A very detailed analysis of USAB is available on the Yahoo
Message board and is reproduced here:
messages.yahoo.com
By Investoften on USAB message board on Dec 24, 1999:
Do Your Own DD before investing. Here is a revised version of how I see it.
1. Company Positioning/Industry : This company is positioned in the Internet BANKING FIRST and Brokerage Next businesses. With the change of laws, Insurance products may get added.
2. Company Products:
BANKING - personal checking, saving, CDs available now . The banking products were rated #1 by Gomez Investment Advisors on product cost and account features and # 20 overall. Under Beta development the USABancShares Flash site was a featured presentation by Macromedia during the recent iWorld internet conference in New York.
BROKERAGE - They have low fees comparable to Waterhouse. I have no direct experience with their Brokerage services yet but will report on it soon.
PRIVATE LABEL BANKING: The company announced on Oct 25 that " With the added functionality of the new site, the company intends to launch its first private label bank in early November." This arena could be very interesting and potentially very explosive and is currently delayed.
3. Importance of PERSONAL BANKING:
This product is to me, the flagship product of this business. They offer a unified product as compared to some less appealing fragmented products offered by the competitors. Currently offered product has a 5% Annual Percentage Yield Interest rate ( EVEN ON A SINGLE DOLLAR in the account). The product includes unlimited FREE BILL PAY.
I just checked the checking account offered by Waterhouse. It is not pure checking but writing checks against your brokerage accounts.
FREE BILL PAY, means that you can set up automatic payments to any merchant and let the payments just get paid as late as you wish so that the Interest on your money is earned as long as you want. For me, it meant setting up my mortgage, credit cards, utilities etc with approximate amounts for the next 5 years and then only go back to change when the actual bill I want to pay is different or if I want or change a monthly payment from here on out.. Mortgage does not need changing too much unless I want to pay extra some months. Utilities will be satisfied as long as they get the amount owed to them but I personally have set up a little extra money so that I don't have to change anything if fluctuations are small. Let some small funds build up with my utilities for bad weather later on etc. I also take advantage of Balanced Payment Plan from my Electric and Gas utility so I pay a fixed amount every month.
My garbage bill is due every other month, is a fixed amount and the system allows different frequencies and paying every other month was one of them. Presto!
SO WHILE I EARN INTEREST EVERY MONTH NOW, I ALSO DONT PAY ANY ACCOUNT FEES.
And my current statement is always ON_LINE. A great convenience.
The product was easy to learn without having to read up on any literature etc.
(click NEXT to part II)
4. As an Investment:
Former banking regulator Bill Siedman, now an CNBC speaker, recently was asked about the future of
internet banking and replied that it is an area ripe for internet as there is no product to ship like Amazon has to.
It has a product that everybody needs constantly and repeatedly like water and air.
There is nothing to sell, only to offer and get accepted for long term relationship.
It tastes like a Bank, rather than a Brokerage, which should appeal to most people as only 11% of the population still does regular online investing.
It is not labor intensive so once the momentum builds up, the fixed costs in the business don't accelerate at the same rate as they would in a labor intensive business. So the impact of inflation should be minimal.
Most other banks may offer on-line banking, but they cannot easily match the interest rate offered by this low cost bank. It really is a wealth sharing idea and should appeal to most economic people.
Word of mouth can get this business going from one customer to the next.
Once a critical mass of initial customers is built up, the new sign ups will come from referrals. Being a banking product that is more likely than a simple brokerage product would be.
Being a small business, with unique ideas, may mean a very high rate of return over time if the company grows to even a fraction of its potential. The potential, IMO, is truly unlimited. TIME TO INVEST IS NOW because, the stock price seems to have bottomed out (a technical double bottom at 5 3/8) and most of the bad news is out ( a lawsuit now settled, secondary offering done, SEC filing show warnings of assured initial losses due to marketing costs). The results of major alliances with marketing don't seem to be figured in the low stock price as these alliances have not proven themselves substantially yet.
The company stock is still not researched by major brokerage houses leads me to think that any such event will bring in enormous number of new investors. It is still not on the Wall Street Radar.
The company valuation is only about $35 million dollars while a similar company (NetBank) is valued at over $600 Million.
RISK FACTORS: I know about these risk factors:
The company is small and the management though aggressive is not experienced enough in running a business like this one. But they are showing creativity.
The company systems are partially out-sourced to EDS (started originally by Ross Perot). Electornic Data Systems has a very high reputation in the industry. Part of the hardware is provided by EDS while most of the front end programming is too. This may actually be good rather than a risk factor. Because while a few things may be out of control, they also are in good hands.
