Small Bank Issuers

While the $50-$100 million peer group is dominated by credit unions a look at bank issuers reveals sagging portfolios.

$50-$100 MILLION PEER GROUP (banks only)
Issuer (State) Receivables Actives
97 96 97 96
3Q 4Q 3Q 4Q
FirstMerit (OH) 91 90 +1% 61 56 +8%
Franklin Bank (CA) 78 88 -11% 52 67 -22%
Trustmark (MS) 58 64 -9% 50 52 -3%
Wilmington Trst (DE) 58 64 -9% 43 46 -6%
Totals: 285 306 -6% 206 221 -6%
receivables in $millions; active accounts in thousands

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IrisCodes in CyberSpace

GTE and NJ-based IriScan, Inc. began a partnership yesterday to combine GTE’s proprietary digital biometric certificates with IriScan technology to create the e-commerce equivalent of legal tender. The combination will require the sender and receiver to be verified and confirmed by their ‘IrisCodes’. Both firms say when the iris recognition process is bound to the digital certificate, the entire value of the transaction may be fully insured by underwriters. A major application will be credit card transactions over the Internet. A prototype is planned for the first quarter of next year.

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Intellect/G&D Team

Intellect Electronics, Inc., a leading provider of smart card enabling terminals and solutions, and Giesecke & Devrient America, Inc. (G&D America), a world leader in the development of cards and card systems, Thursday announced a joint marketing agreement to increase the acceptance of smart card and electronic payment systems.

The non-exclusive agreement will provide the expanding Americas electronic commerce market with unified solutions from Intellect and G&D America featuring seamless connections between smart cards and terminals.

The agreement allows for a more comprehensive consultation approach with customers in the early stages of project development.

The combination of joint technical development and leading terminals from Intellect and G&D America provide customers with increased opportunities for multi-function cards and multi-application schemes.

The combined systems will feature an open architecture that is integrated and transparent to the customer or user.

“G&D America and Intellect are working closely together with the goal of combining our unique and complementary products and solutions to create transparent electronic payments applications for the customer,” said Volker Bartholomaei, president of G&D America.

“The joint marketing agreement demonstrates both companies’ commitment to enabling greater acceptance of smart card systems through solution integration, loyalty programs, and joint project management and marketing efforts.”

As part of the agreement, G&D America is integrating Intellect’s 8515–an ergonomic, multiple scheme terminal with a powerful 32-bit processor and up to 2 MB of memory– into enhanced versions of G&D’s smart card dispensing machine.

The combined solution will provide stored value load-on-dispense and post-dispense card revalue capabilities in a single terminal.

“We see the relationship with G&D America as a natural fit for product implementation and marketing programs to support more complete and accepted payment and transaction solutions,” said Thomas G. Ream, president of Intellect Electronics, Inc.

“We can provide integrated solutions and take advantage of our combined expertise to serve an expanding base of customers and card applications.”

As part of their marketing effort, G&D America and Intellect have developed a variety of templates for smart card payment schemes, including customer loyalty programs.

The companies also will conduct joint customer calls and provide project management support in addition to delivering enhanced services and solutions for electronic payments and transaction processing customers.

About Giesecke & Devrient

Giesecke & Devrient GmbH is a world leader in the development and production of cards and card systems, including microprocessor, memory, and magnetic stripe cards.

A privately-held Munich-based corporation, Giesecke & Devrient employs 4,300 people worldwide in Germany, Belgium, Spain, Mexico, China, Russia, Singapore, Australia, South Africa, Canada, and the United States.

The rapidly expanding G&D America manages 950 employees and is a wholly- owned subsidiary of Giesecke & Devrient.

The Virginia-based company focuses its North American sales and development efforts on products for G&D’s Card and Card Systems Division and its pioneering currency processing systems which are used by major central banks and leading commercial banks throughout the world.

As one of the largest manufacturers of secure magnetic stripe and chip cards in North America, G&D America operates production and research facilities in Cleveland, Ohio; Bedford, Mass.; and Philadelphia; as well as in Toronto and Mexico City.

For further information, please contact G&D’s home page at .

