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Created by douglas hughes

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Date updated:03-14-2008

1/16/2008
We have reopened the newsletter due to the bank stock crash for 2008:
Today CITI bank reported their biggest loss in 192 years. That about says it all.

1. FIRST FINANCIAL HOLDINGS: (FFCH $21.99) operates as the holding company for First Federal Savings and Loan Association of Charleston. With over 55 offices in both South Carolina and North Carolina, they have one of the best franchises in their markets, more important very solid asset quality, which is all that ever, really matters. Many of their top people are over 60 and have been their 20 years +. The only reason to own a bank stock the next 1-2 years will be for takeovers. This is one that could get sold for more than a 50% premium to today’s prices. You get a 4.5% cash dividend while we wait. They are a $2 billion powerhouse with strong management, great assets quality (did we say this already). Their book value is $16.00 has to be worth $32.00 in the worst case. In 2 years, once this crash is over, they could get $39.00+, $32.00 is a low ball price for today’s market. There is still a large “short” position almost 8% that they will have to cover one day. Trades plenty, but wild, use limits as always. Their full earnings report will be out this week. You probably can wait for that report to buy, but we would just average in from time to time under $22.50 over the next year. They have 11.65 million shares outstanding and insiders own over 5%. Look for the bank to buy back a lot of stock starting next week. Downside should be limited to 10% and upside 50%+, make this a top holding today. Headquartered Charleston, S.C.

We really don’t see much to do yet other than be long, TCB, KEY, WTNY, FITB, and FMER out of the money call options one year+ out if you can handle the risk. Buy them on big down days only. If they double in the short -term sell them or let half ride. While so far this has not worked the past 3 months other than for trades, we are now 20% lower on most names. If they do go down 10%-20% more, then we would buy the stock, only. Also, if the fed does something crazy, you could get a double overnight on all these options. They did it once, will they do it again? I would say yes. The Fed has dropped the ball for sure and we are in the middle of one of the worst bear markets in over 15 years. This is nothing like 911, more like 1978-1980 or 1990, hopefully not 1930.
I still feel foreign buyers will come in and take some of the large regional names, if you want to buy the stocks and average down for the next 2 years then do it, starting sooner than later.
KFED can be bought in size under $8.00 all day long also. Downside has to be almost zero from the $8.00 level.
We have sold all PRK today. Their report was very bad and unless they sell, you won’t make money for 5 years with them. We had thought they were run by no-nonsense straight up guys, but going into FL really thru them off course. Florida will take years to recover (5-10), most other real estate markets will take 2-7 years to get an up tick in prices.

Last but not least, COBH. If they don’t change their name this quarter, look for a sale soon at $33+ and STBK also should be sold. Both will need capital with the growth ahead since the CBH merger last year, which has given both new life. CBH killed the market for STBK and now they can shine again, both are very solid with their asset quality and insiders own a ton on both and are getting old, and many have been with both banks 20 years +. AMRB, a bank that is very solid, but in CA, if you want to gamble buy it under $16.00 only, and all in under $13.00, worth $24.00+ in their asset quality holds up, we think it will.
AROW and HARL have held up due to their great asset quality. Both can be sold now and put to work in FFCH or other ideas as they come up if it is not a takeover candidate we do not want to hold it any more, tough times are ahead.

Only the best banks will get sold the next few years, at premiums the bad banks get take-unders, we don’t like them.
Florida “shorts” like IBCA, BPOP and CNB have worked well, but their time is over for now, we feel.
There were two deals this month in 2008 already, MFBC and SHBK, both got good prices.

Douglas Hughes/ BankNewsletter.com : 1-888-814-7575 1/16/2008

FFCH
First Fin Hldg
$18.99
-4.86%
$19.44

take out target, best level to get in in over ten years 4.5% yield, top managment is getting old, great markets, great asset quality.

People owning FFCH also tend to own: ABT CHTR CHZ F FNB GOOG HBAN

TheStreet.com Rating: B- What is this?

WTNY
Whitney Hldg Cp
$17.55
-4.10%
$18.44

takeover target, safe

People owning WTNY also tend to own: BA BMY CDL CSCO DRE FNSR GPS

TheStreet.com Rating: C+ What is this?

FMER
Firstmerit Cp
$17.43
-13.93%
$19.91

takeover target safe

People owning FMER also tend to own: BEE CEO FCH MO MRBK SHO ATLO

TheStreet.com Rating: B What is this?

TCB
T C F Financial C
$16.31
-6.75%
$17.78

takeover target safe at these levels under $17.00

People owning TCB also tend to own: APD BAC BBX CMP COP CRNT WTR

TheStreet.com Rating: C What is this?

BAC
Bk Of America Cp
$22.66
-5.47%
$23.44

$33.10 good entry point today

People owning BAC also tend to own: AAPL GOOG INTC MSFT RACK CFC ASH

TheStreet.com Rating: C+ What is this?

DBD
Diebold Inc
$25.00
-5.55%
$26.40

great value under $25, atm maker

People owning DBD also tend to own: CHK GG LGF NBR PVR RTK SHLD

TheStreet.com Rating: C What is this?

AROW
Arrow Financial C
$23.69
-5.84%
$24.92

under $19.50 is a great entry point, very safe bank

People owning AROW also tend to own: AAPL ANGO ABT BAC BK CHK CNI

TheStreet.com Rating: A- What is this?

C
Citigroup Inc
$13.32
-6.06%
$13.70

good value at $20.00

People owning C also tend to own: ACE BAC CB COP CVX DIS GS

TheStreet.com Rating: C- What is this?

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