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TWST: Looking at commercial banking, what are your expectations for 2001 and what do you base them on? What factors are you looking at as you make those assumptions and draw those expectations?

Mr. Ernst: Right now, there is still a significant amount of uncertainty in the market regarding where expectations are and where they could be going for 2001. It’s unclear to everybody as to whether we are headed into a recession or whether we’re still in line for a softer type of landing. That is the fundamental question that causes expectations for 2001 to be pretty wide at this point. At this point, we still believe you have to stick with high-quality names, and in a falling rate environment over the longer term, we believe that the banks are a good place to be.

TWST: Do you have a general rating for the group? What’s the jumping off point as far as your ratings and recommendations within this group are concerned?

Mr. Ernst: I’ve felt for a while that the regional banks I follow had priced in a best case scenario, and I was actually down to just a few Buys. As these stocks come down a little bit, there are probably more opportunities. Right now I’m still down to a few Buy ideas, but I think the group is getting more attractive at these levels, especially the regional banks. The regionals in general had such a strong run-up last year that a lot of the stock prices were starting to price the best-case scenario with great credit quality and an improving net interest margin. If we get both of those, then in hindsight people would consider the industry to have been pretty lucky.

TWST: How does Texas Regional stack up?

Mr. Ernst: Texas Regional (Nasdaq:TRBS) is another name down in Texas that we like a lot. The stock has run up a bit, so it’s probably a little less attractive than it was a few months ago at these levels. But, again, the company has had a strong growth record historically and there is a very interesting macro play associated with the company. They are located in the Rio Grande Valley, which is home to a concept called the “Maquiladora” — a plant where a lot of US and international manufacturing facilities have been aggregated. The white-collar operations are on the US side of the border and the blue-collar operations are on the Mexican side of the border. It’s a way to attract a lot of cheaper labor sources, and obviously allows those companies to operate in a lower-cost environment. It has caused a significant amount of employment growth over the last 15 years or so in that region. It’s a very strong macroeconomic play that is supporting the future growth of that company.

TWST: Are these companies that you mentioned positively core choices for an investment strategy today?

Mr. Ernst: Banks are probably a good place to be, considering we are in a falling rate environment and we are not currently expecting an economic meltdown. In this current period, people should probably be buying on significant weakness and selling on real strengths, until we get a better sense of the overall economy.