the year as bankers respond to two key edicts this month from the Financial Accounting Standards Board. An average of 70% of securities could be classified as "available for sale," up from 40% today, experts say, as bankers seek to maintain funding flexibility under the new FASB rulings that are part of an initiative to give investors a more accurate picture of an institution's worth. On Nov. 15, the standard-setting board issued a rule allowing institutions to move securities from "held to maturity" to "available for sale" before the end of the year. The one-time adjustments can be done without forcing the bank to revalue all securities in its held-to- maturity category. The board also formally issued a draft of a proposed rule eliminating some of the advantages of securitizations and long-term repurchase agreements. Under the proposal, a securitized borrowing that extends over 90 days will be treated as a purchase and sale. The actions already are having an effect. Lamar Ball, chairman and chief executive of $1 billion-asset First State Bank of Texas, Denton, said he expects to take advantage of the new rule to make a larger share of his securities portfolio available for sale. "I think it's probably going to work out that we'll have a 70-30 split," said Mr. Ball. Previously the bank had maintained an even split between the two accounts. The 70-30 split will become the norm by the end of the year, said Fred D. Price, a partner in the consulting firm Sandler O'Neill & Partners. Mr. Price said the FASB's actions are geared toward making banks mark- to-market more of their assets. "These are continual, incremental pieces that are putting more of the balance sheet under mark-to-market rules," he said, adding that some analysts expect the board to consider marking liabilities to market sometime next year. While he predicts the proposal will ultimately lead to more off-balance- sheet derivatives by banks hoping to synthetically create long-term financing, Mr. Price said the combination of the two rules will have the more immediate effect of pushing banks to reclassify securities. "With the exposure draft out there and the other issues that are confronting bankers, it seems the prudent course of action is to have more of the portfolio available for sale than has historically been carried by the industry," he said.

Mr. Ball said the rule will give his bank flexibility not only in managing the securities portfolio but also in funding. "We all want that flexibility, and I think deposits are going to be harder to come by in the future," he said. But making a higher percentage of securities subject to mark-to-market rules does have a price. "You've got more control of your destiny with this," said Mr. Price. "But the price you pay is to have the market volatility."

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