FTC Debit Exam

The government’s credit-card probe is picking up a new trail. The Federal Trade Commission, according to industry consultants and lawyers, has begun looking at Visa’s plans for its new debit card, called an “online card.” The August 17 issue of Business Week reports the agency is examining Visa’s requirement that transactions with those cards go over Visa’s electronic network rather than regional networks that charge merchants lower fees. Website: [www.businessweek.com][1]

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


TeleBanc Future Hopes

TeleBanc Financial Corp., holding company for TeleBank, a leading national provider of high value financial service products, announced net income of $179,081 for the quarter ended June 30, 1998, as compared to $1.2 million for the same period in 1997.

The company reported $0.00 diluted earnings per share for the quarter ended June 30, 1998 as compared to $0.16 for the quarter ended June 30, 1997. For the six months ended June 30, 1998, the company reported net income of $615,488, or $0.05 diluted earnings per share, compared to net income of $2.1 million, or $0.31 diluted earnings per share for the six months ended June 30, 1997.

The decline in income in the second quarter of 1998 reflects the company’s continued implementation of its strategic plan of solidifying its position as one of the premier national direct marketers of high value savings and investment products through an extensive marketing and promotional campaign, an increased Internet presence and expanded affinity marketing relationships.

President and CEO Mitchell H. Caplan commented, “The company intends to solidify TeleBank’s brand identity and expand its customer base by emphasizing the TeleBank value equation of higher interest and low or no fee financial products, superior customer service, and anywhere, anytime convenience.

“We believe that building the TeleBank brand will, over time, increase customer conversion and retention rates, customer referrals, the number of accounts per customer, and customer receptivity to new products,” said Caplan. “As a result, marketing expenses directly associated with brand building for the first half of 1998 were approximately $1.2 million as compared with approximately $600,000 for the entire 1997 calendar year.”

In the second quarter of 1998, TeleBank launched its first regional marketing campaign, focusing on California and the western states. This regional advertising and promotional effort targets the most profitable consumers by building awareness and increasing reach through radio, print, outdoor and other forms of advertising.

“Early results of the west coast marketing campaign are promising and indicate an 80% increase in new account acquisition in California from May 1998 to June 1998,” Caplan noted. “We expect to see continued growth in California and the western states, which may become a model for future regional, national or international campaigns.”

In addition, TeleBank consummated two Internet-based marketing relationships to distribute its products. The first, ThirdAge.com, is a community-based web site geared to the 45+ baby boomer market, and the second, E-Loan, an Internet-based supplier of value-driven residential mortgage products.

In addition to increased Internet distribution, the relationship with E-Loan is expected to result in fee income through the sale of residential mortgages to TeleBank’s consumer base. “It is the company’s strategy to build similar value-based relationships among community-based, product-based and distribution-based sites,” Caplan said.

TeleBanc announced in January 1998 a definitive merger agreement with Direct Financial Corp., the parent of Premium Bank, a Mid-Atlantic regional direct bank. The merger, which received regulatory approval, is expected to be consummated in early August 1998 and should add approximately 15,000 additional deposit accounts and over $320 million in assets.

With the anticipated consummation of the Direct Financial Corp. acquisition and a corresponding increase in assets of approximately $320 million, management maintained relatively stable asset levels in the second quarter of 1998. As of June 30, 1998, assets totaled $1.2 billion, a $100 million increase, as compared to $1.1 billion as of Dec. 31, 1997.

While the company’s corresponding liability levels also remained stable, deposits increased $81.4 million, an annual growth rate of 31.2%, to $603.6 million at June 30, 1998 from $522.2 million at Dec. 31, 1997. In the second quarter of 1998, retail customer accounts grew at an annualized rate of 43.5% to over 24,000 accounts.

Caplan commented, “Given the successful completion in late July of a follow-on public offering of 4,500,000 shares of TeleBanc Financial’s Common Stock at a price to the public of $14.50 per share, the successful completion of a public offering of $27.5 million of 9% Trust Preferred Securities in July 1998, and the anticipated closing of the acquisition of Direct Financial Corp. in August 1998, the company seeks to continue its historic levels of account and deposit growth.

“As evidenced during the second quarter of 1998, immediately prior to and during periods of substantial growth, the company’s strategy is to acquire single family residential mortgages with lower credit risk characteristics and corresponding lower yields, which results in a decline in net interest margin but allows for conservative growth.”

