First Citizens – Vital Sign

Vital Processing Services (Vital), a leading, full-service merchant services provider, announced the signing of a long-term merchant processing agreement with Raleigh, N.C.-based First Citizens Bank.

First Citizens will consolidate all of its acquiring activities with Vital, utilizing Vital’s entire product line including merchant point-of-sale (POS) products and portfolio management services.

A long-term user of Vital’s authorization and capture services, First Citizens currently has 75 percent of its merchant POS business with Vital. Approximately 8,000 merchant accounts also will be converted to Vital’s clearing and settlement merchant processing system by October, 1998.

“First Citizens’ decision to consolidate our acquiring business with one processor signifies our confidence in Vital as a lasting entity in the merchant processing marketplace. We selected Vital because of its keen understanding of our needs and because it is 100 percent behind our strategic direction,” said Wayne Duncan, executive vice president of retail lending at First Citizens Bank.

“The trend towards single-source processing relationships continues. We are delighted First Citizens chose us to be its merchant processing solution,” said Fred Gumbel, CEO and president of Vital.

With more than $9 billion in assets, Raleigh, N.C.-based First Citizens Bank operates 335 branches serving nearly 200 towns and cities in North Carolina and Virginia. First Citizens offers a complete line of financial services to individuals, families, and small to mid-sized businesses. Products and services offered include mortgage, personal and commercial loans, commercial leases, trust and investor services, savings accounts and checking accounts. The bank was founded in 1898 in Smithfield, N.C. Its World Wide Web page is located at .

Vital Processing Services (Vital) is a leading full-service merchant processing company. Its clients include financial institutions that provide credit card processing to their merchant customers. Headquartered in Tempe, Ariz., Vital offers financial institutions operational services that enhance business solutions without competing for their merchant business. Its services include merchant POS products, electronic authorization and data capture; clearing, settlement and exception processing; merchant accounting, billing, and reporting; operational fulfillment services (including the outsourcing of chargeback and retrieval processing); risk management; and customer service. Vital is a merchant processing joint venture of Visa(R) U.S.A. and Total System Services, Inc.(R) (NYSE: TSS) (TSYS(R)) (). Vital’s Internet address is .


SPS Up 33% for 1Q

SPS Transaction Services, Inc. (NYSE: PAY) today reported net income of $9.9 million or 36 cents per share on a diluted basis for the quarter ended March 31, 1998, a 33 percent increase as compared to 27 cents per share for the same period last year. Net operating revenues for the first quarter were $82.3 million, down nine percent from $90.4 million in 1997.

“It’s been a significant week for us. First, the announcement of our sale agreement with The Associates and now announcing our fourth consecutive quarter with year over year earnings increases. It’s a great beginning to 1998,” said Robert L. Wieseneck, SPS president and chief executive officer. “For the balance of the year, we will work toward effecting a smooth transition to The Associates and continue our focus on increasing revenues while maintaining our profit margin.”

The company reported a 12 percent increase in electronic transactions processed for the quarter, from 102 million to 114 million. Active commercial accounts at March 31, 1998 were 1,003,000, up five percent from 951,000 a year ago. Due to a change in service to a major client, service minutes processed by the TeleServices business group during the period decreased 27 percent to 12.4 million.

Total loans outstanding, which represent both owned and securitized credit card loans, declined and were $1.7 billion at March 31, 1998, down from $1.9 billion at the end of last year. Active consumer private label credit card accounts, both owned and managed, decreased 11 percent to 2.9 million, compared to the first quarter in 1997.

SPS Transaction Services, Inc. is a leading provider of technology outsourcing services including the processing of credit card transactions, private label credit card programs, commercial accounts receivable processing and call center teleservices activities. SPS, a 73.3 percent-owned subsidiary of Morgan Stanley Dean Witter & Co., recently announced the sale of substantially all of its assets to Associates First Capital Corporation. The transaction is expected to close later this year.

