SFNB reports second quarter results and announces strategic partnership with CheckFree.

ATLANTA--(BUSINESS WIRE)--Aug. 14, 1996--For the quarter ended June 30, 1996, Security First Network Bank (NASDAQ:SFNB, http://www.sfnb.com) incurred a net loss of $5.4 million compared to a net loss of $91 thousand for the same period in 1995.

For the six months ended June 30, 1996, SFNB incurred a net loss of $6.1 million as compared to a net loss of $30 thousand for the same period in 1995.

SFNB also announced that Five Paces, Inc., a wholly-owned subsidiary, has entered into an agreement with CheckFree Corp. in which CheckFree will provide back-end bill payment processing for Five Paces' Virtual Financial Manager (VFM) suite of software solutions. In addition, CheckFree will operate VFM as a service to be re-sold to financial institutions seeking an Internet solution. Checkfree provides home banking and bill payment processing services to 142 financial institutions. Under the agreement, Five Paces will continue to utilize CheckFree's electronic payment services as part of the solution it markets to banks and other financial institutions. The integration of the core capabilities of CheckFree and Five Paces will give banks and financial institutions increased flexibility in designing customized electronic banking solutions.

The increase in the net loss for both the three-month and six-month periods, as compared to the prior year, was primarily attributable to the following factors:

-- On May 23, 1996, SFNB acquired Five Paces, Inc., developer of the Virtual Bank Manager (VBM) and Virtual Financial Manager (VFM) software used by SFNB to offer banking services over the Internet. Subsequent to the acquisition, and included in SFNB's results, Five Paces recorded an operating loss of $4.5 million. Included in the Five Paces operating loss was a one-time charge for $3.5 million for in-process research and development;

--General and administrative expenses associated with the continued development of the Internet banking operations amounted to $2.6 million for the six months ended June 30, 1996, as compared to approximately $142 thousand for the same period in the prior year;

--In June 1995, SFNB sold four "brick and mortar" branches located in Kentucky, totaling approximately $39.9 million in assets. As a result of the sale of the branches, net interest income declined by approximately $1.1 million for the six-month period ended June 30, 1996; and

--Subsequent to the acquisition of Five Paces, SFNB did not recognize a tax benefit on the consolidated losses incurred as the Company anticipates that it will continue to incur operating losses for a period of time.

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                    Security First Network Bank
                  Selected Financial Data (unaudited)
               (Dollars thousands except for share data)

                                                   At
                                        June 30,         December 31,
                                          1996              1995
 Balance Sheet
  Earning assets                    $       99,234     $      36,210
  Assets                                   106,971            39,733
  Total deposits                            46,860            32,801
  Stockholders equity                       55,277             4,960

                          For the Three Months

                                                    For the Six Months
                             Ended June 30,           Ended June 30,
                          1996           1995      1996           1995
Income Statement
 Interest income        $  1,095      $  1,365   $  1,795       $  2,889
 Interest expense            532           757        995          1,519
 Net interest income         563           608        800          1,370
 Banking fees &
  other income                49            73        101            137
 Software and data
  center revenue              77             -         77              -
 Cost of software and
  data center revenues      (278)            -       (278)             -
 Gains (losses) on
  sale of assets               -            20          -            (30)
 Charge for in-process
  research and
  development              3,518             -      3,518              -
 Other non-interest
  expense                  2,618           846      3,938          1,535
 Pretax income            (5,725)         (145)    (6,756)           (58)
 Income tax                 (328)          (54)      (676)           (28)
 Net income               (5,397)          (91)    (6,080)           (30)
 Earnings per
  common share          $  (1.13)     $  (0.04)  $  (1.69)      $  (0.01)
 Weighted average common
  shares outstanding   4,777,210     2,400,000  3,588,605      2,400,000

James S. Mahan III, chief executive officer, noted that the operating results were in line with expectations and represented a major step toward establishing the Internet banking and software operations. He stated that "During the second quarter, SFNB passed a number of significant milestones. We completed the acquisition of Five Paces, successfully raised more than $60 million in new capital, experienced excellent growth in deposits and accounts at the Internet bank, successfully brought a $20 billion bank online at the Five Paces data center, and established new strategic marketing relationships to increase the distribution of the VFM software."

                      Internet Bank Deposits

                                                 Average Daily
                                             Account Applications

                                             Number of    for the Month
Deposits and accounts as of:     Deposits     Accounts        Shown

 December 31, 1995             $    349,000      612           24
 March 31, 1996                $  6,139,000    1,753           29
 June 30, 1996                 $ 12,033,000    3,755           50
 July 31, 1996                 $ 13,964,000    4,712           65

As of June 30, the Internet deposits amounted to approximately $12.0 million, with 3,755 accounts. This represented an increase of $5.9 million and 2,000 accounts in the second quarter. The growth in the Internet deposits and accounts continues into the third quarter, with a total balance and number of accounts of $14.0 million and 4,712, respectively as of July 31, 1996. In addition to the positive trends established by the deposit and account growth, the average number of account applications the bank receives on a daily basis continues to accelerate. During the months of April, May and June, the average daily account applications received were 29, 40, and 50, respectively. As a result of the bank's increased marketing efforts, the average number of accounts received on a daily basis in July increased to 65.

