DeepGreen Bank, a one-and-a-half-year-old Internet-only thrift, calls itself the online bank for grownups at least for those who need one of the three products it offers: mortgages, home equity lines of credit, and certificates of deposit.
It says the niche strategy is meant to provide a monoline-style focus, and the slogan about maturity indicate not that the thrift caters to older people, but that it selects customers who have proven that they repay their loans.
While some industry experts take a dim view of online financial institutions that do not offer a full array of products, DeepGreens founder and chief executive officer, Jerome J. Selitto, says it plans to to stay very, very focused and not worry about cross-selling, which many consider bankings Holy Grail.
Cross-selling only works if youre confident that youre offering a real advantage to your customers, he said. Thats why were very focused on the products that we offer the consumer, and weve been very reluctant to be all things to all people.
Before establishing DeepGreen in Seven Hills, Ohio, in August 2000, Mr. Selitto founded and chaired Amerin Guaranty Corp., a publicly traded mortgage insurance company that merged with CMAC Investment Corp. in 1999 to from Radian Group Inc. Philip Yee, DeepGreens chief marketing officer, also hails from Amerin, though most recently he was the chief marketing officer at Norwest Mortgage, now Wells Fargo Home Mortgage.
The thrift, a subsidiary of DeepGreen Financial which itself is owned by Third Federal Savings and Loan Association of Cleveland, which says it is the nations second-largest thrift chose the name DeepGreen because we wanted a name that was different, memorable and meaningful to customers, and we think we have it, Mr. Selitto said. The DeepGreen name combines the concepts of depth and stability with the color of money.
DeepGreen Bank has attracted two high-profile directors: former Comptroller of the Currency Eugene A. Ludwig, who is now the managing partner of Promontory Capital Group LLC, a merchant bank in Washington; and former Federal Deposit Insurance Corp. Chairman L. William Seidman, now a commentator for CNBC.
Mr. Ludwig said in an interview that when he heard about what DeepGreen was offering, he thought it was dynamite. He said, It meets the consumers needs. It uses the Internet very cleverly, in the sense that its not just an information matrix but really allows it to be what its best at, which is a broad spectrum communications and new product matrix.
Despite the big names on its board, DeepGreen Bank is a small operation and does not aspire to be enormous, Mr. Selitto said. It has 65 employees, and finding its Web address can be tricky. (The thrifts site is www.deepgreenbank.com; www.deepgreen.com is something else entirely.) Asked how many customers DeepGreen has, Mr. Selitto said he could only venture a guess of around 20,000.
We really dont need to be bigger than we are now, Mr. Selitto said. Thats not the goal.
Mr. Selitto says he expects the average number of monthly loan applications to more than double this year, through new partnerships with third-party originators such as LendingTree Inc., MortgageIT Inc., Citizens Advantage, and HomeSide Lending Inc. (Washington Mutual Inc. last month bought certain operating assets of HomeSide.)
Under an alliance announced in October, DeepGreen and now provides a link to HomeSides site for customers seeking first mortgages. Mr. Selitto said his thrift does not want to originate mortgages until the process becomes totally paperless.
The thrift is also testing a program under which loan officers and broker-dealers at partner companies refer customers to DeepGreen. Testing began last month with 10 partner companies, and Mr. Selitto said the results thus far have been good more than half of DeepGreens business now comes from partner referrals.
That, to us, is very successful, he said.
Indeed, the focus on serving only the most reliable and creditworthy customers was a factor in the thrifts decision this month to shelve one of its original products, QuickCash, an unsecured personal loan that had let people get up to $25,000 wired to their checking accounts in as little as 20 minutes. (The thrifts normal approval period is seven to 10 days.)
A company spokesman said the product was scrapped mainly because of its cost and a lack of customer interest, though risk was also a consideration.
Mr. Selitto would rather point to the 12,000 applications his thrift processed on average each month last year, and the $1 billion of loans it originated.
Matt Carrick, a research analyst at Gomez Inc., a Waltham, Mass., consulting firm, said DeepGreen is wise to focus on home equity lines of credit, which are simpler and more conducive to self-service Internet delivery than mortgages.
Since it does not have the overhead of a branch structure, DeepGreen could undercut bigger competitors, he said. That definitely puts them ahead of the game versus a larger player such as a Countryside or Washington Mutual thats possibly spreading themselves too thin and not focusing on one product.
But James Van Dyke, a research director at the consulting firm Jupiter Media Metrix, said that pure-play Internet financial institutions fare better when they focus on customers financial needs, rather than a particular type of product.
I think that the opportunities for a product-centric company to succeed in the online world are pretty small, he said.
Consumers also value brand strength, Mr. Van Dyke said. Because of this, DeepGreen should have aligned itself more closely with Third Federals better-known brand, he said.
If you forgo the strength of a traditional brand and its branches and everything, it seems like sort of a 1998 notion, he said. I dont think thats a wise strategy. I dont think you can make up for that by having complete end-to-end online loan products.