The market cap of the company is very small, which presents some risks of takeovers, mergers and the like while also presenting a very good growth RATE opportunity.
(click NEXT to Part III)
FAQ:: Frequently Asked Questions:
****. why are there only 209 holders of record?
Take note that 209 holders of record does not mean just 209 shareholders.
Datek are the holder of record for all their clients that have USAB in their portfolio, likewise E*Trade is one holder of record for their clients.
The true number of shareholders for a company with a free float of 2.5m shares is in the region of 1,000 - 1,500. (source Mcaul and others).
****. Why is SEC document negative?
First and foremost, SEC documents ARE REQUIRED to inform the public in the MOST NEGATIVE way so as to not make the corporation liable in case investors lose their money depending upon fluctuating stock prices. I am glad that the SEC documents here are sufficiently negative and warn the investors. This protects the investors who should buy responsibly and take their own risks. I heartily commend USAB management for not painting too rosy a picture and I believe that they will deliver much more than the SEC document projects. And they seem to be doing that already.
****. Why did they only raise $8 million in SPO?
First nobody can project stock market action, and results in any given sector at any time. One can make educated guesses based on current status.
In a separate window, please open yahoo quotes and request "detailed" quotes on NTBK, TBFC and USAB by putting in all three symbols at the same time . Look at the charts of the three banks. The charts are similar and show a decline which occurred at slightly different time horizon. NTBK announced an APO when their stock was at around $70 and the APO fetched about $38 a share. NTBK has about 29 MILLION SHARES OUTSTANDING , FIVE TIMES that of USAB.
Similarly when USAB announced their intent to SPO the stock was at around $13. The SPO fetched $ 6.75.
But management acted PRUDENTLY in not selling all the 3 million shares, they were planning to sell, something they could control. They sold only 1.4 million at the low price. SO IT IS OUTLANDISHLY FOOLISH, STUPID, DISHONEST, MISLEADING to only state that SPO raised only 8 - 9 million when they intended to raise the 33 million. There are 1.6 MILLION SHARES or so that were NOT USED IN THE SPO DILUTION. These statements show mal-intent on part of our resident paid basher (He appeared here at time of USBANCORP vs USAB lawsuit and we all know the intent of that lawsuit and the thinly veiled threats of that threatened corporation, don't we?). If these shares sold at some future date at $14 per share, USAB will raise $22 Million more. SO AS LUCK WOULD HAVE IT, I AM GLAD ONLY 1.5 MILLION SHARES WERE SOLD IN THE SPO AND THE DILUTION HAS BEEN 25% INSTEAD OF 80%.
(Click NEXT to Part IV)
**** VIABLE ALTERNATIVES TO AN SPO:
If I was running the show at USABancShares.com,
I would be seriously considering alternatives to an SPO. And there are viable alternatives to raise millions of dollars:
Every one has heard of Paul Allen. He has provided mega bucks to GNET (owners of Silicon Investors among other internet properties) and to FATBRAIN.COM, the provided of specialized printed matter and e-publications.
The ELNK/MSPG/SPRINT connection can be useful here. As Mcaul is already speculating, if an important person joins the board of directors of USABancShares.com, the association may come with important financial ties and raising all the needed millions by direct equity stake is entirely possible. It is hard to see USAB fail if it had the money and money easily goes to well orchestrated ventures as this one definitely is. Value Vision (VVTV)' stock was struggling at around 8 at one time. GE CAPITAL took an equity stake and now VVTV trades much higher..40s last time I looked.
Earthlink SEC documents show that FON and PCS ,components of SPRINT - own a chunk of EarthLink and they use EarthLink as Internet Service Provider for all of SPRINT's internet customers.
Technically then SPRINT should have an indirect interest in the welfare of USAB and should somehow offer USAB services to all Sprint Users, at some time.
I think DEEP POCKETS may have arrived for USAB making any need for SPO unnecessary.
**** What are their marketing initiatives?
600,000 e-machines are to have a special key on their keyboard that will let you access your USAB account and Systemax Computer is going to put a Icon on your desk top that will do the
same! I think USAB will get a lot of clients that way too! I am sure there are other deals in the making too! Man what would happen if Dell or Gateway did that! Straight to the moon!
Earthlink and Mindspring are merging and that provides access to 3,000,000 more customers thru promotions like Free Internet Service for a year for opening an account with a certain minimum balance.
****. Are they spending wisely on advertising?
Personally, I think that the spending on advertising has been more focused, with the realization that this product ( 5% CHECKING with FREE BILL PAY and MUSIC to COME) is easy to sell and we are watching to see that unfold.
