R. Kinney Williams - Yennik, Inc.
R. Kinney Williams
Yennik, Inc.

The Community Banker
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Bank Regulatory News

December 1997

December 31, 1997 (Call Report Date) - BANK REPORTS - Reports of Condition and Income (Call Reports) for Fourth Quarter 1997
The enclosed materials pertain to the Reports of Condition and Income (Call Reports) for
December 31, 1997. Please complete these fourth quarter Call Reports as soon as possible and
then submit them electronically. Completed reports must be received by January 30, 1998, in
accordance with the filing requirements discussed below. No extensions of time for submitting
reports are granted. Please note that the enclosed materials contain only one complete set of Call
Report forms.

The latest results from the FDIC's quarterly Survey of Real Estate Trends showed continuing
positive views of local commercial and residential real estate markets.  The FDIC's nationwide survey polled 311 senior examiners and asset managers from the FDIC, the Federal Reserve System, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision. The survey, taken in late October, asked about developments in local real state markets during the prior three months.

Applications Bulletin - Federal Reserve Bank of Dallas week ending December 26, 1997
Diboll State Bancshares, Inc., Diboll, TX, and Diboll State Bancsahres of Delaware, Wilmington, DE, to acquire Pineland State bank, Pineland, TX

December 23, 1997 -  The Federal Reserve Board today announced adoption of final amendments to reduce regulatory distinctions between broker-dealers, banks, and other lenders and implement changes to the Board's securities credit regulations.

December 22, 1997 - INTERNAL AUDITS - Interagency Policy Statement on the Internal Audit Function and Its Outsourcing
The four federal banking agencies have adopted the attached interagency policy statement on the
internal audit function of insured depository institutions, bank holding companies, and the U.S.
operations of foreign banking organizations.

Applications Bulletin - Federal Reserve Bank of Dallas week ending December 19, 1997
State National Bancshares, Inc., Lubbock, TX, to acquire First Sierra Bancshares, Inc., Truth or Consequences, New Mexico
State National Bancshares, Inc., Lubbock, TX, and State National Bancshares of Delaware, Dover, Delaware, to acquire First National Bank of Denver City, Denver City, Texas
Industry Bancshares, Inc., Industry, TX, to acquire Citizens State Bank, Buffalo, TX

December 19, 1997 -  The Federal Reserve Board today issued an interim rule and requested public comment on amendments to reduce regulatory burden in risk-based capital guidelines that apply to banking organizations with significant trading activities.  The action was issued jointly with the Office of the Comptroller of the Currency and the  Federal Deposit Insurance Corporation.
The interim rule is effective December 31, 1997.

December 18, 1997 - SECURITY RISKS ASSOCIATED WITH THE INTERNET - FDIC Issues Paper on Risks Related to Internet Use
In response to the ever-increasing number of financial institutions using the Internet, the FDIC
has issued the attached paper identifying many of the risks to an institution's information system
security associated with Internet use. The paper also describes several risk controls.

December 17, 1997 - FFIEC ISSUES GUIDANCE ON YEAR 2000 BUSINESS                     ENTERPRISE RISK
WASHINGTON, D.C. -- The Federal Financial Institutions Examination Council (FFIEC) today issued safety and soundness guidance on business-wide risk posed to financial institutions by the Year 2000 problem. The guidance underscores that Year 2000 preparation is not only an information systems issue, but an enterprise-wide challenge that must be addressed at the highest level of a financial institution. The guidance lays out what the financial institution regulators expect from senior management and boards of directors in overseeing and managing their Year 2000 projects.

December 15, 1997 - FDIC Flags Economic, Industry and Demographic Concerns
* In the West, banks in some metropolitan areas face growing risks from high exposure to highly cyclical construction lending.
* In America's agricultural heartland, the aging of farmers is posing challenges to agricultural banks.
* In the South, job growth is slowing -- with the exception of Florida, which continues to boom.

