ALTHOUGH IT HAS $4 billion of assets and 2.1 million customer accounts, USAA Federal Savings Bank keeps such a low profile it could be called the Stealth Bank.

The banking subsidiary of the San Antonio-based insurance and financial services concern maintains only a single branch. USAA built its banking franchise upon the loyalty of its more than 2.4 million regular and associate members, primarily active-duty or retired U.S. military officers and their families. As an association, USAA distributes profits to regular members in the form of insurance policy dividends and other allocations.

Members conduct the bulk of their business with the association by mail or over the telephone. Since its 1983 startup, USAA's banking operation has taken advantage of improvements in retail delivery systems and supporting technology to broaden its horizons.

USAA's credit cards, which carry a low interest rate -- currently 12.5% -- and no annual fee, remain its stock-in-trade. It has more than 1.8 million cards issued and more than $2.3 billion on outstanding balances. But the company now offers a full range of other lending and deposit products as well.

"Part of our long-term goal is to be the focal point of financial transactions within" the company, said Jack M. Antonini, president and chief executive officer of the bank. "Customers having some sort of banking relationship with us helps us to facilitate that goal."

Careful, deliberate planning has been the hallmark of USAA since Robert F. McDermott, a retired Air Force general, took the controls of the privately held company in 1969. Under Gen. McDermott, who stepped down as chief executive in 1992, USAA has grown from $200 million of assets under management to $28 billion.

Gen. McDermott focused on improving USAA's customer service, employee productivity, and product offerings. By most accounts, he has been extremely successful on all fronts. USAA is frequently cited by consultants and the business media for its superior use of technology, and in a recent edition of "The 100 Best Companies to Work for in America," it placed in the top 10.

"There's a tremendous amount of true long-term planning that goes on in this company," explained Mr. Antonini, a veteran banker who joined USAA in 1985. "Most public companies don't have that luxury."

The bank's performance has been stellar, with a 1992 return on assets of 2.6% and a 24.2% return on equity. The bank consistently receives ratings of "A+" and "Superior" from Sheshunoff Information Services Inc. and IDC Financial Publishing Inc., respectively.

Mr. Antonini said value and service are the keys. "To be able to offer a good price you have to have low costs," he said. "Direct mail and serving customers from a single location has worked great for USAA. So we decided to use that same philosophy."

Part of that success also can be attributed to quick membership acceptance of new USAA offerings. "We try to focus on the services our members need the most and request the most," said Mr. Antonini.

For example, in 1984 the bank sent out 240,000 preapproved credit card applications in an effort to get the program off the ground. Within weeks, it had opened more than 120,000 accounts -- an astounding 52% response rate. Such direct mail efforts usually aim for a 5% to 10% response.

The company's use of technology, said Mr. Antonini, is integral to such efforts.

Once the company decided to enter the banking business, management didn't spend a lot of time developing basic, applications. USAA's credit card processing and mortgage servicing operations are handled by outsourcing firms. The bank also will move its core deposit and lending functions to a third-party arrangement later in the year.

The bank's data processing staff is augmented by an information services division that supports all of USAA's business units.

As the technology backbone of USAA, the division has amassed a formidable amount of computing and telecommunications power, which is managed and measured with drill-sergeant precision. On the whole, the corporation processes an average of 12 million transactions and 318,000 phone calls each day.

USAA was the first company to implement a large-scale image processing system. The system, used in the company's property and casualty division since 1988, eventually became the basis of International Business Machines Corp.'s ImagePlus product for storage of electronic documents. However, the bank currently does not use this system, employing image only for signature verification and archival storage.

While new technologies play an important role, the heart of USAA's information systems consists of two mainframe-based applications -- a customer information file and a corporate-product data base.

"Everybody at USAA adheres to a number of guidelines associated with those files," said Harry H. Richardson, a bank assistant vice president. "Those are the two key elements to help us give a common look and feel to the customer."

When a customer calls any USAA division, the customer service representative first validates and updates the information residing in those files.

This bit of housekeeping also provides USAA with more accurate data to use for its frequent cross-selling forays.

Regulations prohibit USAA's business units from sharing financial data. "The walls that need to be erected are erected. At this point, we use what we're allowed to use," said Kelth L. Myers, senior vice president, operations, at the bank.

