37% Loan Growth, 25% Deposit Growth, Half The NPAs: Top Analyst From B. Riley Is Finding 25% Equity Returns In East Coast Financial Institutions

• On 9:46 am EDT, Friday October 9, 2009

67 WALL STREET, New York - October 9, 2009 - The Wall Street Transcript has just published its Northeast and Mid-Atlantic Regional Banks Report offering a timely review of the sector to serious investors and industry executives. This 121 page feature contains expert industry commentary through 21 in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Residential Mortgage Situation -- Regional Banks Mergers and Acquisitions Timing Strategy -- Commercial Mortgage Portfolio Decay -- Timing Of Commercial Mortgage Portfolio Bad Debt Write Offs-- FDIC Hit List For Bank Closings -- Mutual Holding Company Structure -- Interest Rate Scenarios -- Banking Pricing Power -- Expensive Bank Valuations -- Tangible Book As Guide For Bank Stock Pricing -- Distressed Sales Of Community and Regional Banks -- TARP Program -- Attitude Of Institutional Investors Towards Resurgence in Community Banking -- Unique Business Models -- Regional Bank Boards Looking For Exit

Companies include: BB and T (BBT); Colonial (CNB); First Niagara (FNFG); PNC (PNC); National City (NCC-PA); Harleysville National (HNBC); Citizens First Bancorp (CTZN); Regions Financial (RF); Bank of America (BAC); SunTrust Banks (STI); Pinnacle Financial (PNFP); Northwest Bancorp Inc. (NWSB); Beneficial (BNCL); Investor Savings Bancorp (ISBC); Territorial Bancorp (TBNK); FNB Bancorp (FNBG.OB); National Penn (NPBC); Trustco Bank (TRST); KeyBank (KEY); M and T Bank (MTB); New York Community Bancorp (NYB); Bank of New York Mellon (BK); Wells Fargo and Company (WFC); JPMorgan Chase and Co. (JPM); Wachovia (WB); Harleysville Savings Bank (HARL); SVB Financial (SIVB); Signature Bank (SBNY); Provident Bank (PBKS); Valley National Bank (VLY); Community Bank System (CBU); NBT Bankcorp (NBTB); Fulton (FULT); Citibank ©; Allied Irish (AIB); Bank of Hawaii (BOH); First Horizon Bank (FHN); Comerica (CMA); Synovus (SNV); Zions (ZION); South Financial Group (TSFG); Bancorp (TBBK); Legg Mason (LM); IBERIABANK Corp. (IBKC); Wilmington Trust (WL); S and T Bancorp (STBA); PHH (PHH); Goldman Sachs (GS); Citigroup ©; U.S. Bancorp (USB); Fifth Third Bancorp (FITB); KeyCorp (KEY); Lehman Brothers; Colonial; Washington Mutual; TD Banknorth (TD), Lakeland (LBAI), Westfield Financial, Inc. (WFD), United Financial Bancorp, Inc. (UBNK), Chicopee Bancorp, Inc. (CBNK)

In the following brief excerpt from the just one of the 21 interviews in the 121 page report, a top tier Banking Industry Equity Analyst discusses the outlook for the sector and for investors.

Andrew W. Stapp, CMA, joined B. Riley & Co. in 2007 as a Senior Equity Research Analyst who focuses on banks and thrifts. Prior to joining B. Riley & Co., Mr. Stapp served as Vice President, Research, at Cohen & Company, where he also covered financial institutions. Before that he was involved in investment banking, successfully consummating approximately 100 M&A transactions in the financial services industry. Mr. Stapp has been a frequent speaker and author on valuation and other issues involving the banking sector; he has been quoted in numerous publications, including American Banker, ABA Banking Journal and SNL Financial. He was ranked as a top-five analyst in the banking sector in 2008 by Forbes Magazine. Mr. Stapp received his MBA in finance from The University of Tennessee, where he was elected to Beta Gamma Sigma in recognition of his academic achievements.

TWST: Are there any specific names you are looking at currently, although you think the market for small-cap banks has gotten ahead of itself?

Mr. Stapp: Well, right now, the only "buy" rating I have on my Northeastern banks is FNB (FNB). But its stock price has blown through my price target, So it's not as attractive as it once was. But there are a couple of banks that I do like. One is Bancorp (TBBK). It's had a dramatic pullback. They've just announced a common stock offering, and it's only trading at 67% of tangible book. This bank has a little bit different operating strategy than the other banks. It does a lot of its business through affinity relationships. For example, it will partner up with the likes of Legg Mason (LM). Through Bancorp, Legg Mason can round out its array of financial products and services by offering banking services through Bancorp. Bancorp also has a business line where it works with distributors of prepaid debit cards. It does the accounting for the distributors of these cards for a fee, and it's gotten a lot of low-cost deposits as a result of these business alliances. Its net interest margin was up 62 basis points year-over-year to 3.96% as a result of the influx of these low-cost funds. That's a very strong net interest margin.

Another bank I like is Signature Bank; it's one of the few banks that's still showing very robust balance sheet growth. Its year-over-year loan growth was 37%, and its year-over-year deposit growth was 25%. At the same time, its NPAs to assets are only 64 basis points. That is pretty attractive when you compare it to the median small-cap bank, which is more like 1.7%. So SBNY is enjoying less than half the NPAs compared to peers. SBNY also compares favorably in terms of net charge-offs. Its net charge-offs in the second quarter were only 47 basis points, compared to over 1% for the small-cap bank sector. Signature is a very well-run bank. Some people are concerned about its CRE exposure, which comprise 58% of loans and are located in the New York City area. But most of these loans were originated in the past 18 months or so. So most were underwritten with the notion that CRE could be the next shoe to drop. In addition, they did an in-depth review of their CRE portfolio last quarter. The study did indicate that some of the pre-2007 paper was showing signs of stress, but they don't have much in these vintages because they didn't get active in CRE lending until after that time. The loans that were originated more recently are not showing any signs of stress, which is good news. But my price target suggests a 15% return would be reasonable in normal markets, which would be a very attractive return. In today's market, I would think investors need more yield return to offset the risk. However, SBNY is a stock that I would encourage investors to look at if there is a pullback in its stock price.

TWST: What do you think a reasonable return would be?

Mr. Stapp: It depends on the bank. I would look for a 25% return to justify a "buy" rating on some of the banks that I cover given their riskier profile. I might look for a 17% to 18% return on some of the safer stocks that I cover. There is one southern bank that I cover, IBERIABANK Corporation (IBKC), that's very well managed and has a very low-risk profile. I have assigned a 14% hurdle rate for this stock. That bank only targets prime commercial credits, so its asset quality has held up much better than peers. Plus it's based in Louisiana, which has one of the lowest unemployment rates in the country. Also its footprint extends into Arkansas, another area that has held up very well with the exception of northwest Arkansas. IBERIABANK doesn't have much exposure to that part of the state.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 121 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.

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