FFIEC - December 12, 1997 - The September 30, 1997 Uniform Bank Performance Report (UBPR) is now being distributed to all insured commercial banks and Federal Deposit Insurance Corporation - Insured Savings Banks (FDIC-ISB) and, is available for sale to the public. For the most part the formats for the commercial banks and the FDIC-ISB's are identical; however, the FDIC-ISB has their own unique UBPR peer groupings.

December 11, 1997 - Manhattan Lawyer Sentenced to Prison for Overbilling FDIC, RTC $1.4 Million
FDIC Inspector General Gaston L. Gianni, Jr., today announced that William F. Duker, former managing partner of the Manhattan law firm of Duker & Barrett, was sentenced December 10 to a prison term of 33 months for defrauding the FDIC and the Resolution Trust Corporation (RTC) of about $1.4 million in overbillings through his law firm.

December 11, 1997 - BANK SECRECY ACT COMPLIANCE - FinCEN Advisory
Attached is a copy of the Department of the Treasury's November 1997 issue of FinCEN
Advisory, published by the department's Financial Crimes Enforcement Network (FinCEN).

December 11, 1997 - FDIC Reports that Commercial Banks Earned A Record $14.8 Billion in the Third Quarter of 1997
Preliminary data from the FDIC show that insured commercial banks earned record profits in the third quarter of 1997 and are on a pace to break the full-year earnings record of $52.4 billion set in 1996. 

December 11, 1997 - FDIC Announces Pilot Project to Collect Trust Survey Data
via the Internet
The Federal Deposit Insurance Corporation, as collection agent for the Federal Financial Institutions Examination Council's (FFIEC) 1997 Annual Report of Trust Assets (ARTA), has initiated a pilot project to collect this survey data via the Internet. 

December 10, 1997 - TRUTH IN LENDING ACT - Revisions to Regulation Z (Truth in Lending Act)
The Board of Governors of the Federal Reserve System has adopted final revisions to Regulation Z, which implements the Truth in Lending Act.  The final rule, which is attached, took effect on November 21, 1997, but compliance is optional until December 22, 1997. 

December 10, 1997- FOREIGN ASSETS CONTROL ACT - Executive Order Prohibiting Certain Transactions With Sudan
President Clinton has signed an Executive Order, effective November 4, 1997, imposing a trade
embargo against Sudan and a total assets freeze against the Government of Sudan. In addition to
blocking transactions with the Bank of Sudan (The Central Bank), transactions with the following
Sudanese banks also must be blocked: Agricultural Bank of Sudan, Bank of Khartoum,
Industrial Bank of Sudan, Islamic Co-Operative Development Bank, National Export-Import
Bank, Nilein Industrial Development Bank, People's Co-Operative Bank, Sudan Commercial
Bank, Sudanese Estates Bank, Sudanese Savings Bank, and Unity Bank.

The FDIC Board today agreed to reduce the regulatory burden of its risk-based capital standard for banks with significant trading activities. 

The FDIC Board of Directors today approved a $1.36 billion budget for the agency, a reduction
of $255 million (16 percent) from the amount that had been planned for 1997. 

Applications Bulletin - Federal Reserve Bank of Dallas week ending December 8, 1997
Smith family, et al, to acquire an interest in First Marshall Corporation, Marshall, TX
Howell family, et al, to acquire an interest in First Marshall Corporation, Marshall, TX
Texas Financial Bancorporation, Inc., Minneapolis, MN, to acquire Conrad Company, Minneapolis, MN, and Community Bank of Arizona, Wickenburg, AZ

December 8, 1997 - GUIDELINES FOR FINANCIAL INSTITUTION DIRECTORS - Reprint of Pocket Guide for Directors
The Federal Deposit Insurance Corporation is pleased to provide you with a reprint of its popular Pocket Guide for Directors. The booklet offers financial institution directors accessible and practical guidance in overseeing their institutions' business.