Instead, the company taps the customer and product data bases for prospects. Members with insurance policies covering older cars may receive a mailing promoting auto loans. A customer with a big-ticket homeowner's policy is probably a candidate for a home equity line of credit.

USAA also used its easy access to customer information to fine-tune lending operations. According to Mr. Antonini, about one million members are preapproved for auto loans, based on their history with the company. Another source of leads is USAA's vehicle information service, which provides members with detailed data about late-model cars.

"They're telling us they're in the market for a car loan when they tell us they're in the market for a car," said Mr. Antonini. "When we send them this package, it also includes the notice that they're preapproved for a car loan from us. That's a level of service they really enjoy. They don't even have to go through the hassle of giving us basic information for an application."

Customers who aren't preapproved can still obtain a car loan in less than 10 minutes with a single phone call. USAA developed a system with an automatic interface to the various credit bureaus.

"As soon as we enter the member's number, the system goes out and does the credit bureau screen," Mr. Antonini explained.

Still, Mr. Richardson said USAA is still "trying to get down and really understand" what it can and can't do with its data. "We'd like to break down some barriers," he said, in order to get a better overall financial view of USAA members.

Cross-selling is not the only task assigned to USAA's data bases, though. "We empower our employees so that they're more intelligent and able to answer customer's questions more quickly and conveniently," said Mr. Antonini.

Since most customer service is handled over the phone, USAA places great emphasis on making queries as painless as possible for both parties. Incoming phone calls are typically answered in three rings or less. On-line computer transactions have a response time of less than two seconds.

"The objective is to have all the information readily available to that rep to be able to service the customer," said Mr. Myers. "With what we've developed internally we're able to do that."

USAA continually fine-tunes such so-called legacy Systems, but it is also preparing for the next generation. All of the business units within the company are in the midst of a three-year program to develop a blueprint for the future.

"You don't go into hundreds of millions of dollars of legacy systems and start taking them apart," said Mr. Richardson. But, he adds, future development efforts will use the client/ server model, supported by IBM's OS/2 operating system and fourth-generation programming languages.

To date, bank management has used the USAA philosophy and infrastructure to develop a successful lending business, much of which is funded by commercial paper. To keep that business growing, and maintain a balance in funding, management is now focused on building its deposit base, which currently stands at $1.3 billion.

Although USAA does not market to the general public, except on a limited basis in the San Antonio area, its banking and brokerage services are available to consumers at large. More than 25% of its deposit customers are nonmembers.

"Every time there was a name change on one of the institutions in San Antonio, you couldn't get into our lobby for the next week," said Mr. Antonini.

Bankers in the San Antonio area, though, characterize USAA's impact on the local market as minimal.

Getting USAA members to move their deposit business to the bank is another matter. "It took a while to develop the reputation and the rapport that already existed within USAA," Mr. Antonini said.

Deposits from members have been growing slowly for the past several years, but early in 1992 USAA stepped up its efforts to attract deposits.

Part of that effort involved updating its delivery systems. In May, the bank introduced its Check and Cash Card, the first ATM card with both on-line and off-line debit capabilities.

The standard card is tied to MasterCard International's Maestro on-line debit program. It can currently be used at about 18,000 merchant locations worldwide.

For customers with overdraft protection tied to their checking accounts, the card also carries a MasterCard logo and can be used anywhere MasterCard is accepted. Currently, roughly half of USAA's 60,000 ATM cards have debit capabilities.

The debit card access, said Mr. Antonini, is part of a bigger package. By the end of the year, USAA customers also will have access to electronic bill payment and improved voice response systems, as well as consolidated statements using image technology. "We've rolled it out kind of cautiously, but it's all part of a bigger package that we'll market fairly aggressively once we have each of these elements in place," Mr. Antonini said.

Mr. Antonini also foresees a closer relationship with USAA's investment management company. "The goal is to be able to marry the two together and being able to present a [Merrill Lynch] cash management account-type of a product with the various USAA products that are available," Mr. Antonini said.

For the time being, USAA is finding that its stealthy presence and untraditional banking structure is not a hindrance. "The bank is saying, 'there's no reason we can't offer products and services to my customers just like any other bank,'" said Mr. Richardson. "What makes us think we can't be a virtual bank?"

In the age of virtual corporation, USAA looks like the type of institution that may give its more traditional brethren a very noticeable headache.

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