FCNB 1Q/01

The Spiegel Group announced financial results for the first quarter ended March 31, 2001. The company reported a net loss of $12.2 million, or $0.09 per share, compared to earnings of $20.2 million, or $0.15 per share, before the cumulative effect of an accounting change, in the first quarter of 2000. Results were consistent with previous guidance and First Call consensus estimates.

“As expected, the first quarter presented a more challenging economic environment as well as difficult comparisons to last year’s strong first quarter results,” stated James W. Sievers, office of the president and chief financial officer of The Spiegel Group. “We experienced higher charge-offs in our credit card businesses and customer response in each of our merchant companies was relatively weak. Clearly, the economy has negatively affected consumer behavior and our financial results.”

Operating income declined by $47.2 million for the quarter, including a $51.8 million decrease in income for the merchandising segment and a $4.4 million improvement in the bankcard segment.

Total revenue for the quarter declined 3 percent to $749.6 million reflecting a 3 percent decrease in net sales and a 10 percent decrease in finance revenue.

Net sales for the quarter included a 2 percent decline in direct sales and a 3 percent drop in retail store sales. Direct sales are comprised of a 94 percent lift in e-commerce sales and a 13 percent decrease in catalog sales. The drop in retail store sales was due to a 10 percent decline in Eddie Bauer’s comparable-store sales offset somewhat by sales growth in its outlet stores.

The decline in finance revenue was primarily attributable to lower securitization income, which includes retained-interest income from securitized receivables and net pretax gains on the sale of receivables. While the yield on receivables rose in the quarter along with the level of receivables serviced, higher charge-offs negatively impacted the performance of the credit card business, particularly in the private-label programs, resulting in lower excess cash flows from the securitization of receivables, which reduced finance revenue. In addition, due to lower receivables sold during the quarter, net gains on the sale of receivables were $8.4 million in this year’s first quarter compared to $15.5 million in the same period last year. The $7.6 million decrease in finance revenue reflects a $15.1 million, or 34 percent, decline in revenue from the private-label credit card programs net of a $7.5 million, or 24 percent, increase in bankcard revenue.

The gross profit margin as a percent of net sales decreased in the first quarter to 35.0 percent from 35.9 percent in the year-earlier period. Margin growth achieved by the company’s Newport News and Spiegel divisions was offset by lower margins at Eddie Bauer. Eddie Bauer’s margin decline was driven by higher markdowns versus last year.

Selling, general and administrative expenses as a percent to total revenue increased by 530 basis points to 47.0 percent for the quarter. This increase resulted from lower productivity on catalog circulation for each of the Group’s merchant companies and weaker performance from private-label credit card programs compared to the prior year.

Outlook

Commenting on the company’s outlook, Michael R. Moran, chairman of the office of the president, stated, “Given the challenging economic environment, we have intensified our efforts to reduce expenses and conservatively manage our inventory commitments going forward. Although the economic outlook for the second half of the year is uncertain, we have taken important actions in our credit business and our Eddie Bauer division that are expected to positively impact earnings.”

The company confirmed its previously issued guidance for the second quarter, calling for modest revenue growth and earnings of $0.02 to $0.05 for the quarter ending June 30, 2001.

For more details on Spiegel’s 1Q/01 results visit CardData ([www.carddata.com][1])

[1]: http://www.carddata.com/

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Home Depot Terminals

IVI Checkmate announced Tuesday the chainwide rollout of ‘e(N)-Touch 1000’ terminals by Home Depot as well as a migration to online debit by Home Depot. IVI also announced an additional order for 15,000 ‘e(N)-Touch 1000’ units that will complete the chain-wide rollout. Home Depot will use the ‘e(N)-Touch 1000’ to implement credit card payment signature capture and customer line item display at all checkouts and customer service counters. As a second phase, Home Depot will implement online debit, which costs significantly less to process than a credit card. The touch screen technology also enable retailers to implement graphically based consumer payment and value-added services.

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MC Baseball Pack

MasterCard International, an official sponsor of Major League Baseball, will make it more affordable for families and friends to enjoy a day at the ballpark by offering the “MasterCard Grand Slam Ticket Pack” to cardholders in 15 markets around the country.

Each Grand Slam Ticket Pack will include four game tickets and vouchers good for concessions. The Ticket Packs will offer discounts of up to 45% and are available for more that 230 home dates at ballparks around the country. MasterCard Grand Slam Ticket Packs are available exclusively to MasterCard cardholders.