Net income for the three months ended June 30, 1998 consisted primarily of $3.3 million in net interest income, $816,000 in net gains on the sale of mortgage-backed securities, investment securities available for sale and loans held for sale, and $365,000 in loan fees, offset by $3.9 million in non-interest expenses, $77,000 in losses related to equity-method investments, $75,000 in provision for loan losses and $51,000 in income tax expense.

Net income for the three months ended June 30, 1997 consisted primarily of $3.4 million in net interest income and $1.4 million in net gains on the sale of securities available for sale and loans held for sale offset by $2.5 million in non-interest expenses, $308,000 in provision for loan losses and $617,000 in income tax expense.

Net interest income reflects an annualized interest rate spread of 1.11% and 1.55% for the three months ended June 30, 1998 and 1997, respectively.

Net income for the six months ended June 30, 1998 reflects $6.9 million in net interest income, $1.9 million in net gains on the sale of mortgage-backed securities, investment securities available for sale and loans held for sale, $449,000 in income on equity-method investments and $712,000 in loan fees, offset by $8.1 million in non-interest expenses, $325,000 in provision for loan losses and $526,000 in income tax expense.

For the same period in 1997, net income consisted of $6.4 million in net interest income, $1.8 million in net gains on the sale of mortgage-backed securities, investment securities available for sale and loans held for sale, offset by $4.6 million in non-interest expenses, $551,000 in provision for loan losses and $973,000 in income tax expense.     Stockholders’ equity decreased $376,000 from $45.8 million at Dec. 31, 1997 to $45.4 million at June 30, 1998. The decrease reflects an unrealized loss on securities of $847,000 and preferred stock dividends of $324,000, offset by the receipt of $180,000 upon the exercise of options and net income of $615,000.

TeleBanc Financial is the parent company of TeleBank and TeleBanc Capital Markets. TeleBank provides high value financial products and services to customers in all 50 states through use of alternative electronic delivery channels including telephones, the Internet, automated teller machines, facsimile and mail.

TeleBanc Capital Markets is a registered investment advisor, funds manager and broker-dealer specializing in single-family residential mortgage acquisition.

Financial Highlights
($ in thousands except per share data)

                                     June 30, 1998       Dec. 31, 1997

Selected Balance Sheet Data:

Total assets                          $ 1,209,466         $ 1,100,352

Loans receivable, net and
  held for sale                       $   585,917         $   540,704

Mortgage-backed securities,
  available for sale & trading        $   434,301         $   340,313

Investment securities, available
  for sale                            $   139,703         $    91,237

Retail deposits                       $   603,594         $   522,221

Brokered callable certificate
  of deposits                         $    66,953                 —

Advances from Federal Home Loan Bank  $   208,500         $   200,000

Securities sold under agreements
  to repurchase                       $   232,411         $   279,909

Subordinated debt, net of original
  issue discount                      $    29,732         $    29,614

Corporation-Obligated Mandatorily
  Redeemable Capital Securities of
  Subsidiary Trust Holding Solely
  Junior Subordinated Debentures
  of the Corporation                  $     9,494         $     9,572

Total stockholders’ equity            $    45,448         $    45,824

Book value per common share           $     10.10         $     10.27

Tangible book value per common share  $      9.64         $      9.87

Common shares outstanding               4,494,988           4,458,322

Deposit accounts                           24,268              21,817

($ in thousands except per share data)

                           For the 3 months        For the 6 months
                            ended June 30,          ended June 30,
                            1998       1997         1998       1997

Results of Operations:

Interest income           $ 18,581   $ 15,275     $ 36,653   $ 28,112

Interest expense            15,276     11,865       29,754     21,743

Net interest income          3,305      3,410        6,899      6,369

Provision for loan losses       75        308          325        551

Net interest income after
  provision for loan losses  3,230      3,102        6,574      5,818

Non-interest income, net     1,104      1,243        3,051      1,851

Total selling, general &
  administrative expenses    3,441      2,250        7,330      4,148

Total other non-interest
  expenses, net                487        202          802        410

Income tax expense              51        617          526        973

Minority interest in
  subsidiary                  (176)       (67)        (352)       (67)

Net income                 $   179    $ 1,209      $   615    $ 2,071

Preferred stock dividends      162        162          324        222

Net income available to
  common stockholders       $   17    $ 1,047      $   291    $ 1,849

Earnings per share:
Basic                      $ 0.00    $  0.24      $  0.06    $  0.43
Diluted                      0.00       0.16         0.05       0.31

Weighted average common shares and equivalents:
Basic                   4,491,801  4,423,922    4,480,016  4,319,224
Diluted                 5,784,144  7,688,588    5,746,498  6,767,874


iMall & GEN Partner Up

iMALL Inc., a leading provider of electronic commerce services and operator of the Internet’s largest shopping mall, and GEN International Inc. ([www.gen.com][1]), a premier web hosting service for online merchants announced Thursday a marketing agreement whereby GEN will exclusively offer iMALL’s Bolt-on e-commerce solution to its new and existing Internet merchants.

