Branchless banking has been a tough nut to crack, with flameouts like WingspanBank well-publicized and many other screens going blank over the last several years. Even the most well-known Internet bank survivor, Egg, has taken a few lumps-recently initiating a piecemeal sale of assets after Prudential, a majority owner, failed to secure a buyer for the whole entity.
Nonetheless, a few determined Web-only banks remain committed to the space and report they're thriving, such as the on-line banking unit of insurance firm State Farm and EverBank Financial Corp.
The newly reorganized EverBank Financial combines a deposit generation and distribution platform with a national loan generation and servicing capability. EverBank is now the largest privately held branchless bank. In particular the bank has worked to integrate single-screen financial services, including banking and off-market credit card functionality, with exotic foreign currency investing through its World Markets Group and basic brokerage services options from EverTrade Direct Brokerage, an aggregated service the firm calls the EverOne Financial Center.
Powered by customized applications from Metavante and Teknowledge (the bank formerly used S1's on-line banking platform), EverOne has roughly 30,000 banking customers "Web-enabled," says Robert Foregger, COO of EverBank National Banking Group.
While its closely held nature precludes hard numbers from being disclosed, Foregger says that EverBank has grown "at greater than a 50-percent compounded rate over the past five years-a period when native growth in banking has averaged about five percent."
"Soft-launched" in November 1999 among family and friends, initial backing in the venture came from Wilmington Savings Fund Society (WSFS), American Skandia (the U.S. variable annuity arm of Stockholm-based Skandia Insurance Company, purchased by Prudential in 2003), and private investors. The service was made available in January 2000.
According to Foregger, EverBank's clients were not cross-hatched, nor did they come out of any prior loan servicing or other arrangements, but "are 100-percent organic growth from direct mail and marketing efforts." While the bank still has four First Alliance branches that customers can walk into in Jacksonville, FL, Foregger is based in Stowe, VT., while EverBank CEO Frank Trotter resides in St. Louis.
EverBank first operated nationally under WSFS Financial's federal savings bank charter, with WSFS providing approximately $5.5 million of the initial $18.2 million to fund the venture, until WSFS sold its stake in 2002 to Alliance Capital Partners, then called First Alliance Bank, for $300,000. WSFS had wanted to focus on traditional banking where it's based in Delaware. In August 2003, WSFS officials described EverBank as a $5.5 million research and development project that about broke even.
Everbank had approximately $294 million in deposits near the time of the sale, and $267 million spread among cash, investments and mortgage-backed securities, as well as $28 million in loans.
Sensing a chance to run the show, the founding management team, including Foregger and Trotter, stayed on after the Alliance sale and now manage the national banking group. An alliance with BNY Mortgage Company of the Bank of New York handles mortgage originations for customers. EverBank also performs portfolio mortgage "subservicing" for BNY.
Though the company says it targets higher-end customers, it takes only a $1,500 minimum deposit to open an on-line checking account. EverBank is also a non-ChexSystems bank, according to marketing material, meaning it accepts customers with past credit problems. "We have different business lines, but for our branchless bank, which is our national banking group, it's really a higher-end client," Foregger says.
Calling EverBank a success story amid dot-bomb blowouts and account aggregation failures, Foregger credits the bank's strategy of innovation among product and service channels as keeping them in business.
Everbank offers some novel deposit accounts, including money market and CDs based on foreign currencies, which banking-related sites claim can earn-potentially-more than twice the interest rate of most domestic checking accounts. Bank of Internet USA, based in Del Mar, CA, offers similar products.
