The Manual of Ideas: Value Opportunities in Banks? by BeyondProxy LLC

Value-oriented Equity Investment Ideas for Sophisticated Investors A Monthly Publication of BeyondProxy LLC  Subscribe at manualofideas.com “If our efforts can further the goals of our members by giving them a discernible edge over other market participants, we have succeeded.”

Investing In The Tradition of Graham, Buffett, Klarman Year III, Volume X October 29, 2010 When asked how he became so successful, Buffett answered: “We read hundreds and hundreds of annual reports every year.”

Top Five Ideas In This Report Barclays (London: BARC, NYSE: BCS) ….. 62

Deutsche Bank (XETRA: DBK, NYSE: DB) ……... 66

Mitsubishi UFJ Financial (Tokyo: 8306, NYSE: MTU) …….. 70

Roma Financial (Nasdaq: ROMA) ………………… 74

Waterstone Financial (Nasdaq: WSBF) …………………. 78

Also Inside Editor’s Commentary ………………... 4 Superinvestor Holdings Update ……15 Todd Combs’ Favorite Banks ……….16 Banking Crisis Assessment ………...20 Thrift Conversions …………………..50 Exclusive Interview: Scott Proper … 41 Exclusive Interview: Mike Godby … 56 100 Profitable Banks ……………..114

About The Manual of Ideas Our goal is to bring you investment ideas that are compelling on the basis of value versus price. In our quest for value, we analyze the top holdings of top fund managers. We also use a proprietary methodology to identify stocks that are not widely followed by institutional investors. Our research team has extensive experience in industry and security analysis, equity valuation, and investment management. We bring a “buy side” mindset to the idea generation process, cutting across industries and market capitalization ranges in our search for compelling equity investment opportunities.

VALUE OPPORTUNITIES IN BANKS? ► The crisis: Where we are, where we are headed ► Five ways of identifying opportunities in banking ► Thrift conversions: Is anyone paying attention? ► 100 profitable banks — and other banking screens ► Top 5 ideas, based on proprietary MOI methodology ► Plus: Superinvestor holdings update ► Plus: Favorite stock screens for value investors ► Plus: Exclusive interview with Scott Proper ► Plus: Exclusive interview with Michael Godby LAST-MINUTE EXTRA: Banks mentioned in this issue include Arrow Financial, BancFirst, Bancolombia, BancorpSouth, Bank of America, Bank of Hawaii, Favorite Bank Bank of Marin, Bar Harbor Bank, Barclays, BB&T Corp., Investments of BBVA Frances, BNP Paribas, Boston Private, Brookline Bancorp, Buffett Pick Century Bancorp, CIT Group, Citigroup, Citizens & Northern, City Holding, Todd Combs City National, CNB Financial, Columbia Banking, Comerica, p. 16 Community Bank System, Community Trust, Credicorp, CVB Financial, Danvers Bancorp, Deutsche Bank, Dime Community, East West Bancorp, F.N.B., Fifth Third Bancorp, First Bancorp, First Bancorp, First Busey, First Commonwealth, First Community, First Financial, First Financial Bank, First Interstate, First Merchants, First Midwest, First Niagara, FirstMerit, Fulton Financial, German American, Hancock Holding, HSBC Holdings, Huntington, Iberiabank, ING Group, JPMorgan Chase, KeyCorp, M&T Bank, MB Financial, Meridian Interstate, Mitsubishi UFJ Financial, NASB Financial, National Penn, NBT Bancorp, NewAlliance, Northern Trust, Northwest Bancorp, NY Community, Old National Bancorp, Park National, PeapackGladstone, People's United, Prosperity Bancshares, Renasant, Rockville Financial, Roma Financial, Royal Bank of Scotland, S&T Bancorp, Santander Brasil, Santander Chile, SCBT Financial, Signature Bank, Southwest Bancorp, State Bancorp/NY, State Street, Sterling Bancorp, Susquehanna, TFS Financial, Tompkins Financial, TrustCo Bank NY, UMB Financial, Umpqua Holdings, Univest Corp. of PA, Valley National, Wainwright B & T, Washington Federal, Waterstone Financial, Webster Financial, Wells Fargo, WestAmerica, Wintrust Financial, and more. (analyzed companies are underlined)

Copyright Warning: It is a violation of federal copyright law to reproduce all or part of this publication for any purpose without the prior written consent of BeyondProxy LLC. Email support@manualofideas.com if you wish to have multiple copies sent to you. © 2008-2010 by BeyondProxy LLC. All rights reserved.

Value-oriented Equity Investment Ideas for Sophisticated Investors

Table of Contents EDITORIAL COMMENTARY ..........................................................................4 SUPERINVESTOR HOLDINGS UPDATE ................................................... 15 EXTRA: BUFFETT PICK TODD COMBS’ FAVORITE BANKS .................. 16 BANKING CRISIS: WHERE WE ARE, WHERE WE ARE HEADED .......... 20 SUMMARY STATISTICS ON FDIC-INSURED BANKS .................................................................... 20 SELECTED STATISTICS BY BANK ............................................................................................. 27 U.S. REAL ESTATE PRICING TRENDS – RESIDENTIAL ............................................................... 32 U.S. REAL ESTATE PRICING TRENDS – COMMERCIAL ............................................................... 37 EXCLUSIVE INTERVIEW WITH SCOTT PROPER .......................................................................... 41 IN THEIR OWN WORDS: BANK CEOS ON BUSINESS CONDITIONS .............................................. 47

THRIFT CONVERSIONS: IS ANYONE PAYING ATTENTION?................. 50 CHEAPEST BASED ON ADJUSTED MARKET VALUE TO TANGIBLE ASSETS.................................... 54 CHEAPEST BASED ON TANGIBLE BOOK VALUE TO ADJUSTED MARKET VALUE ............................ 55 EXCLUSIVE INTERVIEW WITH MICHAEL GODBY ......................................................................... 56

TOP 5 INVESTMENT IDEAS IN BANKING INDUSTRY ............................. 62 BARCLAYS (LONDON: BARC, NYSE: BCS) ............................................................................. 62 DEUTSCHE BANK (XETRA: DBK, NYSE: DB) ......................................................................... 66 MITSUBISHI UFJ FINANCIAL (TOKYO: 8306, NYSE: MTU) ........................................................ 70 ROMA FINANCIAL (NASDAQ: ROMA) ....................................................................................... 74 WATERSTONE FINANCIAL (NASDAQ: WSBF)............................................................................ 78

OTHER INVESTMENT CANDIDATES IN BANKING INDUSTRY .............. 82 BANK OF AMERICA (NYSE: BAC) ........................................................................................... 82 BNP PARIBAS (PARIS: BNP, OTC: BNPQY) ........................................................................... 86 CITIGROUP (NYSE: C)........................................................................................................... 90 HSBC HOLDINGS (LONDON: HSBA, NYSE: HBC, HONG KONG: 005) ...................................... 94 ING GROUP (AMSTERDAM: INGA, NYSE: ING) ...................................................................... 98 JPMORGAN CHASE (NYSE: JPM) ........................................................................................ 102 ROYAL BANK OF SCOTLAND (LONDON: RBS, NYSE: RBS) .................................................... 106 WELLS FARGO (NYSE: WFC) .............................................................................................. 110

100 PROFITABLE BANKS TRADED IN THE U.S. ................................... 114 IN ALPHABETICAL ORDER ..................................................................................................... 114 BY MARKET VALUE .............................................................................................................. 116 BY STOCK PRICE PERFORMANCE ......................................................................................... 118 BY ESTIMATED FORWARD P/E .............................................................................................. 120 BY AVERAGE ANNUAL ROE (PAST SEVEN YEARS) .................................................................. 122 BY MARKET VALUE TO TOTAL ASSETS .................................................................................. 124

BANKING GLOSSARY AND DEFINITIONS ............................................. 126 FAVORITE STOCK SCREENS FOR VALUE INVESTORS ...................... 128 “MAGIC FORMULA,” BASED ON TRAILING OPERATING INCOME ................................................. 129 “MAGIC FORMULA,” BASED ON THIS YEAR’S EPS ESTIMATES ................................................. 130 “MAGIC FORMULA,” BASED ON NEXT YEAR’S EPS ESTIMATES ................................................ 131 CONTRARIAN: BIGGEST YTD LOSERS (DELEVERAGED & PROFITABLE) ..................................... 132 VALUE WITH CATALYST: CHEAP REPURCHASERS OF STOCK ................................................... 133 PROFITABLE DIVIDEND PAYORS WITH DECENT BALANCE SHEETS............................................ 134 DEEP VALUE: LOTS OF REVENUE, LOW ENTERPRISE VALUE ................................................... 135 DEEP VALUE: NEGLECTED GROSS PROFITEERS .................................................................... 136 ACTIVIST TARGETS: POTENTIAL SALES, LIQUIDATIONS OR RECAPS ......................................... 137

THIS MONTH’S TOP 10 WEB LINKS ....................................................... 138

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Editorial Commentary Our task this month has seemed quite daunting at times: We set out to rummage through the wreckage of the banking sector in search of investment opportunities for value-oriented investors. While doing so, we were mindful that many of the latter have viewed banks with suspicion, branding them as “black boxes” whose asset quality is impossible to ascertain. In a time of weak real estate prices and unusual strains on consumers, asset quality has become perhaps more important than ever. While the “black box” critique of banks has merit, we did not simply want to dismiss the beaten-down sector and move on. After all, the following superinvestors have found apparent value in banks: David Tepper in Bank of America (BAC), Citigroup (C), Wells Fargo (WFC), Royal Bank of Scotland (RBS), Fifth Third Bancorp (FITB), and SunTrust Banks (STI); John Griffin and Steve Mandel in JPMorgan Chase (JPM); Glenn Greenberg in U.S. Bancorp (USB); Francis Chou in BAC; Eddie Lampert in Capital One (COF); Bruce Berkowitz in C and BAC; Phil Falcone and Bill Ackman in C; John Paulson in BAC, C, JPM, COF, and STI; Tom Brown in Synovus (SNV) and several other banks; Mason Hawkins in Bank of NY Mellon (BK); and Prem Watsa and Warren Buffett in WFC and USB. All of these positions are among the top ten largest holdings of each investor, suggesting meaningful commitments to the sector by these investment managers. Our research effort has yielded five potential ways of approaching the banking sector in search of compelling investment ideas: 1.

Too-big-to-fail “national champions” that remain historically cheap;

Strong institutions poised to benefit from the weakness of others;

Troubled banks with the most upside in a survival scenario, as gauged primarily by equity market value to total assets;

Banks that may outperform in an inflationary scenario due to relatively large long-term, fixed-rate liabilities; and

All-but-forgotten thrift conversions, with shareholder value yet to be unlocked in a second-step conversion.

The following is a snapshot of companies highlighted this month, along with classification by above category:

Top 5 Investment Ideas in This Report Barclays / BCS London, United Kingdom Deutsche Bank / DB Frankfurt, Germany Mitsubishi UFJ / MTU Tokyo, Japan Roma Financial / ROMA Robbinsville, New Jersey Waterstone Financial / WSBF Wauwatosa, Wisconsin

“National Champion”

“Strong Get Stronger”

Low MV to Assets



 

Inflation Beneficiary

Thrift Conversion

 



 



Source: The Manual of Ideas.

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October 29, 2010 – Page 4 of 141

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Historically Cheap “National Champions” Much has been made about institutions perceived to be “too big to fail.” While the latter does not mean that common stockholders will be made whole in a bailout, such too-big-to-fail banks do enjoy advantages that may help them accrete value at an above-average rate over time. The perception that a bank is too big to fail may boost confidence among those providing it with money, whether it is lenders or depositors. Such institutions also enjoy significant political clout in their respective countries, putting them in a position to tilt regulation in their favor. We slot the following banks, among others, into this category: BAC, C and JPM in the U.S.; Barclays (BCS) and RBS in the U.K.; BNP Paribas (Paris: BNP) and Credit Agricole (Paris: ACA) in France; DB in Germany; ING Group (ING) in the Netherlands; Mitsubishi UFJ Financial (MTU) in Japan; and Credit Suisse (CS) and UBS (UBS) in Switzerland.

Selected “National Champions” (sorted by estimated P/E for 2011) EPS ($) 1

Price ($)

MV ($bn)

Assets ($bn)

MV/ Ass.

2010

2011

P/E 1 2010

2011

ING Group / ING

NED

11.15

1,782

1.68

2.33

Deutsche Bank / DB

GER

58.69

2,696

5.16

9.11

11x

Barclays / BCS

GBR

17.89

2,492

2.04

2.74

Credit Agricole / CRARY

FRA

8.34

2,472

0.77

1.25

11x

Credit Suisse / CS

SUI

42.00

1,089

5.00

5.89

BNP Paribas / BNPQY

FRA

37.00

3,132

4.38

4.87

Bank of America / BAC

USA

11.44

115

2,364

1.08

1.47

11x

JPMorgan Chase / JPM

USA

37.70

149

2,014

3.84

4.62

10x

UBS / UBS

SUI

17.93

1,488

1.88

2.18

10x

Citigroup / C

USA

4.11

119

1,938

0.39

0.46

11x

JAP

4.71

2,512

0.34

0.45

14x

10x

GBR

14.48

2,482

0.31

0.94

46x

15x

Mitsubishi UFJ /

MTU 2

Royal Bank Scotland / RBS 1

Based on consensus analyst estimates as of October 25, 2010. 2 Fiscal years ending March 31, 2011 and 2012. Sources: Company filings, Manual of Ideas analysis.

Strong Institutions Poised to Benefit From the Crisis The saying “the strong get stronger” has much applicability to today’s banking landscape. Institutions with significant troubled assets are simply struggling to stay ahead of the demands of regulators, forced to raise capital at unfavorable terms. In many cases, weak banks are gently—or not so gently—shepherded into the hands of stronger competitors. Sometimes this has occurred even before banks were forced to take writedowns that would render them critically undercapitalized. For instance, in April the FDIC shut down Westernbank Puerto Rico, which had $1 billion of equity and $13 billion of assets, “gifting” large deposits to Puerto Rico’s “strong” bank, Popular (BPOP). John Paulson and Roberto Mignone are among BPOP’s largest shareholders. 1 Strong institutions exploiting the weakness of others include JPM, WFC, Northern Trust (NTRS), and Toronto Dominion Bank (TD), among others. 1

A Value Investors Club write-up on BPOP, dated December 2009, is available at http://bit.ly/aMApiR (no registration required). A more recent VIC write-up on BPOP, dated September 2010, is available at http://bit.ly/94A17L (free guest registration required).

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Troubled Banks with Attractive Risk-Reward Tradeoffs Whereas the previous two categories have received ample attention by investors looking for “safe” values in the banking sector, investors continue to shun troubled institutions. They are doing so virtually without regard for the at times enticing riskreward tradeoffs implied by battered stock prices. Naturally, we find this category worthy of closer investigation. In an exclusive interview inside this report, former Colorado community banker Scott Proper comments on the opportunity in troubled small banks: “I think that significant concentration within a particular community bank is risky, but that a significant concentration within a basket of community banks is attractive. I am surprised we have not yet seen a community bank ETF for banks with tangible equity of less than $1 billion. They are the most significantly mispriced class of banks… I think that worst case, 20% of them will fail, but that these worst-case losses will be more than offset by appreciation in the others. As always, only time can tell. Most of these community banks are currently trading at ten-year, if not historic, lows.” How to identify banks with potentially asymmetric risk-reward profiles? To do so, we borrow a page from the reclusive but highly successful Chandler brothers. According to a 2006 title story in Institutional Investor magazine, “Over the past 20 years, the New Zealand-born brothers [Richard and Christopher Chandler] have turned a modest family fortune of $10 million into a powerful $5 billion fund — all of it their own money — by making bold bets in risky markets around the world.” 2 One such “bet” was an investment in the troubled Japanese banking sector. Wrote II: “Japanese banks had no earnings on which to base multiples, and uncertainty about the extent of bad loans made it difficult to forecast a turnaround. So Richard and his analysts looked at market capitalization as a percentage of assets; on this basis they determined that UFJ and other megabanks traded at about 3 percent, compared with 15 percent for Citigroup at the time. 3 The Chandlers concluded that Japan would have to nationalize the banks or reflate the economy with low interest rates, and bet — correctly, as it turns out — on the latter scenario. ‘Most fund managers are focused on what can go wrong rather than on what can go right and were too afraid to make that call,’ says Richard. ‘We were not.’” On page 28 of this report, we present a table ranking U.S.-traded banks by the Chandler metric, market capitalization as a percentage of assets. The idea is to identify banks that would have large upside in a normalization scenario (assuming no massively dilutive equity offering in the meantime). If a bank can earn a 1% net spread on assets, then a 3% MV-to-asset ratio implies a “normalized” P/E of 3x. Indeed, the Chandlers may envy the opportunity in today’s banking sector, as numerous small banks trade at MV-to-asset ratios of 1% and 2%, implying greater potential upside than the Chandlers had enjoyed in Japan. Of course, many banks trade at MV-to-asset ratios of 1-3% because dilutive equity offerings may be imminent, rendering the pro forma MV-to-asset ratios much higher than 1-3%. Nonetheless, there are still plenty of institutions that meet the regulators’ “well-capitalized” thresholds, suggesting a non-negligible probability that those banks may escape material equity dilution. 2 3

Institutional Investor magazine, “Secrets of Sovereign,” March 2006. Emphasis added. SUBSCRIBE TODAY! www.manualofideas.com

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Playing into this investment case is the thesis that the government, broadly defined, wants to slow the pace of bank failures to minimize the adverse impact on lending and employment. The Fed has subsidized banks with nearly free money, allowing them to earn attractive spreads by investing in longer-dated Treasuries. The FDIC and other regulators are undercapitalized and understaffed to deal aggressively with the problem of “zombie” banks. Everyone seems to be waiting — and hoping and praying — that “quantitative easing” and other Fed measures will prove somewhat inflationary, helping to stabilize real estate prices. The latter would mark a turning point for troubled banks, as collateral values would stop falling and perhaps start creeping higher, eliminating many banks’ imperative for more capital. In a recent confirmation of the regulators’ “kid gloves” approach, on October 19 the FDIC canceled a scheduled bank fee increase. “I am pleased that we are able to provide some (insurance fee) relief now in light of our lower loss projections,” stated FDIC Chairman Sheila Bair. 4 An industry expert told us the following: “The spinning of the message is pretty telling. The real bottom line is that after requiring banks to prepay three years’ worth of FDIC insurance fees last year, they don’t think banks can handle the expense again, according to my regulator friends.” Investing in community banks in the face of bad fundamentals reminds us a bit of the approach David Tepper took in the spring of 2009 when he bought large stakes in several U.S. banks. Tepper’s thesis rested simply on what he believed regulators would do, or as Tepper puts it, on what they told him (and others) they would do. The FDIC’s cancellation of a scheduled fee hike, coupled with the justification of lower loss projections, tells us quite strongly which path regulators are taking. Mr. Market’s valuation of many small banks still reflects on entirely different path. Banks that may have attractive risk-reward tradeoffs based on low ratios of MV to assets include BankAtlantic (BBX), Capitol Bancorp (CBC), Commonwealth Bankshares (CWBS), First Bancorp (FBP), First Place Financial (FPFC), United Community Financial (UCFC), and United Western Bancorp (UWBK).

Small Banks, Big Rewards? (sorted by market value to total assets)

First Bancorp PR / FBP FNB United / FNBN Superior Bancorp / SUPR United Western / UWBK Capitol Bancorp / CBC BNCCORP / BNCC Centrue Financial / TRUE PAB Bankshares / PABK Cascade Bancorp / CACB Intervest Banc / IBCA Carver Bancorp / CARV Tidelands Banc / TDBK First Mariner Banc / FMAR Broadway Financial / BYFC Fentura Financial / FETM Northern States Fin. / NSFC BankAtlantic / BBX Village B & T / VBFC Patriot Nation. Banc / PNBK Bank of Granite / GRAN

State PR NC AL CO MI ND IL GA OR NY NY SC MD CA MI IL FL VA CT NC

Price ∆ Since 12/29/06 -97% -97% -98% -98% -98% -87% -93% -97% -98% -94% -80% -91% -96% -67% -93% -92% -99% -88% -92% -96%

Market Value ($mn) 30 7 11 11 25 6 9 9 15 18 8 6 15 6 5 6 54 7 10 12

MV/ Total Assets .2% .3% .3% .5% .5% .6% .7% .8% .8% .8% 1.0% 1.0% 1.1% 1.1% 1.1% 1.2% 1.2% 1.2% 1.2% 1.2%

Tang. Book/ MV 1563% 292% 1191% 999% 69% 664% 536% 294% 42% 923% 522% 286% 296% 330% 351% 372% 119% 693% 333% 295%

TBV/ Tang. Assets 2.6% 1.0% 4.0% 5.0% .4% 4.1% 3.8% 2.3% .3% 7.6% 5.0% 2.9% 3.2% 3.6% 3.9% 4.3% 1.4% 8.0% 3.9% 3.5%

Insider Own. 16% 7% 15% 6% 12% 14% 28% 36% 15% 33% 4% 34% 23% 31% 24% 44% 55% 20% 50% 7%

Sources: Company filings, Manual of Ideas analysis. 4

Marcy Gordon, “FDIC lowers expected cost of bank failures by $8B,” The Washington Post, October 19. SUBSCRIBE TODAY! www.manualofideas.com

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Potential Inflation Beneficiaries Inflation is not generally considered beneficial to the health of banks. Long-term fixed-rate loan assets may collapse in value while the cost of deposits may skyrocket, destroying bank equity and profitability. Nonetheless, under current circumstances, rising prices may benefit certain banking institutions in two primary ways: First, price inflation, whether accurately reflected in the CPI or not, may help to stabilize real estate prices. As many U.S. banks have in effect morphed into nonoperating REITs, a turnaround in real estate prices is critical to the recovery of the banking sector. Banks with large residential real estate portfolios in areas in which prices would respond most favorably to inflation stand to benefit the most from the Fed’s reflationary efforts. For example, a depreciating dollar may induce non-U.S. residents to buy cheap vacation homes in states such as Florida, potentially helping to reverse the dynamic of declining prices. Similarly, banks operating in areas that would benefit from a boom in commodity prices could see inflation positively impacting the health of their depositors and borrowers. Second, inflation would have a positive impact on banks sitting on variable-rate loans, funded in part with long-term, fixed-rate borrowings. Some banks sold large amounts of trust preferred securities (TruPS) when capital markets were receptive to such issuances. TruPS are generally long term in nature and often carry fixed interest rates. Banks with material long-term, fixed-rate borrowings include CBC, KeyCorp (KEY), PNC Financial Services (PNC), SunTrust (STI), and USB.

Overlooked Thrift Conversions Grizzled value investors will recognize thrift conversions as one of the more conservative, time-tested ways of earning positive risk-adjusted returns in banking. In a first-step thrift conversion, an institution that has been technically owned by its depositors may become a stock corporation and raise capital in an IPO. In these offerings, new investors are essentially “buying” their own capital and getting the existing institution’s assets and business for “free.” Meanwhile, in a second-step thrift conversion, an institution that is partly owned by a mutual holding company (MHC) typically completes a transition to full public ownership by offering MHC-owned shares to investors. For purposes of this report, we are particularly keen on institutions that have completed a first-step conversion but have yet to announce a second-step conversion. Shares in these thrifts are readily available for purchase in the public markets. Still, some of them appear to be inefficiently priced. “While thrifts are often most undervalued at the time of conversion, they occasionally fall to acceptable discounts because of market forces,” according to Seth Klarman. Ideally, the vast majority of the common stock of a publicly traded thrift is held by an MHC. While those shares are considered to be outstanding, the economics belong entirely to the non-MHC shareholders. The analogy would be treasury stock held by a corporation that had completed a share repurchase. The major difference is that treasury stock is not considered to be outstanding. This MHC-related peculiarity causes many investors to overlook thrift conversions, as the relevant institutions may not appear to be particularly cheap at first glance. Thrift conversions had their zenith in the 1980s and ‘90s. Some savvy investors such as Seth Klarman, who had participated in conversions, have since moved on to © 2008-2010 by BeyondProxy LLC. All rights reserved.

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bigger opportunities as their funds have grown in size. In addition, bank-focused investment funds as a category were decimated in the recent financial crisis, making it plausible that thrift conversions may not be as closely followed as before. We are particularly pleased to bring you an exclusive interview with an analyst who follows thrift conversions, perhaps more closely than anyone in the industry — Mike Godby of FIG Partners. We have devoted a meaningful portion of this report to thrift conversions, and two of this month’s five featured ideas — Roma Financial (ROMA) and Waterstone Financial (WSBF) — fall into this category.

Selected Thrift Conversions (sorted by market value to tangible assets) MHC-adjusted Metrics

Price ∆

TBV/

Since

MHC

TBV/

MV/

Insider

Tang.

State

YE'06

Own.

($mn)

Own.