Under the agreement GEN will offer its base of more than 35,000 hosting clients iMALL’s Bolt-on e-commerce solution. Bolt-on e-commerce is a browser-based e-commerce solution that enables Web merchants to easily and cost effectively add commerce to their existing Web sites so they can immediately and securely engage in transactions online. Additionally, iMALL will provide GEN an online mall to showcase GEN’s merchants.

“GEN is exactly the type of company we are trying to partner with,” said Richard Rosenblatt, chairman and CEO of iMALL. “A key part of our e-commerce strategy is to work closely with leading ISPs and Web hosting firms to leverage their installed base of merchants. Agreements with industry leaders such as GEN, Verio (NASDAQ:VRIO), Cardservice International, and animalhouse.com validate both our strategy of providing electronic commerce services to small and medium sized business and the market’s demand for our robust, easy-to-implement transactional solutions.”

“Our merchants are demanding a simple method of commerce-enabling their Web sites,” said Thomas Heimann, chairman and chief executive officer of GEN. After thoroughly surveying e-commerce solutions from a variety of sources, we concluded that iMALL’s Bolt-on e-commerce is the best toolset available; it is very easy to use, yet powerful enough to securely manage an online storefront with tens of thousands of products. We expect that at least 10,000 new merchants will subscribe to iMALL’s e-commerce services within the next year.”

Within the next month, GEN will launch its online mall, powered by iMALL, which will enable GEN’s merchants to offer their goods and services to a large audience of Internet visitors. The mall will include a number of features designed to enhance visitors’ shopping experience including product- and store-level searching, a mall-wide shopping cart, virtual pavilions for special product categories and product ads with direct-ordering capabilities.

About iMALL

iMALL is an electronic commerce enabler of small- and medium-sized businesses allowing them to cost-effectively engage in electronic commerce through the use of iMALL’s proprietary e-commerce tools and services. iMALL offers its electronic commerce services directly to merchants, as well as through partnerships with leading ISPs, Web hosting firms, and financial service companies with an Internet focus. The Company also operates the largest shopping mall on the Internet, located at , with more than 1,600 hosted storefronts, and millions of visitors monthly.

About GEN

Founded in April of 1995 and with headquarters in St. Petersburg, Fla., GEN has quickly become one of the world’s largest providers of Internet Presence Solutions, hosting over 35,000 domains for organizations in over 60 countries. GEN offers a solid basis for any business to get started with Internet and electronic commerce — from hosting a businesses web presence to sophisticated database applications to secure electronic payment solutions. GEN’s home page is located at .

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



IFS International, Inc. announced plans to complete Y2K certification of its TPII family of products by October 31st, 1998.

IFS is taking the Y2K matter very seriously and has had a team assigned to the Y2K verification project since April of 1998.  Certification of IFS International’s core TPII software has been completed and subsequent certification of all ancillary TPII products is due by October 31st, 1998. All current customers affected by TPII Y2K issues will be scheduled for enhancement upgrades after certification completion.

“The changes to our base code have thus far proven to be minimal and we do not have as extensive a problem as legacy based systems.  We also have access to powerful client/server tools to assist us in editing and testing our system for Y2K compliance” said Dave Hodge, CEO of IFS.

Oracle, which is the database used by TPII, has stated that its products are Y2K compliant.  In addition, IFS hardware partners have indicated that all operating system components will be Y2K compliant as well.  Therefore, the impact of Y2K issues on the TPII system should be minimal.

In addition to analyzing the system software for possible Y2K issues, IFS is in a position to be able to simulate various environments for testing Y2K issues and scenarios.  Using transaction simulators, IFS systems were rolled forward in time to December 28, 1999.  Transactions were introduced for a period of several days allowing TPII system components to be tested across the Y2K boundary.

