ARKSYS Euro Ready

The formation of the European Commission (EC) and issuance of the EC’s currency, the Euro, will have large- scale, wide-ranging impact on the financial and economic structure of European countries and interacting nations and their international and multinational businesses.  It will likely produce the largest economic/currency bloc in the world.  The eleven member states, determined March 25, 1998, have embarked upon total reconstruction of the core economic and monetary structure into one unit.

The EC does not just involve a currency re-denomination of many currencies into one, rather it is the blending of financial protocols, procedures and infrastructures.  This economic unification will have a profound impact on banking and financial industry’s payment and transaction delivery systems.

The first phase was completed March 25, 1998, with the identification of countries that will participate and the determination of a timetable.  The second phase will launch on January 1, 1999, establishing the Euro as legal tender and irrevocably locking the exchange rate for institutions of the member states.  For the next three years until January 1, 2002, financial institutions will balance and settle in the new currency.  The existing currencies will become nondecimal sub-units with fixed rates.  At that time, financial institutions may keep records in the European currencies, but those currencies are no longer independent.  On July 1, 2002, the third phase begins with the withdrawal of the European notes and the issuance of the Euro.

ARKSYS is prepared for the new requirements specified by the EC for payment and transaction delivery of electronic funds transfer network solutions, ATM management, POS management, debit card and smart card systems, voice response banking functions, international credit card issuance, merchant management, Internet/intranet/extranet solutions including cash management, home banking and bill payment.  ARKSYS’ core solution, Integrated Transaction Management (ITM) specifically addresses triangulation and conversion, as well as multiple currency storage and auditing functions.  In addition, ITM manages settlement and reporting operations in multiple currencies.  With professional services for planning and conversion and adaptation to accounting venders, networks and bank-specific needs, ARKSYS is fully prepared to aid its clients through the transitional parallel currency period lasting up to 2002 and with payment and transaction delivery solutions that will last far into the millennium.

As specified by the Maastricht Treaty, currency conversion requires that monetary amounts converting from one national currency unit into another shall first be converted into a Euro unit which may be rounded to not less than three decimals and shall be converted into the other national currency unit. No alternative method of calculation may be used unless the same result is produced.  ITM was designed to handle triangulation or automated base currency conversion processes, and was specifically structured for custom Application Program Interface (API) calls and User Exits that will assist in satisfying the local requirements anticipated by the member states will anticipate emerging economic and technological developments to enable its clients to react effectively.  With its pragmatic approach to development and delivery, ARKSYS provides financial institutions and enterprises expanded business opportunities in the payment and transaction delivery industry.

ARKSYS offers Integrated Transaction Management (ITM), a family of payment and transaction processing solutions.  ITM provides functionality that allows U.S. mid-range and off-shore locations of large International financial and nonfinancial institutions to facilitate customers on-line, real time transactions twenty-four hours a day, seven days a week, from a variety of devices.  ARKSYS’ ITM processes and manages retail delivery operations including card and client management systems, international credit card, debit card, ATM and POS management; merchant management; electronic funds network solutions, on-line and intercept processing; access solutions, interactive voice response, Internet/intranet/extranet personal banking and bill payment; Internet security; and wholesale delivery with Internet/intranet/extranet commercial cash management.  The company’s offerings are established in more than 70 countries.  Visit ARKSYS on the World Wide Web at .

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Not Completely Dead

Ameritech has reached an agreement with Household to discontinue the Complete Card program. Ameritech and Household began offering the Complete Card, a MasterCard of Visa credit card, in 1991. The agreement as effective March 31st, and customers will be notified via letter within the next few weeks. The notification will explain hat they will receive a new credit card, endorsed by Household Bank. Ameritech and Household began offering the Complete Card in 1991. The card services more than one million customers throughout the U.S.

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Metris Adds Senior Mgrs

Patrick J. Fox and Joseph A. Hoffman have joined Metris Companies Inc. as senior vice presidents. The announcement was made by Ronald N. Zebeck, president and chief executive office of Metris. Mr. Fox, a 17-year veteran of the consumer credit business, joins Metris as senior vice president, new business development. He comes to Metros from Bank of America, where he worked since 1994, most recently as director of product management and new business development. Mr. Hoffman, an 18-year veteran of the consumer credit business, joins Metris as senior vice president, credit card marketing. Mr. Hoffman comes to Metris as senior vice president, credit card marketing. Mr. Hoffman comes to Metros from Advanta Corp., where he held executive marketing positions over the last two years, most recently vice president of affinity and co-brand marketing.

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First Md Portfolio Premium

Allied Irish Banks, p.l.c. today announced that its wholly owned US subsidiary, First Maryland Bancorp , has reported $95.7m in net income, for the first quarter ended March 31, 1998 compared to $34.1m for the quarter ended March 31, 1997.

