WASHINGTON - The first "virtual" bank has gotten regulators go-ahead, with a few conditions.

The Office of Thrift Supervision this week approved plans by Cardinal Bancshares of Lexington, Ky., to remake a subsidiary in rural Pineville, Ky., into an on-line bank serving customers nationwide on the Internet.

But before Security First Network Bank can make the jump to cyberspace, the thrift agency is requiring it to pay for independent tests of the security systems it will use to keep hackers (and employees) from tampering with customer accounts.

Security First also will be subjected to slightly more Community Reinvestment Act scrutiny than is customary. The agency is demanding that the bank report back in six months on its lending to low- and moderate- income applicants and spell out at that time exactly which community it is serving.

James S. "Chip" Mahan 3d, Cardinal's chairman and chief executive officer, said the Office of Thrift Supervision's conditions are reasonable - especially considering the wariness with which the agency first approached Cardinal's proposal.

"We started with the OTS last September and met with some concern on their part," Mr. Mahan said. "I would say that for at least the first 90 days it was an education process: What is the Internet? What are the security concerns?"

A turning point came when Mr. Mahan made a presentation to thrift regulators using Quicken, the popular home finance computer program, as an example of what his bank was aiming to do. It turned out that John Downey, the agency's director of supervision, was a Quicken user, Mr. Mahan said, and everything went more smoothly after that.

Intuit, the maker of Quicken, already offers some on-line banking services, as do software-giant Microsoft and several banks. As many as 30 banks also offer information about their services on the Internet, the wide-open worldwide computer network whose commercial possibilities are just starting to be explored.

Security First is unique in that it plans to do most of its business on- line, and will use the Internet for actual checking account transactions, not just information.

Mr. Mahan said the bank probably didn't need regulators' approval to start offering services over the Internet. "Any bank or thrift in the country could effectively put a product on the Internet if they wanted to," he said. "But we didn't want the OTS to suddenly come and say, Why don't you stop doing this until we figure out what the Internet is?"

The computer security system that the thrift agency wants tested is devised by Secureware Inc., an Atlanta data security firm that has done most of its past business with the Pentagon and other government agencies. If it passes the tests, the company hopes to market the system to other banks, said Michael McChesney, Secureware's chief executive and Mr. Mahan's brother-in-law.

Internet banking is uncharted territory for the CRA, which requires banks to delineate a service area and show that their lending practices adequately serve it.

But with Security First planning to make checking accounts the focus of its Internet operations and restrict its lending chiefly to the rural southeastern Kentucky county where it will maintain its lone brick-and- mortar branch, Mr. Mahan said he doesn't expect the reinvestment law to be much of an issue.

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