Credit Suisse Bank Analyst Warns Investors To Check Whether Their Long Bank Positions Are Hiding Credit Losses in OREO Account

• On 9:51 am EDT, Monday October 5, 2009

67 WALL STREET, New York - October 5, 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); MandT 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, industry experts discuss the outlook for the sector and for investors.

Craig Siegenthaler is a Senior Equity Research Analyst who covers the financial sector for Credit Suisse in New York. His industry focus includes U.S. regional banks and asset managers.

TWST: Do you have any stocks rated as "sells?"

Mr. Siegenthaler: Yes, there are three. Two of them, I think, are under a little more strain. Let me talk about Synovus (SNV) and Zions (ZION). These are two banks that weren't part of the stress test, which means they kind of weren't forced by regulators to raise capital. Because of that, I think they are in a weaker capital position than their peers. They both have elevated credit versus their peers, meaning they have elevated problem loans and NPLs. And the issue there is I think both of them will have a decent-sized capital raise in front of them. That will be dilutive for shareholders. The other thing you've got to remember is that all these banks also have to pay back TARP, which is another letdown in terms of dilution for shareholders.

TWST: As you look ahead, do you see any reason for investors to go into this area right now?

Mr. Siegenthaler: This can be an attractive point. I think after this recent rally, we've kind of lost that nice entry point. What I would do is look for weakness. What I'm hoping is that we get a big pullback because the third and the fourth quarters are going to be pretty bad, meaning problem loan formations are going to keep getting worse and earnings problems are going to keep getting worse. I'm hoping that gives us a better entry point. As I've said, I would like to pick up these stocks kind of five or six times earnings, not eight to nine times, where they are now. So what I am hoping is we can get these cheaper. If they don't, they're kind of at fair value now. I kind of expect them to perform in line with the market.

TWST: Is there anything else you would like to add?

Mr. Siegenthaler: No, we hit the high-level trends. One thing you may want to think about, though, is OREO - OREO is Other Real Estate Owned, it's kind of like the dumpster for banks. It's when they have a loan that goes into default and they get the property. What they do is they will do a bid, they will do an auction for it. If nobody buys it or if they think it's worth more than the bid, they will put it in their own OREO account, and some banks have seen this account grow very, very fast. So this an area where they can potentially hide losses. I think some of the banks may be doing this.

TWST: Are there any banks you wanted to mention?

Mr. Siegenthaler: BB&T has the highest OREO balance as a percentage of capital and also it's grown the fastest recently. They had $1.25 billion as of this second quarter. So they are the one that grew the fastest. We don't know if it's overvalued or undervalued, but it's a place where losses could be hiding.

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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