The results include a $37.5m after-tax gain from the sale of the company’s consumer credit card business and a $17.3m after-tax benefit from the repositioning of the investment securities portfolio. Excluding these items, the company’s underlying earnings for the first quarter were $40.9m, a 20% increase on 1997. Underlying tangible earnings, which exclude the amortization of goodwill amounted to $53.3m, a 50% increase on 1997.

On February 25, FMB sold its consumer credit card business to Bank of America, N.A. The sale resulted in a pre-tax gain of $60m. In accordance with Irish GAAP, AIB included this gain in its 1997 year-end results released on February 18, 1998 and FMB has included the gain in its first quarter 1998 results. FMB’s residential mortgage origination businesses were sold at book value effective February 13 and thus did not materially affect the company’s first quarter earnings.

FMB’s underlying performance was highlighted by double digit growth in commercial lending, the leasing business, and retail lending, while trust and investment advisory income was up 21%. Asset quality remained strong with non-performing assets amounting to $88.8m (0.51% of total assets). Non-performing loans of $72.5m were covered 223% by total provisions of $161.3m.

First Maryland Bancorp is the holding company for the First National Bank of Maryland, Dauphin Deposit Bank and The York Bank. Headquartered in Baltimore, First Maryland operates nearly 300 branches and more than 400 ATMs from southern Pennsylvania through Maryland and the District of Columbia and into northern Virginia. At March 31, 1998 total assets were $17.4 billion.

FIRST MARYLAND BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)

Three Months Ended
March 31, March 31,
1998 1997
(in thousands)
INTEREST INCOME
Interest and fees on loans and leases $196,972 $136,038
Interest and dividends on investment
securities:
Taxable 54,830 38,589
Tax-exempt 5,228 1,453
Dividends 2,247 694
Interest on loans held-for-sale 7,269 1,918
Other interest income 3,639 5,923
——— ———
Total interest and dividend income 270,185 184,615
——— ———

INTEREST EXPENSE
Interest on deposits 99,512 50,476
Interest on federal funds purchased and
other short-term borrowings 21,476 20,991
Interest on long-term debt 12,692 8,745
——— ———
Total interest expense 133,680 80,212
——— ———

NET INTEREST INCOME 136,505 104,403
Provision for credit losses 8,871 9,900
——— ———
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES 127,634 94,503
——— ———

NON INTEREST INCOME
Service charges on deposit accounts 25,550 21,803
Trust and investment advisory fees 16,148 8,433
Mortgage banking income 14,182 6,018
Other income 33,178 24,551
Securities gains, net 30,432 453
Gain on sale of credit card loans 60,000 –
——— ———
Total non interest income 179,490 61,258
——— ———

NON INTEREST EXPENSES
Salaries and other personnel costs 80,070 58,461
Equipment costs 11,633 9,244
Occupancy costs 10,211 8,125
Other operating expenses 39,384 24,383
Intangible assets amortization expense 14,224 2,252
——— ———
Total non interest expenses 155,522 102,465
——— ———

INCOME BEFORE INCOME TAXES 151,602 53,296
Income tax expense 55,903 19,193
========= =========
NET INCOME $95,699 $34,103
========= =========

FIRST MARYLAND BANCORP AND SUBSIDIARIES
Consolidated Statements of Condition
(Unaudited)

March 31, December 31,
1998 1997
(in thousands)
ASSETS
Cash and due from banks $1,225,841 $1,078,009
Interest-bearing deposits in other banks 1,560 1,656
Trading account securities 35,543 39,539
Federal funds sold and securities
purchased under resale agreements 131,443 51,130
Investment securities available-for-sale 4,280,822 4,444,107
Loans held-for-sale 285,616 482,153
Loans, net of unearned income of $185,713
and $192,569
Commercial 3,008,815 2,868,728
Commercial real estate 2,230,008 2,256,895
Residential mortgage 920,876 987,751
Retail 2,586,397 2,567,166
Credit card 15,054 146,497
Leases receivable 767,106 774,221
Foreign 464,085 482,328
———— ————
Total loans, net of unearned income 9,992,341 10,083,586
Allowance for credit losses (161,336) (168,186)
———— ————
Loans, net 9,831,005 9,915,400
———— ————
Premises and equipment 170,786 170,863
Due from customers on acceptances 13,855 11,810
Intangible assets 937,861 967,433
Other assets 492,201 630,293
———— ————
Total assets $17,406,533 $17,792,393
———— ————

