AmEx KnowledgeBase

American Express TRS and NC-based KnowledgeBase Marketing announced a partnership Tuesday to develop a series of products and services — ranging from turnkey customer acquisition and loyalty programs to advanced data warehousing services. The new services will become available to merchants for the first time later this year, and will be developed, packaged and priced to meet the needs of several merchant segments. American Express selected KnowledgeBase Marketing in conjunction with Yankelovich Partners for the depth and breadth of expertise and resources the collaboration of those two companies provide.


Citibank Card Bonds Rated

Citibank Credit Card Master Trust I’s (CCIMT I) $1.25 billion floating-rate class A credit card participation certificates, series 1998-7, are expected to be rated ‘AAA’ by Fitch IBCA. The corresponding $80 million floating-rate class B certificates are expected to be rated ‘A+’.  In addition, Fitch IBCA expects to affirm its master trust ratings, indicating the issuance of series 1998-7 will not result in a reduction or withdrawal of current ratings assigned to outstanding trust certificates.

The expected ratings reflect the quality of the receivables generated from Visa and MasterCard credit card accounts, the available credit enhancement, the servicing expertise of Citibank (South Dakota) and the transaction’s sound legal and financial structures.

Class A’s enhancement, equal to 11% of the total initial invested amount, is derived from a 5% shared cash collateral account (CCA) and the subordination of the 6% class B certificates.  The shared CCA will first support class A then class B, covering losses not paid by excess finance charge collections.  Class B’s enhancement, equal to 7% of the total initial invested amount, is derived from a 2% CCA dedicated just to class B, along with the 5% shared CCA.

Credit enhancement levels were determined by stressing portfolio steady state yield and payment rate assumptions to determine the level of defaults the enhancement could sustain.  Class A is able to support a 35% decrease in yield, payment rates dropping in half and defaults increasing to a level above 30% and still make full and timely payments to investors.  Class B can sustain a 25% decrease in yield, along with a decline in payment rates by more than 40% and defaults increasing to a level above 25%, while meeting all investor principal and interest obligations.

Class A investors will receive monthly interest payments of one-month LIBOR plus 0.01% and class B investors will receive one-month LIBOR plus 0.125% throughout the revolving and accumulation periods and on the scheduled final payment date.  If an early payout occurs, class A and B investors will receive principal on an accelerated schedule, along with monthly interest payments.  Following the variable accumulation period, principal is expected to be paid to class A and B certificate holders on the May 2000 distribution date.  Series termination is set on May 2002’s distribution date.

Series 1998-7’s terms contain an accelerated payout feature to protect investors from deteriorating collateral or a servicer default.  If certain triggers are breached, the amounts available in the 5% shared CCA will be drawn upon and immediately distributed to class A investors.  In addition, the 2% CCA dedicated solely to class B will be drawn upon and immediately distributed to class B investors.


Base24  &  Mondex

Applied Communications announced yesterday the availability in Canada of Mondex functionality for ACI’s ‘BASE24’ application software.  The ‘BASE24’ solution enables financial institutions to fully integrate chip cards into their electronic banking system and offer chip card products and services through existing and new delivery channels. Applied Communications Canada of Toronto, designed and built enhancements to ‘BASE24’ enabling it to accept, authorize and process smart card transactions using standards adopted by Mondex.  BASE24 facilitates value load and value unload at Mondex-enabled ATMs, POS terminals and other devices, and supports communications between components such as terminals, value managers and vaults to facilitate chip-to-chip functions that do not require authorization. Canadian Imperial Bank of Commerce is the first ACI customer in Canada to add the new Mondex capabilities to their BASE24 processing engine.


MoneyGram Tx Up 12%

MoneyGram Payment Systems, Inc. reported today that its net income for the three months ended March 31, 1998 was $1.8 million, or 11 cents per common share, compared with $2.2 million, or 13 cents per share, in the first quarter of 1997.

Total revenue for the quarter was $34.8 million, compared with $32.4 million in the year-earlier period.  The 1998 revenue total includes $1.35 million from Mid-America Money Order Company and Consorcio Oriental LLC, which were acquired by MoneyGram during the first quarter of this year.

