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TWST: Gerard, how did you see the last 12 months?

Mr. Cassidy: We took a slightly different position from what David presented. We turned very positive on the banks in January 2000 and licked our wounds for three months. As most investors recall, in January and February 2000 the market was infatuated with technology stocks, and it sucked away money that may have normally been invested in other sectors, such as banking, because everybody wanted to obviously make a killing. Around St. Patrick’s Day last year was the final selloff of the bank stocks, and we had a very significant move from March 2000 through the end of the year. The S&P Regional Bank Index was up appreciably last year, as were some of the other indexes, such as the NASDAQ Bank Index. The reason we turned positive was that we believed the Fed was going to stop raising short-term interest rates. We felt that going into that type of environment, bank stocks were going to do better. We also believed that any increases in problem assets were going to be manageable because of an expected soft landing in the economy. Last year we were fortunate to have been able to ride the wave of bank stock appreciation, and as David pointed out, it really took off toward the latter part of the year, as it became more apparent that the Fed was going to cut rates.

TWST: Gerard, usually you suggest some potential candidates. What’s on your list currently?

Mr. Cassidy: We still feel that there are a number of names out there that are acquisition targets, and we think there’s some money to be made. We are very sensitive today, though, in light of the deteriorating asset quality for many banks, and a weakening economy, that investors do not become saddled with a company whose problem assets could ruin any prospective acquisition. In our analysis, we like to try to look at the action of the senior management team and the boards of directors to help guide us to names that could be acquired. Let’s look at our acquisition targets. First, Granite State Bankshares (Nasdaq:GSBI), located in the southwestern corner of Keene, New Hampshire, trades at $21 today with a takeover target of $28. Though management has expressed to us it is running the bank as an ongoing concern rather than a takeover target, we still believe the company will be acquired. What’s interesting here is the State of New Hampshire had a deposit market share maximum of 20%, which was recently changed to 30%. Granite State’s CEO, Charlie Smith, was a catalyst behind the change, in our opinion. The largest banks in the state are permitted to control 30% of the statewide deposits. We believe given the right offer, the company would sell out.

TWST: Gerard, what are you recommending to investors currently?

Mr. Cassidy: We’re recommending tech stocks — just kidding! We are in a similar camp as David and have taken the position that you want to underweight the bank stocks for 2001. I find it very interesting that when we go out and talk to the portfolio management community, most portfolio managers that we talk to, from California to New York, are looking to overweight the banks. The portfolio managers are looking over the valley — the valley, of course, being the economic downturn. We’re not as sanguine about that strategy; we think the valley could be deeper and longer than expected.