LIABILITIES AND STOCKHOLDERS’ EQUITY
Domestic deposits:
Non-interest bearing deposits $2,884,699 $2,957,888
Interest bearing deposits 9,312,859 9,274,034
Interest bearing deposits in
foreign banking office 227,633 232,234
———— ————
Total deposits 12,425,191 12,464,156
Federal funds purchased and securities
sold under repurchase agreements 1,303,027 1,697,468
Other borrowed funds, short-term 384,889 486,690
Bank acceptances outstanding 13,855 11,810
Accrued taxes and other liabilities 621,201 545,672
Long-term debt 705,954 705,843
———— ————
Total liabilities 15,454,117 15,911,639
———— ————

Redeemable preferred stock 7,949 7,897

Total stockholders’ equity 1,944,467 1,872,857
———— ————
Total liabilities, preferred stock
and stockholders’ equity $17,406,533 $17,792,393
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Citibank Flat 1Q

Citibank reported Tuesday that chargeoffs for U.S. bankcards were $668 million or 5.96% of average managed loans for the quarter, up $13 million from $655 million or 5.64% in the 1997 fourth quarter and up $12 million form $656 million or 5.91% a year ago. The 12-month-lagged loss ratio was 6.03% in the quarter, compared with 5.86% in the 1997 fourth quarter and 6.21% a year-ago. The percent of gross write-offs from bankruptcies in the quarter was 37.0%, compared with 40.8% in the prior quarter and 36.6% in the 1997 first quarter. Managed loans delinquent 90 days or more were $842 million or 1.88% at quarter-end, compared with $856 million or 1.80% for the prior quarter and $884 million or 1.98% a year-ago.

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Associates Grabs SPS

Associates First Capital Corporation and SPS Transactions Services, Inc. jointly announced Monday that The Associates has agreed to acquire substantially all the assets of SPS, which consist of the stock of its two operating subsidiaries, for approximately $896 million.  The acquisition will provide The Associates with a substantial portfolio of credit card receivables  including private-label relationships with market-leading corporations that have well-established brands  and a range of technology capabilities such as transaction processing, portfolio management and inbound teleservices.  SPS, through its two principal subsidiaries  SPS Payment Systems, Inc. and Hurley State Bank  manages a portfolio of private-label consumer and commercial credit card relationships.  Managed credit card receivables outstanding at December 31, 1997 were $2.3 billion.

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New MC Board Chairman

MasterCard International announced yesterday that its Global Board of Directors unanimously elected Donald L. Boudreau, 57, its chairman.  Mr. Boudreau is a vice-chairman of The Chase Manhattan Corporation and The Chase Manhattan Bank, responsible for all of Chase’s consumer businesses. Mr. Boudrau succeeds Joseph W. Saunders as chairman of MasterCard’s 30-member Board of Directors.

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VeriSign – VeriFone Certificates

VeriSign, Inc. and VeriFone announced Monday a strategic agreement to create a bundled package that combines VeriSign’s SET digital certificate offering  with VeriFone’s comprehensive Internet payment solution.  Under the agreement, VeriFone will resell VeriSign’s SET digital certificate services and technology as standalone products or as part of VeriFone’s Internet commerce product bundle solution for financial institutions, processors and payment card providers.

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POS ATM Use Up

Cardholders are using ATM cards for POS and ATM transactions an average of 15.4 times per month, three times more per month than 1996, according to the STAR ATM network.  Much of this increased use can be attributed to the growth in POS usage, which jumped form an average of 4.2 times per month to 6.6 times per month in 1997.  According to the November 1997 survey of nearly 3,100 households in nine Western states the survey revealed:  POS users reported spending on average 24 percent more when they use POS than when using other payment methods.  This is an increase from the 1996 survey, which reported POS users spending on average 15 percent more when using POS; and almost two-thirds of the cardholders surveyed believed there were differences between making a PIN-based POS transaction and making a signature-based POS transaction.  When cardholders were directly asked which of  the methods they preferred, 67 percent believed the PIN-based provides more security and user control, and thus is the most preferred payment method.  Use of the POS cashback option increased form 2.3 times per month to 2.5 times per month (women are more likely than men to use the cash-back feature and to use it more frequently)  The majority of cardholders refer to their cards as “ATM” cards (61 %) vs. “debit” cards (9 %)  Nearly 70 percent of cardholders recalled using their ATM card within one week of receiving it.

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Solicitation Response Weakening

The overall response rate to 1997 credit card solicitations declined to the lowest level in 10 years of tracking, deposit platinum card offers driving total mail volume to a record-high three billion pieces, according to Mail Monitor.  The overall response of 1.3 percent declined form the already-low 1.4 percent in 1996.  However, while the response rate was at a record low, the absolute number of 39 million responses in 1997 was six million higher than 1996.  Meanwhile, gold card mailings plunged to a 27 percent share of 1997’s market form 44 percent from 41 percent on 1996, and non-bank card offers dropped to seven percent of 1997’s market form nine percent the year before.  Platinum card solicitations, driven largely by a single issuer that accounted for 26 percent of total mail volume.

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