A fast-growing Dallas bank company started less than two years ago has raised $26.5 million of capital to support a plan to spin off its Internet unit in the first quarter of next year.
Texas Capital Bancshares, with $518 million of assets, said it has rounded up 280 investors since March to buy into the private stock placement. The closely held parent of Texas Capital Bank plans to put about $20 million of the new investments into its Internet arm, Bankdirect, which has applied to state and federal regulators for a separate charter.
The remaining capital would be used to develop recently opened branches in San Antonio and Austin.
Texas Capital also said it would need an additional $50 million to $100 million in the next 12 to 18 months to build up Bankdirect, which has about $210 million of deposits. Much of the new investments would come from the IPO.
"We need to create a separate identity for Bankdirect," said Jody Grant, Texas Capital's chairman and chief executive officer. "The skills required to run an Internet bank are different from the skills needed to run a traditional commercial bank."
Mr. Grant said Texas Capital would retain about 55% of Bankdirect after the public offering. He added that the company would sell up to 20% of Bankdirect to the general public and 25% to other venture capitalists and partners. Separating Bankdirect would let it get more backing from institutional investors and venture capitalists, many of which put more funds into technology than banks, Mr. Grant said.
But even if investments come easier, an Internet consultant said, Bankdirect would still be hindered by the lack of a physical presence.
"If there's a problem with their account, people want to know that they can go to a branch and yell at someone," said Chris Musto, director of financial services at Gomez Advisors, an electronic-commerce research firm in Concord, Mass.
Web banks also have a hard time building assets and taking customers away from traditional banks, Mr. Musto said. Of the 5.9 million U.S. residents who conduct bank transactions online each month, only 300,000 use an Internet-only bank, Gomez found.
"Internet banks offer higher rates and lower fees," Mr. Musto said. "That attracts some people who come and buy a CD, but Internet banks are not building loyalty. They're only attracting rate-hoppers."
No problem, Texas Capital says.
The company says that, by retaining a majority share in Bankdirect, it could exploit the Web bank's deposit-generating abilities and balance that against the strength of its brick-and-mortar branches to generate loans.
Texas Capital Bank, which has focused on business loans since its inception in September 1998, would sell assets to an independent Bankdirect, Mr. Grant said. In fact, most of Bankdirect's assets initially would come from Texas Capital.
Ken Tepper, president of the $366 million-asset USABancshares.com, said it has proven safer for Internet banks to focus on deposits while generating loans through branches. Mr. Tepper's bank operates four branches in Philadelphia. He said it is too soon for Internet banks to stress lending, because they might not be familiar with certain markets and credit risks.
"The concept of deploying loans through online originations is scary to us as bankers," said Mr. Tepper. "Do I want to be offering loans in Sacramento?"
Texas Capital and Bankdirect say this "bricks and clicks" model can work. After all, Bankdirect has pulled in a lot of its deposits while Texas Capital Bank's assets have multiplied by about 30 since its founding. Texas Capital was created through the purchase of a $19 million-asset bank after the founders raised $80 million - the largest initial capitalization ever for a bank.
"From the outset, this was going to be a business bank," said Raleigh Hortenstine 3d, Texas Capital's president. "The Internet bank was only our retail component. We knew if we continued to build and grow our business-customer base, we would need to find an alternative way to fund all these loans."
