Northeastern Community Banks Superior Credit Profile Than National Average Creates Greater Return In Economic Recovery

• On 9:08 am EDT, Tuesday October 13, 2009

67 WALL STREET, New York - October 13, 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 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, two Community Banking equity analysts discuss the outlook for the sector and for investors.

Kevin B. Reynolds, Senior Vice President, Financial Services Research, has covered financial institutions since 2001 on the sell side. Prior to joining Wunderlich Securities, he spent 18 months at Janney Montgomery Scott, LLC, where was the Senior Publishing Research Analyst covering Southern regional and community banks for the Philadelphia-based firm. Before joining Janney in mid-2007, Mr. Reynolds covered Southern banks for both Stanford Group, where he served as Senior Vice President from 2004 to 2007, and Morgan Keegan & Company, where he served as Senior Vice President from 2001 to 2004. Before moving to the sell side in 2001, Mr. Reynolds was an investment banker in the Financial Institutions group at Morgan Keegan for approximately two years. Before joining Morgan Keegan, he spent over two years in the Financial Institutions group of Mercer Capital Management in Memphis, Tenn., providing M&A services to financial institutions, as well as fairness and solvency opinions, and assistance to boards in meeting their corporate finance objectives. Before joining Mercer Capital, Mr. Reynolds spent two years as a Commercial Loan Officer at Union Planters Corporation - now Regions Financial - in Memphis. Mr. Reynolds received both his MBA and BBA degrees in finance from the University of Memphis. He also holds the CFA designation from the CFA Institute.

Mike I. Shafir joined Sterne Agee as a Research Analyst with a focus on Northeast banks and thrifts in April 2006, after working as an Analyst at Moors & Cabot since 2004. Mr. Shafir holds a B.A. in history from Brandeis University and an MBA in finance from Rutgers Business School.

TWST: Mike, how have the banks that you cover fared versus the national banks?

Mr. Shafir: Well, just to clarify, I cover a lot of regional and community banks and thrifts - some in the Mid-Atlantic and also in the traditional Northeast area. I think as a whole, my institutions, as a function of their locations and because some have more capital than average, have fared significantly better than the average bank. I think some of the problems that arose in the Northeast - problems that contributed to capital erosion at some banks - have been more securities-based as opposed to the loan portfolio issues that have been seen elsewhere. So I would say on the whole, the institutions that I look at have fared significantly better than institutions in other regions of the country.

TWST: How has it been for the banks you cover, Kevin?

Mr. Reynolds: Probably the fundamental differences between the Mid-Atlantic North and Mid-Atlantic South region that I cover is that in the South, for the last five, 10, 15 years, we were the culprits in the residential situation that is weighing on the banking sector right now. You have places like Florida and Atlanta that were so speculative and so overbuilt in terms of having a lot of banks - there was substantial new bank formation down there, and all these banks were chasing loan demand, which was arguably fictitious loan demand. And so when you pull all that together, what ended up on balance sheets in the South that weighed things down for the whole region were loans that were originated for which the underlying assumptions were just fatally flawed. And I think that's different from the Mid-Atlantic North area where, as Mike says, we've got issues that are more securities-related. That's because you didn't have builders coming in and speculating that population inflows would continue and accelerate over time, and that home prices would do the same. So with that said, there are a lot of problem banks in the South and mostly in the markets that you would expect them to be in: Atlanta, most markets in Florida, and a few other spots here and there. Overall, among the banks that I cover, there are roughly 15 or so banks that range in asset size from $35 billion down to about $2.5 billion. They've generally performed better than the national average. They are generally better capitalized or more strongly capitalized than the industry averages, but they are experiencing the difficulties that you would expect to see in a severe recession. And I think maybe perhaps for both of us the one common thing here is that we are not hampered or fatally flawed - I don't think, anyway - by either of the two big issues going on. There was the global credit crisis, which was in the shadow banking system. The pipes were clogged and that largely impacted the largest financial institutions. And then there is a severe recession underneath that, which is being felt differently in different markets. That's real, that impacts everyone. You can't escape it. That's what our banks are going through right now. So better than the national average in my universe, but worse than average from a credit perspective.

Mr. Shafir: If I could just add something to that - I think Kevin definitely touched on something that's absolutely true in terms of my institutions. There was not the significant amount of overbuilding and overdevelopment here in the Northeast because of the lack of the kind of organic growth that you had in the Southeast and other more problematic areas. I think that's contributed to the lagging effect that we've had from a credit standpoint here in the Northeast. That being said, we are significantly affected by traditional recessionary environmental issues, mainly rising unemployment. Because no matter how well you underwrote the loan, if somebody doesn't have a job, it's going to be very difficult for them to stay current.

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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