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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: Is there an ideal interest rate environment for banks? Do some banks benefit from a falling interest rate environment, and some from flat or rising rates?

Mr. Townsend: Perhaps there is no ideal environment, but clearly there are adverse environments, as we had last year, when the yield curve was inversely inclined. But the environment that we have currently is a favorable one. The yield curve is now steeply inclined, although not yet as steep as we saw in 1991-1992. For example, currently the spread between the three-month constant maturity Treasury rate and the 10-year CMT is 204 basis points. The last year’s average was approximately 154 bps, but back in May 1992, it peaked at about 367 basis points. So it could be steeper, and historically it has been. But this is a favorable environment for banks to be able to borrow short and lend a little longer, and you can pick up some nice spread. There is also the potential, if banks choose to do this, of doing some leveraging with investments, but then that implies perhaps an increase in interest rate risk. The Federal Reserve is, figuratively, leaving money on banks’ doorsteps, helping through its interest rate policies to encourage new lending and at the same time providing an environment that is conducive to good bank earnings.

TWST: Are there any other companies that you would like to mention?

Mr. Townsend: Let me mention Columbia Bancorp (Nasdaq:CBMD). It’s selling for 1.5 times tangible book value, and 12.5 times our 2002 estimate. This is a company that in my view has a profile that may be attractive to BB&T (NYSE:BBT). It’s located in Ellicott City, Maryland, directly between Baltimore and Washington, DC. It is a commercial bank. About 20% of its deposits are non-interest bearing. It has a nice franchise in a wealthy and economically strong market, and about 800 million in assets, so it’s a nice size. But it’s not quite performing up to where it needs to be. Its 3Q01 return on average equity was 11.97%. But it’s one that over time I think will be found to be attractive by someone and will be acquired. I don’t know that CBMD is currently inclined to sell, but I do keep my eye on them with that in mind.

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.

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.