Financial Highlights
(In thousands, except per share data)

Three Months Ended March 31,
1998 1997 % Change

Net Operating Revenues $ 82,264 $ 90,430 (9%)

Net Income $ 9,897 $ 7,391 34%

Basic Earnings Per Common Share $ 0.36 $ 0.27 33%

Diluted Earnings Per Common Share $ 0.36 $ 0.27 33%
Basic Weighted Average Common
Shares Outstanding 27,249 27,197 —

Diluted Weighted Average Common
Shares Outstanding 27,465 27,367 —

(In thousands, except per share data)

Three Months Ended
March 31,
1998 1997

Processing and service revenues $ 68,142 $ 75,309
Merchant discount revenue 2,966 3,138
71,108 78,447

Interest revenue 55,206 64,076
Interest expense 17,039 20,382
Net interest income 38,167 43,694
Provision for loan losses 27,011 31,711

Net credit income 11,156 11,983


Salaries and employee benefits 28,187 29,523
Processing and service expenses 22,391 28,327
Other expenses 16,026 20,541

Total operating expenses 66,604 78,391
Income before income taxes 15,660 12,039
Income tax expense 5,763 4,648

NET INCOME $ 9,897 $ 7,391

Basic Earnings Per Common Share $ 0.36 $ 0.27

Diluted Earnings Per Common Share $ 0.36 $ 0.27

Basic Weighted Average Common
Shares Outstanding 27,249 27,197

Diluted Weighted Average Common
Shares Outstanding 27,465 27,367

(In thousands, except share data)
March 31, December 31,
1998 1997

Cash and due from banks $ 15,384 $ 14,730
Investments held to maturity –
at amortized cost 36,896 36,617
Credit card loans 1,169,727 1,295,787
Allowance for loan losses (74,822) (79,726)

Credit card loans, net 1,094,905 1,216,061
Accrued interest receivable 14,221 21,847
Accounts receivable 25,666 29,349
Due from affiliated companies 16,561 9,921
Amounts due from asset securitizations 97,715 93,260
Premises and equipment, net 31,951 32,895
Deferred income taxes 41,603 43,059
Prepaid expenses and other assets 14,851 14,664

TOTAL ASSETS $1,389,753 $1,512,403

Noninterest-bearing $ 4,513 $ 6,206
Interest-bearing 540,195 504,088
Total deposits 544,708 510,294
Accounts payable, accrued expenses and other 78,215 80,283
Income taxes payable 18,215 19,725
Due to affiliated companies 474,539 639,066

Total liabilities 1,115,677 1,249,368

Preferred stock, $1.00 par value, 100,000
shares authorized; none issued or outstanding
Common stock, $.01 par value, 40,000,000 and
40,000,000 shares authorized; 27,305,021 and
27,276,269 shares issued; 27,277,357 and
27,206,883 shares outstanding at March 31,
1998 and December 31, 1997, respectively 273 273
Capital in excess of par value 81,792 81,586
Retained earnings 192,680 182,845
Common stock held in treasury, at cost, $.01
par value, 27,644 and 69,386 shares at
March 31, 1998 and December 31, 1997,
respectively (611) (1,662)
Stock compensation related adjustments (58) (7)

Total stockholders’ equity 274,076 263,035



Three Months Ended
March 31, March 31, December 31,
1998 1997 1997
Income Statement Data (thousands)
Transaction processing services $ 22,254 $ 24,462 $ 26,415
Managed Programs 22,765 23,395 21,686
HSB Programs 11,109 14,019 12,769
Servicing fees on securitized loans 12,014 13,433 9,563
Processing and service revenues $ 68,142 $ 75,309 $ 70,433

