Firstar Acquisition

Firstar Corp. signed a definitive agreement Friday to acquire Mercantile Bancorporation through an exchange of shares valued at approximately $10.6 billion. The combined company would become the 13th largest bank holding company in the USA, with assets of more than $75 billion, deposits of $59 billion, assets under management of $67 billion and a market capitalization of $32 billion. The combined company will also become the 25th largest issue of VISA and MasterCards, based on receivables, according to CardData ([www.carddata.com][1]). Firstar will also become the 10th largest ATM system with more than 2,000 ATMs.

FIRSTAR + MERCANTILE (4Q/98 stats)

RECV ACCTS ACTIVES CARDS
Firstar $1.3 billion 949k 798k 1.4m
Mercantile $633 million 476k 272k 490k
Combined $1.9 billion 1.5m 1.1m 2.0m

Source: CardData (www.carddata.com)

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

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Discover UK

Morgan Stanley Dean Witter is coming ashore this month with the launch of its ‘Discover’ card in the UK. The card will offer a cashback feature, however, other details of the offer have not be made public. Discover will compete with the ‘Alliance & Leicester Moneyback’ card, the only card program in the UK currently offering a cashback feature. US-based Providian is set for its first credit card marketing pilot in the UK this month. Also British phone financial services company, Direct Line, launched its first card in the UK market two weeks ago. For details on the UK and Providian, Direct Line and other US-based issuers in the UK, see Friday’s (4/30/99) CardFlash ([www.cardflash.com][1]).

[1]: http://cardflash.com

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Portfolio Sale

Johnstown, PA-based U.S. Bank confirmed Friday the sale of its credit card portfolio to First National Bank of Omaha. The portfolio consists of 16,878 credit card accounts with outstanding balances totaling $13.3 million. The portfolio was sold for a 16% premium. U.S. Bank will recognize a $1.2 million after tax gain on the transaction in the second quarter of 1999. Under terms of the agreement U.S. Bank entered into an agent bank agreement with First National Bank of Omaha.

First National Nebraska (Omaha) Snapshot

(First Quarter 1999 Data)
RECEIVABLES Q VOLUME ACCOUNTS ACTIVES CARDS
$3,240,733,000 $1,031,269,000 3,780,272 1,618,373 4,838,748

Source: CardData (www.carddata.com)

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New Sub-Prime Bank

Baltimore, MD-based Creditrust Corp. announced this morning it is launching a new wholly owned subsidiary, Creditrust Card Services. The subsidiary will issue credit cards to both existing customers and target the secured and partially secured markets. Creditrust has hired Scott Nelson as VP, to head up the new unit. Mr. Nelson has spent approximately six years as VP of Card Member Operations at First USA and most recently he managed the credit card operations at ADP. Founded in 1991, Creditrust Corporation acquires, manages and collects on charged-off bank credit card and private label credit card accounts.

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Corillian Signs Downey

Corillian Corporation, a leading provider of electronic commerce solutions and Web-based financial services, announced Friday that it has inked a contract with Downey Savings, one of the largest financial institutions in the nation, to install the Voyager platform and provide a customized, company-branded, Web-based user interface. The Voyager platform will allow Downey Savings to extend its banking products and services nationwide, allowing customers to access real time account information and pay their bills through both their browser and OFX-based PFM software. Installation of Voyager at Downey Savings is expected in the latter half of 1999.

“Downey Savings selected Corillian as its Internet banking solution provider because Corillian has demonstrated its ability to deliver production tested solutions and professional service expertise,” said Jill Bonner, Downey Savings’ Director of Retail Banking. “Corillian has built a solid foundation to meet all the Internet-based needs of our customers today, while setting the framework for future product enhancements. And the product promises security, an important feature for us, as we’re obviously concerned with protecting our customers’ sensitive account information.”

“Corillian is proud to work with Downey Savings,” said Ted Spooner, Chairman and CEO of Corillian. “Downey has a 42-year history of personalized customer service. Over the years, their technological choices have supported significant growth while maintaining top quality, one-on-one customer care. We look forward to providing them a production-proven, cutting edge Internet banking platform.”

Corillian’s Voyager platform is a high-performance middleware server built upon the Windows NT operating system and is designed to handle Internet-delivered banking and bill payment transactions. The Voyager platform provides a link between financial institutions’ legacy host systems and customers using OFX-enabled personal financial management software and browser-based (HTML) interfaces. Corillian Client Applications enable financial institutions to differentiate and brand their Internet service. The browser based (HTML) user interface and MoneyPAD(TM) Personal Finance Appliance interact with the Voyager platform so consumers can easily access real time financial information.