Assets

Atlantic Coast Fed / ACFC

-90%

65%

623%

.9%

15%

Brooklyn Federal / BFSB

-86%

72%

1087%

1.3%

17%

14%

Magyar Bancorp / MGYR

-75%

56%

489%

1.7%

15%

Waterstone Financial / WSBF

-78%

74%

531%

1.7%

17%

Pathfinder Bancorp / PBHC

-37%

64%

282%

1.9%

14%

PSB Holdings / PSBH

-67%

57%

357%

2.1%

23%

Naugatuck Valley / NVSL

-59%

60%

354%

2.6%

13%

Malvern Federal / MLVF

n/m

56%

383%

2.6%

10%

Heritage Financial / HBOS

-50%

76%

282%

3.2%

25%

Hometown Bancorp / HTWC

n/m

56%

366%

3.4%

12%

Laporte Bancorp / LPSB

n/m

55%

270%

3.5%

SI Financial / SIFI

-44%

62%

249%

3.5%

13%

Prudential Banc / PBIP

-49%

71%

283%

3.7%

10%

FedFirst Financial / FFCO

-45%

57%

301%

4.0%

12%

Oneida Financial / ONFC

-42%

55%

134%

4.2%

21%

Lake Shore Bancorp / LSBK

-36%

60%

293%

4.3%

18%

13%

MSB Financial / MSBF

n/m

59%

252%

4.4%

10%

11%

Alliance Bancorp / ALLB

-67%

59%

242%

4.5%

11%

United Community / UCBA

-39%

59%

240%

4.7%

21%

11%

Charter Financial / CHFN

-84%

61%

180%

5.2%

Meridian Interstate / EBSB

n/m

58%

196%

5.8%

11%

Roma Financial / ROMA

-36%

73%

247%

6.0%

15%

Greene County Banc / GCBC

11%

56%

143%

6.3%

24%

Capitol Federal / CFFN

-36%

70%

541

178%

6.3%

11%

Rockville Financial / RCKB

-35%

55%

102

157%

6.4%

10%

Investors Bancorp / ISBC

-25%

57%

589

146%

6.7%

10%

Kearny Financial / KRNY

-45%

75%

152

266%

6.7%

22%

18%

Northeast Community / NECB

-52%

55%

304%

6.8%

21%

TFS Financial / TFSL

n/m

74%

741

238%

6.8%

16%

Beneficial Mutual / BNCL

n/m

56%

323

164%

6.8%

11%

Clifton Savings / CSBK

-30%

64%

219%

7.2%

20%

16%

Cheviot Financial / CHEV

-36%

62%

243%

8.2%

22%

20%

Northfield Bancorp / NFBK

n/m

56%

216

178%

9.8%

17%

Sources: Company filings, Manual of Ideas analysis.

With that context to our search for bank investments in mind, we highlight the following five ideas for closer consideration:

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Value-oriented Equity Investment Ideas for Sophisticated Investors

Barclays (London: BARC, NYSE: BCS; $17 per ADR; MV $50 billion) $70 $60 $50 $40 $30 $20 $10 $0 Sep 01

Sep 02

Sep 03

Sep 04

Sep 05

Sep 06

Sep 07

Sep 08

Sep 09

Sep 10

Barclays is one of the three largest banks in the U.K., along with RBS and HSBC (London: HSBA, NYSE: HBC), which are also profiled in this report. With $2.5 trillion in assets, Barclays also ranks among the ten biggest banks in the world. Deposits are growing, and customer accounts amounted to $575 billion on June 30th. Retail banking, however, is not the company’s primary earnings engine, as the investment bank, Barclays Capital, has accounted for a majority of assets and, more recently, income. In H1 2010, Barclays Capital ranked #1 in global debt (8% market share), #3 in global forex (11%) and #4 in global, completed M&A (15%).

Key Contributor: Barclays Capital FYE December 31 2007 2008 Assets (in trillions) £1.0 £1.2 % of total assets by selected segment: Barclays Capital 68% 79% U.K. retail banking 7% 5% Pretax income by selected segment (in billions): Barclays Capital £2.3 £1.3 Other businesses (incl. overhead) 3.9 3.8 Total pretax income £6.2 £5.1

2009 £2.1

1H10 £1.4

74% 8%

76% 8%

£2.5 2.1 £4.6

£3.4 0.5 £3.9

Sources: Company filings, Manual of Ideas analysis.

The downside, of course, to Barclays’ deriving such a large portion of profits from Barclays Capital is the cyclicality of the investment banking businesses. On the other hand, one could argue that the other businesses — U.K. retail banking, Barclaycard multi-brand credit card and consumer lending, and South African financial services leader Absa — have simply been under-earning relative to their potential. If those businesses can improve their profitability, the parent’s dependence on Barclays Capital will decrease while overall income should increase. Importantly, unlike some other U.K.-based banks, Barclays has managed through the financial crisis without requiring government aid. The company did raise funds from Qatar and Abu Dhabi in 2008/09, but these investors rank equally with other common stockholders. Since it did not take government aid, Barclays is free to operate outside the confines of the U.K. Asset Protection Scheme. Barclays’ financial position has improved in important ways over the past three years. Core Tier 1 capital has grown from 4.7% in 2007 to 10% in 2010, gross leverage has fallen from 33x to 20x, while the “liquidity buffer” has grown from £19 billion to £160 billion. With shares trading at just under 80% of tangible book value and less than 7x 2011E EPS of $2.74 per ADR, we find the risk-reward interesting. © 2008-2010 by BeyondProxy LLC. All rights reserved.

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October 29, 2010 – Page 10 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Deutsche Bank (Frankfurt: DBK, NYSE: DB; $56 per ADR; MV $55 billion) $160 $140 $120 $100 $80 $60 $40 $20 $0 Sep 02

Sep 03

Sep 04

Sep 05

Sep 06

Sep 07

Sep 08

Sep 09

Sep 10

Deutsche Bank, with $2.7 trillion in assets, is the top corporate and investment bank in Germany and one of the five largest investment banks in the world. The bank completed a €10 billion ($14 billion) rights offering at €33 per share ($46 per ADR) in October, strengthening the capital base ahead of the pending Postbank (XETRA: DPB) acquisition. Postbank is one of Germany’s largest retail banks, with 1,100 branches and $340 billion in assets. Deutsche’s offer for the 70% of Postbank it does not already own implies a $7.5 billion equity value for an entity that will boost Deutsche’s retail deposits by ~$150 billion to ~$350 billion. The deal will not only move Deutsche’s funding and earnings mix toward the more stable retail banking business, but it may also provide some medium-term capital relief, as Postbank has close to $170 billion in non-core assets that will be put into runoff. Management is targeting synergies of €1 billion, which could prove conservative given the two entities’ large overlap in non-revenue generating functions. Our valuation analysis suggest that, after adjusting for deal synergies, a potential capital release from running off Postbank’s non-core assets, and Deutsche’s roughly $15 billion in principal investments, the “core” investment banking franchise may be trading at an implied low single-digit multiple of run-rate earnings. Pro forma for the Postbank acquisition, Deutsche Bank trades roughly in line with tangible book value, which we find quite attractive given the combined entity’s potential to earn midteens normalized returns on equity. Finally, consensus estimates call for Deutsche to earn $9.11 per share in 2011, implying a forward P/E of 6.3x. Mitsubishi UFJ (Tokyo: 8306, NYSE: MTU; $4.60 per ADS; MV $65 billion) $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 Sep 01

Sep 02

Sep 03

Sep 04

Sep 05

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Sep 06

Sep 07

Sep 08

Sep 09

Sep 10

October 29, 2010 – Page 11 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Mitsubishi UFJ Financial (MTU) enjoys an enviable position in Japanese retail banking, where it is the dominant player with roughly ¥100 trillion (>$1 trillion) in deposits. The company was formed in 2005 via the merger of Japan’s second-largest banking group, Mitsubishi Tokyo, and number-four UFJ Holdings, based in Osaka. Unlike the other two megabanks among this month’s five featured ideas— Barclays and Deutsche Bank—MUFJ is primarily a retail and commercial bank and only secondarily an investment bank. This makes the franchise relatively more valuable, in our view, as customer deposits tend to be a higher-quality asset than line items such as trading securities and derivatives. MUFJ has had a foothold in the U.S. banking industry ever since Mitsubishi Bank acquired The Bank of California in 1984. That investment has evolved into full ownership of Union Bank, which ranks fifth and twenty-first in deposits in California and the U.S., respectively. In its pursuit of the U.S. market, MUFJ has departed somewhat from Japanese banks reputation for paying top dollar for acquisitions at cycle peaks. Rather, MUFJ made a $9 billion preferred equity investment in Morgan Stanley in 2008, giving it a 20% diluted equity stake. MUFJ aims for a “global strategic alliance” with the investment bank. This year, Union Bank took over FDICseized Everett, WA-based Frontier Bank and San Rafael, CA-based Tamalpais Bank. One of the reasons MUFJ shares have remained cheap, trading at roughly 80% of tangible book value, is the bank’s history of relatively low returns on equity—not dissimilar from other large Japanese companies. While it is impossible to predict when returns may start creeping toward their considerably higher potential, we note the appointment of Katsunori Nagayasu as CEO in April. While Nagayasu has been with MUFJ since 1970, he has communicated an intention to “shift focus from risk management to growth acceleration.” Now certainly seems to be a better time to do so than it was a few years ago. In our valuation exercise, we arrive at an equity value range of $6 to $10 per ADS by examining fair value under the following three valuation assumptions: (1) value in line with tangible common equity; (2) value based on ten times net income, assuming an admittedly optimistic 15% return on tangible common equity; and (3) value based on six times pre-provision, pretax profit for the past twelve months. Roma Financial (Nasdaq: ROMA; $10 per share; MV $310 million*) *

includes MHC-owned shares

$20 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 Sep 06

Sep 07

Sep 08

Sep 09

Sep 10

Robbinsville, New Jersey-based Roma Financial is the parent of Roma Bank, a federally-chartered stock savings bank with $1.1 billion in deposits. The parent company is nearly three-fourths owned by an MHC, implying that the economics attributable to non-MHC shareholders are more attractive than they initially appear. © 2008-2010 by BeyondProxy LLC. All rights reserved.

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October 29, 2010 – Page 12 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

When adjusting for the MHC ownership and the post-Q2 acquisition of roughly $370 million in assets from troubled Sterling Bank, Roma trades at a market value to total asset ratio of less than 5%. We find this valuation attractive for a wellcapitalized, well-managed bank in New Jersey. Roma has remained profitable throughout the crisis and is not subject to a regulatory order. The bank pays a dividend, and has been buying back stock at prices well below estimated fair value. We view the investment case as compelling. Waterstone Financial (Nasdaq: WSBF; $3.80 per share; MV $117 million*) *

includes MHC-owned shares

$20 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 Sep 06

Sep 07

Sep 08

Sep 09

Sep 10

Wauwatosa, Wisconsin-based Waterstone Financial is the parent of Waterstone Bank, a Wisconsin chartered savings bank with $1.2 billion in deposits. Waterstone is one of the most intriguing “thrift conversions” we have come across, as the related MHC holds nearly 74% of shares outstanding, implying large “leverage” for the true owners of the company. When adjusted for the MHC ownership, Waterstone trades at a market value to tangible asset ratio of less than 2%. This implies large upside for equity holders in a more normalized earnings environment. A second-step conversion in which shares held by the MHC would be sold in a public offering would strengthen Waterstone’s capital ratios, which remain above the regulatory “well capitalized” thresholds (notwithstanding a cease-and-desist order in 2009). While a second-step conversion would in all likelihood represent a positive catalyst, there is some residual risk that the Lamplighter shares could be offered at a “below-market” price, diluting the upside for current holders. We view the risk-reward as compelling but acknowledge that this opportunity likely comes with more risk than any of the other four ideas featured this month.  The following two tables compare the large banks profiled and analyzed in this report. First, we present key statistics on asset size and balance sheet strength. We then compare the relative market valuations of the various banks. It is interesting to note that the major banks as a group trade at less than 4x recent pre-provision pretax income and roughly 7x “normalized” net income. The median market value to tangible book value multiple is 1.0x, with Wells Fargo trading at 2.1x tangible book value on the high end and Barclays and Mitsubishi UFJ trading at 0.8x tangible book at the low end.

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October 29, 2010 – Page 13 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Capital Position, Asset Quality and Returns on Equity 1

Bank of America Barclays BNP Paribas Citigroup Deutsche Bank HSBC ING JPMorgan Chase Mitsubishi UFJ Royal Bank Scotland Wells Fargo

Local Ticker

Assets (billions)

TCE / Assets

(TCE + LLR)3 / Assets

Tier 1 Capital Ratio4

Recent ROTCE5

BAC BARC BNP C US DBK HSBA INGA JPM 8306 RBS WFC

$2,328 £1,587 € 2,237 $1,983 € 1,043 $2,419 € 1,273 $2,142 ¥200,084 £1,581 $1,221

4.9% 2.6% 2.6% 6.3% 3.7% 4.5% 1.8% 4.8% 3.5% 3.6% 5.3%

6.8% 3.3% 3.9% 8.5% 4.1% 5.4% n/m 6.4% 4.1% 4.6% 7.3%

11.2% 13.2% 10.6% 12.5% 11.3% 9.9% 11.2% 11.9% 10.6% 10.5% 10.9%

11% 14% 14% 11% 22% 12% 23% 15% 6% n/m 10%

Average: Median:

4.0% 3.7%

5.4% 5.0%

11.3% 11.2%

14% 13%

Trading Multiples and Dividend Yield Market Value (billions) Bank of America Barclays BNP Paribas Citigroup Deutsche Bank HSBC ING JPMorgan Chase Mitsubishi UFJ Royal Bank Scotland Wells Fargo

Market Value / 2

Pre-prov. Profit6

Norm.7 Net Inc.

Recent8 Net Inc.

Dividend Yield9

$115 £34 €63 $119 €39 £183 €31 $150 ¥5400 £50 $137

1.0x .8x 1.1x 1.0x 1.0x 1.7x 1.3x 1.5x .8x .9x 2.1x

2.8x 2.4x 3.3x 3.2x 5.5x 4.9x n/a 3.8x 2.8x 3.7x 4.0x

6.7x 5.6x 7.2x 6.4x 6.7x 11.3x 8.7x 9.7x 5.2x 5.8x 14.1x

10.4x 7.0x 7.5x 13.8x 8.4x 13.8x 7.0x 9.3x 13.5x n/m 10.8x

.3% 1.4% 2.8% – 1.8% .7% – .5% 3.1% – .8%

Average: Median:

1.2x 1.0x

3.7x 3.5x

7.9x 6.7x

10.2x 9.9x

1.0% .7%

TCE

Balance sheet figures as of September 30, 2010 or latest available date. Deutsche Bank data reflects October 2010 rights offering. Deutsche Bank assets stated on U.S. GAAP basis. Mitsubishi UFJ figures on U.S. GAAP basis, except for Tier 1 capital and net income-driven data, which is based on JGAAP. 2 TCE: tangible common equity. 3 LLR: loan loss reserve. 4 Tier 1 capital divided by risk-weighted assets, as reported by each company for the latest respective balance sheet date. RBS based on “core” Tier 1. ING based on Basel II Tier 1 for banking segment. 5 ROTCE: return on tangible common equity. Based on annualizing returns from latest available interim period. Mitsubishi UFJ figure based on ROTCE using FYE 3/11 JGAAP net income guidance. 6 Based on annualizing pre-provision profit for a recent interim period. Pre-provision profit is stated before the provision for credit losses, income taxes, minority interests, and preferred dividends. 7 Based on the implied net income to common assuming a 15% return on tangible common equity. 8 Based on annualized net income to common for a recent interim period. 9 Based on annualized dividends for recent interim period, except Mitsubishi UFJ (FYE 3/11 guidance). Sources: Company filings, Manual of Ideas analysis.

 Next month we’ll be back with our quarterly “Superinvestor Issue,” tracking the portfolio activity of 50+ respected investment managers and analyzing their latest purchases in search of winning ideas. Until then, Sincerely,

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October 29, 2010 – Page 14 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Superinvestor Holdings Update In the August issue of The Manual of Ideas, we profiled the top holdings of 50+ investment managers, based on Schedule 13F-HR filings with the SEC. On this page, we provide an update on the latest disclosed purchase and sale activity by the same set of investors. This information is based on Schedule 13G or 13D filings and Form 3 or 4 filings. Increases in Superinvestor Holdings  Latest Trade/ Filing

Filing Type

10/21/10 10/20/10 10/19/10 10/13/10 10/12/10 10/8/10 10/4/10 10/4/10 10/4/10 9/30/10 9/30/10 9/29/10 9/27/10 9/22/10 9/10/10 8/24/10 8/23/10 8/12/10 8/12/10

4 4 4 13D 13G 13D 3 3 13G 13F 13F 13G 4 4 13D 13G 13G 13G 13G

Investor

Company / Ticker

Market Value ($mn)

Second Curve Leucadia Second Curve Fairholme Scout Fairholme Pershing Sq. Pershing Sq. Lone Pine Edinburgh Edinburgh Lone Pine Icahn Second Curve Harbinger Lone Pine MSD Lone Pine Lone Pine

Taylor Capital / TAYC Jefferies / JEF Primus Guaranty / PRS St. Joe / JOE Coca-Cola Enter. / CCE AIG / AIG Fortune Brands / FO J.C. Penney / JCP Polo Ralph Lauren / RL Intel / INTC General Dynamics / GD TransDigm / TDG Take-Two / TTWO CompuCredit / CCRT Harbinger Group / HRG Vanceinfo / VIT Domino's Pizza / DPZ Dick's Sporting / DKS Equinix / EQIX

228 4,100 184 1,880 12,460 27,890 8,500 7,720 8,960 110,550 24,550 3,200 874 214 103 1,386 902 3,365 3,400

Stock Price ($) Latest Date

Filing Date

∆ since Filing

12.46 23.88 4.83 20.26 24.62 41.70 55.77 32.66 93.50 19.83 64.55 64.93 10.28 5.97 5.36 34.97 15.23 29.04 74.66

12.56 23.83 4.71 27.57 22.85 40.91 49.60 27.57 91.25 19.20 62.81 63.06 9.90 4.96 5.95 26.79 13.15 27.14 89.96

-1% 0% 3% -27% 8% 2% 12% 18% 2% 3% 3% 3% 4% 20% -10% 31% 16% 7% -17%

Shares Owned Latest (mn) 2.0 49.3 6.4 26.9 16.7 36.7 16.7 34.9 3.3 12.1 2.9 2.5 9.9 4.1 3.9 2.6 3.7 5.1 2.7

∆ since 6/30/10

Holdings as % of Company

27% 1% 6% 0% 35% 12% new new 56% 39% 14% new 5% 11% 19% 128% new new 54%

11% 29% 17% 29% 3% 24% 11% 15% 3% 0% 1% 5% 3% 12% 21% 7% 6% 4% 6%

Source: SEC filings, The Manual of Ideas compilation and analysis.

Decreases in Superinvestor Holdings  Latest Trade/ Filing

Filing Type

10/21/10 10/19/10 10/18/10 10/6/10 9/30/10 9/29/10 9/29/10 8/31/10 8/31/10 8/31/10

4 13D 4 13G 13G 13D 13D 13G 13G 13G

Investor

Company / Ticker

Market Value ($mn)

Berkshire Harbinger ESL Pabrai Pabrai Southeastern Southeastern Fairholme Fairholme Fairholme

Moody's / MCO New York Times / NYT AutoZone / AZO Harvest Natural / HNR Pinnacle Airlines / PNCL Telephone & Data / TDS Pioneer Natural / PXD Hertz / HTZ Humana / HUM Winthrop Realty / FUR

6,040 1,100 10,570 397 103 3,590 8,370 4,380 9,650 271

Stock Price ($) Latest Date

Filing Date

∆ since Filing

26.79 7.57 234.27 11.83 5.55 34.14 72.13 10.64 57.04 12.76

27.01 7.79 232.80 11.16 5.43 32.78 65.37 8.51 47.79 13.70

-1% -3% 1% 6% 2% 4% 10% 25% 19% -7%

Shares Owned Latest (mn) 28.4 10.7 12.4 3.1 2.0 10.5 15.6 10.8 7.1 3.9

∆ since 6/30/10

Holdings as % of Company

-8% -18% -8% -30% 0% -21% -23% -63% -46% -8%

13% 7% 28% 9% 11% 10% 13% 3% 4% 18%

Source: SEC filings, The Manual of Ideas compilation and analysis.

The Manual of Ideas follows the portfolio moves of the following investors: Bill Ackman, Pershing Square; Lee Ainsle, Maverick; Chuck Akre, Akre Capital; Zeke Ashton, Centaur Capital; Brian Bares, Bares Capital; Bruce Berkowitz, Fairholme; Richard Breeden, Breeden Capital; Tom Brown, Second Curve; Warren Buffett, Berkshire Hathaway; Francis Chou, Chou Associates; Chase Coleman, Tiger Global; James Crichton, Scout; Ian Cumming and Joe Steinberg, Leucadia; Boykin Curry, Eagle; David Einhorn, Greenlight; Phil Falcone, Harbinger; Alan Fournier, Pennant; Glenn Fuhrman and John Phelan, MSD Capital; Jeffrey Gates, Gates Capital; Tom Gayner, Markel Gayner; Kian Ghazi, Hawkshaw; Ed Gilhuly and Scott Stuart, Sageview; Glenn Greenberg, Brave Warrior; John Griffin, Blue Ridge; Howard Guberman, Gruss; Andreas Halvorsen, Viking Global; Mason Hawkins, Southeastern; Lance Helfert and Paul Orfalea, West Coast; Chris Hohn, Children’s Investment Fund; Carl Icahn, Icahn; Rehan Jaffer, H Partners; Seth Klarman, Baupost; John Kleinheinz, Kleinheinz Capital; Eddie Lampert, ESL Investments; Dan Loeb, Third Point; Steve Mandel, Lone Pine; Sandy Nairn, Edinburgh Partners; Mohnish Pabrai, Pabrai Funds; John Paulson, Paulson & Co.; Boone Pickens, BP Capital; Mark Rachesky, MHR; Lisa Rapuano, Lane Five; Larry Robbins, Glenview; Bob Rodriguez and Steven Romick, First Pacific; Wilbur Ross, WL Ross; Chris Shumway, Shumway Capital; David Tepper, Appaloosa; Peter Thiel, Clarium; Prem Watsa, Fairfax; Wally Weitz, Weitz Funds; and David Winters, Wintergreen.

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October 29, 2010 – Page 15 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Extra: Buffett Pick Todd Combs’ Favorite Banks On October 25th, Berkshire Hathaway announced the hiring of Todd Combs. Warren E. Buffett, Berkshire’s CEO, commented “For three years Charlie Munger and I have been looking for someone of Todd’s caliber to handle a significant portion of Berkshire’s investment portfolio. We are delighted that Todd will be joining us.” Todd is 39 and has been managing Castle Point Capital for the past five years. Simultaneously with the issuance of our announcement, Todd issued a letter to the limited partners of Castle Point Capital announcing his decision to join Berkshire. Combs has focused on financial services investments and may be joining Berkshire due to GEICO investment chief Lou Simpson’s retirement this December. According to the website of Stone Point Capital, which provided capital to Comb’s investment partnership, “Castle Point Capital is a long/short equity hedge fund focused exclusively on the financial services sector. Formed in 2005, the fund is based in Greenwich, Connecticut and is managed by Todd Combs. Trident III provided the hedge fund’s seed capital in November 2005.” Combs managed $395 million on July 1st, according to a letter obtained by Reuters. Combs’ fund has generated a gross return of 33% since inception in November 2005, compared to a 49% drop in the SPDR Financial Services fund. Carol Loomis provides additional insight into Combs in a Fortune article: Buffett described Combs as an “all-American type” who is not the least bit interested in publicity, an attitude unlikely to shield him from it. Now a resident of Darien, Conn., Combs is by birth a Floridian who graduated in 1993 from Florida State University with majors in finance and multinational business operations. Once out of school he worked for Florida’s comptroller and later moved to Progressive Insurance, where he was involved in the all-important activity of setting automobile insurance rates. Progressive is an arch-competitor of Berkshire's GEICO. Combs’ direct route to Berkshire began in 2005 when he began to manage Castle Point, a new long/short hedge fund set up to take positions in financial services companies. Castle Point was seeded with capital by Trident III, one of four Trident funds established over the years by private equity firm Stone Point Capital. Castle Point raised $500 million over two years and began full scale investing in late 2007. A more traumatic moment to start any kind of fund, much less one focused on financial services, can hardly be imagined. The stock market had just months before hit a peak and begun to sink into the chaos of 2008. Had Castle Point been only a “long” fund, it would have met immediate disaster. But the fund’s short positions apparently saved it. Buffett describes Combs’ record through the financial crisis as “pretty good.” Read more about Todd Combs at The Rational Walk (www.rationalwalk.com). © 2008-2010 by BeyondProxy LLC. All rights reserved.

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October 29, 2010 – Page 16 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

The following is a snapshot of Todd Combs’ favorite investments in the financial services sector. In the banking industry, Combs recently added to an already sizable position in U.S. Bancorp (USB) and initiated a new position in PNC Financial (PNC). He has also been buying shares in State Street (STT) and CIT Group (CIT). MOI Signal Rank™ – Top Ideas of Castle Point Capital Management

1 2 3 4 5 6 7 8 9 10

Market Value ($mn) 31,751 20,264 45,226 3,325 11,816 8,086 28,783 19,069 18,219 150

Company / Ticker MasterCard / MA State Street / STT U.S. Bancorp / USB RenaissanceRe / RNR Western Union / WU CIT Group / CIT PNC Financial / PNC CME Group / CME Chubb / CB Chatham Lodging / CLDT

Price Recent ∆ from Jun. 30 ($) 242.64 22% 40.40 19% 23.59 6% 60.60 8% 17.90 20% 40.38 19% 54.72 -3% 283.69 1% 57.92 16% 18.52 4%

Shares Owned Recent ∆ from Mar. 31 (‘000) 102 70% 561 60% 1,020 28% 255 21% 1,224 36% 357 new 185 new 51 2% 255 28% 107 new

Holdings as % of Co. Fund* <1% 8% <1% 7% <1% 8% <1% 5% <1% 7% <1% 5% <1% 3% <1% 5% <1% 5% 1% <1%

P/E (Est.) This Next FY FY 18x 15x 12x 11x 14x 11x 7x 8x 13x 12x 19x 16x 11x 9x 18x 17x 11x 10x 56x 17x

Price/ Tang. Book 9.2x 2.2x 2.9x 1.1x n/m 1.0x 1.5x n/m 1.2x n/m

Top Holdings of Castle Point Capital Management – By Dollar Value

1 2 3 4 5 6 7 8 9 10

Market Value ($mn) 31,751 45,226 20,264 11,816 3,325 961 18,219 19,069 8,086 291

Company / Ticker MasterCard / MA U.S. Bancorp / USB State Street / STT Western Union / WU RenaissanceRe / RNR Starwood Property / STWD Chubb / CB CME Group / CME CIT Group / CIT PennyMac Mortgage / PMT

Price Recent ∆ from Aug. 30 ($) 242.64 22% 23.59 6% 40.40 19% 17.90 20% 60.60 8% 20.20 19% 57.92 16% 283.69 1% 40.38 19% 17.30 9%

New Positions

Holdings as % of Co. Fund* <1% 8% <1% 8% <1% 7% <1% 7% <1% 5% 2% 5% <1% 5% <1% 5% <1% 5% 5% 4%

P/E (Est.) This Next FY FY 18x 15x 14x 11x 12x 11x 13x 12x 7x 8x 16x n/a 11x 10x 18x 17x 19x 16x 11x 7x

Price/ Tang. Book 9.2x 2.9x 2.2x n/m 1.1x 1.1x 1.2x n/m 1.0x .9x

Sold Out Positions

Broadridge Financial / BR Chatham Lodging / CLDT CIT Group / CIT

Portfolio Metrics

Shares Owned Recent ∆ from May. 28 ('000) 102 70% 1,020 28% 561 60% 1,224 36% 255 21% 740 23% 255 28% 51 2% 357 new 816 9%

Hartford Financial / HIG Leucadia National / LUK PNC Financial / PNC

Portfolio size

Assurant / AIZ First Citizens / FCNCA Reinsurance Gr. America / RGA

Sector Weightings

58%

Median market value

$11 billion

Average market value

$21 billion

Median P/E (this FY)

14x

Median P/E (next FY)

11x

Median P / tangible book

1.3x

Conglomerates Services 2% 17%

$316 million

Top 10 as % of portfolio

Signature Bank / SBNY TD Ameritrade / AMTD Two Harbors Investment / TWO

Based on equity holdings disclosed in 13F-HR filings with the SEC. Excludes portfolio cash, leverage, certain non-U.S. holdings, and non-equity securities.

