Few community bankers would relish being taken to court by one of the nation's largest banks.

Yet Kenneth L. Tepper, the relentlessly optimistic chief executive officer at USABancshares.com, looks back on the day three months ago when he was sued by U.S. Bancorp of Minneapolis and calls it "one of the greatest days of my life."

U.S. Bancorp filed a trademark infringement suit in August against USABanc.com -- as Mr. Tepper's $343 million-asset company was then called -- alleging that the fledgling Internet bank's name was too similar to its own. Although a Minneapolis judge ruled in U.S. Bancorp's favor, forcing the name change to USABancshares.com, Mr. Tepper viewed the battle as validation of his electronic banking model. To him it meant that brick-and-mortar competitors are so spooked by it, they will resort to hardball tactics to run it out of business.

"When we figured we were getting sued by a $77 billion-asset bank, our conclusion was we must be doing something right," Mr. Tepper said. "I thought it was cool. It was some acknowledgement we were on the right track."

Now that the dust has settled, Mr. Tepper, 37, has returned to developing his seven-month-old Internet bank and pursuing his goal of creating a national, deposit-taking powerhouse. Though some people question whether a small thrift with a limited advertising budget can compete against WingspanBank.com and other deep-pocketed Internet players, there is no doubting Mr. Tepper's resolve for reaching out to young, tech-savvy consumers.

In September, Mr. Tepper signed a deal with UltraStar Internet Services, an Internet service provider founded by rock star David Bowie. Under the deal, USABancshares.com will receive exposure on the UltraStar's entertainment Web sites, and UltraStar will be compensated for each account it generates.

In October, the bank signed another deal, this time with PC-maker eMachines, which put a USABancShares.Com "hot button" on keyboards shipped with the company's computers. The key links users directly to the bank's site. "We're never going to have enough money at this company to just go out and buy all the outdoor advertising signs," Mr. Tepper said. So "we focus on channels where we know users come."

Mr. Tepper said he first experimented with on-line banking when he was an undergraduate at Emory University in the mid-1980s. He designed a Macintosh-like PC-banking system, an idea that was shot down, he said, when a friend who worked at Apple Computer Inc. convinced him that the technology was not in place for electronic banking.

After graduating from Villanova University Law School, Mr. Tepper signed on as a corporate attorney for Royal Bank of Pennsylvania. It was the height of the savings and loan crisis, and his job was to collect debts. Later, he was drafted by the Federal Deposit Insurance Corp., which was working to clean up the S&L debacle.

Mr. Tepper considers himself a devout patriot and staunch Republican. Portraits of the Statue of Liberty and Ronald Reagan hang in his office. So when the FDIC knocked, he says, he leapt at the opportunity. "I was going to war. This was the time to serve our country, and I did."

In 1995, Mr. Tepper set out on his own. Betting that consolidation in Philadelphia's bank market meant opportunity, he gathered investors and bought Peoples Thrift Savings Bank in downtown Philadelphia, which he later named BankPhiladelphia. He also formed a holding company, USABancshares, which has since added the ".com" to its name and is the parent of both the brick-and-mortar thrift and the Internet bank.

Thanks mainly to the launch of the Internet bank in April, the company's assets have jumped by 107% since Jan. 1 and deposits have more than doubled, to $273 million.

Despite its growth, the company has had its troubles. Net income dropped 70% in the first nine months, to $3,610,000, mainly because of the costs of a systems conversion and the $1.3 million it has spent on advertising and marketing.

After reaching a split-adjusted high of $15.8125 per share in late July, the company's stock is now trading in the $6 range.

Mr. Tepper acknowledged that USABancshares.com is far from a household name. Its on-line bank has just 5,500 customers, nowhere near Mr. Tepper's goals.

"Until we get to the millionth user, and until we've made a difference, we're nowhere," he said. "So to say we have nice account growth or to say the bank is growing in assets means nothing to me. We've got to (achieve) our strategic vision before I'll have any sense of accomplishment whatsoever."

But is one million users a realistic goal? Dave Koto, a technology consultant for Brintech Inc. in New Smyrna Beach, Fla., wonders whether USABancshares.com will ever have the resources to compete on a national stage when Bank One Corp., as one example, is spending tens of millions of dollars over the next several years to promote its WingspanBank.com subsidiary.

"The jury is really out on how much do you really have to spend to get a significant amount of customers," he says. "The virtual banks today, the ones that want to make a tremendous impact, are spending (a lot) of money."

He added that if the company is forced to increase its ad budget, it probably will have to lower the interest rates on deposit accounts, making it less competitive.

Cassandra Toroian, an analyst with Livingston, N.J.-based Ryan, Beck & Co., also has her doubts. "I think it's going to be difficult to compete against the really big Internet bank players," she says. "They can outspend a bank that size a hundred times over.

"To try and bill themselves as the Internet bank of choice, not just a local community bank that has Internet capabilities, is going to be tough."

Mr. Tepper, however, says size doesn't matter.

"On the Internet, size is transparent," he said. "I have a market where I can offer an insured product, no matter how big I am, and if I can do it efficiently, in an interesting format, I can succeed in a space that was heretofore unknown."

Mr. Tepper has shown he's not afraid to go toe-to-toe with the big boys. In one well-known advertisement, he blasted $235 billion-asset First Union Corp. after it expanded to Philadelphia with the purchase of CoreStates Financial Corp. in 1998. The ad pictures him before the Georgia state flag -- which looks like the Confederate flag -- in an effort to depict the Charlotte, N.C.-based bank as a carpetbagging Southerner unfamiliar with Philadelphia.

He later tried to make the bank look even more alien by threatening to sell Philly cheesesteaks outside First Union's branches.

Mr. Tepper's chutzpah carries on to this day. Although the U.S. Bancorp imbroglio is history, he can't help but take a few more potshots. "We've thought about taking out 40 billboard ads in the Minneapolis area" announcing our bank, he said, tongue in cheek. "We'll probably put a few extra in Minneapolis."

Mr. Tepper may not view the big banks as threats, but he admits he fears the likes of Microsoft Corp. and Dell Computer Corp. In his view those companies, which have built-in access to tech-savvy consumers, could wipe out traditional Internet banks if they could break into the industry.

"If Windows Millennium has 'Gates Bank' on the desktop, we're done," he said.

But as long as those 800-pound gorillas slumber, Mr. Tepper says he'll stay on-line. A competitive person by nature -- he relaxes by playing polo -- Mr. Tepper has plans to launch several banking sites that appeal to individual tastes. For example, he talks about a site that would appeal to car racing enthusiasts by combining Nascar content with banking.

"It's no longer one size fits all," he said. "The technology is there to customize a product."

As Mr. Tepper sees it, it's ideas like these that could make his bank a real player on the Internet and, ultimately change banking forever. "I am passionate about banking. I am passionate on building a network based on providing financial services, and passionate about making a difference," he said, "and I know we will make a difference."

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