“As a long-time MLB sponsor we wanted to create a program that had a direct impact for baseball fans,” said Bob Cramer, vice president, Global Sponsorship & Event Marketing, MasterCard International. “For the past four years, we’ve celebrated the `Priceless’ moments of baseball through our ad campaign. Now, we’re supplementing that concept with a tangible offer that will make it easier for our cardholders to experience those `Priceless’ moments first-hand.”

Starting today, fans can access the MasterCard Grand Slam Ticket Pack by pointing their Web browsers to MLB.com, the official Web site of Major League Baseball and clicking on the MasterCard logo and following the on-screen instructions. MasterCard will offer Grand Slam Ticket Packs for the following cities/clubs:

— Arizona Diamondbacks — Los Angeles Dodgers
— Atlanta Braves — Minnesota Twins
— Baltimore Orioles — New York Mets
— Boston Red Sox — Pittsburgh Pirates
— Cincinnati Reds — San Diego Padres
— Cleveland Indians — St. Louis Cardinals
— Colorado Rockies — Texas Rangers
— Kansas City Royals

Fans wishing to purchase tickets for Baltimore, Cleveland, Boston, San Diego and Atlanta can call their local club box office and ask for the MasterCard Grand Slam Ticket Pack. All other participating MLB Clubs’ offers are available for online purchase; teams may charge a service charge for each order.

“MasterCard has always supported its sponsorship of Major League Baseball in innovative ways, and this new Grand Slam Ticket Pack is a great way for fans to benefit from Major League Baseball’s relationship with MasterCard,” said Tim Brosnan, executive vice president, Business, for Major League Baseball.

The introduction of the Grand Slam Ticket Pack follows the launch of MasterCard’s latest baseball-themed advertising, which debuted on network television on April 9th. The new creative, entitled “The Trip,” tells the story of two “twenty-somethings” who truly love the game of baseball and have decided to embark on the journey of a lifetime by visiting every Major League ballpark.

The story celebrates the institution of baseball by delving into the tradition and pageantry of the game, fans’ passion for the sport, and the shrines that are ballparks. The new baseball spot is the latest in MasterCard’s award-winning “Priceless” advertising campaign produced by McCann-Erickson. “MasterCard’s new ‘Priceless’ creative really captures the essence of the millions of baseball fans who follow the game with such passion and enthusiasm,” said Brosnan.

MasterCard has been an official sponsor and the Official Card of Major League Baseball since 1997. MasterCard also has affiliations with local clubs including the Atlanta Braves, Baltimore Orioles, Boston Red Sox, Cleveland Indians, Los Angeles Dodgers, New York Mets, San Diego Padres, St. Louis Cardinals and Seattle Mariners.

About MasterCard

MasterCard International has the most comprehensive portfolio of payment brands in the world. More than 1.7 billion MasterCard(R), Cirrus(R) and Maestro(R) logos are present on credit, charge and debit cards in circulation today. An association comprised of more than 20,000 member financial institutions, MasterCard serves consumers and businesses, both large and small, in 210 countries and territories. MasterCard is the leader in quality and innovation, offering a wide range of payment solutions in the virtual and traditional worlds. MasterCard’s award-winning Priceless(R) advertising campaign is now seen in 81 countries and in more than 36 languages, giving the MasterCard brand reach and scope unrivaled by any competitor in the industry. With more than 21 million acceptance locations, no card is accepted in more places and by more merchants than the MasterCard Card. In 2000, gross dollar volume exceeded US$857 billion. MasterCard can be reached through its World Wide Web site at [http://www.mastercard.com][1].

[1]: http://www.mastercard.com/

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AmEx 1Q/01

American Express TRS reported first quarter net income of $522 million, up 16% a year ago, on net revenues of $4.5 billion, an 8% 1Q/1Q increase. The net interest yield on U.S. card lending activities increased from 7.8% to 8.3% over the past twelve months, reflecting a smaller percentage of credit card loan balances on introductory rates and a benefit from declining interest rates during the quarter. Marketing and promotion expenses were lower as TRS scaled back certain marketing efforts. Other operating expenses were flat, as the cost of cardholder loyalty programs and business growth were offset by the benefit of reengineering and cost-control efforts. Delinquency and chargeoffs rose significantly up during 1/01. For complete details on American Express current and historical statistics visit CardData ([www.carddata.com][1]).

