REGIONAL BANKING: PROFITABILITY leveled off last year at the nation's largest banking companies after three years of sharp gains, according to an American Banker survey. The banks had been heading for record profits until trading revenues got clobbered in the fourth quarter as executives mistakenly guessed that interest rates would remain stable. Page 5 WASHINGTON: MAINTAINING BARRIERS between insured depositories and commercial firms will only stifle banks, according to congressional testimony by Coley Clark, corporate vice president at EDS, a General Motors data processing unit. Page 2 AFTER KEEPING a low profile for two years, Jonathan L. Fiechter, acting director of the Office of Thrift Supervision, is warning anyone who will listen that the looming gap between what banks and thrifts must pay for deposit insurance threatens the savings industry. Page 3 COMMUNITY BANKING: CIVIL WAR is turning banker against banker in a Texas-sized battle over the state's branching law. A bill to reject interstate branching was passed by the Texas House of Representatives this week and sent to the Senate. Page 8 MINNESOTA BANKERS are steaming over a bill in the state Legislature that would nearly double taxes on their profits. The bill's sponsor says he sees it as a "replacement tax" for refunds some banks are getting under a recent court ruling. Page 9 MORTGAGES: A NATIONAL REALTORS group is speaking out against possible repeal of the mortgage interest tax deduction by Congress. Where the group once saw an ally, it is now loudly leery of the Republican-led Congress. Page 10 INVESTMENT PRODUCTS: PROPHET MARKET Research, which has specialized in private "mystery shopping" studies for banks that want to check their compliance, now plans to market such information to anyone who can pay a $72,000 annual fee. Page 12 BANCORP HAWAII is overhauling the management of its trust subsidiary in a step toward integrating the operation with its private banking and retail investment units. Page 12 CREDIT/DEBIT/ATMs: BIDDING was announced by the Treasury Department for financial institutions that want to take on a large project to change the way government benefits are delivered in Alabama, Arkansas, Florida, Georgia, Missouri, North Carolina, and Tennessee. Page 14 ARTHUR S. KRANZLEY, a major influence on the development of credit and debit card systems, died this week in the Hospital of the University of Pennsylvania. He was 68 and had suffered from complications of emphysema and pneumonia. Page 15 TECHNOLOGY: WALL STREET may still not have fully recovered from the 1987 stock market crash. Those who lived through it agree on one thing: Trades were taking so long to be executed and reported back that investors had no knowledge of their exact losses. That's why rules must change to permit fast trade settlement, writes P. Howard Edelstein. Page 18 FINANCE: FIRST INTERSTATE became one of only a handful of banks to issue public debt this year - unveiling $100 million of seven-year subordinated bonds. The bonds are noncallable for three years and are priced at 110 basis points over the seven-year Treasury note, for an 8.15% yield. Back page

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