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Online bank stock cashes in

A $5.4 million quarterly loss for Security First Network Bank fails to quell Wall Street's enthusiasm for the first Internet bank.

The phone conference scheduled for today by the first Internet-only bank, Security First Network Bank, to explain to Wall Street analysts how it lost $5.4 million in three months had to be delayed awhile because so many stock observers wanted to listen in.

But even the big loss failed to quell Wall Street's enthusiasm for electronic commerce: Security First's stock gained a quarter-point to close at 27-3/4 today.

Security First also announced today that its software subsidiary, Five Paces, had allied with CheckFree, a major supplier of bill-paying and other services to banks, businesses, and consumers.

Under the pact, CheckFree will process bill payments for financial institutions that use Five Paces' suite of software; the partners can resell each others' software to banks that want to get onto the Net.

In addition to its May 23 acquisition of Five Paces, which came in conjunction with Security First's initial public offering, the Internet bank is acquiring SecureWare, which makes security software for the military, for $5.7 million.

The Checkfree partnership underscores how aggressively Security First is aligning itself with companies that provide support services to the banking industry to help bring other banks onto the Internet. Security First made earlier deals with M&I, which supplies data-processing services to financial institutions, and with Alltel, which provides data center management services.

The Five Paces subsidiary has already signed deals with Visa Interactive and Huntington Bancshares, as well as Cardinal Bancshares, Security First's former parent, to move them into Internet banking. The Visa partnership means 100-plus banks around the globe can use Five Paces software.

Gary Craft, a stock analyst with Friedman, Billings, Ramsey & Company who has issued a "buy" recommendation on the stock, expects 15 to 20 banks to sign up for Security Bank's whole services by year's end, with perhaps 10 of them up and running by then.

Security First attributed its loss for the quarter ended June 30 to the acquisitions and higher marketing costs as it promotes its Internet banking services.

As of August 1, the bank had 4,712 Internet accounts with $14 million in deposits and added 65 new accounts daily in July.

The bank also will transfer its headquarters to Atlanta, where it will open its first branch office by year's end. Other branches will be opened in Palo Alto, California, and Cambridge, Massachusetts.

Eric W. Hartz, the bank's vice president of marketing and strategic relations, said many prospective customers like to have a physical branch they can visit, even infrequently, for certain banking transactions.

Security First also expects to roll out other financial services next year--including credit cards, home loans, auto loans, and stock trades--so that the earth-based location also can function as a sales office.