Transactions handled by MoneyGram in the first quarter totaled 1.44 million.  That compares with 1.28 million transactions handled in last year’s first quarter, an increase of 12 percent.

The Company also announced that, in order to protect shareholder value, the Board of Directors of MoneyGram Payment Systems yesterday approved, and the Company entered into, a shareholders’ rights agreement.  Pursuant to the rights agreement, the Company will dividend to shareholders as of record on May 20, 1998 the right to purchase one share of Common Stock of the Company for each share held at an exercise price of $50.00.  In the event a person who does not already own more than 15% of the Common Stock of the Company crosses such threshold or a person who already owns 15% increases its ownership percentage, each rights holder other than such person upon payment of the exercise price will be entitled to purchase Common Stock with a market value of $100.00.  Alternatively, the board may elect to effect a “cashless exercise” of the rights.  The rights will not trade separately from the Common Stock, and no certificates will be mailed to shareholders until the above ownership threshold is crossed.  The board may elect to redeem the rights at a nominal value at a future date.  The rights plan provides that successful completion of the Viad tender offer would not trigger the rights.

MoneyGram Payment Systems, Inc. is a leading non-bank provider of consumer money transfer and other financial services.  Through the MoneyGram network of more than 22,000 convenient agent locations, customers can wire cash in minutes to more than 100 countries throughout the world.  MoneyGram ExpressPayment(SM) service enables credit card issuers, mortgage servicers, finance companies, collections companies and others to collect good-funds payments from delinquent debtors within hours.  The Company was organized in January, 1996 and completed the initial public offering of its common shares on December 11, 1996.

                       MoneyGram Payment Systems, Inc.
                           Statement of Operations
                         Three months ended March 31
                   (in millions, except per-share amounts)

                                     1998                    1997
     Fee and other                  $28.9                   $26.3
     Foreign exchange                 5.9                     6.1
    Total Revenue                    34.8                    32.4

     Agent commissions               11.5                    11.0
     Processing                       8.0                     6.0
     Advertising & promotion          7.0                     6.0
     Selling & service                2.5                     3.0
     General & administrative         3.0                     2.8
    Total Expenses                   32.0                    28.8

    Income before income taxes        2.8                     3.6
    Income tax expense                1.0                     1.4
    Net Income                       $1.8                    $2.2
    Basic net income per
     common share                    $.11                    $.13
    Diluted net income per
     common share                    $.11                    $.13
    Weighted average shares and
     equivalents outstanding       16,600                  16,625


Credit Store Chairman

Credit Store, Inc. announced Tuesday that Martin J. Burke, the Company’s Chief Executive Officer, will add the title and duties of Chairman of the Board.

Mr. Burke succeeds Jay L. Botchman, 65, who indicated to the Company that he wishes more time to devote to his other endeavors. Mr. Botchman remains a member of the Board and he retains his approximately $50 million debt and equity investments in Credit Store, Inc.

The Credit Store’s other senior management remains unchanged. Kevin T. Riordan is the Company’s President and Chief Operating Officer. Mr. Riordan directs the Company’s approximately 300 employees in the day-to-day operations in Sioux Falls. He is also holds responsibility for quality assurance and strategic planning for the Company. Mr. Riordan joined Credit Store, Inc. in April, 1997 from Long Beach Acceptance Corp., an automobile finance company focused on the nonprime and sub-prime markets, where he was president and chief operating officer.

In Sioux Falls, Mr. Riordan is joined by Michael J. Philippe, the Chief Financial Officer and Treasurer; and Richard S. Angel, the Chief Counsel and Secretary of the Company.

Mr. Burke, 40, has been the Company’s Chief Executive Officer since its inception in 1996, and has primarily been involved in securing the Company’s financing and setting its strategic direction. He previously was chief executive officer and a principal at American Home Credit Corp., a mortgage banker which originates and sells sub-prime mortgages. From 1984 to 1995, he was chief executive officer of The Martin Burke Company, an advisor and originator on behalf of clients of hybrid commercial mortgage loans.

