Small Net Bank Challenges Larger Brick-and-Morter Institutions

By Joseph A. Giannone Bloomberg News | THE JOURNAL RECORD, May 26, 1998 | Go to article overview

Small Net Bank Challenges Larger Brick-and-Morter Institutions


Joseph A. Giannone Bloomberg News, THE JOURNAL RECORD


ATLANTA -- Net.Bnk, a bank with no branches, tellers or bankers' hours, is taking on the big banks on the Internet.

Atlanta-based Net.Bnk, with one office and 22 employees, said its low expenses allow it to pay higher rates for deposits, charge less for loans and still make a profit. Analysts expect the Internet bank to challenge bigger banks encumbered with branch networks and thousands of employees.

"Big banks are handicapped," said Bill Burnham, an analyst at Deutsche Morgan Grenfell in San Francisco. "Internet banks can offer great rates; that's what scares the hell out of the big guys." Deposits at Net.Bnk swelled by about $15 million to $20 million a month at a time when most banks struggle to keep them. Consumers are drawn by checking accounts that pay up to 4 percent and require a minimum balance of $100, and by high-yielding certificates of deposit and money markets. Chief Executive and Vice Chairman D.R. Grimes, one of Net.Bnk's founders, said even though the bank is turning a profit, there is a lot of ground to break. "When we had our first audit, the regulators came in and asked to see our vault so they could count up the cash," said Grimes. "We don't have a vault, and there's no cash." If regulators worried about consumers putting their money on an unsecured network, three years of losses at Security First Network Bank -- the first "virtual bank" -- didn't help. The Atlanta-based company spent more on programmers and marketing than it earned from banking. Because of regulators' reluctance to approve Net.Bnk, it was run as Atlanta Internet Bank under Carolina First Corp. of Greenville, S.C., from the end of 1996 until it sold stock to the public in July 1997. Net.Bnk used proceeds from the sale to fund itself and buy a thrift charter. Bank consultant T. Stephen Johnson, co-founder and chairman, recruited Grimes, who spent 12 years at Trust Co. of Georgia, a predecessor to SunTrust Banks, and 18 years at Servantis Systems an electronic banking software company in Norcross, Ga. In April, Net.Bnk's deposits increased 19 percent to $160 million with 10,000 customers in 50 states and 20 countries. Grimes said the bank may attract up to 20,000 customers and $225 million in deposits this year. That compares to an average of 1 percent growth in 1997 for big banks covered by PaineWebber. "I can't think of an industry better fit for the Internet than banking," said Grimes. Investors agreed, boosting Net.Bnk shares 155 percent to a record of 30 last month from the beginning of the year. The stock now trades around 23. By March, Net.Bnk was operating at a profit. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Small Net Bank Challenges Larger Brick-and-Morter Institutions
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.