Financial 81%

MOI Signal Rank™ answers the question, “What are this investor’s top ten ideas right now?” Rather than simply presenting each investor’s largest holdings as of the recently filed quarter end, the MOI’s proprietary methodology ranks the companies in each investor’s portfolio based on the investor’s current level of conviction in each holding, as judged by the MOI. Our proprietary methodology takes into account a number of variables, including the size of a position in an investor’s portfolio, the size of a position relative to the market value of the corresponding company, the most recent quarterly change in the number of shares owned, and the change in the stock price of a position since the most recent quarterly filing date. © 2008-2010 by BeyondProxy LLC. All rights reserved.

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October 29, 2010 – Page 17 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

The following is a quick look at each of the four banking-related institutions among Todd Combs’ top ten holdings:

U.S. BANCORP (USB) Minneapolis-based U.S. Bancorp, with $291 billion in assets, is the parent of U.S. Bank, the 5th-largest commercial bank in the U.S. The company operates 3,013 banking offices in 24 states and 5,323 ATMs and provides banking, brokerage, insurance, investment, mortgage, trust and payment services products.

Source: Company presentations dated October 20th and September 15th, available at http://bit.ly/bgSKy5

PNC FINANCIAL SERVICES GROUP (PNC) Pittsburgh-based PNC Financial Services Group is a diversified financial services organization providing retail and business banking; residential mortgages; specialized services for corporations and government entities, including banking, real estate finance and asset-based lending; wealth and asset management.

Source: Company presentations dated October 21st and September 14th, available at http://bit.ly/blIiTA

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October 29, 2010 – Page 18 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

STATE STREET (STT) State Street provides services to institutional investors, including investment servicing, management, research and trading. With $19 trillion in assets under custody and administration and $1.8 trillion in AUM as of June 30th, State Street operates in 25 countries and employs 29,000 people.

Source: Company presentation dated July 30th, available at http://bit.ly/bn5lyV

CIT GROUP (CIT) Founded in 1908, CIT is a bank holding company with $35+ billion in finance and leasing assets. It provides financing and leasing capital to one million small business and middle market clients and their customers across 30+ industries. CIT maintains leadership positions in small business and middle market lending, factoring, retail finance, aerospace, equipment and rail leasing, and global vendor finance.

Source: Company presentation dated October 14th, available at http://bit.ly/bQ7uEr

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October 29, 2010 â&#x20AC;&#x201C; Page 19 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Banking Crisis: Where We Are, Where We Are Headed In this section, we present selected statistics on the state of the U.S. banking sector.

Summary Statistics on FDIC-Insured Banks QUARTERLY NET INCOME

BANKS REPORTING EARNINGS GAINS

NET INTEREST MARGIN BY BANK SIZE

NONCURRENT LOANS AND NET CHARGE-OFFS

12-MONTH CHANGES IN BANK LIABILITIES

NUMBER OF FDIC-INSURED “PROBLEM” BANKS

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Value-oriented Equity Investment Ideas for Sophisticated Investors

SELECTED PERFORMANCE DATA *

Number of institutions reporting Return on assets (%) Return on equity (%) Core capital (leverage) ratio (%) Noncurrent assets plus OREO to assets (%) Net charge-offs to loans (%) Asset growth rate (%) Net interest margin (%) Net operating income growth (%) Percentage of unprofitable institutions (%) Number of problem institutions Assets of problem institutions (in billions) Number of failed institutions

YTD June 30, 2010** 2009** 7,830 8,195 .6 .0 5.5 .3 8.8 8.2 3.3 2.8 2.7 2.3 (.6) .0 3.8 3.4 567.1 (77.2) 20.3 27.7 829 416 $403 $300 86 45

2009 8,012 .1 .7 8.6 3.4 2.5 (5.3) 3.5 50.8 30.7 702 $403 140

Years Ended December 31, 2008 2007 2006 2005 8,305 8,534 8,680 8,833 .0 .8 1.3 1.3 .4 7.8 12.3 12.4 7.5 8.0 8.2 8.2 1.9 1.0 .5 .5 1.3 .6 .4 .5 6.2 9.9 9.0 7.6 3.2 3.3 3.3 3.5 (90.7) (27.6) 8.5 11.4 24.9 12.1 7.9 6.2 252 76 50 52 $159 $22 $8 $7 25 3 0 0

Asset quality is still an issue, but expanding interest margins are helping banks turns profitable

Excludes insured branches of foreign banks (IBAs). Through June 30, ratios annualized where appropriate. Asset growth rates are for 12 months ending June 30. Source: Federal Deposit Insurance Corporation, The Manual of Ideas.

AGGREGATE FINANCIAL CONDITION % Change 2Q09-2Q10 (4.5) (2.8)

($ in millions) Number of institutions reporting Total employees (full-time equivalent)

Q2 2010 7,830 2,033,662

Q1 2010 7,934 2,027,247

Q2 2009 8,195 2,093,066

Total assets Loans secured by real estate 1-4 Family residential mortgages Nonfarm nonresidential Construction and development Home equity lines Commercial & industrial loans Loans to individuals Credit cards Farm loans Other loans & leases Less: Unearned income Total loans & leases Less: Reserve for losses Net loans and leases Securities Other real estate owned Goodwill and other intangibles All other assets

$13,220,551 4,336,825 1,874,335 1,081,004 383,313 654,450 1,174,939 1,359,543 699,404 58,270 468,562 2,794 7,395,345 251,290 7,144,055 2,527,735 49,285 409,757 3,089,719

$13,356,798 4,401,538 1,887,551 1,090,644 418,017 659,871 1,187,070 1,380,445 716,998 55,600 480,905 2,711 7,502,849 263,065 7,239,783 2,531,647 46,265 424,879 3,114,224

$13,300,007 4,651,638 2,012,537 1,086,496 535,733 672,906 1,364,713 1,037,135 398,233 58,352 516,323 2,903 7,625,258 211,157 7,414,102 2,336,957 33,928 431,395 3,083,625

(0.6) (6.8) (6.9) (0.5) (28.5) (2.7) (13.9) 31.1 75.6 (0.1) (9.3) (3.7) (3.0) 19.0 (3.6) 8.2 45.3 (5.0) 0.2

13,220,551 9,140,980 7,667,695 1,473,285 1,911,837 150,986 510,148 1,506,599 1,487,435

13,356,798 9,198,770 7,692,326 1,506,444 2,051,791 150,540 476,035 1,479,662 1,459,993

13,300,007 9,021,146 7,555,214 1,465,932 2,159,362 168,125 529,986 1,421,388 1,403,711

(0.6) 1.3 1.5 0.5 (11.5) (10.2) (3.7) 6.0 6.0

125,191 385,805 71,614 1,381,160 11,389,950 445,400 6,007,195 17,606,001 1,411,808 225,433,522

141,492 405,395 64,412 1,386,427 11,554,019 480,364 6,104,579 18,096,538 1,413,926 218,068,203

141,247 331,899 46,577 1,365,416 11,436,792 634,642 6,305,132 16,975,455 1,865,371 208,656,901

(11.4) 16.2 53.8 1.2 (0.4) (29.8) (4.7) 3.7 (24.3) 8.0

Total liabilities and capital Deposits Domestic office deposits Foreign office deposits Other borrowed funds Subordinated debt All other liabilities Total equity capital (includes minority interests) Bank equity capital Loans and leases 30-89 days past due Noncurrent loans and leases Restructured loans and leases Mortgage-backed securities Earning assets FHLB Advances Unused loan commitments Trust assets Assets securitized and sold Notional amount of derivatives

Real estate loans are hard to come by, but consumers have re-discovered their credit cards

Foreclosures have left banks with more real estate inventory

Equity capital is growing again

Loan restructurings have been a popular way of avoiding nonaccrual

Source: Federal Deposit Insurance Corporation, The Manual of Ideas.

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AGGREGATE INCOME DATA H1 2010 273,091 56,617 216,474 91,145 122,275 192,790 3,737 17,928 (174) 40,449 40,080 100,747 17,317 22,763 37,904

($ in millions) Total interest income Total interest expense Net interest income Provision for loan and lease losses Total noninterest income Total noninterest expense Securities gains (losses) Applicable income taxes Extraordinary gains, net Total net income (includes minority interests) Bank net income Net charge-offs Cash dividends Retained earnings Net operating income

H1 2009 279,906 81,498 198,409 128,197 136,630 196,686 839 4,900 (3,655) 2,440 2,022 86,723 13,374 (11,352) 5,682

% Change Q2 2010 (2) 135,182 (31) 27,648 9 107,534 (29) 40,303 (11) 60,865 (2) 97,930 346 2,148 Declining 266are 10,307 provisions (232) helping n/m boost reportedn/m income 21,775 n/m 21,597 16 48,959 30 12,934 n/m 8,662 567 20,487

Q2 2009 137,832 38,786 99,047 67,370 68,419 99,449 (927) 315 (3,624) (4,221) (4,376) 49,173 6,139 (10,515) (161)

% Change (2) (29) 9 (40) (11) (2) n/m n/m n/m n/m n/m (0) 111 n/m n/m

Source: Federal Deposit Insurance Corporation, The Manual of Ideas.

Q2 2010, BY ASSET CONCENTRATION GROUP

Number of institutions reporting Total assets ($ in billions) Total deposits ($ in billions) Bank net income ($ in millions)

All Banks 7,830 13,221 9,141 21,597

Credit Card Banks 20 719 272 2,582

4.7 1.0 3.8 1.8 3.0 1.2 .6 1.0 .7 5.9 2.6 82.3 56.5

12.6 1.4 11.2 2.9 4.1 6.4 1.3 2.2 1.4 8.7 11.6 64.9 30.8

3.5 .7 2.7 2.2 2.8 .4 .9 1.4 1.0 11.1 1.8 68.5 61.3

5.3 1.4 4.0 .7 2.7 .5 1.0 1.2 1.0 9.2 .7 114.1 61.3

4.9 1.2 3.8 1.4 3.1 1.3 .2 .4 .2 1.9 2.0 99.5 63.6

4.5 1.4 3.1 1.0 2.1 .7 .7 1.1 .7 6.6 1.1 102.8 53.1

5.8 1.3 4.5 2.0 2.7 1.6 1.3 2.0 1.3 12.0 2.2 93.4 42.5

0 57 45

0 0 0

0 8 1

0 46 42

0 0 0

(.1) 1.2 1.3 2.6 .5 .4

(.7) 3.3 3.2 10.8 3.9 4.2

(.5) 1.0 .7 3.1 .6 .7

.8 1.3 1.4 .6 .2 .2

(.2) 1.2 1.4 2.1 .3 .2

.6 .9 1.2 1.3 .3 .1

.6 3.0 1.4 2.8 1.9 1.1

Performance Ratios (annualized, %) Yield on earning assets Large variability Cost of funding earning assets in NIM, but Net interest margin everyone is Noninterest income to assets doing okay Noninterest expense to assets Loan and lease loss provision to assets Net operating income to assets Pretax return on assets Return on assets Return on equity Net charge-offs to loans and leases Loan and lease loss provision to net charge-offs Efficiency ratio Structural Changes New Charters Banks absorbed in M&A Failed Institutions Prior Second Quarters Return on assets (%)

Prima facie evidence of regulators’ intention to help existing banks rather than allow new entrants to benefit from Fed/FDIC policies

Net charge-offs to loans & leases (%)

2009 2007 2005 2009 2007 2005

Asset Concentration Groups * InterAgriComMortnational cultural mercial gage Banks Banks Lenders Lenders 4 1,579 4,265 745 3,059 189 4,358 795 1,981 155 3,323 530 7,737 489 2,271 1,287

Consumer Lenders 83 97 81 304

* Excludes various “Other” categories. Credit-card lenders: institutions whose credit-card loans plus securitized receivables exceed 50% of total assets plus securitized receivables. International banks: banks with assets greater than $10 billion and more than 25% of total assets in foreign offices. Agricultural banks: banks whose agricultural production loans plus real estate loans secured by farmland exceed 25% of their total loans and leases. Commercial lenders: institutions whose commercial and industrial loans, plus real estate construction and development loans, plus loans secured by commercial real estate properties exceed 25% of total assets. Mortgage lenders: institutions whose residential mortgage loans, plus mortgage-backed securities, exceed 50% of total assets. Consumer lenders: institutions whose residential mortgage loans, plus credit-card loans, plus other loans to individuals, exceed 50% of total assets. Source: Federal Deposit Insurance Corporation, The Manual of Ideas.

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Roughly Flat y-y

Value-oriented Equity Investment Ideas for Sophisticated Investors

Q2 2010, BY ASSET SIZE AND GEOGRAPHIC REGION Asset Size Distribution < $100 mn $1 bn > $100 mn - $1 bn - $10 bn $10 bn 2,745 4,425 555 105 155 1,325 1,429 10,312 129 1,089 1,083 6,839 217 948 506 19,926

Number of institutions reporting Total assets ($ in billions) Total deposits ($ in billions) Bank net income ($ in millions)

Performance Ratios (annualized, %) Yield on earning assets 5.3 Cost of funding earning assets 1.3 Consistent Net interest margin 3.9 NIM Noninterest income to assets 1.4 Noninterest expense to assets 3.8 Loan and lease loss provision to assets .5 Net operating income to assets .5 Pretax return on assets .7 Return on assets .6 Return on equity 4.6 Net charge-offs to loans and leases .7 Loan loss provision to net charge-offs 115.6 Efficiency ratio 76.0

Net charge-offs to loans (%)

2009 2007 2005 2009 2007 2005

NY 969 2,693 1,743 5,000

1,064 2,987 2,099 1,649

1,619 2,866 1,952 5,538

1,852 1,656 1,207 3,029

1,643 788 618 1,419

683 2,231 1,522 4,962

5.4 4.4 3.9 1.1 .9 .8 4.3 3.5 3.0 1.7 1.6 2.1 2.8 2.8 3.0 1.5 1.3 .8 .7 .2 .7 Bigger banks are 1.1 proactive .4 with 1.1 more .8 .2 .8 charge-offs 5.8 2.0 8.6 4.1 2.6 1.9 66.5 92.1 81.0 49.8 60.9 62.8

5.8 .8 5.0 2.2 3.6 1.9 .7 1.1 .7 6.3 2.9 92.7 51.8

5.0 1.0 3.9 1.7 3.4 .9 .7 .9 .7 6.9 1.2 105.4 65.8

4.6 1.1 3.5 1.8 2.6 .9 .9 1.3 .9 7.7 2.1 86.3 53.1

5.2 1.4 3.8 .9 3.2 .8 .2 .4 .3 2.8 1.1 110.7 71.5

5.0 1.3 3.7 1.2 2.9 1.2 .1 .3 .1 1.3 1.9 100.5 63.1

4.6 .9 3.8 2.1 2.9 1.3 .7 1.1 .8 6.9 3.0 78.6 53.8

0 16 9

0 31 26

0 10 9

0 0 1

0 3 4

0 30 11

0 5 12

0 13 6

0 5 2

0 1 10

0.04 0.85 1.09 0.91 0.14 0.19

-0.17 1.14 1.24 1.14 0.18 0.19

-0.83 1.11 1.35 2.23 0.33 0.24

-0.03 1.25 1.28 2.89 0.57 0.51

-0.56 1.05 1.29 2.91 0.84 0.69

-0.05 1.25 1.34 2.26 0.26 0.18

0.18 1.05 0.93 2.4 0.37 0.26

0.74 1.54 1.55 2.56 0.63 0.51

0.21 1.15 1.28 1.32 0.23 0.23

-0.71 1.41 1.63 3.39 0.59 0.63

Structural Changes New Charters Institutions absorbed by mergers Failed Institutions Prior Second Quarters Return on assets (%)

Geographic Regions * ATL CHI KC DAL

* Region codes: NY = New York: Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Puerto Rico, Rhode Island, Vermont, U.S. Virgin Islands. ATL = Atlanta: Alabama, Florida, Georgia, North Carolina, South Carolina, Virginia, West Virginia. CHI = Chicago: Illinois, Indiana, Kentucky, Michigan, Ohio, Wisconsin. KC = Kansas City: Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota. DAL = Dallas: Arkansas, Colorado, Louisiana, Mississippi, New Mexico, Oklahoma, Tennessee, Texas. SF = San Francisco: Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Pacific Islands, Utah, Washington, Wyoming. Source: Federal Deposit Insurance Corporation, The Manual of Ideas.

H1 2010 FINANCIAL CONDITION RATIOS, BY ASSET CONCENTRATION GROUP Asset Concentration Groups * (in %) Earning assets to total assets Loss Allowance to: Loans and leases Noncurrent loans and leases Noncurrent assets & OREO to assets Equity capital ratio Core capital (leverage) ratio Tier 1 risk-based capital ratio Total risk-based capital ratio Net loans and leases to deposits Net loans to total assets Domestic deposits to total assets

Commercial lenders and mortgage lenders are in relatively worse shape

All Banks 86.2

Credit Card Banks 86.2

International Banks 84.0

Agricultural Banks 91.8

Commercial Lenders 88.3

Mortgage Lenders 93.2

Consumer Lenders 94.4

3.4 65.1 3.3 11.3 8.8 12.4 15.1 78.2 54.0 58.0

9.9 377.2 2.2 16.6 11.5 13.4 16.4 198.5 75.2 33.7

4.0 59.8 2.6 9.3 7.2 12.2 15.3 52.8 34.2 32.0

1.6 78.8 1.7 11.3 10.1 14.1 15.2 77.6 63.6 82.0

2.6 56.0 3.9 11.0 9.1 11.8 14.0 86.8 66.1 74.7

1.5 33.1 3.0 10.0 9.3 19.0 20.1 87.4 58.3 66.6

2.9 227.8 1.0 10.7 10.4 14.1 15.9 87.5 72.8 82.2

* Excludes various “Other” categories. See footnotes to table on previous page for institution type definitions. Source: Federal Deposit Insurance Corporation, The Manual of Ideas.

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H1 2010 FINANCIAL CONDITION RATIOS, BY ASSET SIZE AND GEOGRAPHIC REGION Somewhat surprising: Smaller banks have higher core capital ratio

(in %) Earning assets to total assets

Asset Size Distribution < $100 mn $1 bn > $100 mn - $1 bn - $10 bn $10 bn 91.1 91.4 90.4 84.8

Geographic Regions * NY 86.1

ATL 83.9

CHI 86.2

KC 87.0

DAL 90.2

SF 87.0

3.8 102.3 2.2 13.0 9.7 13.9 16.2 83.0 53.8 57.4

3.3 51.8 4.0 11.4 8.0 11.2 14.4 77.2 54.3 62.6

3.3 57.9 3.2 9.2 7.3 11.0 14.3 70.1 47.8 53.9

3.8 63.4 4.6 11.6 9.1 11.2 13.8 90.6 66.1 67.0

2.1 56.9 3.2 10.6 9.5 13.2 15.0 81.8 64.1 77.9

3.4 68.8 2.9 11.7 10.1 15.2 16.9 72.9 49.7 44.2

Loss Allowance to: Loans and leases Noncurrent loans and leases Noncurrent assets & OREO to assets Equity capital ratio Core capital (leverage) ratio Tier 1 risk-based capital ratio Total risk-based capital ratio Net loans and leases to deposits Net loans to total assets Domestic deposits to total assets

1.6 61.6 2.4 12.2 11.6 17.8 18.9 72.6 60.7 83.6

1.8 50.7 3.4 10.2 9.6 13.7 15.0 79.9 65.7 82.2

2.3 51.8 3.6 11.1 9.6 13.9 15.3 82.9 62.9 75.3

3.9 68.4 3.3 11.4 8.5 12.0 15.0 77.2 51.2 52.1

* See footnotes to table on previous page for geographic region definitions. Source: Federal Deposit Insurance Corporation, The Manual of Ideas.

LOAN PERFORMANCE, AS OF JUNE 30, 2010, BY ASSET CONCENTRATION GROUP Asset Concentration Groups * Agricultural Commercial Mortgage Banks Lenders Lenders

All Banks

Credit Card Banks

Int’l Banks

2.0 2.4 1.1 1.1 1.2 2.8 .8 2.2 1.7

1.3 .0 .0 .0 2.0 1.2 2.6 2.2 2.2

2.8 2.5 .6 .6 1.5 4.3 .4 2.6 1.9

1.1 1.9 1.0 1.3 .6 1.7 1.4 1.5 1.1

1.6 2.3 1.2 1.3 .9 2.1 1.0 1.7 1.4

1.9 5.9 1.5 1.7 1.2 1.9 1.0 3.2 1.9

% of Loans Noncurrent ** All real estate loans Construction and development Nonfarm nonresidential Multifamily residential Home equity loans Other 1-4 family residential Commercial and industrial loans Credit card loans Total loans and leases

7.3 16.9 4.3 4.2 1.7 9.8 2.9 2.6 5.2

4.9 .0 .0 .0 2.3 6.1 3.0 2.6 2.6

10.6 19.0 5.6 4.2 1.9 17.7 5.3 2.6 6.8

2.4 10.1 2.9 2.9 .8 1.6 2.3 .8 2.0

5.8 16.5 4.0 4.4 1.2 5.4 2.5 2.9 4.7

4.8 15.1 3.7 3.2 1.8 4.9 3.0 3.2 4.6

1.2 4.5 2.6 1.7 .8 1.1 .7 1.1 1.2

% of Loans Charged-off (net, YTD) All real estate loans Construction and development Nonfarm nonresidential Multifamily residential Home equity loans Other 1-4 family residential Commercial and industrial loans Credit card loans Total loans and leases

2.0 5.1 1.1 1.2 2.9 1.7 1.9 12.2 2.7

4.9 .0 .0 .0 9.0 4.2 17.2 13.7 13.4

2.4 2.8 1.1 1.0 2.8 3.0 1.5 6.3 2.2

.5 3.0 .5 .8 .7 .3 1.3 2.4 .5

1.9 5.5 1.2 1.4 1.4 1.5 1.7 8.1 1.9

1.0 6.2 .7 .9 3.7 .8 1.5 10.5 1.2

1.7 1.7 .5 1.7 2.3 1.1 5.6 5.1 2.4

% of Loans 30-89 Days Past Due All loans secured by real estate Construction and development Nonfarm nonresidential Multifamily residential Home equity loans Other 1-4 family residential Commercial and industrial loans Credit card loans Total loans and leases

Consumer Lenders 1.1 .5 1.8 Relatively large 3.9 differences in loan.9performance 1.1 1.3 1.1 1.5

Excludes various “Other” categories. Noncurrent loan rates represent the percentage of loans in each category that are past due 90 days or more or that are in nonaccrual status. Source: Federal Deposit Insurance Corporation, The Manual of Ideas.

