Low operating expenses helped American Bank, an Allentown, Pa., Internet-only bank that operates the Web site pcbanker.com, increase its earnings for a fifth straight quarter, said Mark W. Jaindl, its president and chief executive officer.

To support steady earnings growth, Mr. Jaindl said, he plans to keep pushing operating expenses down and to steer the bank away from activities that go beyond basic banking, such as online shopping or insurance.

American's fourth-quarter net income grew more than 16-fold from a year earlier, to $204,300, or 5 cents per share. Its ratio of operating expenses to assets was 1.73%, compared with 2.99% a year earlier.

Mr. Jaindl said the bank's goal is to push that ratio below 1.5% by yearend. "By maintaining low operating expenses, we can consistently offer our customers attractive rates on loan and deposit products," he said.

American, which has 20,000 accounts, offers a checking account with a 6.25% annual interest rate and a savings account with a 6% rate.

The fact that it has only one branch has helped keep expenses down, Mr. Jaindl said. In addition, it has kept customer acquisition costs under $40 per person, he said. American gives customers $20 for referring someone to the bank who opens an account.

The bank's assets grew 118%, to $244.9 million during the quarter, and American said that it had no nonperforming assets in its portfolio. Even so, it increased its loan-loss reserve by $127,000 during the fourth quarter because "a softening economy may result in future delinquencies," Mr. Jaindl said.

He mentioned improvements in the Web site, including the addition of automated clearing house transfers and seamless interaction with Intuit's Quicken and Microsoft's Money products, as reasons for the account growth.

American had been considering becoming a financial holding company, which would let it sell financial products such as insurance and brokerage services, Mr. Jaindl said. However, he said, he is not as optimistic as he was before about broadening beyond basic banking. "I don't think people come to their Internet bank to shop or buy insurance."

As it focuses on banking products, the bank plans to lessen the emphasis on its American Mall, an online shopping service that offers access to 80 merchants, including Officemax.com, Borders.com, and Disneystore.com.

"I don't know if we will get rid of American Mall, but I don't see it being a focal point," Mr. Jaindl said. "I want to see more of a focus on the financial side."

Like some of its Internet banking brethren, American has begun imposing fees on some accounts. On Jan. 1 it began charging $5 for accounts with balances below $100. By contrast, WingspanBank.com and BankDirect have imposed fees on accounts with balances of less than $1,500 and $2,500, respectively.


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