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Credit Costs Likely to Trend at Historically Low Levels and Remain There for a Long Period of Time: Managing Director David Darst Discusses His Forecast for the Regional Banking Sector with The Wall Street Transcript

67 WALL STREET, New York - July 11, 2014 - The Wall Street Transcript has just published its Banking Review 2014 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: Banking Review 2014

Companies include: Investors Bancorp Inc. (ISBC), Signature Bank (SBNY), Capital One Financial Corp. (COF), Roma Financial Corp. (ROMA), Hudson City Bancorp, Inc. (HCBK), M&T Bank Corp. (MTB), People's United Financial Inc. (PBCT), Lakeland Bancorp Inc. (LBAI) and many more.

In the following excerpt from the Banking Review 2014 Report, an expert analyst discusses the outlook for the sector for investors:

TWST: Can you speak to how the Northeast and Mid-Atlantic banks have done in comparison to other areas of the country?

Mr. Darst: Throughout the crisis, the Mid-Atlantic and Northeast had a shallower trajectory for credit losses and reserve building. Similar to everyone else, they've also had a lot of opportunities to release loan loss reserves as charge-offs and nonperforming loans decline. So even though the cycle wasn't as pronounced, it happened.

You're seeing a lot of opportunity now, we think. The overall industry went through a period of time in 2009 and 2010 where provision expense and charge-offs peaked, and people were very aggressively establishing reserves. But from 2010 to 2012, you had a lot of deleveraging, with tighter underwriting standards and less loan demand.

As loan portfolios in certain segments shrank, the criticized and classified loans have continued to decline, and that puts us in a position where credit losses will likely swing in the other direction over the next couple of years.

Things always revert to the mean, and we're going in the opposite direction now from 2009 and 2010. We're likely to see credit costs trend at historically low levels and perhaps remain there for a longer period of time than people would forecast today. All of that provides a favorable earnings lever for the banks. That helps offset this environment, where the absolute level for net interest margin is lower than banks would like for it to be.

TWST: We've heard a lot about the environment making it difficult to grow revenues, but it sounds like you found some markets and some banks where people are doing just that...

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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