Brett Rabatin, Managing Director at Sterne, Agee & Leach, Inc., Interviews with The Wall Street Transcript: Texas and California Regional Banks Have Larger Exposure to Positive Economic Trends

Wall Street Transcript

67 WALL STREET, New York - March 5, 2013 - The Wall Street Transcript has just published its Pacific and Southwest Banks Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Heightened M&A Activity - Regulatory Obstacles and Fee Income Replacement - Interest Rates and Loan-Growth Strategies - Pockets of Growth in Western Banking - Regulatory Outlook Gains Clarity

Companies include: SVB Financial Group (SIVB), Flagstar Bancorp Inc. (FBC), Western Alliance Bancorporatio (WAL), Sterling Financial Corp. (STSA), Hilltop Holdings Inc. (HTH), Texas Capital BancShares Inc. (TCBI), East West Bancorp Inc. (EWBC), City National Corp. (CYN), Cullen/Frost Bankers, Inc. (CFR), Comerica Incorporated (CMA) and many more.

In the following excerpt from the Pacific and Southwest Banks Report, an expert analyst discusses the outlook for the sector for investors:

TWST: For those who do have mortgage exposure, what is that segment looking like now?

Mr. Rabatin: I think mortgage has been such a meaningful tailwind for the banks that have been focused in it; whether they've been mortgage banking or mortgage warehouse related, they've benefited so much. The concern for investors going into the next few quarters is, where will those revenues shake out as gain on sale margins decline and refi volumes eventually decline?

It's a story that's very different for each company across the spectrum, but I think investors are, generally speaking, concerned that all banks may have some sort of Flagstar (FBC) quarter coming, where originations slow and gain on sale margins decline. I don't cover them formally, but that's a name where gain on sale margins already really came down in the fourth quarter, and their production levels weren't necessarily much better - actually, I think they were down compared to 3Q. Investors are hesitant, I think, to be involved or get involved in new names where mortgage exposure is heavy, because they're concerned those earnings will dissipate as we go into the next few quarters.

Again, it varies dramatically from bank to bank in the space, because banks have varying levels of refi versus purchase activity in their operations. For Flagstar, one of the things that's unique to them is they do a lot of third-party stuff, where some others have their own platforms to originate mortgages.

Investors generally have decided it's better to be safe than sorry and some of the mortgage-heavy names on one particular Thursday declined after Flagstar did report. My feel for 2013 is, earnings for many names may continue to be better than people expect, but, thinking 2013 versus 2012, definitely by the fourth quarter earnings or earning power from...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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