To further enhance its ability to market the banking services offered over the Internet, SFNB has announced its plan to open the first of its "City Offices" in Atlanta, Ga., in the fourth quarter. The City Office, a hybrid banking solution that complements the convenience and power of Internet banking, will bring the technology to Internet customers in yet another way. There will be only one SFNB City Office in a metropolitan area, and the City Offices will be located in high traffic, commercial/retail areas of the target cities. In addition to the Atlanta location, SFNB plans to open City Offices in Palo Alto, Ca., and Cambridge, Ma. City Offices will be small and high-tech intensive, with large video monitors and Internet browsing technology available for sales representatives to conduct product demonstrations. Additionally, the City Offices will provide a base from which to conduct a variety of lending activities. The Company expects an initial capital investment of $400,000 in each location.

As part of establishing the City Office in Atlanta, subject to regulatory approval, SFNB intends to transfer the headquarters of the bank from Pineville, Ky., to Atlanta. Additionally, in keeping with its focus on extending the Internet bank concept and moving away from traditional methods of delivering banking services, SFNB also intends to sell the $34.6 million in deposits and $20.1 million in loans and related facilities currently located in Pineville.

"In addition to the excellent progress to date at the bank, we continue to press forward with the software sales strategy we outlined during the recent public offering," stated Michael C. McChesney, chief executive officer of Five Paces, Inc. "In addition to establishing strategic relationships with domestic and international channel partners, we continue to focus both on bringing new financial institutions to the Five Paces data center and establishing additional licensing arrangements with the leading bank data processing firms."

Five Paces continues to market VFM to the largest financial institutions around the world. To that end, the company has been working with financial institutions in Europe, Asia and Australia, in addition to its U.S. domestic market.

In June, Five Paces and Visa Interactive (VI) announced an agreement in which VI will incorporate VFM to allow its 100+ financial institutions around the world to offer their customers secure financial services on the Internet. The Five Paces Internet solution complements VI's comprehensive product offering for remote banking and bill payment services, allowing all VI financial institution customers to begin offering their services over the Internet in a secure environment with minimal integration requirements. Integration is simplified because the customer banks of VI are already integrated in VI's ADMS (Access Device Messaging Specification) front-end interface, an open specification for remote banking.

Also in June, Huntington Bancshares, a $20 billion bank headquartered in Columbus, Ohio, went live on the Internet with its Huntington Web Bank using the VFM software through the Five Paces data center located in Atlanta.

Jefferson Banking Company and the Vine Street Trust Company, both of which are subsidiaries of Cardinal Bancshares, Inc., the former parent of SFNB, have signed contracts with Five Paces and are in the process of implementing the VFM software through the Five Paces data center.

As previously announced, the management of the operations of the Five Paces' data center in Atlanta has been outsourced to ALLTEL Information Services, Inc. In addition to providing data center management services, ALLTEL is also marketing the Five Paces data center services to approximately 700 financial institutions which are direct customers of ALLTEL. To date, ALLTEL has entered into an agreement with one of the largest credit card issuers in the U.S., which expects to begin offering Internet banking services to its millions of credit card customers during the fourth quarter. Five Paces also has signed an agreement with a $1.9 billion bank, located in the midwest. The bank will use VFM through the Five Paces data center as its Internet banking solution.

As previously announced, M&I, with the assistance of Five Paces, is creating a data center from which it will provide its financial institution customers the ability to offer Internet banking services. M&I provides traditional data processing services to approximately 650 banks throughout the country. In addition to receiving a fee for installing the data center, Five Paces will also receive a monthly license fee based upon the number of accounts processed at the M&I Internet data center.

M&I has indicated that it intends to have the data center, which is currently undergoing testing, fully operational by the fourth quarter. To date, M&I has announced that three financial institutions will be online at the M&I data center by year-end. The banks include $3.7 billion Marshall & Ilsley Bank, the Milwaukee-based subsidiary of $13.3 billion Marshall & Ilsley Corp.; $800 million Salem Five Cents Bank of Salem, Ma.; and $80 million West Coast Savings Bank of Sarasota, Fl.

As previously announced, SFNB entered into an agreement to acquire SecureWare, Inc. for $5.0 million in cash and $713 thousand in non-cash compensation. The acquisition is subject to the receipt of a fairness opinion and regulatory approval. It is anticipated that the acquisition will be consummated by year-end. SecureWare is a leading provider of secure network communications and application products designed to protect sensitive data in enterprise networks. Founded in 1986, SecureWare works with major vendors, including Hewlett-Packard, IBM and Santa Cruz Operations, to supply security products and services to commercial and government customers. Having developed some of the world's most secure computer platforms, including those used in the Global Decision Support System for the U.S. Air Force Mobility Command, SecureWare also designed the security architecture upon which VFM operates. Additionally, SecureWare has developed other software security products which it anticipates will be released to the public early in the fourth quarter.

Security First Network Bank (http://www.sfnb.com), the world's first Internet bank, opened its doors to the Internet community on Oct. 18, 1995. FDIC-insured SFNB provides its services using Virtual Financial Manager (TM) (VFM), a software system created by and licensed through SFNB's wholly-owned subsidiary Five Paces, Inc. Utilizing a multilayered security platform developed by SecureWare, SFNB's online transactions are protected by the same trusted operating system used by the U.S. Department of Defense and other government agencies.

CONTACT: Security First Network Bank

Robert F. Stockwell, 404-679-3204

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