About Intellect

Intellect Electronics, Inc. is a subsidiary of Intellect Holdings, Ltd., a publicly-traded Australian corporation. Intellect products range from smart card readers, payment systems, electronic wallets and mobile terminals to cryptographic processors that secure facilities such as banking networks.

Intellect products are sold in more than 25 countries, including Brazil, The Netherlands, Belgium, Norway, Australia, Singapore, and the U.S. For further information, contact Intellect’s home page at .

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Link CD-ROM

New CD-Rom Product Improves Data Management Capabilities

A new First Data product, Link CD-ROM, is helping financial institution clients significantly improve operational efficiencies and customer responsiveness by allowing instant access to a large number of differently formatted files on a single CD-ROM. The product can store thousands of pages of credit card statements, cardholder reports and other scanned images of different file formats onto a single disc, with a common index and viewer for instant query and retrieval of any document. For example, a financial institution using Link CD-ROM can verify a cardholder payment by quickly accessing a full color replica of the statement and the scanned image of the cardholder’s cancelled check, simultaneously on the same CD-ROM. Previously, a financial institution would need to search through seperate paper documents, computer files, microfiche and other sources to find the same information they now can access within seconds on a single CD-ROM.

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ECHO Up 30%

Joel M. Barry, chairman and chief executive officer of Electronic Clearing House Inc. , Thursday announced both record revenue and net income for the fiscal year ended Sept. 30, 1997.

Total revenues for fiscal year 1997 increased 30 percent to $18,623,000 from $14,342,000 for fiscal year 1996. Bankcard processing and transaction revenue increased from $11,918,000 in fiscal 1996 to $16,006,000 in fiscal 1997, a 34 percent increase.

Terminal sales and lease revenue increased from $2,189,000 in fiscal 1996 to $2,348,000 in fiscal 1997, a 7 percent increase. Overall, net income for the fiscal year 1997 was $328,000, as compared with a net loss of $599,000 for fiscal year 1996. Earnings per share for the fiscal year 1997 were $.025, compared with a net loss per share of $.053 for the fiscal year 1996.

“We are very pleased with the results for the fiscal year ended 1997,” said Barry. “This is the first time since fiscal 1988 that the company is reporting a net income. Price Waterhouse, our outside auditors, has advised us that the going concern opinion that has been a part of the company’s financial statements for the last 11 years, will be lifted for fiscal year 1997. This signifies a significant turnaround in the financial strength of the company at all levels.”

Electronic Clearing House provides credit card processing, check guarantee and various Internet services to more than 8,000 retail merchants, as well as providing inventory tracking services to thousands of U-Haul dealers across the nation.

Through a subsidiary, Computer Based Controls, ECHO designs, develops and manufactures software and point-of-sale hardware that is utilized as credit card processing terminals, automated money order dispensers, utility bill payment systems and inventory tracking devices.

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New MBNA Card Bonds

MBNA Corporation announced Thursday that MBNA America Bank, N.A., its wholly owned subsidiary, priced $900 million of three-year floating rate credit card asset backed securities. The securitization from the MBNA Master Credit Card Trust II consists of two classes of publicly traded securities (Class A and Class B) as well as a privately placed collateral invested amount.

The transaction, Series 1997-N, includes $765 million Class A (Senior) floating rate asset backed certificates, $67.5 million of Class B (Subordinate) floating rate asset backed certificates and a $67.5 million privately placed floating rate collateral invested amount.

The 3.0 year Class A certificates accrue interest at 7 basis points over the three month London Interbank Offered Rate (“LIBOR”). The 3.0 year Class B certificates accrue interest at 23 basis points over the three month LIBOR. Both the Class A and Class B certificates were priced at par. The transaction, which is scheduled to close December 9, 1997, was lead managed by Merrill Lynch & Co. and co-managed by Bear, Stearns & Co. Inc., Blaylock & Partners, L.P., Deutsche Morgan Grenfell, Lehman Brothers, J.P. Morgan & Co. and Salomon Brothers Inc.

MBNA Corporation, a bank holding company and parent of MBNA America Bank, N.A., a national bank, has $46.2 billion in managed loans. MBNA, the country’s second largest credit card lender, also provides retail deposit, consumer loan, insurance, and card acceptance services.

