Gary Evans

The Bank of Internet is a thoroughly modern financial institution. Open since July 4, 2000, Bank of Internet raised more than $35 million in a March initial public offering. The bank used the auction system that allows more investors a chance to join in and was popularized by search engine Google’s own IPO.

Bank of Internet’s shares initially were sold at $11.50, almost smack in the middle of the auction range of $9 to $13.

But what makes Bank of Internet really modern is its Web-based business model. It has no branches, pens tied to desks or mailed monthly statements. No bricks, all clicks.

“Everything is online,” confirms President and CEO Gary Lewis Evans. “Our primary objective is to become the low-cost operator in the banking business.”

Evans’ bank has more than 17,000 customers who reside in all 50 states. They tend to be older than 50, are comfortable with online banking and like to go “self service.” And they like the bank’s rates. For example, Bank of Internet offers a 3 percent, no minimum balance checking account that includes free checks, no service charges, free bill paying, free ATM/debit cards and reimbursement of other banks’ ATM fees.

“Internet banking customers generally keep higher balances in accounts, and they like self-service so they’re easier to maintain,” Evans says.

The bank’s lending is heavily concentrated in residential real estate. “About 80 percent of our portfolio is apartment loans and income property loans,” Evans says. “We’ve been originating home loans but we tend to sell those.”

Evans characterizes loan demand as “stable and solid,” although less than in the refinancing boom of 2003. “That was a pretty wild time,” Evans recalls. The so-called residential real estate bubble is something “we have to watch carefully,” Evans says, but “being in 50 states we have diversification.” In December, the bank’s assets stood at about $513 million.

Identity theft is a “serious item, something we watch religiously,” Evans says. The bank’s online model reduces the possibility that paper statements or other information that comes in the mail can be used to steal identities, Evans maintains. Because Bank of Internet customers have online access to their accounts, he says they are better able to spot suspicious activity.

The bank’s online systems have not been hacked, and agencies from the FDIC to the FBI are involved in the effort to keep online accounts safe. “We can’t talk about the systems we use, and we wouldn’t want to challenge the world” by talking up the system’s security, Evans says.

He is bullish on the future of online banking. “It’s growing so well I can envision in five years everyone will be doing their banking online,” Evans says. “It’s going to have a major impact. The last time banks went through a similar change in the distribution system was in 1904 when Bank of Italy (later Bank of America) started branches. In 1904, they had to bring the bank to the people because everything was cash and currency. Today, money has evolved to being digitally based.”