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LOAN PERFORMANCE, AS OF JUNE 30, 2010, BY ASSET SIZE AND GEOGRAPHIC REGION < $100 mn

Asset Size Distribution $100 mn $1 bn > - $1 bn - $10 bn $10 bn

Geographic Regions NY

ATL

% of Loans 30-89 Days Past Due All loans secured by real estate Construction and development Nonfarm nonresidential Multifamily residential real estate Home equity loans Other 1-4 family residential Commercial and industrial loans Credit card loans Total loans and leases

1.7 2.2 1.5 1.1 .9 2.1 1.7 2.4 1.6

1.5 2.1 1.3 1.3 .8 1.7 1.3 2.5 1.4

1.3 2.0 1.1 1.0 .8 1.5 .9 2.1 1.3

2.3

% of Loans Noncurrent * All real estate loans Construction and development Nonfarm nonresidential Multifamily residential real estate Home equity loans Other 1-4 family residential Commercial and industrial loans Credit card loans Total loans and leases

3.1 10.3 3.4 2.8 1.4 2.2 2.7 1.1 2.7

4.1 12.9 3.3 3.5 1.2 2.8 2.4 1.7 3.6

5.4 16.4 4.0 4.6 1.4 4.1 2.5 1.7 4.5

8.6 18.8 5.0 4.2 1.8 12.0 3.0 2.6 5.7

4.8 17.9 3.8 3.1 .9 4.7 2.9 2.6 3.7

8.9 17.6 4.8 4.9 1.9 12.2 2.3 2.6 6.3

% of Loans Charged-off (net, YTD) All real estate loans Construction and development Nonfarm nonresidential Multifamily residential real estate Home equity loans Other 1-4 family residential Commercial and industrial loans Credit card loans Total loans and leases

.6 2.7 .5 .8 .7 .4 1.3 4.4 .6

.9 3.2 .6 .8 .7 .6 1.4 7.5 1.0

1.8 5.9 1.2 1.5 1.2 .9 1.5 8.2 1.8

2.3 5.7 1.4 1.2 3.2 2.0 2.0 12.3 3.2

1.0 4.3 .9 1.0 .8 .7 3.3 14.2 4.1

Loans Outstanding ($ in billions) All real estate loans Construction and development Nonfarm nonresidential Multifamily residential real estate Home equity loans Other 1-4 family residential Commercial and industrial loans Credit card loans Total loans and leases **

66 5 20 2 2 28 12 0 95

694 83 267 32 38 240 111 2 887

681 86 269 42 48 224 136 19 921

2,896 209 525 139 566 1,382 915 678 5,496

Other Real Estate Owned ($ in millions) All other real estate owned 1,089 Construction and development 353 Nonfarm nonresidential 330 Multifamily residential real estate 37 1-4 family residential 342 Farmland 25 GNMA properties 2

12,873 6,240 3,183 445 2,833 171 5

10,356 5,570 2,185 413 2,028 90 71

24,968 5,840 3,282 1,895 8,519 31 5,202

2.6 1.1 1.0 1.2 3.2 .7 2.2 1.8

CHI

1.5 2.1 1.9 2.9 1.9 2.4 1.2 1.2 1.3 .9 1.5 1.2 .7 the big1.4 1.2 Are banks really 1.8 3.1 or are 2.8 in worse shape, small 1.2 banks.6not taking .8 the 2.0necessary 2.4 write-1.9 downs in an attempt to 1.6 1.8 capital? 1.6 preserve equity

DAL

2.3 2.9 1.0 .9 1.1 3.6 1.0 2.7 2.1

1.6 1.9 1.0 1.3 1.0 2.4 .9 1.0 1.4

2.1 3.0 .9 .7 1.1 3.1 .5 2.2 1.6

8.2 16.3 4.6 4.6 1.6 13.0 2.6 2.4 5.7

8.9 16.9 4.5 3.6 2.4 13.5 2.8 2.7 6.0

4.8 10.8 2.8 3.8 1.1 5.3 1.7 .9 3.8

6.6 23.2 4.9 4.9 1.4 7.5 4.8 2.6 5.0

2.7 5.6 1.4 1.3 4.3 2.2 1.5 11.1 2.6

2.1 6.1 1.3 1.3 2.1 2.0 1.9 8.0 2.1

2.0 4.3 .8 .8 3.8 1.8 1.9 15.0 3.1

1.2 3.3 .6 .8 1.6 .9 1.1 4.2 1.2

2.1 7.1 1.6 1.7 2.6 2.0 1.6 6.2 2.2

827 52 220 58 87 404 180 325 1,504

1,069 123 245 34 191 460 274 79 1,676

852 63 195 62 176 340 251 48 1,415

637 55 151 18 116 272 173 141 1,137

358 55 125 9 24 132 90 15 516

595 36 145 33 60 267 207 92 1,150

4,052 1,120 928 258 1,500 16 218

14,702 5,976 1,974 437 4,682 47 1,587

9,966 2,622 2,040 421 2,794 68 2,019

8,583 2,897 1,560 531 2,189 58 1,349

5,362 2,693 1,212 151 1,188 99 19

6,620 2,696 1,267 992 1,369 30 90

Noncurrent loan rates represent the percentage of loans in each category that are past due 90 days or more or that are in nonaccrual status. Includes unearned income. Source: Federal Deposit Insurance Corporation, The Manual of Ideas.

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DISTRIBUTION OF COMMERCIAL BANKS AND SAVINGS INSTITUTIONS Asset Size (as of June 30, 2010) ($ in billions)

Number of Institutions

Percent of Total Institutions

Total Domestic Deposits

19 16 70 555 7,170 7,830

0% 0% 1% 7% 92% 100%

3,785 670 920 1,075 1,218 7,668

Greater than $100 billion $50 to $100 billion $10 to $50 billion $1 to $10 billion Less than $1 billion Total

Percent of Total Domestic Deposits 49% 9% 12% 14% 16% 100%

Total Assets Less Total Tangible Equity * 7,243 1,012 1,262 1,293 1,333 12,143

Percent of Total Assets Less Tangible Equity 60% 8% 10% 11% 11% 100%

Data is based on quarter-end balance sheet amounts as of June 30, 2010. These calculations are provided by the FDIC as a rough approximation of how industry assets less tangible equity are stratified by institution asset size; however these calculations are not the equivalent of the future deposit insurance assessment base as defined by the Dodd-Frank Act. The assessment base, with possible exceptions, will be based on an institution’s average consolidated assets during the assessment period; minus an institution’s average tangible equity during the assessment period. These terms have not yet been defined by regulation. Source: Federal Deposit Insurance Corporation, The Manual of Ideas.

PROBLEM BANKS AND FAILED/ASSISTED BANKS ($ in millions) Problem Institutions Number of institutions Total assets Failed Institutions Number of institutions Total assets Assisted Institutions * Number of institutions Total assets

H1 2010

H1 2009

2009

2008

2007

2006

2005

829 $403,203

416 $299,837

702 $402,782

252 $159,405

76 $22,189

50 $8,265

52 $6,607

86 $69,396

45 $35,868

140 $169,709

25 $371,945

3 $2,615

0 $0

8 $1,917,482

5 $1,306,042

0 0

Assisted institutions represent five institutions under a single holding company that received assistance in 2008, and eight institutions under a different single holding company that received assistance in 2009. The headline numbers Source: Federal Deposit Insurance Corporation, The Manual of Ideas.

give ample reason for concern, but is such worry akin to looking in the rearview mirror?

VALUEX Inaugural Meeting of Value Investors Zurich and Klosters/Davos, Switzerland February 2-4, 2011 Organized locally by Guy Spier, Aquamarine Capital Management John Mihaljevic, The Manual of Ideas Attendance by invitation only. Email john@manualofideas.com for more information.

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October 29, 2010 – Page 26 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Selected Statistics by Bank LOAN PORTFOLIO SNAPSHOT OF TOP 50 U.S. BANKS BY DEPOSITS *

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50

Bank of America JPM Chase Wells Fargo Citibank U.S. Bank PNC BNY Mellon HSBC USA TD Bank SunTrust BB&T Regions State Street Capital One Fifth Third ING Bank FIA Card RBS Citizens Union Bank KeyBank MS Bank Citibank (SD) Northern Trust Manu. & Traders Compass Bank Ch. Schwab Bank Sovereign Bank Huntington Chase Bank USA Comerica Bank Bank of the West USAA Federal Marshall & Ilsley Discover Bank Ally Bank Harris GS Bank E*TRADE Bank Capital One Bank Synovus Bank UBS Bank USA Hudson City Sav. Citizens Bank PA DB Americas NY Community RBC Bank (USA) Banco Popular AmEx Centurion City National Associated Bank

Deposits to ($bn) Loans 1,007 141% 969 180% 817 116% 771 164% 191 105% 182 120% 140 569% 129 179% 122 209% 122 108% 104 106% 101 120% 100 847% 94 140% 84 113% 77 196% 77 51% 72 96% 67 143% 66 113% 55 476% 49 45% 49 309% 47 96% 46 114% 46 584% 42 87% 41 113% 41 36% 41 102% 38 88% 37 113% 35 98% 34 75% 32 78% 32 143% 30 842% 28 129% 28 53% 26 116% 26 161% 25 79% 23 150% 22 170% 21 75% 20 111% 20 110% 19 156% 18 136% 17 142%

Problem Loans / Total Loans 30-89 90+ In All Days Days Non- Problem Past Due Accrual Loans ** 1.8% 3.7% 4.4% 9.9% 1.9% 3.5% 4.8% 10.2% 2.3% 4.7% 3.3% 10.3% 2.1% 1.9% 4.4% 8.5% 1.8% 2.5% 2.5% 6.9% 1.8% 3.2% 3.5% 8.5% .9% 1.6% 1.4% 3.8% 2.2% 1.0% 3.1% 6.3% 1.2% .5% 2.2% 3.8% 1.4% 1.2% 4.2% 6.8% 1.9% 2.3% 3.0% 7.1% 1.4% .8% 4.4% 6.7% .0% 1.7% 1.2% 2.9% 2.3% 1.7% 2.1% 6.1% 1.0% .8% 3.6% 5.4% 1.2% .0% 4.5% 5.8% 3.1% 3.8% .0% 6.9% 1.0% .1% 2.5% 3.6% .9% .7% 2.9% 4.4% 1.3% .6% 3.4% 5.3% .0% .0% 4.1% 4.1% 3.2% 3.2% .0% 6.4% 1.1% .0% 1.0% 2.1% 1.0% .4% 2.2% 3.7% 2.5% 1.6% 5.2% 9.2% .4% .0% .5% .8% 1.8% .0% 4.2% 6.0% 1.5% .5% 3.2% 5.2% 1.4% 1.8% .0% 3.2% .9% .3% 2.8% 3.9% 1.3% .1% 3.6% 5.1% .9% .4% .2% 1.5% 1.2% .0% 4.7% 5.9% 2.0% 2.2% .9% 5.0% .5% .0% 1.1% 1.6% 1.5% .5% 3.1% 5.2% .0% .0% .0% .0% 2.6% .0% 7.6% 10.2% 2.6% 2.9% .0% 5.5% 1.0% .1% 5.8% 6.8% .0% .0% .0% .0% 1.8% .2% 2.3% 4.2% .8% .1% 2.8% 3.8% .0% .0% 4.3% 4.3% 1.0% 1.0% 2.1% 4.1% 2.5% .1% 7.2% 9.9% 6.9% 5.3% 9.5% 21.7% 1.0% .4% 3.3% 4.7% 1.0% 2.7% 2.0% 5.8% 1.3% .2% 7.9% 9.3%

1-4 Family 49% 44% 44% 29% 30% 35% 17% 25% 29% 41% 32% 31% 22% 27% 98% 44% 44% 21% 0% 26% 23% 26% 93% 37% 35% 9% 28% 36% 24% 0% 35% 44% 21% 72% 20% 3% 100% 46% 30% 20% 35% 19% 32% 35%

MultiFamily 1% 6% 1% 1% 2% 2% 2% 2% 2% 1% 2% 5% 7% 1% 0% 2% 5% 3% 0% 2% 4% 4% 11% 3% 1% 1% 7% 2% 3% 0% 0% 1% 0% 59% 3% 0% 9% 4%

Loan Portfolio Breakdown by Type *** ComOther Permercial C&D RE C&I sonal 7% 4% 0% 20% 11% 4% 1% 0% 18% 16% 12% 5% 1% 16% 13% 2% 0% 9% 18% 24% 13% 6% 0% 17% 21% 13% 4% 0% 26% 13% 1% 1% 2% 11% 0% 6% 3% 0% 18% 35% 26% 5% 0% 16% 8% 12% 5% 0% 20% 12% 23% 14% 0% 14% 9% 23% 7% 7% 16% 3% 5% 1% 1% 15% 4% 0% 16% 28% 13% 7% 0% 29% 16% 0% 0% 1% 0% 6% 93% 12% 2% 0% 15% 20% 15% 5% 0% 27% 0% 14% 6% 0% 23% 17% 0% - 55% 27% 7% 93% 5% 2% 0% 37% 8% 28% 9% 0% 20% 10% 17% 19% 0% 21% 7% 1% 6% 21% 3% - 21% 6% 20% 5% 0% 18% 15% 5% 95% 22% 9% 0% 50% 1% 16% 5% 3% 13% 23% 0% 0% 0% 63% 22% 11% 2% 24% 4% 1% 99% 4% - 28% 28% 15% 2% 0% 12% 21% 0% 1% - 25% 5% 0% 1% 27% 9% 90% 32% 23% 1% 15% 2% 0% 0% - 46% 49% 0% 0% 0% 0% 11% 5% - 24% 11% 6% 0% 0% 18% 8% 17% 2% 1% 0% 25% 15% 0% 13% 1% 29% 8% 10% 10% 16% 0% 100% 18% 7% 0% 27% 3% 23% 7% 0% 19% 6%

All Other 7% 11% 9% 16% 10% 7% 67% 11% 13% 9% 7% 8% 93% 8% 7% 0% 1% 5% 4% 17% 18% 0% 21% 6% 4% 1% 4% 0% 8% 11% 5% 0% 4% 3% 48% 1% 4% 2% 3% 37% 0% 7% 7% 0% 3% 5%

Shows data for individual banks and national associations rather than bank holding companies. Data as of June 30, 2010. Excludes other real estate owned (OREO). *** C&D = construction and development loans; C&I = commercial and industrial loans (non-real estate). Sources: FDIC, Manual of Ideas analysis. **

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October 29, 2010 – Page 27 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

BANKS TO AVOID? 50 BANKS WITH HIGH TROUBLED ASSET RATIOS *

($ bn)

to Loans

Tier 1 Cap. ($mn)

Reserves ($bn)

Troubled Assets** / T1 Cap & Reserves

1.5 1.0 1.5 2.3 1.2 1.4 7.5 3.6 2.1 1.0 1.5 2.2 6.8 3.6 2.3 1.7 3.3 3.2 1.2 1.8 4.9 2.0 2.8 1.3 1.4 1.1 7.6 2.5 1.6 5.4 1.6 19.9 7.1 2.2 3.2 9.0 1.7 6.5 12.8 1.2 2.1 1.2 1.0 1.6 1.3 2.0 1.3 1.1 1.1 8.4

148% 134% 125% 121% 141% 126% 83% 189% 130% 119% 184% 198% 116% 129% 120% 116% 65% 105% 127% 95% 94% 122% 115% 125% 125% 141% 179% 145% 103% 124% 122% 110% 151% 118% 129% 136% 166% 120% 107% 109% 113% 110% 106% 126% 100% 125% 125% 116% 114% 96%

10 18 4 136 76 38 1,087 193 65 24 222 322 330 258 52 114 479 163 60 118 670 261 187 66 91 74 1,102 136 168 295 75 2,067 655 188 267 964 178 506 1,449 172 216 99 124 112 106 266 126 84 103 1,263

35 53 90 95 36 39 182 159 123 61 0 4 258 79 169 70 32 167 28 58 122 28 32 28 33 24 15 107 52 277 58 684 76 81 202 78 29 36 578 67 40 26 30 47 56 54 44 12 30 377

572% 428% 352% 196% 191% 180% 178% 175% 170% 167% 166% 163% 160% 159% 157% 149% 137% 136% 134% 130% 129% 129% 126% 124% 118% 115% 113% 109% 107% 106% 106% 104% 104% 104% 100% 99% 98% 92% 91% 90% 90% 90% 89% 89% 89% 87% 85% 84% 83% 82%

Deposits State 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50

Hillcrest Bank Premier Bank ShoreBank HomeStreet Bank Metropolitan National AmericanWest Bank MidFirst Bank Bank Midwest First Community Michigan Commerce Community & Southern State Bank and Trust Sterling Savings Bank Ocean Bank Hampton Roads Communityone Bank Scotiabank de PR AnchorBank The Palmetto Bank Bank of Smithtown Doral Bank United Central Bank Superior Bank TIB Bank Great Florida Bank Bank of Choice BankUnited Integra Bank U. S. Century Bank Pacific Capital Bank Bank of Cascades Banco Popular Iberiabank Old Second National Central Pacific Bank EverBank Inter National Bank Great Western Bank Firstbank Far East National Parkway B&T Cascade Bank First Savings NW Community Bks CO Macatawa Bank Amboy Bank PremierWest Bank First Mariner Bank Reliance Bank Flagstar Bank

KS MO IL WA AR WA OK MO NM MI GA GA WA FL VA NC PR WI SC NY PR TX FL FL FL CO FL IN FL CA OR PR LA IL HI FL TX SD PR CA IL WA WA CO MI NJ OR MD MO MI

Problem Loans / Loans 30-89 90+ Days Days Past Due 8.0% .0% 6.6% .3% 2.3% 1.3% 2.1% .2% 3.2% .0% .1% .0% 9.4% 21.6% 1.5% .1% 1.8% .0% 3.7% .2% 6.5% 2.3% 5.3% .5% 1.1% .0% 1.8% .4% 1.0% .0% 1.3% .3% 5.5% 11.2% 2.1% .0% 1.6% .0% 2.5% .0% 2.7% 1.2% 4.1% 17.6% 1.8% .6% 1.0% .0% 1.0% .0% 5.2% 1.4% 3.2% .0% 1.7% .5% 1.2% .1% 1.3% .1% .8% .0% 6.9% 5.3% 2.5% 1.9% 2.0% .0% .4% .1% 4.3% 7.7% 2.0% .4% .7% 5.0% 4.0% 1.6% 4.0% 4.1% 6.1% 1.0% .1% .0% .9% .0% 3.0% .9% 1.0% .2% 3.9% .1% 1.0% .0% 2.8% 1.2% 3.5% .1% 2.2% .2%

% of Loan Portfolio ***

In NonAccrual

1-4 Family

Commercial

C&D

C&I

Personal

15.8% 21.4% 25.2% 16.6% 12.0% 8.0% 2.6% 22.8% 16.4% 12.9% 27.4% 31.8% 14.0% 11.9% 16.8% 15.2% 1.0% 13.1% 9.7% 11.8% 16.8% 2.0% 8.7% 7.2% 9.9% 9.6% 25.8% 13.1% 12.8% 12.5% 6.5% 9.5% 13.4% 12.6% 17.2% 5.7% 11.5% 2.0% 13.2% 13.4% 9.0% 6.7% 12.5% 7.4% 7.1% 8.6% 12.4% 5.2% 7.9% 11.4%

2% 14% 23% 43% 20% 15% 53% 18% 10% 19% 30% 18% 22% 22% 20% 29% 57% 33% 20% 11% 68% 2% 31% 29% 42% 17% 82% 24% 14% 30% 8% 19% 31% 26% 26% 70% 25% 18% 28% 10% 4% 23% 47% 14% 25% 33% 6% 41% 6% 76%

20% 31% 21% 22% 35% 45% 24% 30% 47% 51% 27% 32% 40% 41% 28% 30% 16% 26% 45% 47% 13% 77% 29% 52% 23% 34% 9% 28% 41% 42% 55% 29% 29% 44% 34% 12% 33% 32% 25% 52% 61% 39% 24% 24% 34% 22% 49% 31% 62% 10%

57% 41% 11% 25% 20% 10% 13% 24% 27% 7% 25% 34% 16% 10% 30% 24% 6% 8% 18% 16% 8% 13% 26% 6% 16% 24% 2% 17% 21% 8% 14% 8% 11% 10% 23% 4% 16% 10% 10% 16% 22% 14% 15% 31% 12% 35% 16% 13% 12% 3%

14% 4% 20% 6% 11% 9% 8% 17% 12% 16% 9% 10% 10% 13% 16% 7% 6% 5% 6% 2% 8% 5% 8% 6% 8% 14% 5% 13% 12% 10% 15% 10% 15% 10% 9% 5% 20% 15% 16% 16% 2% 12% 0% 17% 21% 6% 16% 8% 9% 8%

0% 0% 0% 0% 3% 1% 0% 1% 1% 0% 4% 2% 3% 1% 1% 3% 11% 11% 7% 0% 1% 0% 2% 3% 1% 1% 0% 6% 0% 2% 4% 16% 7% 0% 4% 0% 2% 3% 12% 0% 0% 0% 0% 4% 2% 0% 4% 3% 0% 1%

Shows data for individual banks and national associations rather than bank holding companies. Data as of June 30, 2010 for banks with $1+ bn in deposits. Troubled assets are calculated as the sum of loans 90+ days past due, non-accrual loans and other real estate owned (OREO) divided by the sum of Tier 1 capital and loan loss reserves. *** Selected loan types only. C&D = construction and development loans; C&I = commercial and industrial loans (non-real estate). Sources: FDIC, Manual of Ideas analysis.

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October 29, 2010 – Page 28 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

100 CHEAPEST BANK HOLDING COMPANIES (all market caps), by Market Value to Total Assets The following table presents companies trading at exceedingly low ratios of market value to total assets. These are generally distressed institutions, and many will have to raise additional capital, likely leading to significant equity dilution. Nonetheless, the list represents a potential way of identifying companies with asymmetric risk-reward profiles.

Ticker FBP AIB FNBN SUPR TIBB BFCF UWBK CBC BNCC TRUE PABK CACB IBCA CRZBY CARV TDBK FMAR BYFC FETM NSFC BBX VBFC PNBK GRAN OSBC CBKN WBNK DEAR GRBS FFBH IMCB CBCO PNBC FSGI CECB MBR FUNC CWBS CADE HMNF SCMF HCFB FFKT CAFI RBS FCVA BTC TNCC DRL IRE

Company First Bancorp Allied Irish Banks FNB United Superior Bancorp TIB Financial BFC Financial United Western Capitol Bancorp BNCCORP Centrue Financial PAB Bankshares Cascade Bancorp Intervest Banc Commerzbank Carver Bancorp Tidelands Banc First Mariner Banc Broadway Financial Fentura Financial Northern States Fin. BankAtlantic Village B & T Patriot Nation. Banc Bank of Granite Old Second Banc Capital Bank Waccamaw Bank Dearborn Bancorp Greer Bancshares First Federal Banc Intermountain Banc Coastal Banking Princeton Nat. Banc First Security Cecil Bancorp Mercantile Bancorp First United Corp. Commonwealth Bank Cadence Financial HMN Financial Southern Community HCSB Financial Farmers Capital Camco Financial Royal Bank Scotland First Capital Banc Community Bankers TN Commerce Banc Doral Financial Bank of Ireland

State PR IRE NC AL FL FL CO MI ND MO GA OR NY GER NY SC MD CA MI IL FL VA CT NC IL NC NC MI SC AR ID SC IL TN MD IL MD VA MS MN NC SC KY OH SC VA VA TN PR IRE

Stock Price ($) .32 1.19 .58 .90 .42 .35 .38 1.15 1.70 1.40 .63 .54 1.95 8.99 3.11 1.37 .81 3.43 2.25 1.57 .88 1.65 2.00 .76 2.10 1.56 1.30 1.63 2.50 1.92 1.75 2.40 4.90 1.18 2.00 1.70 4.45 2.75 2.45 3.51 1.61 3.49 4.76 2.00 14.80 3.12 .96 4.25 1.55 3.41

∆ Since 12/29/06 -97% -98% -97% -98% -97% -95% -98% -98% -87% -93% -97% -98% -94% -77% -80% -91% -96% -67% -93% -92% -99% -88% -92% -96% -93% -91% -91% -91% -90% -92% -92% -89% -85% -90% -79% -89% -80% -89% -89% -90% -84% -80% -86% -84% n/a -83% -87% -86% -97% -96%

Market Value ($mn) 30 761 7 11 6 26 11 25 6 9 9 15 18 10,620 8 6 15 6 5 6 54 7 10 12 29 20 7 13 6 9 15 6 16 19 7 15 27 19 29 15 27 13 35 14 42,897 9 21 24 167 4,518

Total Assets ($mn) 18,116 235,730 2,023 3,358 1,691 6,150 2,221 4,749 903 1,227 1,111 1,919 2,164 1,225,614 804 585 1,342 552 455 556 4,656 607 817 988 2,463 1,694 574 933 458 678 1,066 436 1,131 1,334 505 1,009 1,776 1,222 1,886 975 1,660 796 2,093 844 2,522,044 546 1,204 1,390 9,397 246,883

MV/ Total Assets .2% .3% .3% .3% .4% .4% .5% .5% .6% .7% .8% .8% .8% .9% 1.0% 1.0% 1.1% 1.1% 1.1% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2% 1.3% 1.3% 1.4% 1.4% 1.4% 1.4% 1.4% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.6% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.8% 1.8%

Tang. Book ($mn) 464 11,905 19 135 10 119 111 17 37 46 26 6 164 32,691 40 17 43 20 18 24 64 49 32 35 86 83 18 30 17 28 46 27 50 104 27 36 55 77 76 65 76 27 120 57 99,348 44 76 86 309 9,871

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TBV/ MV 1563% 1564% 292% 1191% 159% 452% 999% 69% 664% 536% 294% 42% 923% 308% 522% 286% 296% 330% 351% 372% 119% 693% 333% 295% 293% 413% 253% 240% 277% 303% 313% 431% 307% 536% 361% 244% 202% 405% 260% 427% 279% 205% 342% 398% 232% 471% 367% 358% 185% 218%

TBV/ Tang. Assets 2.6% 5.1% 1.0% 4.0% .6% 2.0% 5.0% .4% 4.1% 3.8% 2.3% .3% 7.6% 2.7% 5.0% 2.9% 3.2% 3.6% 3.9% 4.3% 1.4% 8.0% 3.9% 3.5% 3.5% 4.9% 3.2% 3.2% 3.8% 4.2% 4.4% 6.1% 4.4% 7.8% 5.3% 3.6% 3.1% 6.3% 4.0% 6.6% 4.6% 3.4% 5.8% 6.8% 4.0% 8.0% 6.4% 6.2% 3.3% 4.0%

Assets/ Empl. ($mn) 7 10 5 4 4 1 10 4 3 4 4 4 30 20 6 7 2 7 4 4 3 3 6 5 4 4 4 5 6 3 3 4 4 4 6 3 5 6 4 5 5 5 4 4 16 7 4 14 8 17

MV/ Empl. ($'000) 11 33 15 14 16 5 50 19 18 28 32 32 247 174 55 71 21 76 49 47 38 36 65 59 51 53 56 64 78 39 40 60 57 58 81 49 73 96 68 71 89 84 64 64 273 119 71 247 145 312

Insider Own. 16% 1% 7% 15% 12% 35% 6% 12% 14% 28% 36% 15% 33% 47% 4% 34% 23% 31% 24% 44% 55% 20% 50% 7% 15% 23% 12% 16% 18% 27% 30% 15% 6% 10% 50% 55% 3% 19% 11% 24% 8% 13% 7% 4% 69% 20% 4% 11% 2% 0%

October 29, 2010 – Page 29 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Ticker YAVY GFED ACFC SMMF FPFC EVBS FFKY UCFC PVSA VYFC FMFC PFBC MBWM RBNF MCBC UBMI PBCE CSBQ FBIZ BCS BRBI RBPAA MBTF FSRL BKOR BCAR MCBI QCRH DCBF CZBS PFED FBMI FSBI ABVA KSBI SMTB FCFL CRFN SFST BTFG PLBC MCFI PEBK CWBC BOVA MTU SCGLY PMBC FCZA CFFC

