Security First in the News

Wachovia, Huntington Join Security First Network Bank In Internet Banking Venture

Security First to offer only government-approved Internet banking application

LEXINGTON, KY, May 24, 1995 -- Two of America's leading super-regional bank holding companies, Wachovia Corp. of Winston-Salem, NC (NYSE: WB), and Huntington Bancshares of Columbus, Ohio (NASDAQ: HBAN), as well as Area Bancshares Corp., Owensboro, Ky., have agreed in principle to invest in a savings bank planning to open its doors to the Internet later this year. The savings bank, presently a unit of Cardinal Bancshares, Lexington, Ky. (NASDAQ: CARD), received approval of the Office of Thrift Supervision (OTS) earlier this month to be the first financial institution to offer its services over the public information highway, the Internet.

Under a Plan of Distribution adopted by Cardinal, the Internet bank will be spun-off to Cardinal's shareholders. At the time of the spin-off, the bank, to be known as Security First Network Bank, FSB (SFNB), will operate from a single office in Pineville, Ky., and will have total assets of approximately $41 million and stockholders' equity of approximately $2 million.

As part of the spin-off, under agreements with Wachovia, Huntington and Area Bancshares, those three bank holding companies plan to invest a total of $5 million in Security First to acquire equity and certain technology rights. Also as part of the spin-off, Security First will acquire for stock WebTech, Inc., Atlanta, in exchange for stock in Security First. WebTech, an affiliate of the Atlanta computer security firm SecureWare, developed the primary computer banking product which Security First will use to offer Internet banking to customers. All investments are subject to satisfaction of certain conditions, including regulatory approvals and the completion of various due diligence investigations by all of the parties.

Through the acquisition of WebTech, Security First expects to offer computer banking technology to the financial services industry. This will include selling to other financial services organizations the technology necessary for their customers to bank on the Internet. Security First believes that its technology and security architecture for secure transmissions on the Internet provide for the first time a workable and critical element for processing secure transactions and communications on the Internet.

Security First is the only bank to have received approval from a federal bank regulator to offer banking services through the Internet. Other banks offer computer banking services through private networks or on-line services. Some banks also have established "home pages" which provide only information about their conventional bank services. However, Security First expects to offer a full range of depositor banking services over the Internet.

Cardinal executives have worked for the last nine months with computer software and security experts from SecureWare to develop the security technology upon which the bank's on-line services will be based. Privately held SecureWare has an established track record in security software, with more than seven years' experience supplying the military and intelligence establishments. Senior executives of SecureWare formed WebTech to develop software for the financial services industries. WebTech will have exclusive license arrangements for the SecureWare security platform for the financial services industry.

"This is an important milestone, not just for the development of Security First, but for the emergence of the entire electronic banking marketplace," said James S. "Chip" Mahan 3rd, chairman and CEO of Cardinal Bancshares. "Nothing in this market moves forward without solid security technology. We are delighted to have received OTS approval and the support of Wachovia, Huntington, and Area."

Cardinal determined to spin-off Security First to shareholders so that Cardinal could remain focused on its core financial services companies. By making Security First an independent public company, the spin-off also provides Security First the ability to acquire WebTech, including its specialized computer technology and expertise, as well as affiliate with Wachovia, Huntington, and Area Bancshares. The affiliation brings to Security First a combination of needed capital to support its proposed business, as well as greater access to and credibility in the financial services industry. The affiliated bank holding companies will contribute to the further development and operations of WebTech following its acquisition by Security First.

At the time of the spin-off, Security First will sell a combination of stock and warrants for an aggregate of $3 million to the investing bank holding companies, with Wachovia Corp. and Huntington Bancshares investing $1.2 million each and Area Bancshares investing $.6 million.

Cardinal believes the spin-off and the simultaneous investment by the holding companies and acquisition of WebTech will enhance significantly the value of Security First to Cardinal shareholders. At March 31, 1995, the per share book value of Cardinal was $27.04. Giving effect to the spin-off as of that date (before the investment by the bank holding companies and the WebTech acquisition), the per share book value of Cardinal would be $25.60, and the equivalent per share book value of Security First would be $1.44. The effective per share price to be paid by the bank holding companies for Security First stock is $2.17. Based on the per share price to be paid by the bank holding companies, the effective purchase price to be paid for the WebTech acquisition is $3 million.

