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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: What is the third group?

Mr. Townsend: The third group is comprised of companies that trade at a premium to the group but at the same time have excellent earnings prospects and are doing very well in this economic environment, despite all the difficulties. These typically have strong management teams, and the stars are well aligned for them to outperform the group in the coming year.

TWST: And the stocks are worth the premium that investors would have to pay.

Mr. Townsend: Exactly. One of those is BB&T Corporation (NYSE:BBT), which is trading at 2.9 times tangible book value of $11.33 (these are all third quarter tangible book values, by the way), and just over 12 times our 2002 estimate of $2.70. It’s a company that I believe is well-managed and very focused. It has been an active acquiror and manages the acquisition and conversion processes well. I believe that acquisition accretiveness will probably exceed management’s guidance.

TWST: Will BB&T continue to be a consolidator?

Mr. Townsend: I expect that it will be. There are some companies on my list that would seem to fit their profile very well.

TWST: What is their profile?

Mr. Townsend: BB&T prefers companies between about $150 million and $1 billion in assets. It prefers commercial banks to thrifts, but will acquire either if it augments its market position. BB&T has expanded strongly in Maryland and also Virginia and Georgia, three markets that it has particularly focused on, and I think they’re looking for opportunities also in northern Florida to expand.

TWST: Given the relatively low valuations of most of the group, is this an environment in which you expect to see a lot of consolidation?

Mr. Townsend: I would be surprised if in a more difficult economic environment, we don’t find that some management teams finally capitulate and say, “We need to partner up with someone larger that has a good, strong currency, that can carry the value of our own assets to a higher level.” There are many community banks that are currently trading at well below 2 times tangible book value, that have what I would say are good prospects but may have to wait a few more years until the market really discovers them. These could realize that value much more quickly if they were acquired.

TWST: What about companies to keep an eye on? They may not necessarily be on your recommended list today but should be on a watch list?

Mr. Townsend: There certainly are others in the Southeast region that are terrific companies and ones that I’d like to pick up coverage on but on which I do not yet have a recommendation. It would probably be best if I limit my remarks to companies that we currently have under coverage.

TWST: In conclusion, how do you view investor sentiment surrounding the bank stocks today, in general and specifically with regard to the Southern and Southeastern banks?

Mr. Townsend: I think that there is a lot of interest currently, certainly among institutional investors, in this area, and they are watching them all quite closely. Credit risk is an issue that is perhaps keeping some investors from wading in too deeply right now, but I expect that they will become more active as they look out into 2002 and begin to give thought to what happens as the economy begins to improve and the Fed eventually tightens interest rates. As rates tighten, some commercial banks will actually begin to do a little bit better on their margins. These have some asset sensitivity that investors would like to be in front of. BB&T is one, for example, that has some asset sensitivity and will tend to have some margin expansion in a recovering economy. And of course in a recovering economy, after a lag, we should see some improving credit quality as well, and that would be good for them all.

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.