Company Yadkin Valley Fin. Guaranty Federal Atlantic Coast Fed Summit Financial First Place Fin. Eastern VA Bank First Financial United Community Parkvale Financial Valley Financial First M & F Preferred Bank Mercantile Bank Rurban Financial Macatawa Bank United Bancorp Peoples Bancorp SC Cornerstone Banc First Business Fin. Barclays Blue River Banc Royal Banc PA MBT Financial First Reliance Oak Ridge Financial Bank of Carolinas MetroCorp Banc QCR Holdings DCB Financial Citizens Bancshares Park Bancorp Firstbank Corp. Fidelity Bancorp Alliance Bankshares KS Bancorp Smithtown Bancorp First Community Bank Crescent Financial Southern First Banc BancTrust Financial Plumas Bancorp MidCarolina Fin. Peoples Bancorp NC Community West Banc Bank of Virginia Mitsubishi UFJ Societe Generale Pacific Mercantile First Citizens Banc Community Financial

State NC MO GA WV OH VA KY OH PA VA MS CA MI OH MI MI SC TN WI EN IN PA MI SC NC NC TX IL OH GA IL MI PA VA NC NY FL NC SC AL CA NC NC CA VA TK FRA CA OH VA

Stock Price ($) 2.58 5.18 1.27 3.89 3.55 3.55 5.05 1.47 6.65 3.30 3.50 1.68 4.28 2.75 1.93 3.50 1.61 1.70 9.00 18.22 1.50 2.04 1.75 3.25 4.37 3.22 3.08 9.30 4.06 4.39 4.26 4.61 5.66 2.97 6.50 3.83 2.40 2.60 6.02 2.99 2.79 3.00 5.25 3.05 1.95 4.63 11.56 3.02 4.00 3.52

∆ Since 12/29/06 -87% -82% -93% -80% -85% -84% -82% -88% -79% -75% -82% -96% -88% -74% -90% -84% -85% -89% -61% -69% -75% -92% -89% -79% -66% -78% -85% -47% -86% -62% -87% -78% -70% -81% -75% -84% -87% -78% -72% -88% -81% -81% -72% -81% -74% -63% -66% -81% -80% -70%

Market Value ($mn) 42 14 17 29 60 21 24 45 37 15 32 27 37 13 34 18 11 11 23 54,879 5 26 28 13 8 13 38 43 15 9 5 36 17 15 9 57 13 25 19 53 13 15 29 18 6 65,412 42,895 32 31 15

Total Assets ($mn) 2,240 732 901 1,520 3,153 1,100 1,239 2,314 1,842 762 1,568 1,323 1,804 649 1,650 849 538 523 1,074 2,524,448 237 1,184 1,264 593 343 540 1,624 1,836 644 394 214 1,477 708 620 344 2,307 516 986 741 2,058 506 561 1,088 672 217 2,402,406 1,568,961 1,149 1,119 552

MV/ Total Assets 1.9% 1.9% 1.9% 1.9% 1.9% 1.9% 1.9% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1% 2.2% 2.2% 2.2% 2.2% 2.3% 2.3% 2.3% 2.3% 2.3% 2.3% 2.4% 2.4% 2.4% 2.4% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.6% 2.6% 2.6% 2.7% 2.7% 2.7% 2.7% 2.7% 2.7% 2.8% 2.8%

Tang. Book ($mn) 96 37 53 76 174 60 66 212 59 39 74 114 119 27 33 56 41 27 54 64,842 14 72 86 33 21 32 94 129 48 32 22 78 39 36 19 91 20 63 45 113 27 36 77 45 17 83,175 52,578 56 49 37

TBV/ MV 229% 272% 313% 264% 288% 283% 274% 467% 159% 253% 231% 423% 323% 199% 97% 316% 364% 241% 238% 118% 271% 272% 304% 243% 273% 258% 248% 301% 315% 340% 425% 216% 224% 235% 228% 159% 150% 251% 237% 215% 199% 244% 264% 251% 285% 127% 123% 177% 160% 242%

TBV/ Tang. Assets 4.3% 5.1% 5.9% 5.0% 5.5% 5.5% 5.3% 9.2% 3.2% 5.1% 4.7% 8.6% 6.6% 4.3% 2.0% 6.6% 7.6% 5.1% 5.1% 2.6% 6.0% 6.1% 6.8% 5.5% 6.2% 6.0% 5.8% 7.0% 7.4% 8.1% 10.1% 5.4% 5.5% 5.8% 5.6% 4.0% 3.8% 6.4% 6.0% 5.5% 5.2% 6.4% 7.1% 6.7% 7.7% 3.5% 3.4% 4.8% 4.5% 6.7%

Assets/ Empl. ($mn) 5 5 6 7 4 3 4 4 5 6 3 11 7 2 4 4 5 5 9 17 4 8 4 4 4 4 5 5 4 3 4 3 5 8 5 8 5 7 7 4 3 7 4 6 4 30 10 6 4 4

MV/ Empl. ($'000) 97 98 111 125 72 67 76 80 99 118 64 213 148 50 87 82 98 106 188 374 93 169 80 92 96 104 128 123 86 69 85 77 132 188 118 191 136 166 180 95 74 180 109 148 116 828 274 152 109 99

Insider Own. 5% 19% 69% 23% 10% 5% 15% 13% 27% 46% 22% 20% 13% 16% 7% 17% 29% 17% 28% 12% 28% 45% 8% 21% 32% 21% 33% 12% 4% 38% 41% 4% 21% 24% 25% 5% 53% 18% 25% 9% 22% 19% 22% 46% 15% 5% 7% 8% 8% 33%

Sources: Company filings and other data, Manual of Ideas analysis.

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October 29, 2010 – Page 30 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

We take a quick look at selected companies in the previous table in order to identify ideas that warrant further inquiry:

Ticker FBP

FNBN

SUPR

TRUE

IBCA

FMAR

OSBC

Company First Bancorp firstbankpr.com

State PR

FNB United MyYesBank.com

Superior Bancorp superiorbank.com

Stock Price ($) .32

∆ Since 12/29/06 -97%

Market Value ($mn) 30

Total Assets ($mn) 18,116

MV/ Total Assets .2%

Tang. Book ($mn) 464

TBV/ MV 1563%

TBV/ Tang. Assets 2.6%

Assets/ Empl. ($mn) 7

MV/ Empl. ($'000) 11

Insider Own. 16%

FBP’s FirstBank subsidiary is Puerto Rico’s second-largest bank behind Banco Popular (BPOP). FBP’s loan portfolio is concentrated primarily in Puerto Rico, with a small portion in Florida. The above MV-to-asset ratio of 0.2% must be adjusted for the exchange of preferred for common stock, completed in late August. $487 million, or 89%, of the relevant preferred stock was tendered into the exchange offer, resulting in the issuance of 227 million common shares. Positively, the company essentially issued stock at $2.15 per share, or multiples of the recent stock price, resulting in a large one-time gain for common shareholders. The completed exchange offer increases FBP’s tangible common equity and Tier 1 common ratios to 5.21% and 6.62%, respectively, from 2.57% and 2.86%, respectively, and shares outstanding from 93 million to 320 million, implying a “true” current market value of roughly $100 million. The MV-to-assets ratio rises accordingly from 0.2% to 0.5%. This is still exceedingly low, so the question becomes how much more common equity issuance the bank will be forced to undertake. Here, the news is sobering, but let’s look at the math: The U.S. Treasury continues to hold $400 million of FBP preferred stock from a TARP investment. FBP can compel conversion of the preferred into common if it separately raises $500 million in new common stock. As management is both pursuing a $500 million equity raise and the $400 million conversion, let’s assume that FBP must issue $900 million of stock at $0.30 per share. This would bring the total share count to roughly 3.3 billion, resulting in a pro forma market value of $1 billion. Consequently, the MV-to-assets ratio would increase from 0.5% to 5.5%. Considering the risks involved in the pending equity issuance and FBP’s balance sheet, an MV-to-assets ratio of 5.5% is insufficient to make this an attractive opportunity, in our view. .58

-97%

2,023

.3%

292%

1.0%

FNB signed a regulatory consent order in July, agreeing to raise new capital. According to CEO Larry Campbell, the bank is “actively engaged with financial advisors to assist us in developing a capital raising plan over the coming months to stabilize our financial position.” As the bank only meets “adequately capitalized” thresholds even after receiving $51 million in TARP money, we believe common equity dilution could be very substantial going forward. As a result, we pass on FNBN. .90

-98%

3,358

.3%

135

1191%

4.0%

15%

Superior Bancorp has a troubled asset ratio (troubled assets divided by the sum of Tier 1 capital and loan loss reserves) of 125%. This puts the bank at risk of shutdown by the FDIC while requiring management to scramble to raise equity capital. Shareholders have approved an increase in authorized common shares to 200 million, compared to fewer than 13 million shares outstanding. Assuming an increase in shares outstanding to 200 million and no change in the stock price, Superior would have a market value of $180 million, implying an MV-to-asset ratio of 5.3%. We view this as too high given the risks.

Centrue Financial centrue.com

Intervest Banc intervestnatbank.com

First Mariner Banc 1stmarinerbank.com

Old Second Banc oldsecond.com

1.40

-93%

1,227

.7%

536%

3.8%

28%

St. Louis, Missouri-based Centrue Bank has been providing banking services for 135 years. Capital ratios at the bank and the holding company continue to exceed regulatory “well capitalized” threshold, at least on paper. The company sold a branch during Q2, resulting in a small gain. Management has also “implemented an aggressive cost reduction program that includes streamlining operational functions, reducing marketing and other discretionary expenses, freezing officer salaries, eliminating annual bonuses for 2010 and reducing Board of Director fees.” These action suggest that insiders, who own 26% of the company, are at least attempting to help the bank survive the crisis. Centrue had a troubled asset ratio of roughly 75% as of June 30th, up slightly from March 31st. While this ratio is high, it does not put Centrue at imminent risk of closure and indeed may allow management to continue optimizing capital without a large near-term equity raise. We find Centrue worthy of a closer look. 1.95

-94%

2,164

.8%

164

923%

7.6%

247

33%

New York City-based commercial real estate lender Intervest completed a sale of 10.6 million common shares for $1.95 per share on October 14th. The offering included some participation by company insiders. Following the equity raise, Intervest has roughly 20 million shares outstanding, implying a market value of roughly $40 million. Market value to total assets is therefore 1.8% — quite attractive assuming the company can escape further equity dilution. Intervest’s troubled asset ratio actually decreased in Q2, from 56% as of March 31st to 31% as of June 30th. As a result, we find the shares worthy of some consideration. .81

-96%

1,342

1.1%

296%

3.2%

23%

Baltimore-based First Mariner raised $11 million at $1.15 per share in Q2. The company previously extinguished $20 million of trust preferred debt by issuing $2 million of stock at $1.23 per share to chairman and CEO Edwin Hale, Sr., who had purchased the debt for $2 million in cash. We believe Hale’s actions show he is committed to continuing to strengthen the capital base of First Mariner in a way that should not unnecessarily dilute shareholders. While First Mariner continues to have a troubled asset ratio in the 80s, we are intrigued by Hale’s success in keeping the bank off the brink of failure. 2.10

-93%

2,463

1.2%

293%

3.5%

15%

Aurora, Illinois-based Old Second had a troubled asset ratio of 103% as of June 30th, up from 78% as of March 31st. This seems to necessitate an equity raise, although capital ratios remain above “well capitalized” thresholds. Old Second is not regarded as “well capitalized” because it is subject to a regulatory order to increase the Tier 1 leverage capital ratio to 8.75% and the total riskbased capital ratio to 11.25% (the bank’s Tier 1 leverage capital ratio was 7.76% and the total risk-based capital ratio was 10.73% as of June 30th). CEO Skoglund is attempting to avoid major equity dilution, but it is unclear whether he will be successful. According to Skoglund, “Like many financial institutions, we would like to be in a position to augment our capital position and we continue to pursue every avenue to do so. However, we remain confident that Old Second National Bank has sufficient capital and projected strong core earnings that are more than sufficient to support our operations and to weather the current challenging economic climate. We’ve been operating for nearly 140 years and have navigated many previous economic downturns and we intend to do so again now.” It will be interesting to review Old Second’s Q3 results (to be released after our print deadline).

Sources: Company filings and other data, Manual of Ideas analysis.

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U.S. Real Estate Pricing Trends – Residential In this section, we briefly survey real estate prices in order to assist us in formulating a thesis on the likelihood and magnitude of additional write-downs U.S. banks may have to take on their real estate-related loan portfolios. As the latter comprise a majority of the total assets of U.S. banks, developing an understanding of real estate price trends should be a worthwhile exercise. Stabilization of real estate prices would suggest that loan loss provisions and charge-offs may moderate, while continuing price declines may suggest a need for further write-downs, potentially necessitating additional capital raises by U.S. financial institutions. The latter, of course, have been particularly destructive to shareholder value at publicly traded banks, as many banks have been forced to raise equity capital at severely depressed valuations. U.S. housing prices fell 32% from the peak in the second quarter of 2006 to the trough in the first quarter of 2009. Housing prices have stopped their four-year descent and appear to be stabilizing around the 2009 trough. According to the S&P/Case-Shiller U.S. National Home Price Index 6, housing prices in the second quarter of 2010 increased 7% from the 2009 trough and are up 4% sequentially from the first quarter of 2010. Following the steep drop over the last four years, recent housing prices approximate the price level in 2003.

S&P/Case-Shiller National Home Price Index, 1987-2010 200

175

150

125

100

50 1987 1989

1991 1993 1995 1997 1999

2001 2003 2005 2007 2009

Source: Standard & Poor’s. Prior to April 2006, the S&P Case-Shiller Home Price Index was known as the Case-Shiller Home Price Index. An index is an unmanaged statistical composite.

While average U.S. housing prices have declined by roughly a third from peak to trough, a more detailed look reveals big differences in performance by city. “Best performers” such as Dallas and Denver had peak-to-trough price declines of 11% and 14%, respectively, and have recently seen prices rebound by nearly 10% relative to the troughs reached in February 2009. On the other hand, worst performers such as Las Vegas and Phoenix had peak-to-trough price declines of around 55%. In fact, Las Vegas was the only major city that recorded a new trough in June 2010, with prices down 1% from June 2009. 6

The S&P/Case-Shiller U.S. National Home Price Index tracks the value of single-family housing within the United States. The index is a composite of single-family home price indices for the nine U.S. Census divisions and is calculated quarterly. It captures approximately 75% of U.S. residential housing stock by value. For further information visit http://bit.ly/6Ivqgq © 2008-2010 by BeyondProxy LLC. All rights reserved.

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Figure 2 shows peak-to-trough declines for 20 major metropolitan areas and their price performance through June 2010. These 20 major metro areas are aggregated to form the S&P/Case-Shiller Composite-20 housing price index 7.

City by City Peaks, Troughs and Recent Data *

Data available as of August 31, 2010.

Source: Standard & Poor’s. Prior to April 2006, the S&P Case-Shiller Home Price Index was known as the Case-Shiller Home Price Index. An index is an unmanaged statistical composite.

Recent Performance The S&P/Case-Shiller Composite-20 index was up 1% y-y in July, confirming that the price rebound from the second quarter continued into the third quarter. As the figure on the following page shows, performance diverged again by market. Twelve cities experienced price increases, seven had price declines, while prices in one market remained unchanged. The positive recent price performance appears supported by the home buyer tax credit, which covered purchases closing through September 30, 2010. It remains unclear how housing prices will develop following expiry of the tax credit and in the absence of new government support programs. According to David Blitzer, Chairman of the Index Committee at Standard & Poor’s, “While we could still see some residual support from the homebuyers’ tax credit… anyone looking for home prices to return to the lofty 2005-2006 might be disappointed. Judging from the recent behavior of the housing market, stable prices seem more likely.”

The S&P/Case-Shiller Composite-20 index measures the average change in home prices in 20 major metropolitan areas and is calculated monthly.

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July Housing Price Level by Metropolitan Area *

* Data through July 2010. Source: Standard & Poor’s and Fiserv.

Outlook As the figure below shows, housing prices are slightly below the “pre-bubble” trend line of the S&P/Case-Shiller U.S. National Home Price Index. The trend line is based on an extrapolation of index values from 1987 through 1999, with the latter year marking the start of the most recent housing boom. If one excludes the aberration of housing prices since 1999, recent prices are approximately in-line with the historical pricing trend since the late 1980s. While this does not mean prices will not decline further, it puts the recent boom and bust in residential real estate into historical perspective.

S&P/Case-Shiller Index and Survey of Professional Forecasters

Sources: Standard & Poor’s, Fiserv (historical data), MacroMarkets (mean future expectations data).

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With regard to an outlook for U.S. housing prices, we note the existence of a home price futures market. 8 Based on recent futures prices, the consensus is for prices to remain relatively stable at recent levels through 2014. While the futures market in housing is relatively new, it may be as good an indicator as any for the future direction of housing prices.

S&P/Case-Shiller Index and CME Futures

Sources: Standard & Poor’s.

It is usually instructive to compare housing prices to per-capita income as a measure of housing affordability. As the below figure shows, the median house price to median household income has averaged around 3.5x in the decade leading up to the start of the housing boom in 2000. While the ratio reached nearly 5.0x in 2005/06, it has declined closer to 4.0x recently. Assuming household incomes do not rise, house price declines are needed for the ratio to revert to the “pre-bubble” level of 3.5x. Again, the ratio differs widely by major metro area, reflecting local peculiarities. In New York, for example, the ratio reached a high of almost 10x in 2005/06 before declining to ~7x in 2010. As this remains modestly above the trend-line level of 6x, it may indicate further price declines ahead. On the other hand, the price-to-income ratio of under 5x for Arizona is at the lowest level since at least 1975. This may indicate that housing prices in Arizona are too low assuming incomes do not deteriorate further.

Median House Price to Median Household Income

Source: Harvard JCHS, http://calculatedrisk.blogspot.com 8

See http://bit.ly/cg1OMb

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House Price to Per-Capita Income, New York

Note: House price is calculated as the Case-Shiller state house price index multiplied by the 2000 Census mean value for owner-occupied housing units. Source: Standard & Poor’s.

House Price to Per-Capita Income, Arizona

Note: House price is calculated as the Case-Shiller state house price index multiplied by the 2000 Census mean value for owner-occupied housing units. Source: Standard & Poor’s.

Conclusion The U.S. housing market has experienced a boom and bust since 2000, with prices recently returning roughly in-line with the historical trendline. While price performance and housing affordability diverges widely by market, it appears quite clear that on both measures the major adjustment in prices has already occurred. On average, it is therefore reasonable to expect that prices remain at least stable around the 2009 trough levels. This is supported by recent house price performance as well as implied futures prices through 2014. While a sustained rise in real estate prices likely requires an increase in average household income, a material house price decline from recent levels appears unwarranted if household incomes remain stable.

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U.S. Real Estate Pricing Trends – Commercial According to the Moody’s Commercial Property Price Index (CPPI), 9 U.S. commercial real estate prices fell 44% from the peak of October 2007 to the trough in October 2009. Prices have remained relatively stable since then, with July 2010 data showing prices 1% above the October 2009 trough. This puts recent prices roughly in-line with prices in 2002, the start of the commercial real estate boom. Prices nearly doubled from 2002 to 2007.

All Commercial Real Estate Properties Index – U.S. National

Sources: MIT Center for Real Estate, http://mit.edu/cre; Real Capital Analytics, www.rcanalytics.com

A look at the four major commercial real estate property types reveals diverging pricing trends. Whereas apartment and office property prices are on an upward trend, retail property prices appear not to have found a bottom yet. Meanwhile, industrial property prices are relatively stable around the recent bottom.

Apartment Properties Index – U.S. National

Sources: MIT Center for Real Estate, http://mit.edu/cre; Real Capital Analytics, www.rcanalytics.com 9 The Moody’s Commercial Property Price Index (CPPI) is a periodic same-property round-trip investment price change index of the U.S. commercial property market based on data from the MIT Center for Real Estate and industry partner Real Capital Analytics. For more, visit http://bit.ly/cBGLl

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Industrial Properties Index – U.S. National

Sources: MIT Center for Real Estate, http://mit.edu/cre; Real Capital Analytics, www.rcanalytics.com

Office Properties Index – U.S. National

Sources: MIT Center for Real Estate, http://mit.edu/cre; Real Capital Analytics, www.rcanalytics.com

A Cautionary Note While the above indices are helpful to put the boom and bust in commercial real estate prices in historical perspective, recent data may be misleading in assessing the state of the market and prospects for a recovery. This is because commercial real estate transaction volume declined nearly 90% from 2007 to 2009 and has remained low during 2010. In addition, the CPPI index is based on repeat transactions, and therefore excludes many distressed properties that have not traded yet. As a result, it appears reasonable to assume recent pricing trends are more a reflection of the market for “healthy” properties and may be too optimistic as a proxy for the overall market including the most distressed properties.

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Retail Properties Index – U.S. National

Sources: MIT Center for Real Estate, http://mit.edu/cre; Real Capital Analytics, www.rcanalytics.com

The figures below provide a further breakdown of commercial real estate pricing trends by geographic region and property type.

West Region, 2001-2010 (quarterly) Apartments

Industrial

Office

Retail

Sources: MIT Center for Real Estate, http://mit.edu/cre; Real Capital Analytics, www.rcanalytics.com

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East Region, 2001-2010 (quarterly) Apartments

Industrial

Office

Retail

Sources: MIT Center for Real Estate, http://mit.edu/cre; Real Capital Analytics, www.rcanalytics.com

South Region, 2001-2010 (quarterly) Apartments

Industrial

Office

Retail

Sources: MIT Center for Real Estate, http://mit.edu/cre; Real Capital Analytics, www.rcanalytics.com

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Exclusive Interview with Scott Proper We present an interview with former community banker Scott Proper, who headed the Vail, Colorado operations of Millennium Bank, a Colorado statebased and chartered bank, for five years. In September, Scott left Millennium to start Proper Investments and Consulting, a firm specializing in debt restructuring services and distressed real estate workouts. We find Scott’s perspective on the problems plaguing U.S. community banks — and on how to analyze them — invaluable, as he was an active industry participant until very recently. Scott is a Yale graduate and former captain of the Yale Heavyweight Crew Team.

The Manual of Ideas: You experienced the boom and bust in U.S. community banking first-hand. Obviously, it appears banking executives and regulators learned little from the S&L crisis of the 1980s and ‘90s. Are we as a political and economic system doomed to keep repeating past excessive behavior, or is there a way to get things under control permanently? Scott Proper: I think these economic cycles will continue. I do not have confidence that there is a way to get things under control permanently. I also do not have confidence that all of a sudden human beings will start paying more attention to the lessons of history than they generally do. Whether that means we are “doomed” or whether it simply means that we ought to anticipate more exaggerated economic peaks and troughs is a matter of perspective. I think that people are eager to forget about the exaggerated peaks and troughs, and get back to “business as usual.” In contrast, I now believe that these exaggerated peaks and troughs are business as usual.

“Sudden increases in the loan loss reserve may indicate that the increase was mandated by a regulator and was not a voluntary decision of management (management tends to try to gradually appropriate a proper loan loss reserve over time).”

MOI: Analyzing the quality of the loan assets on a bank’s balance sheet can be a daunting task, since investors typically don’t have access to data on individual loans. What do you focus on when trying to assess the quality of the loan portfolio of a publicly traded bank? Proper: The most thorough tool for evaluating a U.S. bank’s financial circumstances is the Uniform Bank Performance Report (UBPR), available at www.ffiec.gov/ubpr.htm (a user’s guide is available at ffiec.gov/ubprguide.htm). To evaluate the quality of a bank’s loan portfolio, not only is the information in an individual UBPR important, but so are the trends from UBPRs over time. Sudden increases in the loan loss reserve may indicate that the increase was mandated by a regulator and was not a voluntary decision of management (management tends to try to gradually appropriate a proper loan loss reserve over time). Currently past due loans, which are identified by category in a UBPR, can signal loan losses to come. Furthermore, historically, certain loan categories present more risk and, therefore, likelihood of loss than others. MOI: Which metrics of loan portfolio quality are particularly prone to management judgment, i.e., can be made to look better than they really are?

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Proper: GAAP permit substantial interpretation and manipulation of the loan loss reserve. It is theoretically supposed to be calculated based upon historical loan performance. However, the last two years have rendered historical loan performance information basically irrelevant for many banks. When a loan is booked, a loss reserve expense must be taken on the income statement immediately. That loss reserve for the individual loan is then added to the bank’s cumulative loan loss reserve on its balance sheet. As an amortizing loan performs over time, the loan loss reserve expense can be recovered as the loan’s principal is paid down. For a revolving loan, the loan loss reserve taken can be recovered when the loan matures and is closed out (not renewed). Keep in mind that the loss reserve means that booking a new loan normally leads to a loss on the income statement that is offset over time by interest revenue. The loan loss reserve that must be set aside on the financial statements is based upon how lenders have graded their loans, and what management perceives appropriate reserves to be for each grade. For example, a CD-secured loan won’t require any loan loss reserve at all. However, a used car loan may require a 3% reserve. Lenders have a conflict of interest in grading loans, because they are evaluated heavily based upon their loan origination skills. This is supposed to be offset by lenders’ superiors, but they are often incentivized the same way. That leaves the policing up to the compliance and audit departments. If those departments do not oversee loan grading and reserve amounts correctly, the last defense is regulators, who can mandate that a bank increase its reserves. I have never heard of a regulator requiring that a bank decrease its reserves.

“The loan loss reserve that must be set aside on the financial statements is based upon how lenders have graded their loans, and what management perceives appropriate reserves to be for each grade. […] I have never heard of a regulator requiring that a bank decrease its reserves.”