IFS generated sets of test credit cards with issue dates and expiration dates both before, on, and after the Y2K boundary.  All tests were completed successfully on schedule by July 31st, 1998 on the core TPII system.  IFS International plans to start formal Y2K certification with VISA’s Denver Processing Center early next month to ensure Y2K compliance for its VISA Cash product lines.  Recent releases of TPII have included any completed enhancements related to Y2K.

“We consider the Y2K issue as a serious matter and plan a thorough certification of our base and our customer systems.”   We believe Dave Hodges previous experience of managing two large certification projects will be a great asset to the project,” said Frank Pascuito, Chairman.

IFS International, Inc. develops, markets, and supports software products for the Electronic Funds Transfer (EFT) market.  IFS International products are used to provide ATM, POS, smart-card, debit card management, bank teller, bank platform, home banking and call-center solutions to the EFT industry. Its family of software products, marketed under the name TPII, serves as a manager of EFT systems for automated teller machines (ATM), point-of-sale (POS) and voice authorization.  The NCI International, Inc. subsidiary adds complementary products to the IFS family, including NCI Business Center, an enterprise-wide retail banking solution designed to automate all traditional as well as Internet/Intranet transactions.  IFS also provides a turnkey system for smart-card implementation.


Earning Credit

VISA chose two college students yesterday to co-host a series of 30 Hollywood-style game shows on college campuses nationwide to teach students about wise money management.  The show/tour, which kicks off August 22 at Arizona State University,is called “Earning Credit”, and will award $1,000 tuition scholarships and other prizes to students who take turns answering questions on such topics as credit cards and budgeting money. As part of its back-to-school education drive, VISA is also distributing “What’s Up with Money in Your Life?” teaching kits to 4,000 colleges and universities.



PNC Bank Corp. and the Pittsburgh Pirates announced a 20-year marketing alliance under which the new home of the Pirates will be named PNC Park when it opens in 2001. Under the naming rights agreement, PNC Bank will pay approximately $1.5 million a year through the 2020 baseball season.  In addition, the bank has negotiated a separate marketing agreement that provides a variety of marketing, advertising and merchandising opportunities with the Pirates — including the exclusive right to offer financial services at the ballpark.


Utell – VISA Promo

Utell International has paired up with VISA to offer travelers added values and discounts of up to 53% off at eleven Thailand hotels.

Running now through Oct. 31, 1998 guests staying at participating hotels and paying with VISA will receive such added extras as room upgrades or a complimentary breakfast. Added extras vary for each hotel and are designated by the individual property. These special rates and added extras are exclusive to Utell International, for single or double occupancy, require no minimum/ maximum stay and are available seven days a week.

The properties participating in ‘Thailand Prefers VISA’ include: Allamanda Laguna, Central Waterfront Suites, Karon Villa Phuket/Karon Villa Royal and Pearl Village Hotel in Phuket; Central Grand Plaza, Imperial Queen’s Park Hotel and Rembrandt Hotel in Bangkok; Central Wong Amat Beach Hotel and Royal Cliff Beach Resort in Pattaya; Central Sukhontha Hotel in Hat Yai; and Imperial Samui Hotel in Samui.

Utell International, a REZsolutions Inc. company, is the world’s leading hotel marketing and reservations company representing more than 7,700 hotels in over 180 countries. Member properties range from budget to deluxe, city center to resort and include major international brands as well as independent hotels.

For more information or to make reservations with a Utell-represented property from the U.S. and Canada, call 800/44-UTELL. REZsolutions Inc. is the result of the merger of Anasazi Inc. and Utell International and is the leading provider of technology-based systems, reservation and distribution networks, private label reservations services and marketing programs for the hospitality industry.


MasterCard Online Promo

MasterCard and Preview Travel, Inc., put together a marketing alliance Wednesday to promote the use of Preview’s online travel service. The alliance makes MasterCard a premier advertiser and the exclusive payment system sponsor for Preview Travel, as well as the primary sponsor of the Preview Travel Business Travel Center.  The program, which will appear on Preview Travel’s Web site and America Online, provides Preview Travel’s MasterCard users with travel and entertainment offers, upgrades, special awards and discounts.  The program will also feature a point-of-purchase promotion on Preview Travel’s services on Excite and Lycos. The alliance between MasterCard and Preview Travel follows MasterCard’s recently announced alliance with Yoyodyne and Excite.