Credit Store Inc. is a nationwide financial services company that markets credit cards to consumers who previously had had an interruption in the repayment of their debts and may be excluded from the more traditional sources of consumer finance. The Company uses sophisticated methods to analyze, value and purchase portfolios of non-performing consumer debt from major institutional lenders at a substantial discounts. The Company then uses its direct marketing expertise to contact and negotiate settlements with the consumer, most of the time placing settlement on the new unsecured credit cards offered through the Credit Store. The Company offers an innovative and practical way for the consumer to rebuild their creditworthiness and gain access to an unsecured credit card.


Bankruptcy Coalition Supports Child Support

Official Statement From Bankruptcy Coalition

Current bankruptcy law unequivocally protects the obligation of parents to support their children. We recognize the need to ensure, as specifically as possible, that any reform to the bankruptcy code must maintain the special status afforded to alimony and child support payments. In recent days, there has been considerable confusion and conjecture regarding how pending bankruptcy reform legislation would affect the priority of child support and alimony payments in a bankruptcy proceeding. In fact, the bills currently under consideration on Capitol Hill would in no way change the priority of those payments.

However, in order to address any remaining confusion, we would wholeheartedly endorse an amendment to the pending bills that would specifically and categorically state that child support and alimony payments must be given priority in bankruptcy proceedings. We have communicated our position on this matter to members of both the House and Senate Judiciary Committees. We are certain that appropriate legislative language will clear up any possible confusion on this important matter. American Banker’s Association

American Financial Services Association

America’s Community Bankers

Bankruptcy Issues Council

Consumer Bankers Association

Credit Union National Association

Independent Bankers Association of America

National Retail Foundation

U.S. Chamber of Commerce


SFNB  Results

For the quarter ended March 31, 1998, Security First Network Bank and its wholly owned subsidiary Security First Technologies, Inc. (S1), incurred a net loss from continuing operations of $8.1 million, or $0.77 per share, compared to a net loss from continuing operations of $6.6 million, or $0.80 per share, for the first quarter, 1997.

The first quarter 1998 loss includes approximately $2.1 million, or $0.20 per share, of goodwill amortization resulting from an acquisition during the fourth quarter 1997.  Excluding amortization of goodwill, the net loss from continuing operations for the first quarter was $6.0 million or $0.57 per share compared to $6.3 million or $0.76 in the first quarter 1997.  Including discontinued operations, the first quarter net loss was $8.6 million, or $0.82 per share, in 1998 and $5.9 million, or $0.71 per share, in 1997.

As of March 31, 1998, 32 institutions including SFNB, are offering S1’s Virtual Financial Manager(TM) (VFM) product suite to customers enabling them to bank, pay bills, view credit card statements and manage their money over the Internet.  As of April 30, 1998, management estimates there are more than 127,000 accounts using S1 technology worldwide through its three distribution channels.  More than 76,000 accounts are represented through the S1 Data Center; 7,000 are accounts of financial institutions using the product suite through third party data processors; and it is estimated that 44,000 are accounts of financial institutions with direct licenses of the software.

Revenues and Operating Margins

During the first quarter of 1998, S1 had software revenues of $3.4 million, as compared to $3.4 million in the fourth quarter of 1997.

S1 Data Center fees in the first quarter of 1998 were $310,000, a 77% increase over the fourth quarter of 1997.  The average quarterly revenue per billable customer processed in the Data Center, including customers processed for SFNB, amounted to $9.64.  As of the end of the first quarter of 1998, twelve financial institutions were online through the Data Center.  During the month of March, including SFNB accounts, the Data Center processed in excess of 69,000 Internet banking accounts, which represented approximately 44,000 billable customers.

The negative operating margin for Data center services declined in the first quarter 1998 to $1.5 million from $1.7 million in the fourth quarter 1997.  The improvement in the operating margin is the result of an increase in the number of accounts processed.  In addition, the direct costs of operating the Data Center and providing technical support to customers have stabilized as S1 has established adequate capacity to meet near-term growth expectations.