When the loan loss reserve is being manipulated drastically from month to month or quarter to quarter or even year to year, it’s probably inaccurate. Substantial fluctuations in the loan loss reserve — in percent, not absolute dollars, because loan loss reserves fluctuate as aggregate outstanding loan balances change — mean that management really didn’t understand the risks of the loans the lenders were originating, which is why it needed to modify the loan loss reserve down the road. Several big increases can mean that loans are weakening but management is just hoping and hoping that something would get figured out. Finally, a sudden, very large increase in the loan loss reserve reflects management exhaustion for a deal that is basically uncollectible. I would interpret any of these things as a major red flag in my evaluation of overall bank health: if management did not understand the loan risks adequately earlier, it probably does not understand them now, either. A number of banks have doubled or tripled their loan loss reserves over the past two years; this is ultimately totally arbitrary and most likely done to appease regulators. It makes getting an honest sense of the strength of a bank’s loan portfolio very challenging. I have seen banks with 15% equity that are ultimately worthless when one evaluates their loan portfolio and adjusts their loan loss reserve fairly. This is because overconfidence about the bank’s loan portfolio — or outright dishonesty, in some instances — had led management to avoid taking losses by avoiding setting aside appropriate loan loss reserves. In result, the balance sheet is more an interpretive dance than it is communicative of anything meaningful. In contrast, I have seen banks with 6% book equity that are run by very conservative bankers who arguably overstate their loan loss reserves because they are very critical in their loan grading as well as in their reserve percentages for loans by grade. SUBSCRIBE TODAY! www.manualofideas.com

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MOI: How does information on the loan-to-value (LTV) of mortgage loans help investors gauge the solidity of a loan portfolio? Let’s assume a bank is sitting on loans that were made at the peak of the real estate bubble in Arizona, where prices in some areas have been cut in half. If the original LTV of the loans was 75%, would it be fair to assume that the bank would be looking at a 25% hit to bring the loans in line with market? Is there a rule of thumb on how much a bank must spend to market and sell a foreclosed property? Proper: In your example, you are correct, except that the bank has to pay sales commissions and other transaction costs. It is also not in a strong position as seller; I think an appropriate estimate is that the bank will receive 85% to 90% of the property’s market value in actual cash proceeds. I am reluctant to put out this ballpark figure, though, because the appropriate loss to forecast depends most heavily on the location, location, location of the property. When the bank is the owner of record, the property is often not kept up well. There have been many instances where borrowers who have been foreclosed upon intentionally trash the property out of spite to pass a less valuable property on to the bank. A bank worth its salt is monitoring the values of its collateral actively. This includes ordering new appraisals when significant shifts in real estate values have occurred, and adjusting loan loss reserves accordingly. It’s appropriate, especially when you consider that a bank monitors the value of the collateral for a revolving line of credit secured by accounts receivable at least monthly. How could it be prudent to monitor the value of real estate as collateral only once at origination? When a bank forecloses on a property, it is then responsible for ongoing maintenance, property taxes, insurance, owners’ association dues, etc. These carrying costs can be substantial. MOI: Explain for us the difference between loan loss provisions and chargeoffs… At what point is a bank required to charge off a problem loan? Are banks resisting charge-offs simply because they want to keep their reserves looking strong in order to appease regulators, or are there other reasons?

“When the bank is the owner of record, the property is often not kept up well. There have been many instances where borrowers who have been foreclosed upon intentionally trash the property out of spite to pass a less valuable property on to the bank.”

Proper: A parallel can be drawn between a bank’s loan loss provision and a manufacturing company’s reserve for accounts receivable losses (bad debt). The bank sets aside a provision as individual loan performance as well as market conditions suggest. As previously mentioned, this provision is malleable and is constantly being interpreted by management. A charge-off occurs when management decides that the deal, or a portion of it, is a goner. Suppose a bank has a $500,000 loan to a client and it had previously taken $150,000 in provision on the loan because the value of the collateral had deteriorated. At that point, the bank has a $500,000 loan asset on its balance, offset by the $150,000 provision. If management decides that there is no way that the $150,000 provision is recoverable and opts to take a $150,000 loss on the loan, the asset’s value on the balance sheet decreases to $350,000, and the $150,000 provision goes away. There is no loss on the income statement, because the $150,000 expense was already taken when the $150,000 provision was established to begin with. This illustrates the importance of the provision as a predicting tool. If a bank realizes it must take a loss on a loan but has not set aside adequate provision, it will use up the provision and then some when it takes the loss.

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Sometimes, a bank sets aside excessive provision. It can recover this provision, so it is not permanently punished for overestimating its provision. In the current economic climate, recoveries on the loan loss provision are basically nonexistent. The excess provision is retained by management so that further increases to provisions down the road are less likely. MOI: It seems that some banks have adopted an “extend and pretend” strategy of restructuring loans, particularly commercial real estate loans, in order to keep them classified as performing. In July, the Wall Street Journal pointed to Winston-Salem, NC-based BB&T Corp.: “Its total of one type of restructured commercial loan hit $969 million in recent months, the bank reported in April. That was a huge jump from six months earlier, when the figure was just $68 million.” The Journal added that, “BB&T’s report showed a significant number of cases where it was extending loan maturities and allowing interest rates not widely available in the market for loans of similar risk.” Do you view these types of loan restructurings as an “extend and pretend” strategy, and how prevalent is this behavior? Proper: To me, “pretend and extend” is the imprudent modification of an existing loan to avoid an increase in the loan loss reserve or to avoid a write-off of principal. I have seen all types of this behavior, whether it’s modifying a loan from amortizing to interest-only, drastically lowering a loan’s interest rate so the rate does not appropriately reflect risk, allowing the release of collateral so the borrower can generate cash proceeds to keep his head above water and cover another six months’ of payments, etc.

“…’pretend and extend’ is the imprudent modification of an existing loan to avoid an increase in the loan loss reserve or to avoid a writeoff of principal. I have seen all types of this behavior, whether it’s modifying a loan from amortizing to interestonly, drastically lowering a loan’s interest rate so the rate does not appropriately reflect risk, allowing the release of collateral so the borrower can generate cash proceeds to keep his head above water and cover another six months’ of payments, etc.”

The most egregious case I observed was a bank that had a $900,000 nonperforming mortgage on a single family home worth about $750,000. The bank offered to have a third-party client set up an LLC to buy the property for $900,000. That $900,000 would be financed 100%, and the loan had no personal recourse. The client moved into the house and had to pay 2% interest monthly on the $900,000 loan. After five years, the client could sell the house. Any proceeds left after the $900,000 loan was paid off were the LLC’s to keep. Any shortfall in proceeds would be written off by the bank. This is a straw man transaction and is a prime example of surreptitiously structuring a deal to delay the inevitable. The counter-argument is that it buys the bank time. But that’s the thing in business: Time is always of the essence. It was shocking to me when I learned the bank had modified loans this way many times, and with regulatory approval! Basically, if a loan is not performing and is in the proverbial emergency room, a “pretend and extend” renewal puts it on permanent life support. The hope is that there will be a miraculous medical invention that will get the patient off life support. This avoids write-offs of principal or appropriate loan downgrades and overstates the strength of a bank’s loan portfolio. Ultimately, the bank needs a reality check and needs to pull the proverbial plug on the loan that’s in the emergency room. “Pretend and extend” is what leads to zombie banks. Such banks have tons of basically nonperforming loans and assets, but thanks to a mixture of regulatory encouragement and liberal interpretation of GAAP, they continue to limp along. Banks that are hopping on the “pretend and extend” bandwagon, and regulators who are turning their heads the other way or even endorsing it, are all praying every night that inflation will rear its head soon. SUBSCRIBE TODAY! www.manualofideas.com

October 29, 2010 – Page 44 of 141

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MOI: It’s clear that inflation would be a boon for banks’ loan portfolios in terms of helping to stabilize and ultimately increase the market prices of the real estate collateralizing the loans. However, if inflation does take off in earnest, long-term interest rates would likely rise substantially as well. This could be great for home owners who owe money on 30-year fixed mortgages, but those holding such mortgages as assets could see the mark-to-market value of the assets impaired substantially. Help us understand who would take the hit in the case of much higher long-term interest rates — would it be the banks themselves, Fannie and Freddie, or someone else? Proper: Since late 2008, the primary purchaser of long-term fixed-rate residential mortgages has been the Federal Reserve. It has been accepting a yield 1% to 2.5% less than the next highest bidder at pooled debenture auctions. The Fed has not yet been able to extricate itself from this predicament, in a manner somewhat similar to the corner China has backed itself into with its purchases of U.S. government debt. If the market value of these pooled mortgage bonds gets blown out of the water by increasing long-term interest rates, the Fed would have to deal with the mark-to-market problem. However, because these bonds are presently illiquid, there’s no real way of valuing them currently and, unlike any other entity on the planet, the Fed can always just print more dollars to cover its losses. The same asset value write downs would apply for Fannie and Freddie and any holder of such mortgage-backed bonds.

“If regulators insisted tomorrow to put an end to the extend-and-pretend, ostrichhead-in-the-sand approach, and seized all the banks that ought to be seized, the losses would be so substantial that the FDIC would deplete its reserves and be insolvent.”

MOI: The behavior of regulators seems to be one of the biggest wild cards in the banking industry today. Not only does Washington seem to have an incentive to keep “zombie” banks alive in order to avoid further foreclosures, layoffs, etc., but institutions like the FDIC may not be physically able to deal with all the problem institutions out there. The FDIC’s employee count has gone from 4,476 at the end of 2006 to 7,393 as of June 30th of this year, while the number of problem institutions has gone from 50 to 829 in the same period. This implies a ratio of fewer than nine FDIC employees per problem bank, the lowest level since data has been available (1990). What is your view of the approach regulators have taken and are likely to take in the future? Proper: Regulators have been absolutely overwhelmed by the problems in the banking industry. The implosion has reflected very poorly on regulators. To me personally, this cannot be overstated and has left me with a permanent sense that very few, if any, regulators and bankers have a comprehensive understanding of what they are doing. They are just along for the ride, tossed about by the waves of market forces, with inadequate tools to redirect the waves. If regulators insisted tomorrow to put an end to the extend-and-pretend, ostrich-head-in-the-sand approach, and seized all the banks that ought to be seized, the losses would be so substantial that the FDIC would deplete its reserves and be insolvent. If the FDIC were insolvent, perhaps the U.S. government would come to the rescue to provide emergency reserves, but who can say? The mere exercise would have substantial and destabilizing economic and political repercussions. This is why regulators have enabled banks that ought to fail to stay alive: the problems are so prevalent and significant that regulators have been forced to rewrite the rules and their own economic standards in order to prevent a collapse of the FDIC.

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October 29, 2010 – Page 45 of 141

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MOI: For the reasons you mention, there seems to be little doubt the FDIC would ever be allowed to fail. The government and the Fed have made it clear – with actions, not just with words – that they will keep supporting the economy and large failing institutions virtually without regard for the cost. Investors like David Tepper of Appaloosa have made no secret of the fact that their investments have depended on and benefited from the “Bernanke put” etc. Yet, many small publicly traded community banks now sell at valuations that imply a high likelihood of failure. Does this create asymmetric risk-rewards in some situations, and if so, how would you go about identifying the most attractive opportunities? Proper: What you outline is critical. The current capitulation within the banking industry is the kind that yields profoundly attractive mispriced assets. A basic approach is to screen banks based upon their market capitalization relative to their tangible equity — first, goodwill on a bank’s balance sheet is utterly worthless and second, there are banks with market caps of only 5% of book equity.

“I am surprised we have not yet seen a community bank ETF for banks with tangible equity of less than $1 billion. They are the most significantly mispriced class of banks, in my view. I personally invested a fixed dollar amount equally in about 250 community banks. I think that worst case, 20% of them will fail, but that these worst-case losses will be more than offset by appreciation in the others.”

Some very rudimentary review of the bank’s UBPR to evaluate its loan loss provision and the adequacy of the provision relative to its peers (all of this is communicated within a UBPR), along with a review of what types of loans make up a bank’s loan portfolio can give the investor a good sense of whether a bank’s stock is worth buying. It’s always important to read the bank’s annual report and to review news headlines related to the company. These days, the CEO and CFO will take a call from any investor, and I consider it worthwhile talking to them, even if just to discuss the economy in general, to see what they say and how they say it. Some bankers are so paranoid about potential shareholder lawsuits that they’ll speak very openly about their bank and its problems. I think that significant concentration within a particular community bank is risky, but that a significant concentration within a basket of community banks is attractive. I am surprised we have not yet seen a community bank ETF for banks with tangible equity of less than $1 billion. They are the most significantly mispriced class of banks, in my view. I personally invested a fixed dollar amount equally in about 250 community banks. I think that worst case, 20% of them will fail, but that these worst-case losses will be more than offset by appreciation in the others. As always, only time can tell. Most of these community banks are currently trading at ten-year, if not historic, lows. MOI: Scott, thank you very much.

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October 29, 2010 – Page 46 of 141

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In Their Own Words: Bank CEOs on Business Conditions JPMorgan Chase – Chairman and CEO Jamie Dimon From 3Q10 earnings release and conference call (October 13, 2010): •

“Our mortgage delinquency trends remained relatively flat compared with the prior quarter, and we expect mortgage credit losses to remain at these high levels for the next several quarters. If economic conditions worsen, mortgage credit losses could trend higher.”

•

“With respect to our credit card portfolio, delinquencies and net chargeoffs continued to improve, and we reduced loan loss reserves by $1.5 billion this quarter as estimated losses declined. We expect credit card net charge-offs to continue to improve next quarter.”

•

“On track to hire over 10,000 people in the U.S. this year.”

•

“I think it’s reasonably hopeful that sometime in the first quarter [of 2011] we can reinstall a dividend or something like that. I think it makes sense to do. I think some banks will start retaining far too much excess capital at one point next year.”

•

“We’re completely comfortable with capital. I think we showed you a number that in 2013, when Basel III starts to roll in, we will have, even under adverse circumstances [11% tier 1 common] – a huge number.”

•

“I think at one point going forward, when everything clarifies around Basel, we could be an aggressive buyer of our own stock if we think the price is cheap. We’re not going to do it at any price. We’re not like everybody else. At a low price we’d do it, at the high price we don’t.”

•

Question: “Do you have any sense of timing of when the U.S. regulators will be deciding on the additional buffer to be required of systemically important institutions?” Dimon: “Not specifically. They’re waiting for this thing in Korea on November 20, and then at one point we hope to get some guidance.”

Citigroup – CEO Vikram Pandit From 3Q10 earnings release and conference call (October 18, 2010):

•

“Provisions for credit losses and for benefits and claims declined $746 million sequentially to $5.9 billion, the lowest level since the second quarter of 2007, reflecting continued improvement in credit quality.”

•

“Citi remained one of the best capitalized banks with $125.4 billion of Tier 1 Capital and a Tier 1 Common ratio of 10.3% at the end of the third quarter 2010.”

•

Question: “It does look like you are sitting on a lot of capital. You indicated at the beginning of the call that 2011 is going to be a year of calibration, return to shareholders starts in 2012. Is that a function of what you’ve kind of talked about with regulators and the feedback you’re getting from them, or is it a function of kind of the numbers that you are running and what you are comfortable holding?” Pandit: “We think 8% to 9% Tier 1 common is about the right number. It reflects base of Basel, as we understand it... that’s sort of the number that we think is prudent given our business model, which is much more of a services and a customer-friendly model for a bank… But there is also – it’s also very clear that as these Basel rules and calibrations and guidelines become clear, I think it would not be unusual to expect

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October 29, 2010 – Page 47 of 141

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guidance from the regulators for the industry in terms of how they are thinking about dividend policy and return to our shareholders. I think that to us is going to be the key driving guideline in terms of timing of return. But as I said, 2011 is going to be a year where a lot of this stuff is going to be determined. And so really 2012 is the year where we think we would be in position to return capital, of course, given any guidance we get from the regulators.” •

Question: “Currently [Citigroup’s] Tier 1 common is 10.3%. Any sense what that 10.3% figure would be today under Basel III, as we know it?” Pandit: “The 10.3% is a right number today, and that measure is no longer the right measure steadily over time. But we’re also saying the right measure for us is Tier 1 common as defined by the Basel II and III, 2.5, all of that stuff coming together and that’s 8% to 9%.”

Bank of America – CEO Brian Moynihan From 3Q10 earnings release and conference call (October 19, 2010): •

“BAC does not expect to issue common stock to meet new standards of Basel III.”

•

“Tier 1 common equity ratio estimated to remain above 8% through all periods assuming the following effective dates: Basel II and Market Risk 100% effective 12/31/11, Basel III 100% effective 12/31/12 (assumes no Basel III phase-in effect when in fact there is one).”

•

“Deposits continue to grow and loans moving closer to stabilization.”

•

On foreclosure issues:

•

“Currently conducting a voluntary internal review of foreclosure process across all 50 states. For the 23 judicial states, we are amending and re-filing 102,000 foreclosure affidavits.”

“Ongoing assessment supports conclusion that our past foreclosure decisions were accurate.”

“Foreclosure sales are suspended until assessment is complete, but foreclosure process for delinquent borrowers continues. We anticipate that [fewer] than 30,000 foreclosure sales will be delayed as a result of our decision to suspend foreclosure sales.”

BofA delinquency statistics for completed foreclosure sales in 3Q10: o

“80% of borrowers had not made a mortgage payment for more than one year.”

“33% of properties were vacant.”

“50% of borrowers were unemployed or had income reduced.”

On mortgage repurchase requests: o

“If you think about people who come back and say, I bought a Chevy Vega, but I want it to be a Mercedes with a 12-cyclinder, we’re not putting up with that. We will be very ardent to protect the shareholders’ interest.”

“…we will diligently fight this. It has worked to our benefit. We have thousands of people who will understand and look at everyone’s loans.”

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October 29, 2010 – Page 48 of 141

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Mitsubishi UFJ Financial – CEO Katsunori Nagayasu From September 2010 investor presentation: •

“Gross profits increased [in Q2] due to an increase in market product income such as net gains on debt securities, partially offset by a decrease in net interest income caused by a decline of interest-rates and a decrease in loan balance.”

•

“Total credit costs decreased significantly due to a decrease in provision for credit losses reflecting the improvement of economic environment. Credit costs of the subsidiaries… also improved.”

•

“Loans decreased from end of March 2010 due to lower demand of domestic and overseas corporate loans.”

•

“Deposits decreased from end of March 2010 due to a decrease in corporate deposits of domestic and overseas branches, partially offset by an increase in individual deposits.”

Royal Bank of Scotland – CEO Stephen Hester From 2Q10 earnings release and conference call (August 6, 2010): •

“Recovery in NIM [net interest margin] continues, outlook remains positive for rest of 2010.”

•

“Non-core asset reduction on plan, targeting more in H2.”

•

“Customer franchises remain strong, with core businesses generally increasing or holding steady their customer numbers during [Q2]. …on course to meet UK mortgage and business lending targets.”

•

Bruce Van Saun (CFO): “…of the impairments in Non-Core, about 75%-80% of the number in the quarter was associated with commercial property, so that’s really where we’re kind of taking the pain.”

•

Question: “If I could get a better handle on the Non-Core run-off… you mentioned potentially proceeding ahead of plan for the full year.” Van Saun: “I think there’s sufficient interest in the market, and we have a good handle on the portfolios and ways to accelerate some of these positions, and so it boils down to a question as to what’s the liquidity discount you’d need to trade those assets today versus what you think that would be further down the road. And so far, at this point, we think there’s reasonable interest at reasonable liquidity discounts… we want to certainly lay the notion out there that there is a pretty good pipeline now. It does appear that risk appetite has improved post the CEBS stress test, and you know, we’ll see where we go from there.”

HSBC – CEO Michael Geoghegan From 1H10 conference call (August 2, 2010): •

Question: “…in relation to your attitude to loan growth, it’s very pleasing to see that you’ve been able to offset the drag from the U.S. business. I was wondering if you could comment on the impact of pricing…” Geoghegan: “Clearly we are seeing pricing strain in certain markets, particularly in Asia. […] We do look to market share in the UK here, where we have grown our mortgage new business by about 8% of all new mortgages. We do see a reasonable return on that.”

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October 29, 2010 – Page 49 of 141

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Thrift Conversions: Is Anyone Paying Attention? Thrift conversions are one of the more conservative, time-tested ways of earning attractive risk-adjusted returns in banking. According to famed value investor Seth Klarman of The Baupost Group, “…the opportunity to buy significantly overcapitalized, conservatively managed thrifts between 50% and 75% of book value and at reasonable earnings multiples offer a low-risk investment with significant return potential.” 10

Main Types of Conversions Among Depository Institutions

Sources: James A. Wilcox, “Credit Union Conversions to Banks.”

In a first-step thrift conversion, an institution that has been technically owned by its depositors may become a stock corporation and raise capital in an IPO. In these offerings, new investors are essentially “buying” their own capital and getting the existing institution’s assets and business for “free.” Klarman illustrated the mechanics of a thrift conversion as follows: “A thrift institution with a net worth of $10 million might issue one million shares of stock at $10 per share. …ignoring costs of the offering, the proceeds of $10 million are added to the institution’s preexisting net worth, resulting in pro forma shareholders’ equity of $20 million. Since the one million shares sold on the IPO are the only shares outstanding, pro forma net worth is $20 per share. The preexisting net worth of the institution joins the investors’ own funds, resulting immediately in a net worth per share greater than the investors’ own contribution.” 11 Meanwhile, in a second-step thrift conversion, an institution that is partly owned by a mutual holding company (MHC) typically completes a transition to full public ownership by offering MHC-owned shares to investors. Ideally, the vast majority of the stock of a publicly traded thrift is held by an MHC. While those shares are considered to be outstanding, the economics belong entirely to the non-MHC shareholders. The analogy would be treasury stock held by a corporation that had completed a share repurchase. The major difference is that treasury stock is not considered to be outstanding. This MHCrelated peculiarity causes many investors to overlook thrift conversions, as the relevant institutions may not appear to be particularly cheap at first glance. Thrift conversions had their zenith in the 1980s and ‘90s. Some savvy investors such as Klarman, who had actively participated in conversions, have since moved on to bigger opportunities as their funds have grown in size. In addition, bank-focused investment funds as a category were decimated in the recent financial crisis, making it plausible that thrift conversions may not be as 10 11

Seth Klarman, Baupost Group letter, December 1999. Seth Klarman, Margin of Safety, p. 183-184.

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October 29, 2010 – Page 50 of 141

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closely followed as they had been in the past. Writes Klarman, “The arithmetic of a thrift conversion is surely compelling. Yet except for brief interludes when investing in thrifts was popular among individual investors, this area has been virtually ignored. Only a small number of professional investors persisted in identifying this source of value-investment opportunities and understanding the reasons for its existence over a number of years.” 12

Thrift Conversions: Most Popular in Mid-1980s to Mid-‘90s

Sources: OTS, FDIC, James A. Wilcox, “Credit Union Conversions to Banks.”

As the following table shows, investments in thrift conversions continued to generate “alpha” long after their attractiveness had been recognized by valueoriented investors. While we have not come across reliable recent data on the stock performance of thrifts pursuing conversions, we have no reason to believe that the return profile has changed significantly from the one shown here:

Median First Day Stock Price Increases in Thrift Conversions *

* James Wilcox on standard, first and second steps: “First-and second-step conversions each have some conceptual similarities to and differences from standard conversions. Standard and secondstep conversions are similar in that they both involve final steps away from mutuality. As such, they typically involve uncompensated transfers of claims from non-buying members to buying members and external investors. First-step conversions differ in that mutual members retain formal ownership of at least 51 percent of the stock subsidiary. Standard and first-step conversions are similar in that they both involve the IPO of shares that then put a market price on the value of residual claims (shares of stock) on their entities. Second-step conversions differ in that shares of stock in their entities (albeit with formally different legal rights) traded prior to the conversion.” Sources: James A. Wilcox, “Credit Union Conversions to Banks;” Luse and Gorman 2005: 13-14.

Seth Klarman, Margin of Safety, p. 127.

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Regulators have known about the “windfall” that may be available in thrift conversions for some time, and have tried to address it in a way that makes it easier for depositors to capture a piece of the pie. We came across the following interesting slide in an FDIC presentation:

Regulators’ Critique of Thrift Conversions •

Incentives are to keep offering prices relatively low! All parties benefit; (insiders /depositors /investors)

•

Results may not necessarily be associated with accounting adjustments!

•

Underwriters often low ball IPO price especially for small/unknown firms to assure successful subscription offering and capture rents during subsequent trading for insiders /investors

•

Stock options to insiders: keep strike price low

•

Fighting a “head wind” in the model

Sources: FDIC; Adams, Carow and Perry, “Earnings Management and Initial Public Offerings: The Case of the Depository Industry,” CFR Workshop.

Despite the regulators’ efforts to level the playing field, they have largely failed, in our view. Opportunities for outsized risk-adjusted returns in thrift conversions remain readily available.

OTS-regulated Mutual-to-Stock Conversion Applications; MHC Stock Issuance

Sources: Office of Thrift Supervision / 2009 Fact Book.

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The table on the previous page reveals an interesting fact: While the number of thrift conversions has dropped sharply since the 1980s, the dollar amount of capital raised has remained relatively stable or has even increased. Recent mutual-to-stock conversions and MHC stock issuances have been materially larger in dollar volume per deal than in the 1980s. As a result, those willing to do the work still have an ability to deploy meaningful amounts of capital in thrift conversion opportunities.

Comparison of Credit Unions, Mutual Thrifts, Stock Thrifts, Commercial Banks

Sources: James A. Wilcox, “Credit Union Conversions to Banks.”