American Express U.S. Card Portfolio Snapshot
1Q/01 4Q/00 3Q/00 2Q/00 1Q/00 Ann Chng
Volume $55.6b $59.0b $56.2b $55.8b $50.6b +10%
Loans $30.2b $28.7b $27.1b $25.9b $24.2b +25%
Cards 34.2m 33.3m 32.9m 32.5m 31.4m + 9%
Delinq* 2.9% 2.8% 2.6% 2.4% 2.6% +12%
Losses 5.1% 4.4% 4.3% 4.4% 4.6% +11%
Yield** 8.3% 7.7% 7.8% 7.4% 7.8% + 6%
* 30+ days past due; ** net interest yield
Source: CardData(www.carddata.com)

[1]: http://www.carddata.com/

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CompuCredit 1Q/01

Sub-prime specialist CompuCredit reported Monday that it added 199,000 accounts and posted a $50 million increase in credit card outstandings during the first quarter. Earnings for 1Q/01 were $6.4 million, compared to $11.3 million in 4Q/00 and $24.0 million in the first quarter of 2000. As of Mar 31, the 60+ day managed delinquency rate was 9.4% as compared to 9.5% for 4Q/00 and 6.9% one year ago. The pro forma net charge-off rate was 14.8% in the first quarter as compared to 13.2% for the fourth quarter of 2000 and 8.4% for 1Q/00. The managed net interest margin also declined from 23.8% one year ago to 21.6%. At the end of the first quarter, CompuCredit outstandings for its sub-prime ‘Aspire VISA’ card stood at $1.6 billion and total accounts logged in at 2.3 million. CompuCredit issues credit cards through Columbus Bank & Trust. For complete details on CompuCredit’s current and historical statistics visit CardData ([www.carddata.com][1]).

[1]: http://www.carddata.com/

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Wireless Vending

PA-based e-Vend.net Corp. announced three new technologies for the next generation of vending. The new technologies will give the ability to make both cash and credit card transactions from one machine, to monitor two machines from one monitoring device, and gives the operator the option of a handheld solution for use when no wireless signal is available. e-Vend.net’s operating system is the only online vending system that offers non-cash payment options, including secure credit card, debit card, PIN card, and RFID tags. The company’s ‘reDEX’ device contains the proprietary technology that enables vending machines to be monitored wirelessly. Despite its open technology, signal remains an issue in some remote vending locations. With the launch of its new hand-held device, e-Vend.net is now able to monitor even those machines without access to any signal.

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5pm ATM Deposits

A technology upgrade now allows Hibernia National Bank to credit deposits made at 256 of its automated teller machines (ATMs) to customer accounts long after teller windows have closed. Hibernia’s full-service ATMs now credit accounts with deposits on the same business day as long as the deposit is made prior to 5 p.m., an extension of the 3 p.m. deadline at most of the bank’s teller windows. The change, which adds convenience for customers in Louisiana and East Texas, was completed last month.

Previously at Hibernia, and currently at most banks across the country, late-afternoon ATM deposits were credited on the next business day, says William Arnold, Hibernia’s ATM delivery channel manager. Depending on an ATM’s location, the cutoff for credit was from noon to 2 p.m.

Hibernia is one of only a handful of banks nationally to extend deposit-credit times uniformly to 5 p.m. at its full-service ATMs accepting deposits, Arnold says. Some ATMs, often located in retail establishments, only dispense cash and cannot accept deposits.

The change follows a successful pilot program in the bank’s New Orleans branches in 1999 that showed the later cutoff time increased deposit activity at ATMs, Arnold says. Hibernia believes the attraction and flexibility of allowing later same-day credit for deposits will increase customers’ comfort with and use of ATM deposits.

Only 8% of transactions through more than 175,000 ATMs in the PULSE network of 2,000 financial institutions, including Hibernia, are deposits. Cash withdrawals comprise 77% of ATM transactions, Arnold says. “We believe that once customers make that first deposit at an ATM, they will become much more comfortable with it, as we saw when the direct-deposit feature was first introduced,” he says.

ATM deposits give customers a receipt, similar to those from teller windows. The new technology and newly designed ATM deposit envelopes have eliminated the need for a separate deposit slip. Customers can deposit cash, checks or a combination. The normal industry check-clearing process applies to ATM deposits.

Hibernia, a Fortune 1000 company, has $16.7 billion in assets and 263 locations in 34 Louisiana parishes, 16 Texas counties and two Mississippi counties. Hibernia is the leader in Louisiana with 23.3% of deposits and in its Texas market area with 10.7%. Hibernia Corporation’s common stock (HIB) is listed on the New York Stock Exchange. News releases, product and service information, and other useful data are available at [www.hibernia.com][1]. Requests for information about products and services can be e-mailed to mailus@hibernia.com.