PULSE – Chase Renew

The PULSE EFT Association has renewed its contract with Chase Bank of Texas to provide the network’s technical operation for the next five years. The new agreement calls for Chase Bank to continue to provide operation of the hardware and software associated with the PULSE system. In addition, Chase is responsible for management of the on-line functions of the network.

In making the announcement, Stan Paur, PULSE president and CEO, noted, “Over the years, Chase has done an extraordinary job in providing the technical services necessary to maintain the highest levels of service for PULSE member financial institutions and their customers. This agreement will ensure the continued high level of uninterrupted service that PULSE provides. The levels of support provided by Chase are essential as the use of electronic banking services through PULSE continues to expand.”

Tom Vicknair, executive vice president at Chase, commented, “Our organization is delighted at PULSE’s decision to extend the switch agreement. We are committed to maintaining the highest levels of service. In fact, over a 26-month period, the PULSE switch has experienced zero minutes of unscheduled down time.”

Chase Bank of Texas, N.A. has 123 branches throughout the state and market leadership positions in retail, corporate and commercial banking and community development lending. Chase Texas is a unit of The Chase Manhattan Corporation, one of the world’s largest financial institutions with $367 billion in assets.

PULSE is a not-for-profit, shared electronic funds transfer network comprising nearly 2,000 banks, credit unions, and savings and loans in Arkansas, Colorado, Louisiana, Mississippi, New Mexico, Oklahoma, Tennessee and Texas. The network includes more than 30,000 ATMs and 122,000 PULSE PAY point-of-sale terminals.


eCommerce Solution

eCommerce Corporation ([www.ecommerce.com][1]) is announcing the roll-out of the first-ever turnkey electronic commerce solution for business.

The pending acquisition of eCommerce by Enhanced Services Company, Inc. allows eCommerce of Stamford, Conn., to create, market, build, host and fulfill for their customers interactive business solutions, all under one roof.

“It’s clear that e-commerce represents the next wave of development in the continuing metamorphosis of the Internet as a business communications medium,” said Lance Estes, president and CEO of eCommerce Corp. “We’re very enthusiastic to be the first to market a true turnkey system for the interactive business community, because we know how important it is to our customers’ business success. We recognize how critical it is for our customers to remain on the cutting edge of information technology and keep a step ahead of their competitors.”

The key to eCommerce’s success has been to deliver high-quality, commerce-enabled, scalable web sites available around the clock to the Internet community. The company has built on such success as Sports Illustrated and the NFL store ([www.ultimatefootballshop.com][2]), Gymboree Corp. ([www.gymboree.com][3]) and such Turner properties as the WCW ([wcw.ecommerce.com][4]).

With its turnkey system, eCommerce offers complete credit card authorization and settlement, along with a total integration with a 150,000-sq.-ft. fulfillment house and state-of-the-art fulfillment backend system. The completion of the integration of the front-end web site with the backend system allows for the real-time communication of data to the web database, bank gateway, site administrator and the self-serve online customer service center. Double quantity pricing for fulfillment makes this come together in one complete package that is easily managed by a single individual at the corporate headquarters or anywhere. All administration functions are performed through secure browser-based screens including daily reporting of activity and sales.

eCommerce plans to launch nine new enterprise-quality sites within the next six weeks that will take advantage of the new backend integration.

Enhanced Services Company, Inc. of El Segundo, Calif., recently announced the execution of a Letter of Intent to acquire eCommerce for a combination of cash and stock. The marriage will result in a one-stop shopping electronic commerce organization offering the full spectrum of graphics design and technology, Internet advertising, digital marketing and database fulfillment services. eCommerce will become a subsidiary of ESVS.

[1]: http://www.ecommerce.com
[2]: http://www.ultimatefootballshop.com
[3]: http://www.gymboree.com
[4]: http://wcw.ecommerce.com


CADRE System

NeuralTech and Frederick, MD-based Merlin Solutions signed an agreement whereby Merlin Solutions will use the NeuralTech ‘CADRE’  system to process disputes on behalf of its customers who are credit card acquirers and their processors.The ‘CADRE’ system, currently installed in 4 out of 10 of the nation’s largest merchant acquirers, delivers a highly modular interactive software solution that automates each phase of the dispute resolution process. ‘CADRE’ provides interactive customer service case management; sales draft retrieval requests; chargeback initiation; representment processing; and cardholder contact and correspondence management. ‘CADRE’ utilizes NeuralTech’s expert system technology, which codifies the VISA/MasterCard Association rules governing dispute resolution.