About Downey Savings

Downey Savings and Loan Association, F.A., held by Downey Financial Corp., (NYSE: DSL) is headquartered in Newport Beach and has helped California residents with their banking and borrowing needs since 1957.

With assets in excess of $6 billion, Downey Savings, an Equal Housing Lender, has 95 locations throughout California and also offers home loans nationwide. The stock of Downey Financial Corp. is traded on the New York Stock Exchange and Pacific Exchange under trading symbol “DSL.” The Downey corporate Web site address is http://www.downeysavings.com.

About Corillian Corporation

Based in Beaverton, Oregon, Corillian is the leading provider of end-to-end Internet banking solutions that help financial institutions become on-line financial service providers. The Voyager platform is built upon the Windows NT operating system and uses the latest Microsoft(R) communications technology, Distributed COM (DCOM). Voyager server applications support core banking and bill payment transactions. Future applications will support brokerage, bill presentment, small business and cash management transactions. Voyager handles transactions for Corillian’s customizable browser-based (HTML) financial interface, Corillian’s MoneyPAD(TM) Personal Finance Appliance (PFA), and OFX-enabled personal financial managers like Quicken(R) and Microsoft(R) Money. For more information, visit [www.corillian.com][1].

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

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UK Competition

Credit card competition is heating up more in the UK as Providian Financial moves in and Lloyds drops its interest rates. Providian will begin marketing a card next month with a 13.9% APR and no annual fee. The middling offer is targeted to sub-prime consumers. Jim Elliott, EVP of Providian’s European operations, is heading the move. Meanwhile Lloyds TSB Group PLC is dropping the annual fee and cutting the interest rate on its ‘Asset’ card. The new pricing will be a tiered rate with an APR of 18.9% for balances under 1,000 pounds and 15.9% for balances over that amount. Phone financial services company, Direct Line, has also entered the UK market. Last week the firm rolled out a no-fee card with a six-month intro rate of 6.8% and a go-to rate of 15.9%. Capital One introduced, last month, a fixed, long-term interest of 11.9% to new customers. USA-based People’s Bank (CT) and Advanta market cards with a six-month teaser rates of 6.9%.

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DANKORT Deal

Telepartner A/S Thursday announced that it has entered into an agreement with DANKORT which will allow Telepartner to accept on-line credit card payments on its [www.909.dk][1] Web site for the first time.

DANKORT, the Danish bank and credit card system, is the largest credit card system in Denmark with more than 2.6 million users. As a result of the agreement, Telepartner will begin accepting credit card payments immediately through its e-commerce Web site.

“Until now, it has been impossible to use the Danish credit card DANKORT as a means of payment on the Internet,” said Aldo Petersen, chief executive officer of Telepartner. “As one of the largest Scandinavian retailers of music over the Internet, we will be better able to service our customers as a result of this new agreement with DANKORT.”

According to Petersen, Telepartner has one of the most active Web sites with overnight distribution in all of Scandinavia.

“The DANKORT agreement will greatly simplify payment for CDs and music selections from our on-line music shop,” Petersen said. “When coupled with the overnight delivery services we introduced last year, I see even greater potential for e-commerce than ever before in this area.”

Formed in 1986, Telepartner A/S is an Internet solutions integrator, ISP, and telecommunications company that provides a host of services and products to businesses and consumers, primarily in Scandinavia.

These many services include domain name registration, international telephony, e-commerce, Web site design and hosting, business and consumer e-mail services, and a wide variety of other telecommunications products and services.

[1]: http://www.909.dk

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Checkfree Glitch

Checkfree customers have had a frustrating week trying to use dialup PC banking. According to the Atlanta Journal and Constitution as many as 500,000 consumers of twenty banks have been unable to bank online by dialing directly into the bank. The problem has apparently been linked to Checkfree’s recent move to its new ‘Genesis’ technology platform. The Orlando Sentinel says SunTrust Bank customers have been completely shut out of all PC banking while only 15% of Wells Fargo’s customers have been unable to conduct business by computer. Checkfree says this is the first service interruption of this magnitude. The company processes more than 11 million transactions per month for more than 2.8 million subscribers.