Balance Sheet Data (millions)
Total loans* $1,749.7 $2,078.4 $1,875.8
Owned loans $1,169.7 $1,498.4 $1,295.8
Total loans* $1,832.5 $2,173.8 $1,832.0
Owned loans $1,252.5 $1,593.8 $1,252.0
Operating Data (thousands)
Electronic point-of-sale
transactions processed 113,681 101,882 121,950
TeleServices service
minutes processed 12,416 17,022 14,848
TeleServices customer
contacts processed 2,154 2,550 2,685
Active consumer private label
accounts(end-of-period) 2,898 3,246 3,080
Active commercial
accounts(end-of-period) 1,003 951 979

Asset Quality
Net charge-off % (Total loans)* 9.7% 8.9% 9.6%
Net charge-off % (Owned) 10.3% 9.1% 10.0%
30-89 days delinquency
%(Total loans)* 5.0% 4.7% 5.4%
30-89 days delinquency %(Owned) 5.3% 5.0% 5.7%

90-179 days delinquency %(Total loans)* 3.9% 3.6% 4.2%
90-179 days delinquency %(Owned) 4.2% 3.8% 4.7%

Allowance for loan losses (Owned)
(thousands) $ 74,822 $ 84,394 $ 79,726

Allowance for loan losses % (Owned) 6.4% 5.6% 6.2%

* Total loans represents both owned and securitized credit card loans.


Chase 1Q

Chase Manhattan’s first quarter was a mixed bag as delinquency fell and chargeoffs edged up. Chargeoffs, as a percentage of average receivables, stood at 5.77% for the first quarter compared to 5.66% for first quarter 1997. Delinquency, 90+ day past due as a percentage of average receivables, logged in at 2.04% compared to 2.46% last year.

                         CHASE  SNAPSHOT
                    1Q98                4Q97
     Recv           $31.4b              $32.5b
     Q Vol          $10.2b              $11.7b
     Accts          21.3m               21.5m
     Actives        13.2m               13.5m
     Cards          29.9m               30.1m
Source Card Management Information Services 1Q Portfolio Survey


Voters Want Bankruptcy Reform

America’s voters believe that the Federal law allowing forgiveness of debt should be reformed, according to survey results released Wednesday. Asked to respond to a recent study concluding that those declaring bankruptcy were forgiven $4 billion in debt they could have repaid, 76% were critical and 43% were outraged.  The survey of 1000 registered voters was conducted via telephone last week by Frederick Schneiders Research of Washington, D.C. Among Republicans, independents and those whose incomes exceeded $32,000 annually, the support level was 91%.


CashSource Plus 200/400

Diebold introduced yesterday the CashSource Plus 200 and CashSource Plus 400, the most recent additions to its low-cost family of cash dispensers designed for the growing off-premises market.  The CashSource Plus 200, designed as a low-cost retail offering, features a 5.7-inch, color display for easy customer interface.  Transactions are confirmed via a Visa II dial-up POS message format.  The CashSource Plus 400 is designed for retail off-premises locations which required enhanced functionality.  It features a larger eight-inch, full VGA color display for greater visibility and advertising capabilities.  Communication is completed using full ATM protocol via dial-up or leased lines.  Diebold’s 911/912 message format allows the cash dispenser to be operated in an ATM deployers current network.


Millennium Adds Data Jacks

Nortel, a leader in advanced public access solutions, today announce a jack option for its wall mounted Millennium(x) MultiPay MultiCard terminals. This innovative feature allows Millennium payphone users to take full advantage of mobile computing by delivering a data communications port to public areas such as airports, hotel lobbies, truck stops, convention centers and other locations where business travelers require access to their network. By integrating the RJ-11 port into the phone’s card reader bezel, Nortel’s Millennium payphone provides users with an easy-to-use phone that offers a range of payment methods such as smart cards, credit cards, and calling cards.

According to the August 1997 Yankee Group study, “Understanding the Next Phase of Mobile Computing,” mobile computer sales are increasing at a rate of 23 percent annually. Nortel’s Millennium phones equipped with data jacks will enable these mobile computer users to access their private email, corporate intranets, the Internet, and information databases from the public arena. Conveniently located on the front of the phone near the card reader bezel, the data jack is easy to find and easy to use. In addition, bi-lingual visual prompts on the Millennium phone’s florescent display provide instructions for use and payment. The visual prompts can be programmed to operate in either English, Spanish, Japanese or French.

