COMMUNITY BANKING: UNHAPPY WITH what they call unfair competition for coveted municipal deposits, New York State's community bankers are asking for more stringent regulation of indirect municipal investment pools. "What we want to do is level the playing field," said Michael Smith, executive vice president of the New York State Bankers Association. Page 10 WASHINGTON: THE FEDERAL RESERVE Board approved a 4.5% salary increase next year as part of an overall $8.3 million spending boost. The increase will go to a merit pool, from which supervisors will be able to give top employees larger raises. Page 2 A FEDERAL JUDGE in Texas accused the Federal Deposit Insurance Corp. of pursuing a fraud case against the chairman of Dallas' Bluebonnet Savings Bank for political reasons. U.S. District Judge Joe Kendall dismissed the agency's fraud charges, writing: "The court finds the FDIC's counterclaim without merit and pushing the envelope" of frivolity. Page 3 REGIONAL BANKING: DESPITE RISING deposit costs, gains in fee income and loan growth helped First Chicago, NBD, National City, Boatmen's, and Mercantile in the Midwest report higher second-quarter earnings. Page 4 TWO OF THE BIGGEST West Coast bank holding companies - First Interstate and U.S. Bancorp. - posted higher earnings in the second quarter that were in line with expectations. Page 5 MORTGAGES: IN A BID to build market share, the nation's largest mortgage lender, Countrywide Credit Industries, has launched an ambitious television advertising campaign. The spots now air in about one-third of the nation. Page 6 THE LEGAL TEAM for mortgage banking and consumer finance at Washington- based Brownstein Zeidman & Lore has bolted en masse to the Washington office of Kirkpatrick & Lockhart, a much larger Pittsburgh law firm. Page 7 INVESTMENT PRODUCTS: GERARD T. MORDA moved from New York to Colorado to begin advising affluent clients who are, like him, newcomers to the Boulder area. He seeks to help community banks with less than $100 million of assets, advising their customers on risk-averse financial planning and investments. Page 8 FIRST AMERICAN Corp.'s brokerage chief - who is also president of the Bank Securities Association - has left the company, just as former investment program officials from two other big banks were taking nonbank berths. Page 9 TECHNOLOGY: BANK MERGERS announced last week should make competition in the cash management business even more cutthroat, an industry consultant predicts. Competition will get stiffer, he said, because the combined banks will have bigger technology budgets and greater economies of scale. Page 14 CHECKFREE Corp. and Cybercash Inc. announced plans to create a system to secure financial transactions over the Internet. The automated bill payment processor will ally itself with the software maker to produce a set of products and services to let consumers pay bills and buy items via computer networks. Page 16 CREDIT/DEBIT/ATMs: KEY FEDERAL Savings Bank and Mobil Oil have introduced a stored-value card that offers an alternative to using cash, checks, or credit for buying gasoline and other services. Page 18 FIRST OF AMERICA said it would install the nation's first bank-issued smart card system on two campuses this fall - at the University of Michigan in Ann Arbor and Western Michigan University in the bank's headquarters city of Kalamazoo. Page 18 FINANCE: TWO OHIO-BASED banks - Cincinnati's Fifth Third with $250 million and Columbus' Banc One with $500 million - are expected to bring subordinated debt to market this week. Back page

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