PHILADELPHIA - Ken Tepper wants to prove Bill Gates wrong.

The 33-year-old banker is tired of hearing the Microsoft computer mogul proclaim that banks are dinosaurs that will be replaced by computer software.

"Bill Gates may know how to write software," said Mr. Tepper, but "he doesn't know how to underwrite credit, he doesn't take deposits, he doesn't make loans, and he's not insured by the Federal Deposit Insurance Corp.

"The future of banking in America is not with Bill Gates or any other fly-by-night approach to get rich quick through some computer program or on-line service."

In fact, Mr. Tepper has his own theories about the future of community banking and its use of technology - and he's eager to test them out.

With the backing of some of Philadelphia's most powerful and prominent business leaders, the former regulator and investment banker has set his sights on an established, pristine Philadelphia savings bank, from which he hopes to launch a technologically advanced, super community banking company.

Under the auspices of a new holding company, USABancShares, the tall, self-assured Mr. Tepper is actively pounding the pavement of Philadelphia, seeking investors to contribute $10 million in capital to buy People's Thrift Savings Bank.

The 108-year-old institution, based in nearby Plymouth Meeting, has been a stable and conservative figure on the Philadelphia banking scene for most of its history. But it's prevented from growing beyond its current $20 million in assets by inadequate capital.

Its loan portfolio, almost exclusively in simple home mortgages for much of its history, accounts for less than one-fourth of its total assets. And 95% of its deposits are in certificates of deposit, since it just started checking accounts this month.

But now, Mr. Tepper wants to use the offering proceeds to buy the thrift for $1.3 million, raise its legal lending limit, and expand into full consumer and commercial lending in an effort to triple its size within a year as he molds it to his liking.

"I think the concept is a good one. By having an existing franchise, he just gets up and running that much quicker," said Ben Plotkin, executive vice president of Ryan, Beck & Co., noting that consolidation has left underserved community bank niches. "It's better than any de novo you could find."

And Mr. Tepper has got some pretty unusual firepower behind him.

The company's high-profile board is led by Bruce W. Kauffman, a former justice of the state Supreme Court and now chairman of a Philadelphia law firm, Dilworth, Paxson, Kalish & Kauffman.

Also on the board are some of the city's leading figures in real estate and development, as well as the head orthopedic surgeon for the Philadelphia Eagles football and Flyers ice hockey teams.

And if that's not enough, the bank also has a three-member advisory board led by L. William Seidman, former chairman of the Federal Deposit Insurance Corp. and the Resolution Trust Corp., where Mr. Tepper worked for two years.

"We have a lot at stake," said Mr. Kauffman. "We've all worked very hard to build our reputations, and we're not going to jeopardize that for anything, even making money."

What drew them all together is a belief that Philadelphia is being slowly drained of its local banks. In the last few years, Mr. Tepper said, about 15 small banks have disappeared, either through mergers or failures.

And the only remaining large bank, CoreStates Financial Corp., is now viewed as an acquisition target of hungry superregionals.

"Where there used to be four community banks on the corner, there's now going to be one superregional," he said. "We've been doing business here in Philadelphia for 300 years, and we demand local access to our business leaders. And people are just not going to get that with this consolidation.

"We want to restore that tradition, even if it's just one small community bank at a time. You've got to start somewhere."

And Mr. Tepper knows about tradition. He has a long history in the city's financial and political community. He was born into a wealthy family on Philadelphia's Main Line, and after law school joined Royal Bank of Pennsylvania as corporate counsel in charge of mergers and acquisitions for his father-in-law, chairman Daniel Tabas.

In 1990 he switched gears, joining the Resolution Trust Corp.'s 11- person team assigned as conservators for City Federal, a failed New Jersey thrift with $13 billion of assets, more than $2.3 billion nonperforming. But even a two-year stint until 1993 as director of merchant banking for $500 million-asset Tucker Federal Savings and Loan in Atlanta didn't satisfy his desire to head a community bank.

Finding People's Thrift marked the end of a two-year search for an institution with little or no nonperforming assets and that "would provide a very clear entry vehicle for our business plan," he said.

In fact, the last time the state-chartered savings bank foreclosed on a property, Franklin D. Roosevelt was president and people were dancing to swing bands. It was 1944.

And People's Thrift has been looking for a merger partner, especially after Madison Bank terminated a merger agreement last September when People's refused to renegotiate the price.

But People's Thrift is only the beginning for Mr. Tepper, he says. He wants to buy other small community banks and let them retain their independent identities and management, while achieving economies of scale under the holding company.

"We won't be a stodgy old do-nothing organization, but one that will act intentionally," Mr. Kauffman said, affirming that directors want to "make some money."

"We're going to do it the old-fashioned way. We're going to earn it. No get-rich-quick schemes."

Mr. Tepper and his partners are counting on Philadelphia's "parochial" mentality and pride in its 300-year tradition of local banking to draw in the customers and make USABancShares a success.

"We think we're going to be able to compete very well with banks whose management and board members live thousands of miles away," Mr. Tepper said. "I'm looking forward to competing with the guys who have never even seen a cheese steak, let alone eaten one."

He said that the larger banks have begun looking at basic deposits and loans as secondary lines of business, focusing instead on cross-selling their other products.

"That's a word that's going to be forbidden from our bank," he said. "We will be entrepreneurial in spirit and open to every opportunity. However, we will be 100% committed to the core business, which is taking deposits and making loans. That's the way you serve community customers."

Mr. Tepper said he's a firm believer in the use of technology, though he dismisses existing home banking and financial software as a complex "waste of time" that won't succeed. Instead, USABancShares is trying to develop its own software.

"Banking and credit underwriting is our business, not Bill Gates' business," he said. "And it seems to me that his time is best spent trying to develop a version of Windows that works."

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