Boring Portfolio

NetB@nk Comments
Bore Readers Weigh In

By Dale Wettlaufer (TMF Ralegh)

ALEXANDRIA, VA (June 9, 1999) -- Over the last couple days, I've received some excellent feedback on NetB@nk (Nasdaq: NTBK) on the Boring message board. First, I'd like to thank everyone that has taken the time to post. It's been a big help. Second, I wanted to condense some of the commentary on NetB@nk's customer service. Here's a few of the comments:

  1. "This customer is not happy and is considering closing their account as soon as that first deposit clears... As [NetB@nk's] customer service representative was frustratingly useless, I sent a detailed explanation (figuring that maybe I just was not clear on the telephone) via e-mail. That was Friday, this is Tuesday, and I have had no response. This is not good for someone who wants to handle my money."

  2. "Since their system upgrade early in the year, access and reliability improved greatly. But still, I can compare my experience with them as working with the government. You don't really have to interact with them much; they will provide services, and you don't have to worry about it most of the time. But whenever you have to deal with them, it's a nightmare... I pleaded for a response, but to no avail. Sometimes, after holding for an hour for their customer support, the representative told me that she will just "take my name and number." And I had a misfortune of opening my account at the end of last year -- holiday season. I sent about $8000 in deposits, which they took about three weeks to receive. I was very aggravated. And personal treatment is nonexistent."

  3. "One day a few months ago, I decided that it was time to bank on the 'Net. After all, I already paid most of my bills online or via direct withdrawal. Why not automate the whole process? After searching around on the 'Net, checking out Gomez and SmartMoney, etc., I decided to go with NetB@nk. They seemed the biggest, they were free, and they paid good interest on their checking accounts... It took a week to get my account opened. When they did, they got my social security number incorrect.

"I never got an ATM card... not after four emails and two phone calls (with long hold times). They didn't know I ordered one. Then the excuse was that they didn't know which one I wanted (ATM or check card). Then they said that they were back-ordered seven weeks. Then I just didn't get a reply at all. My first checkpay was late... I had to call my creditor and beg that they wouldn't charge me a late fee. One of my deposits was credited for the wrong amount. (That was the last straw.)

"When I dipped into my line of credit, there was no way to pay it off on the Web site. When I emailed to ask why not, and what I needed to do to pay off the balance, I didn't get any reply. A week later I got a reply, but only after I mailed them to inform them that I was closing my account, effective immediately."

That's not the most encouraging sign. I'm totally onboard with the entire concept that a fast-growth business is going to make mistakes here and there. AOL, E*Trade, Schwab, and other companies have all had their problems with outages and, in AOL's case, long customer service telephone wait times. But I at least want to hear some anecdotes about the systems working well when they do work and I at least want to hear people rave about their positive experiences with the company. Retail banking is a service business. If the company doesn't absolutely strive to be the best in this area, I'm just not interested.

Here's the thing. I've had an online brokerage and banking account for two years. I earn money market rates on my cash equivalents, I can trade stocks, I can use a debit card that draws off the money market fund balance, I have online bill payment, and I'm happy with it. There's nothing really special, in my opinion, about what NetB@nk is. What would make it special is how well it can service customers. I don't doubt that they have the management talent to make the thing work. The executives and board members here have a backgrounds in banking and in data services companies catering to financial services companies. One of the board members is CEO of South Carolina bank holding company Carolina First Corp. (Nasdaq: CAFC), which itself owns a big chunk of NetB@nk. Are they willing to go that extra mile, however?

Again, I'll wait on that. I don't really care what the valuation here says. I can make this thing look as cheap as I want or as expensive as I want doing a discounted cash flow on it. It all hinges on what happens in the out-years of the model, not in how unprofitable the company is in the next few years. I don't want to see a low efficiency ratio now -- I want to see happy, raving customers now. For me to believe big numbers in the out-years, I want to see the company retain today's happy raving customers and attract those customers' friends. Intellectually, I can make a case, too, where customers hate doing business with this company but where it experiences high growth and where it's undervalued in the near-term. That's not the sort of thing I want to get involved with, however. As always, I very much could use the feedback on the customer service issues or anything else on your mind.

A couple notes:

A few people have sent me the following article on Berkshire Hathaway from Best's Review, which is a century-old insurance industry information company: I also recommend the other articles in the publication. This one, on catastrophe risk modeling, looks pretty interesting:

I added a new company to the radar the other day, CKE Restaurants (NYSE: CKR). This company franchises and operates Carl's Jr., Hardee's, and Taco Bueno restaurants and has run into a bit of a rough patch here. It looks pretty interesting. If anyone has any feedback on that, I'd love to hear it on the Boring message board.

Congratulations to the Buffalo "Brick House" Sabres on game 1. Good luck tomorrow night.

Call Your Boss a Fool.

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06/09/99 Close
Stock Change   Bid
APCC    ---    19.81
BRKb  -34      2360.00
CSL   +  3/16  47.50
GTW   -1 1/2   62.00

                  Day     Month   Year  History
        BORING   -0.73%   1.33%   5.91%  42.21%
        S&P:     +0.10%   1.29%   7.59% 119.48%
        NASDAQ:  +1.81%   1.98%  14.90% 142.02%

    Rec'd   #  Security     In At       Now    Change
  8/13/96  200 Carlisle C    26.32     47.50    80.44%
  4/20/99  460 American P    14.48     19.81    36.86%
 12/31/98   12 Berkshire   2276.17   2360.00     3.68%
   2/9/99  100 Gateway 20    72.38     62.00   -14.34%

    Rec'd   #  Security     In At     Value    Change
  8/13/96  200 Carlisle C  5264.99   9500.00  $4235.01
  4/20/99  460 American P  6659.25   9113.75  $2454.50
 12/31/98   12 Berkshire  27314.00  28320.00  $1006.00
   2/9/99  100 Gateway 20  7237.50   6200.00 -$1037.50

                             CASH  $17972.40
                            TOTAL  $71106.15