Software license fees, which are earned upon the sale and installation of S1’s software in a financial institution’s data center or in a third party data processing center, decreased from fourth quarter 1997 to first quarter 1998 as anticipated.  The revenue decline is the result of fewer in-house licenses of the software as more implementations are occurring in the S1 Data Center.  However, as third party data processors, which are offering the S1 software to their financial institution customers, bring those sites online, software license fees should increase in future quarters.  As of the end of the first quarter 1998, 16 financial institutions were online with third party data processors and it is anticipated that a significant number of the remaining 40 financial institutions, who have entered into agreements to use the VFM software through third party data processors, will be online during 1998.

Revenues from professional services, which includes implementation and consulting fees, amounted to $2.4 million in the first quarter, an increase of $411,000 or 20% over the fourth quarter of 1997.  During the first quarter of 1998, the professional services operating margin was 36%.  Management anticipates that this margin will continue to move towards 40% in future quarters as pricing for services stabilizes and contracts with relatively low revenue caps have been essentially completed.

Operating Expenses

Excluding amortization of goodwill and acquisition charges, operating expenses increased by $402,000, or 7% over the fourth quarter in 1997.  The increase in operating expenses is attributed to the increase in product development expenses related to the development of enhancements for the existing software as well as the development of new modules for the VFM suite of products.

Capital Resources and Cash Flow

As of March 31, 1998, S1 had $15.4 million in cash and investment securities and $5.2 million in accounts receivable available to fund operations.  During the first quarter of 1997, excluding the change in current receivables and payables, S1 used $4.7 million to fund continuing operations as compared to $5.1 million in the fourth quarter 1997.  Management anticipates that in the near term, revenue growth will continue to exceed the expense growth and accordingly, cash used to fund continuing operations should decline in future quarters.

Additionally, as previously announced, management anticipates that the banking operations (reflected as discontinued operations) of the Company will be sold in 1998 resulting in up to $9.0 million additional cash available to fund software operations.

Discontinued Operations

As was previously disclosed, management has entered into a formal plan to sell its banking assets and related liabilities, which totaled $58.6 million on March 31, 1998.  For financial statement purposes the results of SFNB’s banking operations have been reflected as “discontinued operations.”  The banking assets held for sale are presented net of related liabilities and the net losses from banking operations are segregated on the statement of operations and reported as “discontinued operations.”

For the first quarter of 1998, the banking operations reported a net loss of $465,000 as compared to net income of $755,000 in the same period during the prior year.  Included in the 1997 first quarter results is a $1.5 million gain on the sale of SFNB’s Pineville, KY banking operation.

Other First Quarter Announcements

During the first quarter, SFNB and S1 announced the sale of SFNB to Royal Bank of Canada, with the total transaction cost of $20 million.  Royal Bank will purchase SFNB for $13 million; continue to process SFNB Internet transactions through the S1 Data Center; and license S1 technology and consulting services for $6 million.  Additionally, Royal Bank purchased $1.0 million of common stock and, subject to closing the transaction, will be granted an option to purchase additional 733,597 shares of stock for $10 million at an average price of $13.63 over a period of 21 months from the date of closing.  Royal Bank also has purchased the right to future international software development as well as current consulting services. Additionally, Royal Bank has entered into the S1 STAR program through its acquisition of VFM software.

Also during the first quarter, S1 announced that the Republic National Bank of New York, a wholly owned subsidiary of Republic New York Corporation (NYSE RNB), had signed a letter of intent to use S1’s Internet banking software applications for financial transactions and to process those transactions through the S1 Data Center.

About Security First Network Bank

Security First Network Bank (NasdaqSFNB) (), the world’s first Internet bank, opened its doors to the Internet community on October 18, 1995.  FDIC-insured SFNB provides its services using Virtual Financial Manager(TM) (VFM), a software system created by and licensed through its wholly owned subsidiary, Security First Technologies (S1).

About Security First Technologies

Security First Technologies (S1) is a wholly-owned subsidiary of the world’s first Internet bank, Security First Network Bank (Nasdaq SFNB).  S1 develops integrated, brandable Internet applications that enable financial institutions to offer products, services and transactions over the Internet in a secure environment.  S1 also offers strategic marketing support, training, product integration, and customer and data service center outsourcing.  S1, through direct sales and channel partnerships, has agreed to provide software applications and technology to 80 financial entities, including 15 of the top 100 U.S. financial institutions.