The internet banks are all down currently and a strong rebound, IMO, is in the offing.
(click NEXT to Part V)
*****. If we look at the recent price action on the stock, it looks real bad.
That would be a very narrow view. There has been a pullback because of a very sudden large rise. It is only natural. Look at the 5 year chart to really get your underpinnings on this stock:
quote.yahoo.com ( This one says to me: Time to Buy )
*****. If another bank wants to copy USAB's Flash site, all they have to do is pay $269 to Macromedia or get it for FREE for a 30 day trial.
Very Bright. Check this web-site and see how soon you get going : macromedia.com
Look at the range of products you will have to learn and combine. Graphic Designers are not paid $140 an hour by my organization for nothing.
*****.A survey released in late summer by Cyber Dialogue, a New York research firm, that showed in the 12 months ended in July, 2.2 million new online banking customers were gained but 2.1 million were LOST due to complicated service and poor customer support.
Answer. That survey was presented on CNBC and the author was asked if he separated Pure Internets from the Traditional Brick and Mortar Banks. The answer was "NO, We did not ". The President of a Pure Internet present there said that his bank had only lost 2% of its customers. Remember the tobacco industry surveys.
And makes perfect sense too. What Interest rate do traditional banks pay it on-line users? Last I heard they were being CHARGED a fee for Bill Pay.
****. SNFB offers 6% so why go with USAB:
6% is temporary to April 15, 2000 and also limited to a certain amount.
Read the real 2.5% offer in the fine print:
* 6% annual percentage yield for deposits up to $10,000 until April 15, 2000; 2.5% annual
percentage yield for $10,000.01 or higher. (APY is accurate as of April 26, 1999.) $100
minimum deposit to open account. No minimum deposit to earn stated interest. Member
FDIC. Limited to first 50,000 customers.
(Click Next to Part VII)
*****. A question on post 18412:
" prospectus for the last SPO (Oct 1) said that USAB will have "3 months" of cash to fund operations and the SPO was completed a month and a few weeks
ago. So, they could possibly be 1/3rd of the way through."
If the funds are depleted this as fast as 3 months, that would also mean a huge increase in the number of accounts, justifying a higher valuation and formation of an
account base that would bring in additional accounts at little or no cost.
Management is probably also cognizant of the unrelenting and misguided bashing by a bigger competitor's representatives on this message board (since contained
by volunteer shareholders like myself and numerous others) and is likely to conserve cash and delay another SPO till after the results of the earlier investments are
shown.
**** Did this company have any stock-splits: From SEC filings:
All per share data has been adjusted to reflect (a) a 33% stock dividend
paid on July 18, 1997, (b) a 33% stock dividend paid on August 17, 1998
and (c) a two-for-one stock split effected in the form of a dividend paid
on June 15, 1999, and has been calculated based on the weighted average
number of shares outstanding during the period, assuming the conversion of
the shares of Class B common stock into shares of common stock. See
"Certain Relationships and Related Transactions."
(click NEXT to Part VIII)
**** Does USAB provide ONE-STOP SHOPPING for the Customers?
1)banking - 5% interest rate on checking and No FEES - Match that?
2)credit cards - EnergyOne Visa at introductory rate of 5.9%
3)brokerage/stock trading - $12 per trade any stock up-to 1000 shares.
4) Equity Options. Over 4000 load and no-load mutual funds.
5)mortgages - Click on "LOANS" . Available are Home Purchase and Refinance Loans (with cash out) , Debt Consolidation Loans, Commercial loans, 2nd Mortgage Loans, Home Equity Lines of Credit. Current 1 year arm is 6.25% as of 11-14-99. Rate calculator available for Loans.
5) Mortgage Auctions now available from USAbancShares site called www.loangravity.com or click on Loangravity Icon.
6)Leasing for Businesses
7)Bill pay - Absolutely Free. Add new merchants at will.
8)Money transfers between accounts and Money wires.
9)Convenience of a major network of ATM's when you need them - wherever CIRRUS symbol is displayed.
10) Certificates of Deposit - standard and thru CD Auctions.
11) Automatic contributions to a number of charities from your account (optional of course).
12). Free incoming wire deposits and Direct Deposits.
13). Stock research thru Reuters Moneynet etc.
****. Has the company asset growth been good over the past 3-4 year?
From SEC document for recent years:
$ 165,106,000 (1998)
$ 89,326 ,000 (1997)
$ 38,146,000 (1996)
$ 25,786,000 (1995)
As of end of the 3rd quarter the assets had reached 340,000,000.
Total deposits increased 138.4% to $272.7 million at September 30, 1999, compared to $114.4
million as of December 31, 1998. |
