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Five analysts and top management from ten sector firms examine the banking sector in this special 71-page South & SouthEastern Regional Banks issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info449.htm

TWST: Charlie, how have the states in the South and the Southeast been affected to date by the economic downturn, compared to other regions of the US?

Mr. Ernst: Overall, the Southeast as a whole appears to have held up a little better than some other parts of the country, especially if you’re lumping Texas into that mix. For example, the Purchasing Managers Index indicates that the Houston market is still expanding, while the national economy is technically contracting. The employment numbers in the Tennessee, Virginia, Florida, Texas, and North Carolina markets held up well in the third quarter, while Alabama, Mississippi, and Georgia were a little soft. Overall, the Southeast is clearly exposed to the national economy so, in our opinion, a deep downturn in the nation may impact its economies, too. However, we feel that the Southeast has held up a little better than some other parts of the country.

TWST: Charlie, how do you determine what constitutes an attractive market for a bank to operate in, and what are the attributes of an attractive market?

Mr. Ernst: There are a couple of things. First, it depends on what kind of company it is. Then we can consider the general characteristics, which include the size of a market, the wealth within the market, and the household and income growth rates. That being said, there are plenty of smaller banks out there, for example, Texas Regional (TRBS). It may not be in the largest or wealthiest market, but there are strong and compelling macro trends driving the company’s long-term prospects.

TWST: Charlie, I asked you about what constitutes an attractive market, but I don’t recall that you gave us one.

Mr. Ernst: As Jefferson said and I mentioned earlier, the markets down in Texas continue to look great, and I agree with the positive comments surrounding the Jackson, Mississippi market. Specifically, Nissan is estimating that 4,000 jobs will directly result from the new auto facility, which is estimated to cost 930 million. Additionally, there’s potentially a ratio of 4:1 or 5:1 other jobs that will be created as a result of the plant. Also, Virginia and North Carolina appear to be holding up relatively well. In Florida it will be interesting to see what happens and whether there will be fallout from tourism as a result of the September 11th tragedy.

TWST: Charlie, will you give us a couple of stocks that you think investors could buy today?

Mr. Ernst: As I mentioned earlier, we still believe that the risks outweigh the reward for most of the regional banks. That being said, there are some stocks that should do better than their peers over the longer haul. National Commerce (NYSE:NCF) is a company that I have liked for a long time. Basically the story here includes a long history of strong growth, even when it is combined with CCB (Central Carolina Bank) on an originally reported basis. The combined growth rate of cash earnings over the last three- and five-year periods is around 14%-15%. Historically, the company has had excellent credit quality. Over the last five- and 10-year periods, net charge-offs averaged 22 and 30 basis points. We believe that National Commerce has a very strong demographic footprint in the Southeast, and very high insider ownership of 22%, plus high management compensation hurdles.

This special issue includes:

1) South & SouthEastern Regional Banks - In an in-depth (14,000 words) Analyst Roundtable, Jeff Davis, Analyst covering regional banks at Midwest Research, Inc., Charles N. Ernst, Vice President at Putnam Lovell Securities, Inc., Jefferson L. Harralson, Vice President at SunTrust Robinson Humphrey Capital Markets and Christopher M. Mutascio, Principal at Legg Mason Wood Walker, Inc., examine the outlook for the sector including investment approach, credit quality and share specific stock recommendations.

2) Regional Bank Stocks - In an in-depth (3,300 words) Analyst Interview, Gary B. Townsend, Senior Analyst at Friedman, Billings, Ramsey & Co., examines the outlook for the sector and shares specific stock recommendations.

3) The TWST confidential Off-The-Record survey of management performance at thirteen sector firms asked market insiders about the ability of management teams to create shareholder value.

4) CEO interviews (average 2,500 words). Top management of nine sector firms examine the outlook for their firm and the sector.