After a successful trial, U S WEST plans to deploy its Millennium Data Stop, Nortel Millennium phones equipped with data jacks, in select locations throughout its 14 state area. “More and more people are carrying laptop computers, and these people need convenient public access to data communications,” said Mike Goebel, new product development manager, U S WEST. “Many travelers cannot wait until they arrive at an office or their hotel room; they need immediate access to their data, and Nortel’s Millennium phones are the obvious solution.”

Nortel’s Millennium MultiPay MultiCard with data jack will enable new revenue streams and comprehensive reporting to payphone service providers. In addition, the phones are equipped with a card reader, which increases the security of calling card numbers and eliminates concern about onlookers. The Millennium phones also interface in real time with financial institutions to obtain positive card validation and monitor cards for suspicious use.

The Millennium MultiPay with data jack is available as both a factory installed option and a field upgradeable feature. There are currently more than 150,000 Millennium payphones throughout North America. More information on Nortel’s public communications access terminals is available by calling 800-4NORTEL (800-466-7835).


AmEx Czech Cards

Komercni Banka and American Express today launched the American Express Card in the Czech Republic.  The launch follows an Independent Operator agreement between the two companies announced in September of 1997.   Under the terms of the Independent Operator agreement signed in September, Komercni Banka acquired the right to conduct the American Express Card-issuing business in the Czech Republic.  Komercni Banka is responsible for all operations supporting the American Express Card  including billing and payment systems, accounting, customer servicing, credit and fraud control, and charge authorizations  and marketing the Card in the Czech Republic.  Since the two companies joined forces in 1997, the number of merchants accepting the American Express Card in the Czech Republic has expanded significantly, enhancing the relevance and utility of the Card to customers there.


Unsigned Card Apps Spell Trouble

Increasingly, banks are looking to the latest electronic advances to remain competitive and provide their customers with rapid credit approval and related services. Many banks now take credit applications by phone and fax and are expected to shortly accept applications over the Internet. However, while the latest technology may greatly speed the process, the courts have ruled that a signature is still necessary in all transactions.

“Get it in writing,” warns the April issue of Lending & Risk Management News, a monthly newsletter published by RMA, the association of lending and credit risk professionals. John B. Montgomery, Esq. and Edward J. Kuna, Esq. of the banking and finance group of the Pittsburgh law firm of Tucker Arensberg, point to a recent case in the Federal District Court in Colorado as the basis for their warning.

At issue in the Colorado case was whether a computer-generated statement of financial condition in a credit application — neither signed nor seen by the debtors — constituted a “writing” under the Bankruptcy Code. While applying for a line of credit and credit card over the phone, the debtors were questioned about their financial condition, and the loan officer entered the information into the computer system. On the basis of that information, the application was approved, and the borrowers never saw nor were asked to sign a written application.

Eventually, the borrowers filed for bankruptcy and sought discharge of their debts, including that owed the lender. In Bankruptcy Court, the lender objected to the discharge of its debt on the basis of alleged fraudulent statements made by the debtors to the loan officer. To satisfy the “writing” requirement, the lender offered a computer-generated printout of information entered into its computer system by the loan officer during his conversation with the debtors. The Bankruptcy Court denied the objection, a ruling sustained by the District Court.

The Court found that while the ordinary conduct of modern business may allow for the enforcement of contracts made by phone, facsimile transmission or other electronic means, this special requirement that an exception to discharge must be based on a “statement in writing” cannot be waived by the Courts. A computer-generated loan application does not constitute a “statement in writing.”

Montgomery and Kuna warn lenders to carefully analyze their loan procedures. “While the electronic age may compel them to use non-traditional means to obtain customers and speed transactions, lenders should be certain they do not outstrip current law at the risk of their depositors and shareholders.”

