Wunderlich's "Burn-Down" Analysis

Wunderlich Securities conducted a mid-cycle "burn-down" analysis on the WSI Regional and Communicty Banks that incorporated cumulative loss expectations by loan type on peak loan balances since early 2008, which Wunderlich believes was the beginning of the credit cycle. Bancorp South BXS Green Bankshares GRNB and Texas Capital Bancshares TCBI all appear to have significant core capital deficiencies, but Wunderlich believes the models overstate the loss content of loan portfolios given the success of underlying markets in the Texas Triangle. Wunderlich advises investors to exercise caution with these companies. Synovus Financial SNV and Whitney Holding WTNY both appear to be priced at significant discounts to as "burn down" diluted shares, even after swallowing severe loan losses and raising common equity solely for the purpose of redeeming TARP. These companies are participating in FDIC-assisted acquisitions, according to Wunderlich: Bank of the Ozarks OZRK($37.64, Buy), CenterState Banks CSFL($9.12, Buy), Columbia Banking System COLB($18.93, Buy), Hancock Holding Company HBHC($29.41, Buy), Heritage Financial Corporation HFWA($13.42, Buy), Home BancShares HOMB($22.45, Buy), IBERIABANK IBKC($51.02, Buy), PacWest Bancorp PACW($18.77, Buy), Renasant Corporation RNST($14.01, Buy), SCBT Financial Corp. SCBT($29.78, Buy), and Washington Banking Company (WBCO–$13.10, Buy).