Compubank

www.compubank.com

CompuBank (Houston, TX; in formation) will become the first independent bank launched directly onto the Internet. It will also become the first federally chartered Internet-only bank (i.e., national bank). The other two Internet-only banks, Security First Network Bank and Atlanta Internet Bank, were both spinoff divisions of traditional financial institutions (Cardinal Bancshares and Carolina First respectively) and were approved via the Office of Thrift Supervision.

The bank received preliminary approval from the OCC on August 20, 1997 to open an Internet-only financial institution. But the bank will be on a short regulatory leash until they prove themselves. For the next three years, the bank is required to seek OCC approval for each new product introduced. This will put quite a burden on management which will need to broaden Compubank’s product line relatively quickly if they hope to become a viable company. Prologic will be providing the online banking platform: its Ovation product running on Windows NT.

Initially, the bank plans to refrain from lending, hoping to earn enough of a spread collecting deposits online and investing in government guaranteed bonds. This is a contrarian strategy, but we won’t comment until hearing more of their business plans. They may have identified some unique transactional niche (such as online money orders) or vertical markets (ISP owners) that will allow them to turn a profit. At least it lessens their CRA burden. Given that the bank was not planning on becoming a lender, the OCC granted the bank’s request to be treated as “limited purpose.” The bank will satisfy CRA obligations by providing access to online banking services for low and moderate income individuals in the Houston area.

Contacts: Frank S. Goldberg is CEO. Mr. Goldberg started Houston’s Security Bank in the 1980s. Jonathan H. Lack is EVP Marketing and Planning, 713.871.1422, jlack@compubank.com. Robert Wilband is CEO at Prologic, www.prologiccorp.com, in Richmond, BC, Canada, 604.278.6470.