Signs that Internet banks are reaching adolescence are starting to sprout.

Two Internet banks are now among the more than 350 that have become financial holding companies under the Gramm-Leach-Bliley Act. The designation lets Stonebridgebank.com and Clarity Holdings Inc. create subsidiaries that could engage in activities such as securities trading, insurance underwriting, and merchant banking. A third Internet bank, Allentown, Pa.-based American Bank, is awaiting approval of its holding company application.

Both Stonebridge and Clarity said they plan to use their new status to expand the range of services they offer small businesses without having to ally themselves with multiple service providers, as most fledgling Internet banks are forced to do.

Christopher Annas, chief executive officer of Stonebridge, said he plans to use the approval to "offer a full range of financial services without having to go through a lengthy federal approval process every time we want to do something new."

The $75 million-asset bank in West Chester, Pa., said it plans to offer insurance within 120 days, then title and real estate services, and later, merchant banking to small-business customers in the Delaware Valley region of New Jersey, Pennsylvania, Delaware, and Maryland.

"Internet-only banking is going beyond the first generation of what Internet-only banking accomplished," said Chris Musto, the director of financial services at Gomez Advisors.

Only seven months old, Stonebridge has amassed a $45 million-asset loan portfolio and $50 million of deposits. The bank also targets consumer clients nationwide and plans to expand its small-business reach beyond the Delaware Valley.

"We are competing with the Net.Banks and E-Trade Banks of the world, but we intend to have small-business insurance and merchant banking, as well as sell a myriad of financial products," Mr. Annas said.

Purchase, N.Y.-based ClarityBank.com, which also targets small businesses, plans to offer merchant banking and brokerage services by yearend, said David Arzi, its chief executive officer.

It opened for business at the end of March with $18 million of deposits from a one-branch bank in New Valley, Tex., that it bought in order to get Federal Deposit Insurance Corp. coverage. The bank says it now has $52 million of deposits and $64 million of assets.

Though Clarity and Stonebridge will be able to avoid a multialliance structure to support a full array of products, they will be challenged in "accomplishing that integration in practice," Mr. Musto said.

USABancshares.com is stepping back from the integrated approach. It has operated as a financial holding company since 1995 through the brick-and-mortar Philadelphia bank that preceded it. Two months ago it sold 51% of its online brokerage, USACapital, to Bonds Online, and now it is looking for a brokerage partnership.

"Though it make sense to bring financial services under one umbrella, we have decided to focus on banking," said Kenneth L. Tepper, chief executive officer of USABancshares.com.

Stonebridge was founded in February 1999 as the one-branch Community Bank of Chester County. It established its Internet platform in January 2000 to "fill the gap between a national and an Internet bank," Mr. Annas said.

Stonebridge got its financial holding company status July 19 from the Federal Reserve Bank of Philadelphia. Clarity received its on June 1.

The banks had to prove they were well capitalized by federal standards, well managed, and had "satisfactory" or better ratings under the Community Reinvestment Act.

Through July 21, 351 financial holding companies had been approved, most of them with less than $1 billion of assets, according to the Federal Reserve. Charles Schwab Corp., Citigroup Inc., and J.P Morgan & Co. were the first big companies to get the designation.


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