For additional information on this or other articles in Lending & Risk Management News, contact RMA, 1 Liberty Place, Suite 2300, 1860 Market Street, Philadelphia, PA 19103. Telephone 215-446-4000.

RMA is the premier international association of lending and credit risk professionals. Founded in 1914, its membership consists of more than 3,000 financial service providers. These institutions are represented in the association by more than 18,000 commercial loan and credit personnel in 50 states, Puerto Rico, Canada and numerous foreign cities including Hong Kong and Singapore.


Metris’ Pause

Despite no marketing campaigns in the first quarter Metris still added 25,000 accounts and about $70 million in receivables to its card portfolio. As of March 31, Metris held $3.6 billion in card loans and 2.2 million accounts and logged $747 million in first quarter card volume. However above average delinquency and chargeoffs still dog Metris. The net chargeoff rate was 8.8% and 30+ day delinquency rate stood at 7.4%. Both figures would have been higher had it not been for the purchase accounting related to two recent portfolio acquisitions. Metris also reported yesterday its fee income increased 68% to $56.3 million due in part to a change in company policy for billing over-limit fees.


Cash America on a Roll

Cash America International, Inc. (NYSE:PWN) announced today that net income increased 20% in the first three months of fiscal 1998 compared to the prior year.

Net earnings reached $4,534,000 (18 cents per share) for the three months ended March 31, 1998 compared to $3,790,000 (15 cents per share) for the three months ended March 31, 1997. Total revenue increased 10% in the first quarter of 1998 to $84,194,000 from $76,519,000 in the first quarter of 1997.

The earnings increase was driven by a 44% increase in net earnings from the Company’s core lending activities. Lending operations produced net earnings of $5,528,000 in the first three months of 1998 versus $3,844,000 during the same period in 1997. The first quarter is a significant period from a seasonal standpoint and Cash America benefited from higher loan balances coming into the quarter. Net revenue from lending activities were up 10% in the three month period ended March 31, 1998 reaching $47.5 million compared to $43.2 million in 1997.

Check cashing operations, conducted through Cash America’s wholly owned subsidiary Mr. Payroll Corporation, reported a net loss of $941,000 in the first three months of 1998, almost 4 cents per share, compared to a loss of $54,000 in the same period last year. Mr. Payroll Corporation developed a fully automated check cashing machine in June of 1997 and began commercial deployment in late 1997 and in the first quarter of 1998.

Commenting on the results of the first quarter, Chairman and Chief Executive Officer Jack R. Daugherty said, “Cash America posted the strongest first quarter performance in the Company’s history in its core lending business. We reached earnings goals through the execution of a consistent strategy of loan growth and rapid liquidation of merchandise in 1997 and kept the momentum going into 1998. Higher loan balances generated increased finance and service charge revenue and the disposition of merchandise available for sale was improved over the prior year, leading to significant gains in net revenue from lending activities.”

Daugherty added, “The performance of our core business allowed us to support the development of Mr. Payroll operations during the quarter. The potential benefits of Mr. Payroll’s check cashing activities will be realized in future years and our investment today is necessary in order to have the opportunity to achieve its long term objectives.”

Also during the quarter, Cash America announced that it had added 14 new lending locations and entered into a letter of intent to acquire a 40 unit pawnshops chain during the second quarter of 1998. The additions further the Company’s standing as the largest operator of pawnshops.

Additionally, the Company announced that the Board of Directors, at its regularly scheduled quarterly meeting, declared a $0.0125 (1.25 cents) per share cash dividend on common stock outstanding. The dividend will be paid to shareholders of record on May 5, 1998 and will be paid at the close of business on May 19, 1998.