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October 29, 2010 – Page 53 of 141

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Cheapest Based on Adjusted Market Value to Tangible Assets The following table shows banks that have completed a first-step conversion and IPO but have yet to complete a second-step conversion, in which shares held by an MHC would be sold to the public. We adjust metrics such as market value by stripping out MHC shares, as the economics associated with those shares belong to the non-MHC current shareholders. For example, the fourth-ranked bank in the table, Wauwatosa, Wisconsin-based Waterstone Financial (WSBF) has 74% of the common stock held by Lamplighter Financial, MHC. Those shares are not actually “outstanding” for economic purposes, as the economics associated with those shares belong entirely to the holders of the remaining 26% of WSBF shares. As a result, the bank’s “apparent” market value of $124 million compares to “true” market value of only $33 million. Given WSBF’s tangible assets of nearly $1.9 billion, we conclude that the bank’s market value equals only 2% of tangible assets. Finally, we note that a few banks shown in the table have announced a second-step conversion that has not been completed. As the final terms of such conversions may be unavailable, we have made no adjustments to reflect the pending conversions. For example, first-ranked Atlantic Coast Federal Corporation (ACFC) has commenced a second-step offering in which current shares would convert into new shares at an exceedingly low exchange ratio, thereby hurting existing holders. Despite exceptions such as ACFC, we view the following table as a good list of potentially dramatically undervalued banks. “Apparent” Metrics (unadjusted for MHC)

($ in millions, except per share data)

∆ Price

Institution / Ticker

MHC Own. 65% 72% 56% 74% 64% 57% 60% 56% 76% 56% 55% 62% 71% 57% 55% 60% 59% 59% 59% 61% 58% 73% 56% 70% 55% 75% 56% 57% 55% 74% 64% 62% 56%

Atlantic Coast Fed / ACFC Brooklyn Federal / BFSB Magyar Bancorp / MGYR Waterstone Financial / WSBF Pathfinder Bancorp / PBHC PSB Holdings / PSBH Naugatuck Valley / NVSL Malvern Federal / MLVF Heritage Financial / HBOS Hometown Bancorp / HTWC Laporte Bancorp / LPSB SI Financial / SIFI Prudential Banc / PBIP FedFirst Financial / FFCO Oneida Financial / ONFC Lake Shore Bancorp / LSBK MSB Financial / MSBF Alliance Bancorp / ALLB United Community / UCBA Charter Financial / CHFN Meridian Interstate / EBSB Roma Financial / ROMA Greene County Banc / GCBC Capitol Federal / CFFN Rockville Financial / RCKB Kearny Financial / KRNY Beneficial Mutual / BNCL Investors Bancorp / ISBC Northeast Community / NECB TFS Financial / TFSL Clifton Savings / CSBK Cheviot Financial / CHEV Northfield Bancorp / NFBK

State

Price

Since YE'06

GA NY NJ WI NY CT CT PA GA NY IN CT PA PA NY NY NJ PA IN GA MA NJ NY KS CT NJ PA NJ NY OH NJ OH NJ

$1.82 1.85 3.49 3.98 8.20 3.65 5.10 6.57 8.38 5.24 7.27 6.89 6.82 11.20 7.45 8.03 7.41 7.35 7.25 8.26 10.57 10.56 17.17 24.68 11.56 8.90 9.00 11.86 5.85 9.13 8.55 8.44 11.35

-90% -86% -75% -78% -37% -67% -59% n/m -50% n/m n/m -44% -49% -45% -42% -36% n/m -67% -39% -84% n/m -36% 11% -36% -35% -45% n/m -25% -52% n/m -30% -36% n/m

TBV/ MV

Insider Own.

$24 24 20 124 20 24 36 40 87 12 33 81 68 34 53 49 38 49 57 154 238 325 71 1,826 226 605 733 1,363 77 2,815 224 75 494

218% 306% 218% 139% 102% 153% 143% 171% 69% 160% 122% 95% 82% 128% 60% 118% 104% 99% 98% 70% 82% 67% 63% 53% 71% 67% 72% 63% 137% 63% 79% 94% 78%

5% 5% 7% 4% 5% 10% 5% 1% 6% 3% 3% 5% 3% 4% 10% 7% 4% 4% 9% 3% 2% 1% 11% 3% 4% 6% 2% 3% 1% 0% 7% 8% 3%

Other Data

“True” Metrics (adjusted for MHC)

TBV/

TBV/ MV

MV/ TA

Insider Own.

$9 7 9 33 7 10 14 18 21 5 15 31 20 14 24 20 16 20 23 60 99 88 31 541 102 152 323 589 35 741 80 29 216

623% 1087% 489% 531% 282% 357% 354% 383% 282% 366% 270% 249% 283% 301% 134% 293% 252% 242% 240% 180% 196% 247% 143% 178% 157% 266% 164% 146% 304% 238% 219% 243% 178%

1% 1% 2% 2% 2% 2% 3% 3% 3% 3% 3% 3% 4% 4% 4% 4% 4% 4% 5% 5% 6% 6% 6% 6% 6% 7% 7% 7% 7% 7% 7% 8% 10%

15% 17% 15% 17% 14% 23% 13% 2% 25% 6% 6% 13% 10% 9% 21% 18% 10% 9% 21% 6% 4% 4% 24% 9% 8% 22% 5% 8% 1% 1% 20% 22% 7%

Tangible Assets $901 524 544 1,881 393 482 565 695 659 157 429 885 538 355 572 460 359 448 492 1,141 1,717 1,457 495 8,543 1,601 2,258 4,747 8,834 515 10,940 1,114 351 2,192

6% 14% 8% 9% 5% 8% 9% 10% 9% 12% 9% 9% 10% 12% 6% 13% 11% 11% 11% 9% 11% 15% 9% 11% 10% 18% 11% 10% 21% 16% 16% 20% 17%

Tang. Assets/ Empl. $6 7 6 4 4 6 5 8 5 3 4 4 8 4 2 5 7 6 5 6 11 7 5 14 8 8 6 13 5 12 12 n/m 11

Acronyms: MHC = mutual holding company; MV = market value; TA = tangible assets; TBV = tangible book value. Excludes banks with no MHC ownership and banks with deposits of less than $100 million. Source: Company SEC filings, Manual of Ideas analysis.

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October 29, 2010 – Page 54 of 141

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Cheapest Based on Tangible Book Value to Adjusted Market Value The following table ranks our universe of MHC-owned thrifts by tangible book value to adjusted market value. While institutions with relatively higher ratios of tangible book to market may also be relatively more undervalued, such institutions may also be perceived to have greater loan portfolio quality issues or inadequate levels of equity to total assets, potentially necessitating a future capital raise at unfavorable terms. Obviously, the only way to determine whether an institution with a high ratio of book to market is indeed undervalued would be to assess the solidity of book value in light of metrics such as loan loss provisions and the ratio of non-performing loans to total loans. ($ in millions,

∆ Price

except per share data) Institution / Ticker

“Apparent” Metrics (unadjusted)

Since

MHC

TBV/

Insider

Other Data

“True” Metrics (adjusted for MHC)

TBV/

MV/

Insider

State

Price

YE'06

Own.

Brooklyn Federal / BFSB

$1.85

-86%

72%

$24

306%

1087%

17%

Atlantic Coast Fed / ACFC

1.82

-90%

65%

218%

623%

Waterstone Financial / WSBF

3.98

-78%

74%

124

139%

531%

Magyar Bancorp / MGYR

3.49

-75%

56%

218%

489%

Malvern Federal / MLVF

6.57

n/m

56%

171%

Hometown Bancorp / HTWC

5.24

n/m

56%

160%

PSB Holdings / PSBH

3.65

-67%

57%

153%

Naugatuck Valley / NVSL

5.10

-59%

60%

143%

Northeast Community / NECB

5.85

-52%

55%

FedFirst Financial / FFCO

11.20

-45%

57%

Lake Shore Bancorp / LSBK

8.03

-36%

60%

Tang.

Tangible

Ass./

Assets

Empl.

$524

14%

15%

901

17%

1,881

15%

544

383%

695

10%

366%

157

12%

10%

357%

23%

482

354%

13%

565

137%

304%

515

21%

128%

301%

355

12%

118%

293%

18%

460

13%

Prudential Banc / PBIP

6.82

-49%

71%

82%

283%

10%

538

10%

Pathfinder Bancorp / PBHC

8.20

-37%

64%

102%

282%

14%

393

Heritage Financial / HBOS

8.38

-50%

76%

69%

282%

25%

659

Laporte Bancorp / LPSB

7.27

n/m

55%

122%

270%

429

Kearny Financial / KRNY

8.90

-45%

75%

605

67%

152

266%

22%

2,258

18%

MSB Financial / MSBF

7.41

n/m

59%

104%

252%

10%

359

11%

SI Financial / SIFI

6.89

-44%

62%

95%

249%

13%

885

Roma Financial / ROMA

10.56

-36%

73%

325

67%

247%

1,457

15%

Cheviot Financial / CHEV

8.44

-36%

62%

94%

243%

22%

351

20%

n/m

Alliance Bancorp / ALLB

7.35

-67%

59%

99%

242%

448

11%

United Community / UCBA

7.25

-39%

59%

98%

240%

21%

492

11%

TFS Financial / TFSL

9.13

n/m

74%

2,815

63%

741

238%

10,940

16%

Clifton Savings / CSBK

8.55

-30%

64%

224

79%

219%

20%

1,114

16%

Meridian Interstate / EBSB

10.57

n/m

58%

238

82%

196%

1,717

11%

Charter Financial / CHFN

8.26

-84%

61%

154

70%

180%

1,141

Northfield Bancorp / NFBK

11.35

n/m

56%

494

78%

216

178%

10%

2,192

17%

Capitol Federal / CFFN

24.68

-36%

70%

1,826

53%

541

178%

8,543

11%

Beneficial Mutual / BNCL

9.00

n/m

56%

733

72%

323

164%

4,747

11%

Rockville Financial / RCKB

11.56

-35%

55%

226

71%

102

157%

1,601

10%

Investors Bancorp / ISBC

11.86

-25%

57%

1,363

63%

589

146%

8,834

10%

Greene County Banc / GCBC

17.17

11%

56%

63%

11%

143%

24%

495

Oneida Financial / ONFC

7.45

-42%

55%

60%

10%

134%

21%

572

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October 29, 2010 – Page 55 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Exclusive Interview with Michael Godby We are pleased to present an exclusive interview with thrift conversion expert Michael Godby, principal at Atlanta, Georgia-based FIG Partners. Mike has close to fifteen years of extensive mutual-to-stock conversion experience. He served as a vice president in an eight-year career at Capital Resources, managing over two dozen mutual thrift conversions and participating in at least 25 more conversions. Mike served as a vice president of investments for Legg Mason for three years prior to joining ASG Securities. His background includes extensive experience serving high net-worth and institutional clients who primarily invest in banks and thrifts. He is a graduate of the University of Pittsburgh.

The Manual of Ideas: For those of us who may not be experienced with thrift conversions, could you give us a primer on the types of conversions and why you think they are generally fertile ground for finding value investment opportunities? Michael Godby: First, let’s just make sure that your reader understands what a thrift conversion is. It is when a mutual thrift sells some or all of their mutual interest to the public in a stock offering. These shares are offered first to the depositors of the thrift, and then to the community or through a syndicate offering. Subscription rights are given to the depositors of the thrift and those rights are governed by federal regulations that were written to protect those depositors. These priority rights are non-transferable, and violators of that have been prosecuted in the past.

“Professional depositors in the early days could simply mail a check to the thrift, and the thrift was happy to open an account for them. However, since the mid1990s most thrifts have placed local restrictions to keep professionals out.”

Depositors who have carved a niche in investing in these conversions have been seeding accounts over the course of the last 25+ years. Their deposit balances influence the amount of stock they receive when a conversion oversubscribes. Professional depositors in the early days could simply mail a check to the thrift, and the thrift was happy to open an account for them. However, since the mid-1990s most thrifts have placed local restrictions to keep professional depositors out. As of this past quarter there were roughly 700 mutual thrifts in 45 states. There are multiple types of conversions: the standard or full conversion where 100% of the thrift converts to a public company, a mutual holding company (MHC) conversion where a minority stake converts to a public company, a partial MHC where additional minority shares are sold in the public company, and a second-step MHC where the remaining majority of an MHC converts and is sold in the public company. Types of Conversion Standard Mutual Holding Companies (MHC) Partial Second MHC Second Step MHC

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Post Conversion Mutual Status No Yes Yes No

% Company Public 100% < 49.99% < 49.99% 100%

October 29, 2010 – Page 56 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Number of Thrift Conversions 2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Total

As %

181

100%

Standard

34%

Mutual Holding Companies

40%

Second Step MHCs

24%

Partial Seconds

Still Public

143

79%

Acquired

19%

Total Conversions Type of Conversion

Current Public Status

FDIC Seized

Source: Michael Godby, FIG Partners.

The statistics supporting this niche for the last twenty years make conversions reasonably predictable and attractive investments depending on the type of conversion, the pricing cycle and market conditions. Only during very bullish times do all types of conversions work from an IPO pop perspective. The pricing cycle vacillates like any other depending on appraisals. If in a given quarter appraisals for conversions are too high, the appraisals are lowered the next quarter and so on until the conversions are priced accordingly with market conditions. Market forces win out as the buyers post-offering support only those offerings that are priced with reasonable value. Sometimes a conversion fails to raise the funds needs as stated in the prospectus and at that point management may choose to cancel the conversion, or reappraise and resolicit those who previously subscribed for the offering, as is currently occurring for Capital Federal (CFFN).

“…naturally, the time to own [thrift conversions] is no different than any other stock — buy them when no one wants them.”

The number of professional depositors that have meaningful deposit accounts has varied in the sector for years based on the success or failure of first-day pops over periods of quarters. Quite often, if a conversion is priced reasonably, the professional depositors will oversubscribe the offering. This is also magnified when the local depositors subscribe heavily due to market conditions and/or expectations that the bank is only converting to sell out sooner than later. MOI: Is there a way to generalize which types of conversions are best to own, and whether it is better to invest in a conversion-related capital raise or to buy stock in the open market. Are there any studies that have looked at the historical data? Godby: The best types of conversions to participate in are typically based on which part of the cycle we’re in. The last time we had a major credit cycle similar to today was during the early 1990s. There were a limited amount of professional depositors at the time, and the values were lower than we have today. Currently, the pricing of offerings is at pre-1994/95 levels. Standard conversions have typically offered the greatest value over the years. The statistics not only support that, but whether or not you’re a subscriber, the greater returns occur for investors who hold them past the first-

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October 29, 2010 – Page 57 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

day pop, or purchase them in the market post-conversion. Also, standard conversions move the earliest in a recovery as they are offered at greater discounts to their peers. The MHCs will follow eventually, but naturally the time to own them is no different than any other stock — buy them when no one wants them. For the patient investor today, there are deeply discounted micro-cap MHCs that trade at implied low valuations. Although, I would suggest waiting until at least pricing has bottomed in second-step MHC conversions first, given that valuations for MHCs are driven by second-step valuations and their supply and demand. Because MHCs are leveraged plays on increasing valuations for their second-stage conversion price, the lower the public shares as a percentage of the total MHC shares, the greater the leverage on increasing valuations.

Thrift Conversion Investment Returns, 2000 – 2010 2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Average

12%

21%

13%

27%

17%

11%

12%

100%

28%

-4%

-33%

-40%

-25%

-33%

-11%

26%

Day 1 IPO Pop or Return

23%

11%

16%

27%

26%

13%

17%

16%

Return Since IPO Date

90%

42%

-31%

-35%

-3%

41%

39%

17%

37%

20%

35%

18%

11%

13%

110%

51%

-34%

-47%

-29%

-39%

-29%

-15%

-5%

-3%

Day 1 IPO Pop or Return

27%

11%

Return Since IPO Date

-28%

-26%

-21%

-17%

-44%

-2%

-8%

21%

-14%

S&P 500 Annual Return

-9%

-12%

-22%

29%

11%

16%

-37%

26%

All Conversions Day 1 IPO Pop or Return Return Since IPO Date Standard Conversions

MHC's Day 1 IPO Pop or Return Return Since IPO Date Second Steps MHC's

Source: Michael Godby, FIG Partners; SNL Securities.

MOI: Once a second-step conversion has occurred and an MHCs owns no more shares of a thrift, is there generally still a window of opportunity to invest because the market may not be fairly valuing the post-conversion thrift?

“…the quality of the secondstep MHCs has declined in the last year, which has led to lower pricing…”

Godby: Yes, at times, but what has occurred for the last two years, is that there is a declining market for their pricing, led by excess supply and weaker demand in general by syndicate buyers for second-step MHCs. This has led to most professional depositors stepping away from investing in second-step MHCs. Due to the fact that the OTS [Office of Thrift Supervision] is being absorbed by the OCC [Office of the Comptroller of the Currency], MHCs are running for the door to convert because of fears of dividend waivers going away, and grandfathering of plans and buybacks, to name a few. This has pressed management to convert now with the regulator you know, and not the latter. Coincidentally, the quality of the second-step MHCs has declined in the last year as well, which has led to lower pricing, and naturally one begets the other. There will be a quarter when all second steps are priced accordingly and work, but for now, it’s clearly deal dependent.

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Value-oriented Equity Investment Ideas for Sophisticated Investors

MOI: What are the main variables to analyze when deciding whether a pending conversion constitutes an attractive investment? Godby: During the recent banking crisis, the safest financials to own were the over-capitalized thrifts. As far as I’m concerned, very little has changed to suggest otherwise. Like any value investor, I focus on price to tangible book, excess tangible capital, asset quality, deposits per share, earnings multiples, and terminal values for the thrift based on being acquired, and in roughly that order. Of course, this is all relative to a peer group, and you can never rely on the peer group in the prospectus. In standard and MHC conversions, the appraisal typically reflects a low-valued peer group, because management wants to buy stock at a relatively cheap price. For partial and second-step MHC conversions, it is quite to the contrary. Management already owns stock and has an interest in pricing it as overvalued as possible, so the peer group reflects that.

“In standard and MHC conversions, the appraisal typically reflects a lowvalued peer group, because management wants to buy stock at a relatively cheap price. For partial and second-step MHC conversions, it is quite to the contrary. Management already owns stock and has an interest in pricing it as overvalued as possible, so the peer group reflects that.”

One of the major reasons over-capitalized thrifts perform so well is because six to nine months after their conversion, the shareholders typically approve a management recognition plan for 4% of the company’s stock. Then, at the oneyear anniversary the board usually approves a repurchase. Depending on whether the thrift is a state-chartered or OTS-chartered institution there’s the potential for repurchases of up to 20% of their stock in a given year. These are events that typically move stock prices higher in the worst of markets. Even if the thrift is not a meaningful earner, what better return on equity is there than repurchasing stock below 95% of book and quite often, well below that. Quite often, investors have a misperception of what a bank is worth when it sells out. Most sell-side analysts tout price-to-tangible book as be the most important factor in calculating acquisition prices, which simply is not true. All too often investors are overly optimistic on what thrifts will do with excess capital, hence anticipating greater earnings growth, which often doesn’t occur. Deposit premiums or multiples on deposits, core or otherwise, is the basis by which acquirers justify the profitability of an acquisition. In bull markets for financials, deposit premiums naturally move up. What has remained true in the past twenty years is that core deposits are hard to grow, and thrift deposits are stickier post acquisition than are community bank deposits. I think your typical banker would have learned that through previous cycles, yet they haven’t. When it comes to MHCs, you have to pay close attention to pricing of the second-step conversions and the current implied fully converted values (price to tangible book, P/E, equity to assets, deposits per share and deposit premium deltas). The main mistake MHC investors have made in the past was not understanding the degree of leverage when markets shift valuations lower. The leverage works great going up, but awful going down! MOI: It is generally understood that management incentives play a big role when it comes to how quickly and at what terms second-step conversions are consummated. Can you expand a bit on the impact of management and how investors can evaluate this variable? Godby: First, let’s talk about how the typical thrift converts. What was said to me two decades back is that in ten years all thrifts will have converted. Well, not so fast, there is a bastion of mutuality in the minds of many management teams that run the typical mutual thrift (socialism at its finest!). In their eyes, there

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Value-oriented Equity Investment Ideas for Sophisticated Investors

aren’t enough incentives to ever convert their thrift. Unfortunately for some of them, board members retire and members change, retirement closes in, and sometimes, just capitalism occurs. Incentives? Eight percent ESOPs, four percent management recognition plans, ten percent option plans and, most importantly, cheap relative values to invest their own money in their company at the IPO price. By the way, like everything else that happens in the market, fear or greed kick in. The investment bankers and attorneys that specialize in the space work these well. “Convert now, before the regulator changes.” “Happy birthday, Mr. CEO, isn’t this your 60th, time to convert, you can’t leave your mutual thrift to your grandchildren.”

“When thrifts trade above takeout value, shouldn’t you short them? I pay close attention to the deltas on implied deposit premiums from a fully converted perspective for these institutions. At the peak, it seemed easy to see that the relative upside to downside was clearly against investing in these companies.”

The real variables beyond the financial impact for an MHC converting through a second step are age of management, need for capital, and the grand scheme of empire building by management. All simple to get, but you need to understand the management of each institution. CEO hits age 65, can’t be acquired because of OTS regulations for three years, so five years out he needs to sell—time to convert. A thrift levers up to 7% tangible equity to assets, management thinks it has to convert. The board knows of a local thrift or bank that wants to sell out, and it would fit their branch network perfectly, but they need more capital—nothing to do but convert. There may be other reasons but these are the most common. MOI: Have you seen an increase in thrift conversions as a result of banks need for additional equity capital? Godby: There have been a number of companies that have converted for this reason in the past two years, one even failed to raise capital and was seized. If a thrift does need capital and there are too many problems, such as rising nonperforming assets, investors may back away. Also, size plays a role in pricing of the conversions, and the illiquidity is being discounted to 1992-1993 pricing. But this cycle will shift as well, as it did in the early nineties. In 1991 and 1992, the thrifts that had problems got aggressive with their writedowns, converted, and most were extremely successful. During that period, I can recall only one thrift failing post-offering due to problems. This is the type of environment we’re in today, but you have to be very selective! MOI: Before the financial crisis, it seems like a second-step conversion was almost always a positive catalyst for a stock, so owning a thrift in anticipation of a second step seemed like a good strategy. However, post-crisis, we have observed some thrifts using a second-step conversion as a way to raise desperately needed capital. In some cases, the exchange ratio is set in a way that significantly dilutes the interests of existing shareholders, creating a negative catalyst. Is this assessment fair, and if so, how can investors guard against the destruction of value in a second-step capital raise? Godby: Can you say tulip bulb? Then again, timing is everything! When Peoples of Connecticut (PBCT) converted at 142% of tangible book, at a 17% implied deposit premium, it just had to be over. I have not been an avid shorter of overpriced thrifts, but when I did short, I based my shorts on relative implied deposit premiums. When thrifts trade above takeout value, shouldn’t you short them? I pay close attention to the deltas on implied deposit premiums from a fully converted perspective for these institutions. At the peak, it seemed easy to

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October 29, 2010 – Page 60 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

see that the relative upside to downside was clearly against investing in these companies. As for MHCs that have a desperate need for capital, there haven’t really been any, but there will eventually be one that does. Let’s remember the term desperate is relative. Your assessment is fair, but when a thrift does need that capital, what to do? Raise capital, dilute investors, what else is there? Management rationalizes the dilution in ways stated above. I did make one mistake this past year in the MHC space, and that was staying in TFS Financial (TFSL) too long, but I was fortunate to get out of the rest of the MHCs close to the peak of the market with my clients. Even I was rationalizing the dividend, excess capital, leverage… I was fortunate to buy the MHCs when few wanted them, so I really can’t complain. (I currently own TFSL.) MOI: Could you talk about a recent thrift conversion you’ve found particularly interesting or surprising in terms of valuation or other features of the deals?

“[A favorite investable situation at this time] is OBA Financial (OBAF), which converted on January 22nd. A known activist investor has filed a 13D on it.”

Godby: This past quarter there was a standard conversion, Standard Financial (STND), Monroeville, Pennsylvania, with a market cap of $35 million. It was issued at $10 per share, 55% of tangible book, 11x earnings, 14.5% tangible equity/assets, with 0.62% non-performing assets at a 25% discount to its peers. It currently trades at $12 per share and has performed better than other recent conversions. The most interesting thing about it is its terminal value upside. At the peak of the market for our thrifts a few years ago, the typical thrift converted at a level where terminal value upside offered 50-100% in three to five years. Today those percentages have doubled, and as is the case of STND there is still significant five-year upside. Also, a recent 13D was filed by a known activist investor [ed. note: Joseph Stilwell], which can’t hurt. MOI: Do you have a favorite investable situation at this time, and why? Godby: Yes, most of the time there are investable ideas that are value-based. As with any of these ideas, though, it helps when there are catalysts that make [the thrifts] more attractive. A catalyst such as an activist investor pressing management to improve shareholder value through stock repurchases and selling out eventually. Other catalysts would be quarterly timing of stock repurchases and MRPs. Another would be discounted values of new conversions to peer pricing. From time to time I’m buying [a thrift] because of supply/demand reasons that cause stock prices to soften. We are now in a cycle where the performance of conversions from three quarters ago has underperformed the market, and the thrifts have to vote on their benefit packages. This should cause their stock supply to dry up and their stock prices to rise. An example would be OBA Financial (OBAF), which converted on January 22nd. Also, a known activist investor has filed a 13D on it [ed. note: Lawrence Seidman]. MOI: Is there a book on this subject or another way for investors to learn more about thrift conversions? Godby: Peter Lynch had mentioned conversions in his book Beating The Street. But since that time, MHCs and second-step MHCs have become a significant portion of the conversion market, and I don’t know of any book that discusses them properly. MOI: Thank you very much, Mike.