[1]: http://www.hibernia.com/

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Datakey Order

Datakey Inc. announced that an international government organization has placed an order for Datakey PKI smart cards, card readers and client software for 10,000 users. Datakey PKI smart card systems will provide advanced security and strong user authentication for employees conducting daily business operations over computer networks.

About Datakey, Inc.

Datakey, Inc. is a leading international provider of smart card solutions for PKI. Headquartered in Minneapolis, Minn., the company offers a family of smart card-based information security and digital signature products. Using state-of-the-art cryptographic technology, these products fill growing market needs for secure, smart card-based user authentication and data privacy for business-to-business e-commerce. Datakey’s smart card-based information security products play an integral role in any PKI system by providing two-factor security — something that is owned (a smart card) and something that is known (a password).

Shares of Datakey’s common stock are traded on Nasdaq under the symbol DKEY. You can find more information on the Datakey Web site at [http://www.datakey.com][1] . You can view all Datakey press releases on the Web site at [http://www.prnewswire.com][2] or via fax by calling Company News On-Call at 800-758-5804, ext. 231950.

[1]: http://www.datakey.com/
[2]: http://www.prnewswire.com/

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Project ACTION

NACHA announced Monday at its PAYMENTS 2001 conference that it is launching a project that would enable consumers and businesses to make secure payments for Internet transactions. Called Project ACTION — ACH Credit Transactions Initiated Online — the program will develop a payment method for Internet consumer-to-business, business-to-business, and electronic bill payment transactions utilizing Automated Clearing House (ACH) credits.

“An advantage of the ACH Network is the ability to process credit payments, in which funds are pushed to sellers or other payment recipients,” said Elliott C. McEntee, President and Chief Executive Officer of NACHA. “For example, ACH credits have been in use for more than 25 years for Direct Deposit, and in 2000 were used more than 3 billion times to make Direct Deposit payments to 100 million people. Currently, other payment methods require account information to be provided to sellers, that then attempt to authenticate the buyer and pull funds from buyers’ accounts.”

How ACTION Works

The key difference between ACTION and other electronic payment methods is that a buyer (a consumer or business) would initiate a payment to a seller via its own financial institution, rather than authorizing the seller to debit its account. This feature enhances security of payments while reducing many of the risks.

With ACTION, a buyer visits a seller’s web site, decides to make a purchase (or pay a bill) and chooses ACTION as the payment method. The buyer selects its financial institution from a drop-down menu, and is linked to its financial institution’s web site. The financial institution authenticates the buyer, perhaps through an existing Internet banking platform, and asks the buyer to authorize the payment. The financial institution then verifies the buyer’s account balance and initiates a guaranteed ACH credit payment to the seller’s financial institution.

“ACTION brings security and privacy to payments for Internet transactions because consumers and businesses will be able to initiate payments directly from their financial institutions, rather than providing account information to a seller or a third-party,” said McEntee. “Consumers and businesses have existing, trusted relationships with their financial institutions, whereas they may be uncomfortable providing account information on the Internet to sellers or service-providers. Many financial institutions are already able to authenticate their customers online through Internet banking platforms or similar methods. ACTION leverages that existing ability into new authentication and payments business opportunities online.”

Benefits of the ACTION Payment Model

ACTION provides financial institutions the ability to serve as a payments portal for individual and corporate customers. ACTION is an opportunity for banks to build authentication and guaranteed payment services into their payments processing business. Financial institutions can leverage existing authentication methods and information technology investment to support ACTION.

Sellers benefit from receiving guaranteed payments from buyers’ financial institutions, which reduces the risk of returned payments. The risk of fraud is lower because the responsibility for authenticating buyers is shifted from sellers to the buyers’ financial institutions, where trusted relationships with buyers already exist. ACTION provides sellers the opportunity to offer a secure payment option that allows buyers to pay directly from their checking accounts.

Buyers benefit from the ability to keep their financial and payment information private from sellers that perhaps were previously unknown to them. Buyers can utilize a method to pay directly from checking or savings accounts with existing funds.

Next Step

Project ACTION will be operated as an independent membership program within NACHA. Members will develop the business plans and requirements, product design, technology requirements, and a brand identity. Membership is open to all payments industry stakeholders. The first meeting of the Project ACTION membership will take place May 15-16 in Reston, Virginia. For membership information, visit the Project ACTION web site at [http://www.project-action.org][1] , or contact Julie Hedlund, Senior Director of Electronic Commerce, NACHA, at 703-561-3915 or jhedlund@nacha.org.

