"Best On The Street" Financial Institution Equity Analyst Warns Against Buying Bank Stocks: 1,000 Banks Will Fail In Next Two Years

• On 5:02 pm EDT, Wednesday October 7, 2009

67 WALL STREET, New York - October 7, 2009 - The Wall Street Transcript has just published its Northeast & Mid-Atlantic Regional Banks Report offering a timely review of the sector to serious investors and industry executives. This 130 page feature contains expert industry commentary through 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 just one of the 21 interviews in the 130 page report, interviewees discuss the outlook for the sector and for investors.

Paul Miller, Managing Director and head of financial institutions research at FBR Capital Markets, is well known in the investment community for providing in-depth, fundamental analysis and investment recommendations on thrifts and mortgage finance companies. Mr. Miller covers large-cap banks, mortgage banking companies and small-cap thrifts, including Bank of America, Wells Fargo & Co., PNC Financial Services and BB&T Corp. Mr. Miller was recognized by the Financial Times/StarMine in 2008 and 2009 as the leading earnings estimator in thrifts and mortgage finance. He was also named The Wall Street Journal's "Best on the Street" in 2006 and 2007 for coverage of thrifts. In 2008 and 2009, Mr. Miller received the Forbes.com Blue Chip Analyst Award as the leading analyst covering banks and thrifts; he received the same award for coverage of finance companies in 2009. In 2008, Bloomberg Markets ranked Mr. Miller number one for bearish best calls from among more than 3,000 analysts worldwide. Mr. Miller is a former Bank Examiner for the Federal Reserve Bank of Philadelphia, where he worked for five years. As a Bank Examiner, Mr. Miller conducted financial analysis for more than 30 community banking institutions in the Philadelphia and Harrisburg market areas. Mr. Miller earned his B.S. in economics, his B.A. in international relations and his M.S. in economics from the University of Delaware. He received the charted financial analyst designation in 1997.

TWST: Are there any good stories out there?

Mr. Miller: In my coverage list, I don't have any. But you have to really pick out small - some of the small, good community banks that have done very well. There is one that's out there that I do not cover, it's called First Niagara (FNFG), and it has been able to pick up some of the branches that PNC had to divest in the Nat City (NCC) deal. It's in upper New York; they were very conservative, had a lot of capital on the sidelines and they raised capital for growth. And that's the type of company that you want to look at - companies that are raising capital not to shore up their balance sheets but to take advantage of dislocations. It's just one example. I think the Northeast area is the area that you can dig around to find some nice gems.

TWST: Is that because there are more community banks in that area than in other parts of the country?

Mr. Miller: Not necessarily. Every region has their unique flavor. The Northeast had its share of mergers, but the Midwest has unit banking, which created a ton of banks in Illinois and some other Midwestern states. And so you might say you have too many banks sitting out there - too many small banks that can't overcome these crises. Illinois didn't have a big run-up in its housing market, but yet it's leading - one of the leading states - in bank failures because so many of its banks are just not big enough to overcome the crisis. I think every region is unique. There are 8,000 banks out there, of which probably close to a 1,000 will fail over the next couple of years. But I would think mostly the big failures have already taken place. On an asset side, it's definitely going to be smaller but the numbers will be mind-boggling. Still, it really won't mean a lot, if that makes sense.

TWST: To have all those small banks fail?

Mr. Miller: It's not going to be as devastating as you think because the asset size will not be that big. You're not going to have any more WaMus, which really caused a lot of panic in the system when they took place.

TWST: On the list you're following, do you rate anything as a "sell" currently?

Mr. Miller: We have a few "sells," more than I would like to have. We think Wells Fargo is very rich at these levels. We believe that their credit losses are coming slower in the late cycle, but they have not recognized the losses like some of these other companies have. So we are very concerned about Wells Fargo's valuation, with it trading at three times book. It's one of the highest-valued stocks that we have on our coverage list.

TWST: Are there any other stocks or any developing stories you are following that are worth noting?

Mr. Miller: Yes, the big issue that we are watching right now has to do with another foreclosure wave and the impact it will have. The foreclosure moratoriums really shut down foreclosures for six months, from last year up to March 31 of this year. Now that the foreclosure moratorium has been lifted, it takes about six months to take possession of a home and get it ready for sale. And so you are going see at the end of the year a hidden inventory start to come out putting what we think could be significant pressure on home prices. If so it would put another leg down on home prices. Now what we don't know - which we hope, because nobody wishes for negative news on a constant basis - is that there is enough demand out there to buy up this excess inventory sitting on the banks' balance sheets on foreclosed properties. If there is not, you could see some more downward home pricing pressure, which could have a self-fulfilling impact on people exiting the market, which would then see more pricing pressure on the downside than you really want to see in the market.

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 130 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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