Applications Bulletin - Federal Reserve Bank of Dallas week ending December 5, 1997
Western Bank, Las Cruces, Employee Stock Ownership Plan, Las Cruces, NM, et al, to acquire an interest in Western Bancshares of Las Cruces, Inc., Carlsbad, NM
American State Financial Corporation, Lubbock, TX and American State Financial Corporation Delaware, Wilmington, DE, to acquire Security Shares, Inc., Abilene, TX, and Security State Bank, Abilene, TX

December 5, 1997- SUSPICIOUS ACTIVITY REPORTING - Guidance for Financial Institutions on Reporting Computer-Related Crimes
The Federal Bureau of Investigation, working with FDIC staff, other federal banking agency
representatives and other federal law enforcement agencies, developed the attached guidance for
reporting, in Suspicious Activity Reports (SARs), violations of the federal criminal statute relating
to computer crimes, 18 U.S.C. Sec. 1030 (Fraud and Related Activity in Connection with

December 4, 1997 - Comptroller Applauds States that Permit Competition in Financial Services
WASHINGTON -- Comptroller of the Currency Eugene A. Ludwig applauded states that permit consumers to enjoy the benefits of open competition in financial services while at the same time
providing appropriate consumer protections.  In particular, he pointed to Illinois, which recently enacted a comprehensive package of consumer safeguards that protects consumers against abusive insurance sales practices by all providers without putting banks at a competitive disadvantage.

For release: December 4, 1997 - St. Louis FRB - Scan the business section of most bookstores and you'll find numerous works on how to get employees to excel, with most of them focusing on rewards other than salary. Now, two economists have looked at the link between workers and their pay, and have concluded that a firm's compensation structure can be as important a factor as any in an employee's performance.

December 3, 1997 - New OCC Assessment Schedule Lowers Charges, Continues Effort to Rationalize Fees for National Banks
The Office of the Comptroller of the Currency issued its assessment and fee schedules for 1998, implementing several changes that reduce charges for national banks and ensure that assessments more accurately reflect the actual costs of supervision.

December 3, 1997 - OCC ANNOUNCES SIX NEW ENFORCEMENT ACTIONS AND ONE TERMINATION - The Office of the Comptroller of the Currency today announced seven enforcement actions taken against national banks.  The seven actions released today include: one formal agreement, two civil money penalties, one personal cease and desist order restitution, one removals/prohibitions, one safety and soundness order and one termination of an existing enforcement action.

December 3, 1997 - HOME MORTGAGE DISCLOSURE ACT - HMDA Data Reporting for Calendar Year 1997
As previously announced, some rules and reporting requirements for the 1997 Home Mortgage
Disclosure Act (HMDA) data have changed. Since there are only three significant changes, you
may rely on the 1996 Guide to HMDA Reporting, supplemented by the attached November 19,
1997, letter from the Federal Financial Institutions Examination Council (FFIEC), for guidance on collecting and reporting the 1997 data.

December 3, 1997 - Amendment to Annual Audit and Reporting Requirements (Part 363 of FDIC's Rules and Regulations)
The FDIC Board of Directors has amended the "Annual Independent Audit and Reporting
Requirements" (Part 363 of the FDIC's rules and regulations). The amendment implements the
provision of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 that
repealed Section 36(e) of the Federal Deposit Insurance Act. Section 36(e) had required each
insured depository institution with $500 million or more in total assets to have an independent public accountant perform specific procedures for determining compliance with designated safety and soundness laws.

December 2, 1997 - The Federal Reserve Board today published proposed revisions to the official staff commentary to Regulation Z, Truth in Lending, which applies and interprets the requirements of the regulation. Comment is requested by January 20, 1998.

December 1, 1997 - The Federal Reserve Board - Approval of the notice of The Sanwa Bank Limited, Osaka, Japan, to acquire through its wholly owned subsidiary, Sanwa Business Credit Corporation, Chicago, Illinois, all the shares of Morcroft Capital Corporation, Fairfield, New Jersey, and thereby engage in providing financing and leasing services pursuant to Regulation Y.

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