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Scotiabank Selects PRISM CardAlert

Nestor, Inc. today announced that Scotiabank has selected PRISM(R) CardAlert(TM), an advanced neural network-based fraud risk management system, to combat credit card fraud.

“Our goal is to protect our card customers against fraud by using the best technology available,” said Walter Kalichuk, Chief Security Officer at Scotiabank. “With PRISM, we can dynamically update the fraud detection model and configure queues to match our in-house expertise. This enables us to catch fraud earlier while maintaining complete control over our fraud operations.”

PRISM CardAlert is an adaptive fraud detection and account management system that dramatically reduces losses associated with credit and retail card fraud. CardAlert learns dynamically from card transaction data to detect and alert issuers, acquirers and processors to all types of card fraud at authorization or within minutes of the transaction.

PRISM CardAlert combines patented neural network technology for early detection, expert rules-based strategies for targeted fraud control, and advanced client/server account management software for taking immediate customer service and fraud prevention actions. The system proactively monitors transactions, volume levels, historical data, cardholder masterfile information and other data in real-time.

Transactions are scored for the probability of fraud by evaluating how different it is from the cardholder’s baseline patterns and how closely the transaction matches known patterns of fraud.

“Traditional risk management systems are static and provide satisfactory performance when installed. Over time the performance deteriorates because the fraud patterns have changed but the fraud detection model hasn’t,” said Sushmito Ghosh, Vice President of Financial Solutions at Nestor. “Nestor’s neural technology is unique in its ability to learn dynamic fraud patterns incrementally. The system detects new fraud schemes earlier, maintains peak efficiency and ensures that long-term detection rates are as effective as ‘start-up’ accuracy.”

According to Paul Facciol, Director of Security for the Canadian Bankers Association, “Credit card risk management is a growing concern in Canada. In 1996, credit card fraud losses in Canada exceeded $83 million, up significantly from the previous year. Substantial credit card fraud is attributed to stolen cards, including counterfeit schemes by highly organized crime groups.”

PRISM CardAlert’s risk models are based on each issuer’s unique credit card portfolios. This custom modeling technique enhances the system’s fraud detection capabilities, lowers false positives and provides earlier detection of suspicious activity than traditional neural networks. Separate, targeted custom models can be deployed for VIP and gold cards, geographic regions of operation, seasonal purchasing patterns and other card behavior trends specific to the issuer’s portfolio.

PRISM utilizes a graphical Windows interface that maximizes the efficiency of the fraud-prevention staff, allowing them to review more alerts, confirm transactions immediately, and block fraudulent card usage.

Nestor, Inc., headquartered in Providence, R.I., is a leading provider of intelligent decision-support solutions for the financial services industry. Nestor’s client/server products incorporate innovative pattern-recognition technologies ideally suited for data-intensive, mission-critical decision applications in real-time environments. The company’s products support fraud detection and case management for credit, debit, retail and corporate card fraud, as well as merchant fraud; bankruptcy prediction, and Internet customer support applications. More information can be obtained via the company’s Web site at .

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NYCE Inks Casino Deal

Foxwoods Resort Casino — the largest casino in the world–has selected NYCE Corporation to support its automated teller machine (ATM) program.

Under the agreement, NYCE provides comprehensive support for Foxwoods’ ATMs, which are deployed throughout the casino’s 4.1 million square foot facility. Currently, 19 ATMs are installed and operational, and an additional three are expected to be live by the end of November. NYCE’s end-to-end technology solution for Foxwoods includes ATM terminal driving, transaction processing, 24-hour terminal monitoring support and gateway access services.

“We are extremely pleased that NYCE’s reliability, efficiency and market strength were recognized by Foxwoods,” said Joseph Makarewicz, vice president of sales with NYCE Corporation. “Our robust technology and focused support services ideally position NYCE to support ATMs in high-traffic, non-traditional locations such as Foxwoods Resort Casino.”

Based in Woodcliffe Lake, New Jersey, NYCE Corporation provides financial institutions with flexible, state-of-the-art processing services that include telephone- and PC-based banking and bill payment solutions, ATM terminal driving, card authorization, card management, and gateway access. The corporation also operates the NYCE Network, the largest shared regional electronic funds transfer (EFT) network in the Northeast.

