Cutting its marketing budget helped, but USABancshares.com still lost money in the second quarter.

The Philadelphia-based Internet bank had a $1.4 million loss in the period. That was a 40% improvement over the $2.5 million first-quarter loss, but the four-year-old company did much better in the second quarter of 1999, when it turned a profit of $510,000.

Highlights for the second quarter included a single-day record for visits to the company's Web site: 30,000, on July 26. As of June 30, USABancshares.com had 55,000 accounts. Assets were $360 million, up 57% from a year earlier, and net interest income was $3.1 million, up 59%.

Officials say they are encouraged that account enrollment accelerated even after it slashed its marketing budget by $1 million, to $1.5 million. Since its inception the company has spent $6 million on marketing.

"We've had the greatest growth in the last three months" in accounts, said Kenneth L. Tepper, president and chief operating officer of USABancshares.com. "Our numbers show the true core of the Internet model and the grass-roots word-of-mouth advertising. Banking isn't going to be any different - if customers like it they will tell their friends."

Chris Musto, director of financial services at Gomez Advisors in Lincoln, Mass., said USABancshares.com is on a familiar route.

"The pressures they are facing are typical of pressures on dot-coms across a number of industries to show a near-term path toward profitability by reducing marketing expenditures," he said.

USABanchsares.com is trying to draw people to its site by leveraging off well-known consumer brands. For instance, it has a partnership to enclose promotional offers in packaging of Hawaiian Punch.

It is also pushing its brick-and-mortar branches, another development that is becoming familiar to online banks. It has four walk-in branches, all in Philadelphia.

"We aggressively look to partner with people locally. They just want to see us face to face, especially on the lending side," Mr. Tepper said.


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