Cash America International, Inc. is a diversified provider of specialty finance services to individuals in the United States, United Kingdom and Sweden. Cash America is the largest provider of secured non-recourse loans to individuals, commonly referred to as pawn loans, through 415 locations in 16 states and two foreign countries. In addition, the Company provides check cashing services through its wholly owned subsidiary, Mr. Payroll Corporation, and rental services through its wholly owned subsidiary, Express Rent A Tire, Inc.

This release contains forward-looking statements about the business, financial condition and prospects of Cash America International, Inc. and Mr. Payroll Corporation (“the Company”). The actual results of the Company could differ materially from those indicated by the forward-looking statements because of various risks and uncertainties including, without limitation, changes in demand for the Company’s services, changes in competition, the ability of the Company to open new operating units in accordance with its plans, economic conditions, real estate market fluctuations, interest rate fluctuations, changes in the capital markets, changes in tax and other laws and governmental rules and regulations applicable to the Company’s business, and other risks indicated in the Company’s filings with the Securities and Exchange Commission. These risks and uncertainties are beyond the ability of the Company to control, and, in many cases, the Company cannot predict all of the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements.

Cash America International, Inc.
Highlights of Consolidated Results of Operations
(In thousands, except per share data)

Three Months Ended
March 31,
1998 1997

Consolidated Operations:
Total Revenue $ 84,194 $ 76,519
Net Revenue 48,698 44,058
Total Operating Expenses 38,416 35,125
Income from Operations 10,282 8,933
Interest Expense 3,007 2,806
Net Income $ 4,534 $ 3,790

Net Income Per Share – Basic $ 0.19 $ 0.16
Net Income Per Share – Diluted $ 0.18 $ 0.15

Weighted Average Shares – Basic 24,429 24,245
Weighted Average Shares – Diluted 25,633 24,875

Segment Results:

Lending Operations —

Total Revenue $ 82,112 $ 75,635
Net Revenue 47,498 43,174
Total Operating Expenses 35,737 34,225
Income from Operations 11,761 8,949

Check Cashing Operations —

Total Revenue 1,529 884
Net Revenue 795 884
Total Operating Expenses 2,214 900
Loss from Operations (1,419) (16)

Rental Operations —

Total Revenue 553 —
Net Revenue 405 —
Total Operating Expenses 465 —
Loss from Operations (60) —

Financial and Operational
Data as of: 3/31/98 3/31/97 12/31/97
——– ——– ——–
Lending Operations —

Loans Outstanding $108,907 $101,732 $112,240
Merchandise Held
for Disposition 51,585 45,455 53,468

Number of Locations
(not in thousands) 415 385 401

Amounts Per Location —


Loans Outstanding $ 262 $ 264 $ 280
Merchandise Held
for Disposition 124 118 133


Loans Outstanding $ 176 $ 173 $ 199
Merchandise Held
for Disposition 138 134 150

Check Cashing Operations —

Average Number of Units
During the Period (not in thousands) —

Franchised Check
Cashing Units 146 150 150
Automated Check
Cashing Machines 32 — 5

Annualized Amount of
Checks Cashed Per Average Unit —

Franchised Check
Cashing Units $ 6,522 $ 5,488 $ 5,017
Automated Check
Cashing Machines 2,348 — 1,733


AmEx Expands Platinum Free Tix

American Express announced Wednesday that Ireland’s Aer Lingus and Aerolineas Argentinas, have joined the Platinum Card International Airline Program.  The program, one of the benefits of the Platinum Card from American Express, offers Platinum Card members complimentary companion tickets on 14 international airlines with the purchase of full-fare first or business-class tickets.  Platinum Card members may take advantage of the complimentary companion tickets as often as they like.  Tickets on the participating airline are available from May 1, 1998, through April 30, 1999, and must be purchased through Platinum Card Travel Services.  There is a maximum of one complimentary companion ticket per trip, per Platinum Card member traveling.  The companion ticket must have the same itinerary as the cardmember, and travel must originate from the United States within one of the three distinct travel periods and be completed by April 30, 1999.