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In the Middle

Among card issuers with $100 million to $200 million in receivables credit unions and secured card portfolios have fared best this year with the exception of Carolina First. National low- rate issuers AFBA, Amalgamated, and Simmons are experiencing contractions this year while credit unions in UT and PA are seeing robust growth. Meanwhile secured card specialist Orchard Bank leads this peer group in growth. The data are based on CardData/Bankcard Update/Bankcard Barometer’s ‘Third Quarter 1997 Portfolio Survey’.

$100-$200 MILLION PEER GROUP
Issuer (State) Receivables Actives
97 96 97 96
3Q 4Q 3Q 4Q
AFBA Industrial (CO) 130 150 -13% 78 88 -11%
Amalgamated (IL) 102 104 -2% 70 75 -7%
Boeing Emp CU (WA) 166 152 +9% 78 74 +5%
Carolina Frst (SC) 145 127 +14% 78 65 +20%
Frst Commerce (NE) 164 156 +5% 150 145 +3%
Frst Security (UT) 187 201 -7% 138 149 -7%
Orchard Bank (OR) 137 115 +19% 159 134 +19%
Pa St Emp CU (PA) 134 116 +16% 70 56 +25%
Simmons Frst (AR) 170 166 +2% 146 153 -5%
Teachers CU (IN) 125 126 -1% 50 51 -2%
Zions (UT) 111 116 -4% 89 88 -1%
Totals: 1571 1529 +3% 1106 1078 +3%
receivables in $millions; active accounts in thousands

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NeuralTech Names Execs

NeuralTech, Inc. a leading provider of intelligent client/server solutions for the financial services industry announces the hiring of two new executives. Ralph Koch as Vice President and Chief Financial Officer and John Cramp, Executive Vice President and Chief Operating Officer.

Ralph Koch previously served as Vice President and Chief Financial Officer of Information Management Consultants, Inc. (“IMC”), a systems integration and software development.

John S. Cramp also came from IMC, where he was Vice President responsible for commercial business operations and product development.

“With the addition of John and Ralph, NeuralTech’s executive team is the strongest in the company’s history.” says Bruce Mancinelli, President and CEO, “We are now well positioned to grow the company and expand our market reach.”

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E-Commerce Patent

A patent was issued yesterday for an Internet electronic check technology that goes beyond existing systematic electronic funds transfer security controls and that is compatible with existing payment systems. A group of inventors, under the auspices of BankBoston, Bellcore and the Financial Services Technology Consortium, were issued the patent. The group says the security and privacy of the patented electronic check technology uses digital signatures and certificates which are securely contained in a hardware token such as a smart card.

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Citi to use Affinity Technology

Affinity Technology Group, Inc. and Citibank today announced an agreement in which Citibank, the nation’s second largest bank, will utilize Affinity technology for its indirect auto lending business.

Citibank chose Affinity’s recently introduced e-xpertLender(SM) — which works with Affinity’s core Decisys/RT(SM) technology to fulfill the vision of offering real-time, closed-loop banking over multiple channels — to aid the expansion of Citibank’s indirect auto lending business into additional geographic markets nationwide.

Affinity’s proprietary technology is designed to automate the processing and closing of credit, deposit, insurance, mortgage and other financial transactions through any retail delivery channel — branches, call centers, kiosks, ATMs, indirect agents, home banking, the Internet, retail dealers, the Affinity Automated Loan Machine (ALM(R)), and beyond. The technology allows consumers to conduct financial transactions anytime and anywhere they like, while enabling financial institutions to realize greater market share by servicing consumers’ needs precisely when and where they are ready to buy. Affinity is located on the World Wide Web at .

Citibank is a subsidiary of Citicorp, a global financial services organization serving consumers, businesses, governments and financial institutions through 3,200 offices in 98 countries and territories. In the United States, Citibank serves consumers and small businesses through a network of some 450 branches in nine states and the District of Columbia as well as national credit card, mortgage and electronic banking services.

Statements in this news release looking forward in time are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements involve risks and uncertainties, including general economic conditions, delays and risks associated with the development of new technologies, consumer and industry acceptance of automated delivery channels and regulatory risks.

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