywhere.

Money has become electrons, easily moved to pay bills or transfer to another account. There's no need to physically go to a bank. Almost everything can be done on a computer -- any computer with Internet access.

And one bank has learned how to make a considerable profit on this new way of banking: Bank of Internet USA (BofI). While most Internet companies have blown through billions of dollars trying to capture eyeballs, Bank of Internet USA opened with $14 million on July 4, 2000. That money came mostly from the San Diego area from individuals who had been successful in their own businesses.

They shared the vision that banking with going to change and that the Bank of Internet was the right business model for this new way of banking.

Within 14 months the bank showed a profit, and for the fiscal year 2002, it reported a net profit of $1.4 million. (Most banks don't show a profit for three years after opening.) BofI now is a $235 million institution with depositors in all 50 states and loans in over 15 states, and its profits continue to increase monthly.

It's secret: cut the costs and pass the savings onto the consumer.

Much like the Costco model of doing business, BofI brings value to banking. There's not a lot of overhead to hurt profits. There's only one office.

While the average bank has about $4 million of assets for every employee, at BofI, there are over $12 million per employee. The technology has mostly been developed in house so the processing flow is unique to the bank. And with its investment in computers, it can grow to over a $1 billion without adding another PC.

Bank of Internet USA has used the Internet as a tool for its banking operation. It is a safe, conservative lender (its loan-to-value ratio for its single family and multi-family loans is less than 60% on average). It has no delinquencies and no defaults. The senior management has decades of banking experience and have the rare combination of good banking skills with entrepreneur savvy.

Is it the most successful Internet company ever? Maybe. One thing is certain. BofI is using the Internet to deliver a product or service that can be done with electrons. That's really what the Internet does best. By keeping its costs to a minimum, executing its business plan, and passing on the savings to its customers, Bank of Internet USA has shown that being a dot com can mean good and growing profits. And, the word of mouse is growing.

For more information log onto www.bankofinternet.com or www.bofi.com.