Virtual Financial Manager(TM), S1’s suite of applications, operates exclusively on VirtualVault, Hewlett-Packard’s UNIX platform HP-UX, a Trusted Operating System environment designed to securely host Web applications.

Forward-looking statements

Statements in this news release concerning future results, performance, expectations or intentions are forward-looking statements.  Actual results, performance or developments may differ materially from forward-looking statements as a result of known or unknown risks, uncertainties and other factors, including those identified in the Company’s prospectus dated May 3, 1996 and those described from time to time in the Company’s other filings with the Office of Thrift Supervision, press releases and other communications.

                     Consolidated Statements of Operations *
               (In thousands, except share and per share data)

                     March 31,    June 30,    Sept. 30,   Dec. 31,   March 31,
                       1997        1997         1997        1997       1998
    Software license
     fees              $673       $1,187      $ 1,094     $ 1,188    $ 669
    services            973        1,605        1,661       2,038    2,449
    Data center fees     24           90          122         175      310
    Total revenues    1,670        2,882        2,877       3,401    3,428
    Direct costs
    Software license
     fees               490          484          391         240       20
     services         1,237        1,433        1,157       1,519    1,570
    Data center fees  1,507        1,717        1,854       1,869    1,823
    Total direct
     costs            3,234        3,634        3,402       3,628    3,413
    Gross margin     (1,564)        (752)        (525)       (227)      15

    Operating expenses
    Selling and
     marketing        1,083        1,088          992       1,142    1,071
     development      2,375        2,524        2,696       2,912    3,383
    General and
     adminstrative    1,369        1,098          991       1,179    1,204
    Depreciation and
     amortization       310          370          401         660      637
    Amortization of
     goodwill and
     charges            341          346          346       3,492    2,088
    Total operating
     expenses         5,478        5,426        5,426       9,385    8,383
    Operating loss   (7,042)      (6,178)      (5,951)     (9,612)  (8,368)
    Interest income     419          351          346         365      255
    Loss from
     operations      (6,623)      (5,827)      (5,605)     (9,247)  (8,113)
    Income (loss) from
     operations         755         (706)        (236)       (502)    (465)
    Net loss        $(5,868)    $ (6,533)     $(5,841)    $(9,749) $(8,578)

    Net loss per
     common share
    Loss per common
    share from continuing
    operations before loss
    from non-recurring
    charges, amortization
    of goodwill and acqu.
    charges         $ (0.76)     $(0.65)      $(0.57)      $(0.59)  $(0.57)

    Loss per common share
    from non-recurring
    charges and amortiz.
    of goodwill and acqu.
    charges           (0.04)      (0.04)       (0.04)       (0.34)   (0.20)

    Loss per common share
    from continuing
    operations        (0.80)      (0.69)       (0.61)       (0.93)   (0.77)

    Income (loss) per
    common share from
    operations         0.09       (0.08)       (0.03)       (0.06)   (0.05)

    Net loss per common
    share           $ (0.71)     $(0.77)     $ (0.64)      $(0.99)  $(0.82)
    Weighted average
    common shares
    outstanding     8,276,415   8,444,111    9,060,726   9,892,454  10,523,921
    Common shares
    outstanding at
    end of period   8,426,425   8,619,873    9,471,892  10,487,245  10,616,518
    Number of financial
     S1 Data Center        21          18           18          17          17
     Third Party Data
      Processors            9          24           32          43          56
     Direct license
      in-house              4           6            6           6           7

    Number of completed
      S1 Data Center        3           3            6           8          12
       using third party
       data processors     —         3            3          11          16
      Direct license
       in-house            —       —          —           4           4

    Number of accounts
    processed in S1
    Data Center**        15,700     21,000       37,000     49,500      69,400
    Number of VFM
    Customers in
    S1 Data Center**     12,100     17,600       28,000     32,700      44,000

    *  Certain amounts in prior periods have been reclassified to conform to
       the fourth quarter 1997 presentation.

