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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: Jefferson, do some banks benefit more in a falling interest rate environment, and some benefit from flat to rising rates?

Mr. Harralson: Absolutely. The common thinking out there is that all banks benefit from falling rates, but that is definitely not true. While there's an entire group of banks that benefit from falling rates, there is an equally large group that benefits from rising rates. I think Chris mentioned this, and I think it's very true, that we're getting down to the point where rates are so low that almost all the banks will be hurt by falling rates, other than some of the mortgage originators. So whereas up to this point we've had some banks benefit and some banks not benefit, from here on, the lion's share of the banks will be hurt by falling rates.

TWST: What are the characteristics of the banks that benefit from falling interest rates, and the banks that benefit from flat or rising rates?

Mr. Harralson: It's all about the asset mix and the liability mix, and how well they're match-funded. A bank that does business with a lot of small businesses and is heavy in prime-based loans will have its assets reprice immediately, and as rates go down, it will get hurt. Conversely, on the funding side, it's ironic that if you're a very core-funded bank, with the best, most core deposit base, you're going to be hurt more in a falling rate environment, as these rates are very close to 0%, and cannot be repriced down.

TWST: Jefferson, what are the strategies that the companies are going to have to employ in order to be successful in what appears to be a deteriorating environment?

Mr. Harralson: The smaller banks need to successfully employ their high customer service strategy. Additionally, following up on what Chris said, these banks need to have the ability to charge an extra fee for customer service, because they're never going to be able to match the pricing of the larger banks. So, small banks need to make sure that they are able to court these customers and get them to continue to pay an extra quarter or half point where necessary. The big cap banks, the $10 billion to $30 billion banks, are the ones that are more in the middle, and it's tougher for them to have a high customer service strategy. But they're also being outpriced by the larger banks. These guys need to find successful niches to be able to implement their fee-income-based business strategies.

TWST: Are there any others that you would like to highlight, Jefferson?

Mr. Harralson: On the balance sheet play, one of our favorite names for the last couple of years has been a bank called Seacoast Banking Corporation of Florida (Nasdaq:SBCFA). It is headquartered in Stuart, Florida, and has a three-county market area in South Florida. It's one of the wealthiest market areas in the country, and the franchise has the number one market share. You also get a 2.5% dividend, and the bank has had net recoveries so far in 2001, which is vastly different from most banks. They are forecasting no charge-offs in the fourth quarter as well. So an investor would get a high dividend and a well-above-average franchise that a lot of acquirors would like to take a look at.

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.