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Only one branch, but more than 21,000 customers for BoI

There's really only one branch of Bank of Internet USA, but the bank is everywhere.

One of the few banks in the country to be based entirely online, Bank of Internet USA doesn't have tellers or notaries to finish a home loan transaction. But Gary Lewis Evans, one of the bank's founders and its current president and chief executive officer, said what the bank lacks in physical presence, it makes up for in savings it passes on to customers. The method of banking he said, might be a sign of what's to come everywhere.

Gary Lewis Evans, one of the Bank of Internet's founders and its current president and chief executive officer

"I started banking in 1971, and people had to go to the bank in 1971, there wasn't a choice," Evans explained. "Stores didn't like taking checks and there were no ATMs, there were no check cards, no debit cards." And now? "Almost everyone I run into, they say, 'I never go to the bank.'"

Bank of Internet USA, which opened on July 4, 2000, gets around much of the hardware of modern banking by essentially outsourcing. The bank reimburses customers up to $10 a month for fees incurred by using other banks' ATMs. If a customer takes out a home loan from Bank of Internet USA, the bank hires an appraiser to look at the house and a notary from a title company close to where the customer lives to finish the paperwork.

"I would compare it to eBay and Amazon versus the postal system or FedEx: It's almost like FedEx and UPS and all those things were in place that made eBay and Amazon work. It's just a delivery system, if that wasn't there [the Internet companies] would have been almost impossible to set up," Evans said. "In the home lending business that infrastructure's in place."

Most banks have online components today, but they combine that with the classic banking practice of branches with tellers and other employees. Evans said he doesn't think personal banking will ever go totally to the wayside, but in the not too distant future, there will likely be two kinds of banks: those that are based on the Internet, and personal banks that come to their customers. The transition for standard model banks to strictly Internet companies will, however, be difficult, Evans said.

"People could do a transition but I think it's a difficult transition," said Evans, who is the former president of La Jolla Bank and was on board when they started an online banking site in 1994. "As an example, we have 25 employees, and for a bank our size it's fair to say there would probably be 150 employees on a comparable basis, so it's very difficult to change that model."

The Internet model is cheaper, Evans said. The company saves on salary and -- even more pressing in pricey San Diego -- real estate and office space costs. Evans said Bank of Internet USA passes those savings on to the more than 21,000 customers who bank with the company in all 50 states. Evans said he is sure people like the bank because 6 percent to 9 percent of their customers are from referrals, a high number for a bank, in his experience, he said.

A Los Angeles native, Evans began banking in 1971 and came to San Diego in 1981, where he is married and has three children. He got the idea for a completely Internet-based bank in the mid-'90s while working at La Jolla Bank. The idea took some time to build steam, but he and a group of like-minded bankers were able to raise about $14 million to put the company together. BofI Holding Inc. (Nasdaq: BOFI), which reported 14.3 percent growth last quarter, revenues of $10.91 million and has $37.69 million in cash, owns Bank of Internet USA. That company went public at a Google-style auction in March of 2005 and netted about $31 million at the initial public offering.

Even though most people have e-mail addresses and a lot of people shopped online in the late '90s when the idea for Bank of Internet was coming together, Evans said he and his fellow founders faced a lot of skeptics.

"Even in '99 and 2000 when we were raising capital, there was a lot of people who thought, 'How can you even do that? How can you do banking on the Internet?'" he said. "They were just thinking that you've got to meet people and sell. So we clearly had a fresh look at it, what people are doing, what people need, and that's what we're providing."

While many industries have been transformed by the Internet, Bank of Internet USA is one of only three purely Internet-based, full-service banks in the country, the others being First Internet Bank of Indiana and Atlanta-based ebank, according to Evans. The bank has the same issues a lot of other banks do, security being a main focus due to their online nature, but Evans said the company prides itself on having top-of-the-line security. When asked about the bank's security he said: "I don't like to get cocky on these kinds of things, but we've done a good job."

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