    ** Includes Security First Network Bank accounts and customers.

      Selected Financial Data (In thousands, except share and per share data)

                                          Three Months Ended
                                              March 31,
                                     1998                    1997
    Software license fees            $669                   $ 673
    Professional services           2,449                     973
    Data center fees                  310                      24
    Total revenues                  3,428                   1,670

    Direct costs
    Software license fees              20                     490
    Professional services           1,570                   1,237
    Data center fees                1,823                   1,507
    Total direct costs              3,413                   3,234
    Gross margin                       15                  (1,564)

    Operating expenses
    Selling and marketing           1,071                   1,083
    Product development             3,383                   2,375
    General and adminstrative       1,204                   1,369
    Depreciation and amortization     637                     310
    Amortization of goodwill and
    acquisition charges             2,088                     341
    Total operating expenses        8,383                   5,478
    Operating loss                 (8,368)                 (7,042)

    Interest income                   255                     419

    Loss from continuing
     operations                    (8,113)                 (6,623)
    Income (loss) from
     discontinued operations         (465)                    755
    Net loss                      $(8,578)                $(5,868)

    Net loss per common share
     Loss per common share
      from continuing operations
      before loss from non-
      recurring charges,
      amortization of
      goodwill and
      acquistion charges           $(0.57)                $ (0.76)

    Loss per common share from non-
     recurring charges and
     amortization of goodwill
     and acquisition charges        (0.20)                  (0.04)

    Loss per common share
     from continuing operations     (0.77)                  (0.80)

    Income (loss) per common share
     from discontinued
     operations                     (0.05)                   0.09

    Net loss per common share      $(0.82)                 $(0.71)

    Weighted average common shares
    outstanding                10,523,921               8,276,415
    Common shares outstanding at
    end of period              10,616,518               8,426,425

                                  March 31,            December 31,
                                    1998                    1997

    Cash and investment securities 15,352                  19,951
    Accounts receivable, net        5,181                   4,297
    Other current assets            1,083                   1,141
    Noncurrent assets               8,660                  10,803
    Total assets                   30,276                  36,192
    Current liabilities            14,298                  12,654
    Stockholders’ equity           15,978                  23,538


Beijing Card Test Center

China opened the National Credit Card Test Center yesterday in Beijing to enforce standards for mag stripe and chip-based cards. China said the Center will examine the quality of materials used for payment cards including the cards’ abilities to withstand chemical corrosion and create enviromental pollution. The Center will also monitor up to 32 indices of mag cards and about 18 indices of chip cards. The Chinese government estimates 72 million payment cards have been issued in the country.


Home ATM

Comerica introduced ‘Comerica Home ATM’ yesterday which transfers the universal experience of using an ATM to the consumer’s personal computer. The ‘Comerica Home ATM’ program screens look and work just like a typical ATM that consumers already know how to use, as a matter-of-fact the guide to get started is only one page.  Customers have the ability review accounts, retrieve monthly statements, perform balance inquiries, and transfer funds between accounts. Customers can also use the new service to pay bills, using screens that look just like a check. Monthly service fees will vary according to region, but will generally range between $5.95 – $7.95.  The software is free and customers receive the first 60 days free. Comerica worked with software developers at Home Financial Network in Westport, CT to create ‘Comerica Home ATM’.


Beating Fraud

MasterCard International reported Monday the lowest fraud to sales ratio since the association began tracking fraud statistics. Worldwide fraud basis points (the measurement of fraud against sales volume) for 1997 declined to 7.7, representing a 14.4% decrease in basis points and the lowest basis points level in more than ten years. This compares to 9.0 basis points in 1996. Total dollar losses were $462 million – down from $499 million in 1996 representing the greatest decline in total dollar amount ever recorded. MasterCard attributes its successful fight against fraud to its tamper-evident signature panel, the use of three-dimensional holograms,  and card validation codes including CVC1 and CVC2. MasterCard says its current biometrics pilot may drive fraud even lower. MC  FRAUD  HIGHLIGHTS

1. Counterfeit fraud decreased 25.2% last year to 1.6 bp

2. Asia Pacific region fraud down 20.7%

3. Latin America region fraud down 33.5%.

4. Worldwide counterfeit category accounted for 20.5% of total fraud, down from 25.4% in 1996

5. Fraudulent applications declined 3.6%