The spin-off and related matters are subject to approval by the stockholders of Cardinal Bancshares, Inc. and WebTech, Inc., and the proposed activities are subject to approval by the Board of Governors of the Federal Reserve System. Other regulatory approvals, including those of the Office of Thrift Supervision, will also be required.

In the transactions, Cardinal, Wachovia, Huntington and Area will receive the right to use the software developed for Security First in their own electronic banking offerings.

"Our investment in Security First will enable Wachovia to gain greater knowledge of this emerging technology and establish the foundation for broad applications in the long term," said Walter E. Leonard Jr., executive vice president of Wachovia Corp. "This investment also provides Wachovia access to excellent security software for potential use in our banking environment." "We are excited about Security First's advanced security architecture, which provides an essential element necessary for Internet banking," said Bill Randle, director of marketing and strategic planning for Huntington Bancshares. "This investment will move Huntington closer to providing true on-line banking, which we believe will have a major effect on the way our customers handle their money."

Security First's unique security architecture relies on three basic elements:
Trusted Operating System: Designed by SecureWare, the trusted operating system features a full set of security safeguards, including access controls.

Firewall: SecureWare's advanced firewall system is designed to bar unauthorized entry and utilizes log files to provide fraud detection.

Encryption: Comprehensive privacy, data integrity, and identification and authentication provided by public key encryption technology developed by RSA Data Security.

Wachovia Corp. is a $40.2 billion interstate bank holding company with dual headquarters in Atlanta and Winston-Salem, NC, and 500 banking offices in Georgia, North Carolina, and South Carolina.

Huntington Bancshares is an $18 billion regional bank holding company headquartered in Columbus, Ohio. The company's banking subsidiaries operate 344 offices in Ohio, Florida, Illinois, Indiana, Kentucky, Michigan, Pennsylvania, and West Virginia.

Area Bancshares Corporation, a $1.2 billion bank holding company based in Owensboro, Ky., owns and operates Bowling Green Bank and Trust Co., N.A. in Bowling Green, Ky.; First City Bank and Trust Co. in Hopkinsville, Ky.; The New Farmers National Bank of Glasgow, Ky.; The Owensboro National Bank in Owensboro, Ky.; Southern Deposit Bank in Russellville, Ky.; and ABC Credit Corporation, based in Owensboro, Ky., with branches in Russellville, Madisonville, Hopkinsville, Henderson, Owensboro, Mayfield, Franklin, and Radcliffe, Ky.

Cardinal Bancshares, Inc., a $607 million bank holding company, owns and operates HNB Bank based in Harlan, Ky. with offices in Irvine and Cumberland, Ky.; The Vine Street Trust Company located in Lexington, Ky.; Jefferson Banking Company in Louisville; First Federal Savings Bank based in Pineville, Ky. with offices in London, Corbin, Barbourville and Williamsburg, Ky.; Mutual Federal Savings Bank located in Somerset, Kentucky with offices in Monticello and Russell Springs, Kentucky; First & Peoples Bank located in Springfield, Kentucky; Cardinal Credit Corporation based in Lexington, Kentucky with 21 offices throughout Kentucky, and VST Financial Services, Inc. based in Atlanta, Georgia with offices in Tampa, Florida and Wilmington, North Carolina. Based on March 31, 1995 financial data, following the spin-off Cardinal will have total assets of $568.5 million, and stockholders' equity of $35.4 million.

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For further information, contact:

Cardinal Bancshares:
Robert F. Stockwell
(606) 255-8300

Security First Network Bank:
Kim Humphreys
(404) 315-6296 EXT. 196

Miller Communications:
Doug Black/Scott Collins
(617) 536-0470
Home Page: (

Huntington Bancshares:
Natalie Kompa
(614) 480-5413

Wachovia Corp.:
Andrew Trincia
(910) 770-6387

Area Bancshares Corp.:
Timothy O. Shelburne
(502) 688-7751