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MBNA Cards

MBNA signed affinity card agreements with the Pittsburgh Pirates and the Marine Corps Association yesterday. MBNA says it now has the endorsement of 17 ‘Major League Baseball’ teams and is the “Official Credit Card Issuer of Major League Baseball”. MBNA has issued nearly 900,000 ‘Major League Baseball’ affinity cards. MBNA also announced Thursday that the Marine Corps Association has entered into an agreement with MBNA to issue credit cards to nearly 100,000 Marines, former Marines, and their families. The MCA was formed in 1913 by the Marines of the Second Provisional Brigade at Guantanamo Bay.

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Leo to Launch Next Month

ORGA Kartensysteme GmbH, the German-based global leader in smart card development and delivery, will officially launch its new customer loyalty system, Leo, at CardTech/SecurTech ’99 in Chicago.

At the Show, ORGA will also announce its participation in two exciting new technology initiatives with MasterCard and American Express.

The Leo Smart Card-based Loyalty System addresses the biggest challenge facing retailers today: how to attract and retain customers. ORGA’s secure, flexible, highly configurable technology engine offers merchants an effective customer retention solution far superior to traditional standalone paper card alternatives. For systems integrators, Leo represents a quick yet powerful loyalty application development tool.

Banking: ORGA will demonstrate its new ACE Smart Card Accepting Device Approver, a highly reliable test simulator for banking terminals. This fully automated testing instrument supports a variety of Smart Card-based credit/debit and electronic purse applications. It has already won both EMV and Geldkarte (ZKA) approval for use.

Health Care: In addition to featuring its innovative DentCard dental application at CTST ’99, ORGA will provide information on its ongoing role in the trendsetting Health Passport Project. Sponsored by the Western Governors Association of the U.S., this trial is being conducted in the states of Wyoming, North Dakota and Nevada. ORGA is supplying more than 40,000 multifunction microprocessor cards, which will be issued primarily to women and small children who receive benefits from more than one national support program. The cards store personal and medical data as well as food vouchers, which recipients use for cashless shopping.

Emerging Markets: ORGA will be demonstrating a unique new smart card application which ensures the privacy and authenticity of Internet services. The company’s sm@rt c@rd goes online (SGO) system provides a secure process for accessing the World Wide Web. As a result, Internet usage can be more effectively monitored and sensitive information found on Web pages can be protected from tampering by unauthorized individuals.

Telecommunications: ORGA will feature its SIMtelligence family of products, which cover all aspects of GSM network service implementation, from initial consultation to SIM cards, programming tools and network infrastructure. The company’s SIMtelligence Center allows operators and users of mobile phones fast and easy access to new or existing value-added services. Depending on the subscriber’s needs, applications can be downloaded, activated or deactivated by utilizing ORGA’s Over-The-Air (OTA) updating capabilities.

In addition, ORGA is presenting its full line of HPS personalization systems, from desktop to high-capacity, multi-order production capabilities. The HPS family offers high-speed, full-color processing, a fully automatic solution for chip programming, testing and laser engraving. These systems personalize all standard memory and processor cards from various manufacturers and can produce personal identification, mobile telephone, access control and health services cards.

ORGA Kartensysteme GmbH Germany has been a pioneer in the development of microprocessor-based smart card technology since 1985. Application areas include: telecommunications, health care, retail/loyalty, banking, personal ID and e-commerce. ORGA enjoys a world-wide presence with subsidiaries, branch offices and joint ventures in Brazil, China, France, Great Britain, Russia, Singapore, South Africa and the USA. Visit our Web Site at: [www.orga.com][1]

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

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Cap One Splits

Capital One announced this morning its Board of Directors has approved a three-for-one stock split of the company’s common stock.The three-for-one stock split will be in the form of a 200 percent stock distribution, or two-share stock dividend, to be distributed on June 1, to stockholders of record on May 20, 1999. The split will increase the outstanding number of Capital One shares from approximately 65 million to 195 million. Also at yesterday’s meeting, the Board of Directors approved a special stock option program, known as ‘EntrepreneurGrant’. Under the new program the company’s two top executives have given up all remaining compensation through the year 2001. Richard Fairbank, Chairman/CEO, and Nigel Morris, President/COO, gave up one additional year’s salary and two additional years of annual cash incentive, annual option grants, and Senior Executive Retirement Plan contributions, in exchange for a one-time option grant. The options vest early if the stock price reaches $300 at anytime on or before June 15, 2002, and in any case, in nine years or upon a change of control, regardless of the stock price. Mr. Fairbank will receive an option to purchase 376,887 shares and Mr. Morris will receive an option to purchase 251,258 shares of the company’s common stock. About 141 senior managers are also able to participate in the program, by electing to give up all annual stock option grants for the next two years, in exchange for the ‘EntrepreneurGrant’.

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