The ACH Network

The ACH Network serves 20,000 financial institutions, 3 million businesses, and 100 million individuals. The ACH Network is commonly used for Direct Deposit of payroll and government benefits such as Social Security, Direct Payment of consumer bills, business-to-business payments, federal tax payments, and, increasingly, e-commerce and international payments. In 2000 there were almost 6.9 billion ACH payments made worth more than $20.3 trillion.

About NACHA – The Electronic Payments Association

NACHA is the leading organization in developing electronic solutions to improve the payments system. NACHA represents more than 12,000 financial institutions through direct memberships and a network of regional payments associations, and 600 organizations through its six industry councils. NACHA develops operating rules and business practices for the Automated Clearing House (ACH) Network and for electronic payments in the areas of Internet commerce, electronic bill payment and presentment (EBPP), financial electronic data interchange (EDI), international payments, electronic checks, and electronic benefits transfer (EBT). Visit NACHA on the Internet at [http://www.nacha.org][2].

[1]: http://www.project-action.org/
[2]: http://www.nacha.org/

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Diebold Cutbacks

Diebold is eliminating approximately 600 positions and divesting its MedSelect business to save about $25 million annually. As it releases its 1Q/01 report this morning, the ATM manufacturer said it will incur realignment charges of $27 million against first quarter earnings and additional charges in the range of $30 million to $40 million through the balance of this year. The company continues to streamline its North American operations with early retirement programs for eligible employees, the consolidation of facilities and additional job eliminations associated with manufacturing capacity adjustments and attrition. Diebold employs 11,000 worldwide.

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ACH 2000

NACHA reported yesterday that the number of bill payments and other consumer debit payments, including credit cards, made over the ACH Network in 2000, totaled 2.2 billion, an 18.4% increase over 1999. Thirty-two million paper checks were also converted into electronic ACH debits at retail locations last year. Commercial use of ACH payments increased by 14.1%, from 5.29 billion in 1999 to 6.03 billion in 2000. The number of Direct Deposits in 2000 increased by 8.75% over 1999, from 3.0 billion to 3.3 billion. The total ACH payments for 2000 hit 6.88 billion compared to 6.12 billion for 1999. The dollar amount of the transactions grew from $19.0 trillion in 1999 to $20.3 trillion in 2000, a 6.5% increase. The statistics were released yesterday at the ‘NACHA Payments 2001’ conference.

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Levitz/Seaman Renew HH

Household International, the $98 billion consumer lender (managed assets), announced that its private label credit card unit has renewed its partnership agreements with Seaman Furniture Company, Inc., and Levitz Home Furnishings, Inc.

“With these agreements, Household strengthens its position as the leading private label credit card provider to the furniture industry,” said Sandy Derickson, managing director and CEO, Household Retail Services. “We are proud to continue our long-term, successful partnerships with Seaman’s and Levitz, two of the industry’s top furniture retailers.”

Household renegotiated contracts with both retailers when Levitz Home Furnishings, Inc., became the parent company of both Seaman’s and Levitz Furniture Corp., which recently emerged from Chapter 11. Household has managed Seaman’s private label credit card program since 1997 and Levitz’s since 1998.

“Our reorganization has been a lengthy process, and we have appreciated Household’s continued support,” said Ed Grund, CEO of Levitz. “Now, we are moving forward and extending our partnership with Household so that Levitz customers will continue to benefit from Household’s premier credit card program.”

Previously, Seaman’s and Levitz had been ranked independently among the top 20 furniture retailers in the U.S., but now Levitz Home Furnishings, Inc.’s subsidiaries will command 116 stores positioned to produce approximately $900 million in sales this fiscal year. Both companies’ private label credit card programs offer customers a revolving credit card account, special financing offers, a dedicated line of credit and no annual fee. The programs also allow customers to apply for credit online at Seamans.com and Seamanskids.com .

“Using Household’s private label expertise and financing flexibility, Seaman’s has built a highly successful credit card program,” said Alan Rosenberg, CEO of Seaman’s. “We look forward to building on this success by continuing our long-term partnership with Household.”

Levitz operates 59 stores on the West and East Coast and in the Phoenix, Las Vegas and Minneapolis/St. Paul markets. Seaman’s operates 57 stores on the East Coast and Ohio.

Household businesses are leading providers of consumer finance, credit cards, non-prime auto finance and credit insurance products in the United States, United Kingdom and Canada. In the United States, Household largest business, founded in 1878, operates under the two oldest and most widely recognized names in consumer finance-HFC and Beneficial. Household is also one of the nation’s largest issuers of private-label and general purpose credit cards, including the GM Card and the AFL-CIO’s Union Privilege card. For more information, visit the company’s Web site at [http://www.household.com][1].

[1]: http://www.household.com/

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