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Value-oriented Equity Investment Ideas for Sophisticated Investors

Top 5 Investment Ideas in Banking Industry Barclays (London: BARC, NYSE: BCS) London, United Kingdom, 44-20-711-1000

Financial: Money Center Banks Trading Data

www.barclays.co.uk

Consensus EPS Estimates

Price: $17.89 (as of 10/22/10) 52-week range: $15.36 - $24.11 Market value: $54 billion Shares out: 3.0 billion

This quarter Next quarter

Ownership Data

Valuation

Latest n/a n/a

Month Ago n/a n/a

# of Ests n/a n/a

P/E FYE 12/31/09 P/E FYE 12/31/10 P/E FYE 12/31/11 P/E FYE 12/30/12

12x 9x 7x n/a

P / tangible book

0.8x

FYE 12/31/10

2.04

1.97

Insider ownership: 12%

FYE 12/31/11

2.74

2.65

Insider buys (last six months): 0 Insider sales (last six months): 0 Institutional ownership: 2%

FYE 12/30/12 LT growth

n/a 4.5%

n/a 1

Latest EPS Surprise Report date: Estimated EPS: Actual EPS:

n/a n/a n/a

Operating Performance and Financial Position ($ billions, except per share data) Interest income Interest expense Pretax income Net income Diluted EPS Shares out (avg)

12/31/03 20 9 5 3 1.70 1.6

12/31/04 22 11 7 5 2.98 1.6

(6) 3 0 475 3 223 7 710 0 20 664 0 26

15 3 0 11 4 837 7 862 0 20 817 0 25

Cash from ops Cash ST investments LT investments Fixed assets, net Loans, other assets Intangible assets Total assets Short-term debt Long-term debt Deposits, other liab. Preferred stock Common equity

Fiscal Years Ended 12/31/05 12/31/06 12/31/07 28 35 41 15 20 25 8 10 10 6 7 7 3.37 4.47 3.76 1.6 1.6 1.6 6 6 258 251 4 949 12 1,480 194 20 1,238 0 28

16 12 280 274 4 1,014 12 1,596 219 22 1,323 0 32

12/31/08 45 26 8 7 3.19 1.8

12/31/09 34 15 17 15 1.46 2.7

LTME 6/30/10 31 34 26 23 1.69 2.8

FQE 6/30/08 21 13 3 3 1.36 1.6

FQE 6/30/10 16 6 6 4 1.26 2.9

54 48 210 308 7 2,698 17 3,288 292 48 2,889 0 59

66 130 233 180 9 1,641 14 2,208 318 42 1,773 0 76

33 166 583 229 9 1,540 14 2,542 365 42 2,056 0 79

24 10 509 362 5 1,288 13 2,187 235 35 1,882 0 36

(27) 166 583 229 9 1,540 14 2,542 365 42 2,056 0 79

(18) 9 294 312 5 1,332 13 1,966 271 29 1,628 0 37

Ten-Year Stock Price Performance and Trading Volume Dynamics

$70 $60 $50 $40 $30 $20 $10 $0 Sep 01

Sep 02

Sep 03

Sep 04

Sep 05

Sep 06

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Sep 07

Sep 08

Sep 09

Sep 10

October 29, 2010 – Page 62 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

BUSINESS OVERVIEW

SELECTED OPERATING DATA1

Barclays owns the following major strategic assets: Barclays Capital (76% of total assets; 1H10 pretax income: £3.4 billion): one of the world’s top investment banks: #1 in global debt (8% market share), #3 in global forex (11%) and #4 in global, completed M&A (15%) during 1H10. Other businesses (24% of assets; 1H10 pretax income: £547 million after head office costs of £421 million): Main profit centers are U.K. Retail Banking (£504 million), Barclaycard (£317 million) and Absa (£318 million), offset by Barclays Corporate (-£377 million), which provides commercial banking in select European and emerging markets. Other, smaller businesses include Western European retail banking, African banking operations, and wealth management. 20% of BlackRock (BLK), valued at $6+ billion. Barclays received BLK shares for Barclays Global Investors in 2009. The stake is treated as an “available for sale” investment.

INVESTMENT HIGHLIGHTS • •

•

Managed through the crisis without U.K. state aid, leaving Barclays free to run the business outside of U.K. Asset Protection Scheme rules. Shares trade at ~0.9x tangible book despite a strong, global investment banking franchise (esp. in credit), no apparent need to raise new equity, good “through-the-cycle” returns, and growing profits. Barclays Capital return on tangible equity was 22% in 1H10, up from 7% in 1H09 on “significant reduction in credit market losses taken through income and in total impairment charges.” Significant earning power of non-investment banking businesses, which only contributed £0.5 billion of pretax income in 1H10 versus ~£4 billion in 2007 and 2008 each. Commercial banking lost ~£0.8 billion in its non-U.K. operations in 1H10.

INVESTMENT RISKS & CONCERNS •

• • • •

Cyclical business Barclays Capital dominates assets (~75%) and profit contribution (80%+ in 1H10). Without improvement in retail/commercial banking, Barclays is largely a “one-trick pony.” 1H10 pretax profit benefited from special gains of £1.0 billion, representing ~25% of total profit. Loan loss reserve is only ~52% of identified “credit risk loans” of £23 billion at June 30. Customer deposits cover only ~90% of net loans, requiring other funding sources (incl. wholesale). CEO Varley (53) is leaving and will be replaced by Bob Diamond, Barclays President, in March 2011.

FYE December 31 2007 ∆ tangible book value/share 19% ∆ total assets 23% ∆ employees 7% ∆ net interest income 5% ∆ pre-provision profit 5% ∆ EPS -9% Assets (£tn) 1.0 Selected items as % of total assets: Derivatives 20% Loans, net2 31% Other assets 48% Customer deposits 32% Other liabilities 67% Common equity 2% % of total assets by selected segment: Barclays Capital 68% UK retail banking 7% Pretax income by selected segment (£bn): Barclays Capital 2.3 Other businesses (incl. central costs)3 3.9 Total pretax income 6.2 Revenue (£bn) 21.0 % of revenue by type: Net interest income 46% Non-interest income 54% Selected items as % of revenue: Pre-provision profit 43% Loss provision 13% Net charge-offs 8% Net income to common 18% Pre-provision profit (£bn) 9.0 Loan loss reserve (£bn) 3.8 Loan loss reserve ratio 1.0% Employees, period-end (k) 132 Return on tang equity 28% Tang equity/assets (avg) 1% Tier 1 capital ratio 8% ∆ shares out (avg) 1%

2008 52% 67% 16% 19% 17% -15% 1.2

2009 0% -33% -6% 4% 20% -53% 2.1

1H10 35% 3% 1% 4% -4% 23% 1.4

48% 25% 27% 22% 76% 2%

30% 33% 36% 29% 68% 3%

32% 31% 37% 29% 68% 3%

79% 5%

74% 8%

76% 8%

1.3 3.8 5.1 21.2

2.5 2.1 4.6 29.1

3.4 0.5 3.9 16.6

54% 46%

41% 59%

36% 64%

50% 26% 13% 18% 10.6 6.6 1.3% 153 18% 1% 6% 15%

43% 28% 11% 9% 12.7 10.8 2.3% 144 8% 2% 11% 47%

42% 19% 13% 15% 7.0 11.7 2.3% 147 14% 2% 13% 8%

Figures are based on continuing operations (exclude the Barclays Global Investors fund management business sold to BlackRock in December 2009). ~90% of gross loans and advances are to customers (roughly 50/50 split between retail and wholesale/corporate) with the remainder to banks as of June 30, 2010. Approximately £6 billion of loans are in commercial real estate. 3 In 2007 and 2008, ~£2.6 billion of pretax income was attributable to U.K. Retail Banking and Barclays Commercial Banking. 2

RATINGS

VALUE Intrinsic value materially higher than market value? DOWNSIDE PROTECTION Low risk of permanent loss? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends?

      

THE BOTTOM LINE Unlike some other U.K.-based banks, Barclays has managed through the financial crisis without requiring government aid. While it did get funds from Qatar and Abu Dhabi in 2008/09, these investors rank equally with common holders. Barclays is free to operate outside of the confines of the U.K. Asset Protection Scheme. The late 2009 sale of the BGI fund business further bolstered capital. The flipside is that the remaining business is ever so dominated by the cyclical investment bank – this may explain the below tangible book valuation. Long-term investors, however, may be attracted by the strong franchise. © 2008-2010 by BeyondProxy LLC. All rights reserved.

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October 29, 2010 – Page 63 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

…additional insight into Barclays: OUR ESTIMATE OF THE EQUITY FAIR VALUE RANGE

Valuation methodology

Conservative

Base Case

Aggressive

1.0x tangible common equity

10x “normalized” net income (based on 15% return on tangible common equity)1

6x LTM preprovision, pretax profit2

Conservative case metrics: Tangible common equity as of 6/30/2010

£41 billion

Fair value multiple

1.0x

Estimated equity value

£41 billion

Base case metrics: “Normalized” net income to common

£6 billion

Fair value multiple

10x

Estimated equity value

£61 billion

Aggressive case metrics: LTM pre-provision, pretax profit (year to June 2010)

£12 billion

Fair value multiple

Estimated equity value

£74 billion

Estimated fair value of the equity of Barclays (£ billions):3

£41 billion

£61 billion

£74 billion

£3.30 per share

£4.96 per share

£6.02 per share

$64 billion

$96 billion

$117 billion

$21 per ADS

$31 per ADS

$38 per ADS

1.0x

1.5x

1.8x

…year to June 2010

13x

19x

23x

…1H10 (annualized)

13x

15x

…2007-09 (average)

12x

18x

22x

…2007-09 (peak: 2007)

10x

16x

19x

Estimated fair value of the equity of Barclays (US$ in billions):3 Implied equity fair value to tangible book Implied ratios based on net income to common during…

The annualized return on tangible common equity was 14% in 1H10. The average ROTCE was 18% during 2007-09, excluding BGI, which was sold in 2009. 2 Pre-provision, pretax profit is stated before the provision for credit losses, income taxes, minority interests, and preferred dividends. 3 Based on 12.3 billion diluted common shares outstanding (1 ADS = 4 shares). Estimated fair value in US$ is based on the recent exchange rate at 1£=US$1.57. Source: Company filings, Manual of Ideas analysis, assumptions and estimates.

FINANCIAL CONDITION, 2007 vs. H1 2010

Source: Company presentation, autumn 2010; available at http://bit.ly/9zCGnw

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October 29, 2010 – Page 64 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

…additional insight into Barclays: IMPAIRED ASSET COVERAGE RATIO, H1 2008 – H1 2010

Source: Company presentation, autumn 2010; available at http://bit.ly/9zCGnw

LOAN LOSS RATE, 1990 – H1 2010

Source: Company presentation, autumn 2010; available at http://bit.ly/9zCGnw

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October 29, 2010 – Page 65 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Deutsche Bank (XETRA: DBK, NYSE: DB) Frankfurt, Germany, 49-69-910-1000

Financial: Investment Services Trading Data

www.db.com

Consensus EPS Estimates

Price: $58.69 (as of 10/22/10) 52-week range: $49.40 - $74.98 Market value: $55 billion Shares out: 930 million

This quarter Next quarter

Ownership Data

Valuation

Latest n/a n/a

Month Ago n/a n/a

# of Ests n/a n/a

P/E FYE 12/31/09 P/E FYE 12/31/10 P/E FYE 12/31/11 P/E FYE 12/30/12

6x 11x 6x n/a

P / tangible book

1.4x

FYE 12/31/10

5.16

n/a

Insider ownership: <1%

FYE 12/31/11

9.11

n/a

Insider buys (last six months): 0 Insider sales (last six months): 0 Institutional ownership: n/a

FYE 12/30/12 LT growth

n/a 5%

n/a n/a

Latest EPS Surprise Report date: Estimated EPS: Actual EPS:

n/a n/a n/a

Operating Performance and Financial Position ($ billions, except per share data) Interest income Interest expense Pretax income Net income Diluted EPS Shares out (avg) Cash from ops Cash ST investments LT investments Fixed assets, net Loans, other assets Intangible assets Total assets Short-term debt Long-term debt Deposits, other liab. Preferred stock Common equity

12/31/03 38 30 4 2 2.62 0.61

12/31/04 39 32 6 3 5.76 0.54

(8) 9 658 350 8 83 11 1,120 174 136 771 0 39

(39) 11 718 131 7 294 10 1,170 175 149 811 0 36

Fiscal Years Ended 12/31/05 12/31/06 12/31/07 58 81 90 50 71 78 9 12 12 5 8 9 8.82 14.81 16.59 0.51 0.51 0.52 (89) 9 824 181 7 349 11 1,382 229 158 954 0 42

16 10 n/a 144 5 2,037 11 2,208 210 155 1,797 0 46

12/31/08 76 59 (8) (5) (9.67) 0.55

12/31/09 38 20 7 7 9.65 0.69

LTME 6/30/10 29 10 9 8 10.81 0.69

FQE 6/30/09 10 6 2 2 2.09 0.70

FQE 6/30/10 11 6 2 2 2.22 0.70

52 14 n/a 87 6 2,949 13 3,069 176 186 2,663 0 43

(19) 13 n/a 98 5 1,962 13 2,091 123 184 1,733 0 51

39 19 n/a 345 5 2,297 17 2,683 127 205 2,293 0 58

0 15 n/a 291 4 2,090 14 2,414 139 188 2,039 0 48

13 19 n/a 345 5 2,297 17 2,683 127 205 2,293 0 58

23 12 n/a 142 4 2,512 13 2,682 323 177 2,129 0 53

Ten-Year Stock Price Performance and Trading Volume Dynamics

$160 $140 $120 $100 $80 $60 $40 $20 $0 Sep 02

Sep 03

Sep 04

Sep 05

Sep 06

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October 29, 2010 – Page 66 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

BUSINESS OVERVIEW

SELECTED OPERATING DATA — DEUTSCHE BANK1

Deutsche Bank (DB) operates in three major segments: Corporate and Investment Bank (~90% of assets; 1H10 pretax income: €4.0 billion): Includes Corporate Banking and Securities (95+% of segment assets), a top 5 global i-bank. The other sub-segment is Global Transaction Banking (1H10 pretax income: €0.6 billion), which includes trade finance, cash management, as well as trust and securities services. Private Clients/Asset Management (~10% of assets; 1H10 pretax income: €0.5 billion): Includes Asset and Wealth Management (including DWS and Sal. Oppenheim) and Private and Business Clients (traditional banking and investment management for individuals/small businesses). Corporate Investments (€27 billion of assets; 1H10 pretax income: break-even): Manages global principal investments, including €16 billion of non-core assets (mainly notes relating to Deutsche Pfandbriefbank) and €8 billion of equity investments (including a 30% stake in Deutsche Postbank). In September, DB made €25/share offer for 70% of Postbank not already owned (implies €5.5 billion total market value). Publicly-traded Postbank is one of Germany’s largest retail banks with €242 billion of assets and ~1,100 branches. DB has ~2,000 branches, of which ~50% are in Germany.

INVESTMENT HIGHLIGHTS •

•

• •

Postbank acquisition to increase earning power of non-investment banking businesses, “resulting in equal importance versus investment banking.” DB targets a combined pretax profit of its private/ business clients segment and Postbank of >€3 billion assuming, among others, €1 billion of synergies. Implied valuation of DB’s investment banking business appears low if retail business is worth 6-8x guided pretax income and taking into account DB’s principal investments and “potential capital relief from…run-off of non-core [Postbank] assets.” Trades at ~1.0x post-deal tangible book value. Western Europe accounted for ~70% of yearend 2009 loans. North America: ~17%, E. Europe: ~3%.

•

2008 -35 14% 3% 41% -150% 2.2

2009 15% -32% -4% 0% n/m 1.5

1H10 20 11% 4% 16% 4% 1.9

72% 10% 18% 24% 74% 2% 13.6

74% 12% 14% 18% 81% 1% 28.0

6 % 17% 18% 23% 75% 2% 16.2

91% 9%

45% 55%

47% 53%

24% 66% 10%

67% 30% 3%

70% 29% 1%

-229% 5% -42%

23% 8% 19%

35% 10% 27%

-4.7 1.1 0.8 -3.8

7.8 2.6 1.1 5.0

4.8 0.5 0.4 2.9

0.7% 1.4% n/m 1% 10% 6%

1.3% 2.8% 21% 1% 13% 25%

1.2% 2.5% 22% 1% 11% 2%

All figures are based on IFRS. Total assets per U.S. GAAP would be €1.04 trillion based mainly on adjusting derivatives per U.S. GAAP netting rules. 2 Post-capital increase and Postbank deal “expected to be at 11.7%.”

SELECTED OPERATING DATA — POSTBANK FYE December 31 Assets (€mn) Common tangible equity as % of assets Net income to common (€mn)

2007 203 1.4% 856

2008 231 1.1% -886

2009 227 1.3% 76

YTD 6/30/10 242 1.3% 153

MAJOR HOLDERS

INVESTMENT RISKS & CONCERNS •

FYE December 31 2007 ∆ tangible book per share 18% ∆ total assets 21% ∆ employees 14% ∆ net interest income 26% ∆ pre-provision profit 12% Assets (€tn)1 1.9 Selected items as % of total assets: Securities / trading assets 7 Loans, net 11% Other assets 19% Customer deposits 26% Other liabilities 72% Common equity 2% Revenue (€bn) 30.8 % of revenue by type: Net interest income 29% Non-interest income 71% % of revenue by segment: Corporate and investment bank 62% Private clients and asset management 33% Other 5% Pretax income margin by selected segment: Corporate and investment bank 27% Private clients and asset management 20% Total pretax margin 28% Selected income statement items (€bn): Pre-provision profit 9.4 Loss provision 0.6 Net charge-offs 0.5 Net income to common 6.5 Selected credit data: Loan loss reserve ratio 0.8% “IFRS impaired” loans/gross loans 1.3% Return on tang equity 25% Tang equity/assets (avg)1 2% Tier 1 capital ratio2 9% ∆ shares out (avg) 1%

Postbank execution risk. €1 billion of synergies may be optimistic (30% are revenue-related) and costlier to achieve than expected (€1.4 billion). Non-core Postbank assets may require write-downs. €10 billion October rights offering size may imply underlying DB balance sheet issues. DB stated proceeds are “to cover capital consumption from Postbank…, and to support the capital base.” IFRS impaired loans are >2x loan loss reserves.

Insiders <1% | Axa 5% | BlackRock 5% | Credit Suisse 4%

RATINGS

      

THE BOTTOM LINE Deutsche Bank’s pending tender for leading German retail bank Postbank should significantly increase the earning power of its non-investment banking businesses. Based on €1 billion of targeted deal synergies, a potential capital release from running off Postbank’s significant non-core assets, and DB’s own €10+ billion of principal investments, the recent valuation may put DB’s “core” investment banking franchise at a low single-digit multiple of run-rate earnings. Despite deal execution risk, the valuation is compelling at 1.0x post-deal tangible book and good prospects for a “normalized” ROE in the mid-teens. © 2008-2010 by BeyondProxy LLC. All rights reserved.

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October 29, 2010 – Page 67 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

…additional insight into Deutsche Bank: OUR ESTIMATE OF THE EQUITY FAIR VALUE RANGE

Valuation methodology Conservative case metrics: Tangible book on 6/30/2010 (pf 10/2010 rights issue) Fair value multiple Estimated equity value Base case metrics: "Normalized" net income to common Fair value multiple Estimated equity value Aggressive case metrics: Management's 2011 pretax “core” profit target3 Fair value multiple Estimated equity value Estimated fair value of the equity of Deutsche Bank4 Implied equity fair value to tangible book Implied ratios based on net income to common during… …year to June 2010 …2Q10 (annualized) Implied equity value to Q2 ann. pretax, pre-provision profit

Conservative

Base Case

Aggressive

1.0x tangible common equity

10x “normalized” net income (based on 15% return on tangible common equity)2

7x management's 2011 pretax "core" profit target of €10 billion3

€39 billion 1.0x €39 billion €6 billion 10x €58 billion

€39 billion €42 per share 1.0x

€58 billion €63 per share 1.5x

€10 billion 7x €70 billion €70 billion €75 per share 1.8x

7x 8x 6x

10x 13x 8x

12x 15x 10x

Relevant figures are adjusted to reflect October 2010 rights offering, in which Deutsche issued 309 million shares at €33.00 per share (€9.9 billion net proceeds). The annualized return on tangible common equity was 22% in 1H10. 3 Based on 2Q10 company presentation, page 34; “core” relates to “core businesses, excluding Corporate Investments and Consolidation & Adjustments” (the equivalent figure for 1H10: €4.4 billion). In an investor presentation on October 1, 2010 (after an announced tender offer for the remaining stake in Deutsche Postbank), management reaffirmed that “on balance, our assumptions still support EUR 10bn pretax profit target for 2011.” 4 Based on 929 million common shares outstanding following October 2010 rights issue. Source: Company filings, Manual of Ideas analysis, assumptions and estimates. 2

DEUTSCHE BANK AND POSTBANK – SNAPSHOT

Postbank Annual Report 2009 (German version p. 10); on Postbank Interim Report as of 30 June 2010 Includes sight, term, savings and home savings deposits from retail and business clients. 3 Includes EUR 50 billion Deutsche Bank Private Wealth Management, and excludes business clients. Source: Company presentation dated October 1, 2010; available at http://bit.ly/bYWK8x 2

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October 29, 2010 – Page 68 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

…additional insight into Deutsche Bank: POST-ACQUISITION MARKET POSITION IN GERMANY AND EUROPE

Segment Private Customers. Source: Company presentation dated October 1, 2010; available at http://bit.ly/bYWK8x

GERMAN ECONOMIC SNAPSHOT

1 Loan loss provisions in % of revenues in retail banking, average of leading market players of respective country. Source: Company presentation dated October 1, 2010; available at http://bit.ly/bYWK8x

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October 29, 2010 – Page 69 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Mitsubishi UFJ Financial (Tokyo: 8306, NYSE: MTU) Chiyoda-Ku, TK, Japan, 81-3-324-8111

Financial: Regional Banks Trading Data

www.mufg.jp

Consensus EPS Estimates

Price: $4.71 (as of 10/22/10) 52-week range: $4.48 - $5.74 Market value: $67 billion Shares out: 14.1 billion Ownership Data

Valuation

This quarter Next quarter

Latest n/a n/a

Month Ago n/a n/a

# of Ests n/a n/a

P/E FYE 3/31/10 P/E FYE 3/31/11 P/E FYE 3/30/12 P/E FYE 3/30/13

6x 14x 10x n/a

P / tangible book

0.8x

FYE 3/31/11

0.34

Insider ownership: 5%

FYE 3/30/12

0.45

Insider buys (last six months): 0 Insider sales (last six months): 0 Institutional ownership: 2%

FYE 3/30/13 LT growth

n/a n/a

Latest EPS Surprise Report date: Estimated EPS: Actual EPS:

n/a n/a n/a

3/31/04 17 5 14 10 1.54 6.4

3/31/05 18 6 9 5 0.77 6.5

8 38 245 355 7 625 4 1,275 130 70 1,028 2 46

3 52 245 354 7 671 4 1,333 100 74 1,105 3 51

Fiscal Years Ended 3/31/06 3/31/07 3/31/08 31 48 54 11 19 26 4 10 (0) 2 4 (7) 0.23 0.37 (0.66) 8.1 10.1 10.3 4 77 324 591 14 1,242 41 2,289 141 171 1,858 3 116

19 35 369 600 14 1,233 38 2,289 177 177 1,807 3 125

7 50 516 512 13 1,285 30 2,406 237 168 1,897 3 101

3/31/09 48 20 (22) (18) (1.69) 10.8

3/31/10 34 10 15 10 0.83 12.3

LTME 3/31/10 34 29 (3) (8) 0.84 12.3

FQE 3/31/08 27 13 (6) (10) (0.97) 10.4

FQE 3/31/10 16 4 6 5 0.40 13.0

(12) 38 553 453 13 1,303 19 2,379 207 163 1,932 5 71

28 35 540 664 12 1,190 18 2,460 208 174 1,968 5 104

22 35 540 656 12 1,197 18 2,460 208 174 1,968 5 104

7 50 516 512 13 1,285 30 2,406 237 168 1,897 3 101

16 35 540 656 12 1,197 18 2,460 208 174 1,968 5 104

Ten-Year Stock Price Performance and Trading Volume Dynamics

$18 $16 $14 $12 $10 $8 $6 $4 $2 $0 Sep 01

Sep 02

Sep 03

Sep 04

Sep 05

Sep 06

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October 29, 2010 – Page 70 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

BUSINESS OVERVIEW

SELECTED OPERATING DATA1

Mitsubishi UFJ (MUFG) operates in five segments: Retail Banking (FYE 3/10 adj. pre-provision income: ¥445 bn):* Covers all Japan-based retail businesses, including commercial banking, trust banking and securities businesses. Corporate Banking (¥675 bn): Covers all Japanese and overseas corporate businesses, including commercial, investment and trust banking, as well as UNBC. UNBC’s main subsidiary Union Bank is one of the largest commercial banks in California, in terms of total assets. Trust Assets (¥66 bn): Asset management and administration for pension trusts offered to corporate and other funds. Global Markets (¥467 bn): Consists of treasury operations, asset/liability and liquidity management as well as providing services in money and foreign exchange markets. Other (-¥252 bn): Includes mainly central functions.

INVESTMENT HIGHLIGHTS • •

•

• •

•

Japan’s leading retail bank, with 800+ domestic locations and ~¥100+ trillion (>$1 trillion) in deposits, ahead of competitors Mizuho and SMFG. Japan represents ~75% of total assets of ~¥200 trillion and ~80% of gross loans of ¥92 trillion. Roughly three quarters of total interest and noninterest income relate to Japanese income. Made a $9 billion preferred equity investment in Morgan Stanley in 2008 and holds a 20% fully diluted equity stake. MUFG aims for a “global strategic alliance” with the U.S. investment bank. Increasing exposure to U.S. community banking via ownership of Union Bank, which has acquired Frontier Bank and Tamalpais Bank in 2010. Katsunori Nagayasu (63) became CEO in April. Nagayasu, who joined predecessor company Mitsubishi Bank in 1970, wants to “shift focus from risk management to growth acceleration.” Shares trade at ~0.8x tangible book.

INVESTMENT RISKS & CONCERNS •

• •

Earnings guidance implies a P/E of 13-14x based on ¥400 billion of JGAAP net income for FYE March 2011 (~flat y-y). Dividend guidance of ¥12 per share, up ¥1 y-y, implies a 3% recent yield. Poor returns on equity. While shares trade well below tangible book, this may be justified if return on equity doesn’t improve on a sustained basis. ¥155 trillion of off-balance sheet commitments, of which ~50% are derivative instrument guarantees.

Based on JGAAP: excludes provisions for credit losses, gains/losses on trading assets/securities and foreign exchange, impairments, and other items.

FYE March 31 2006 2007 2008 2009 2010 ∆ tangible book per share 2% 10% -18% -32% 35% ∆ total assets 72% 0% 2% 1% 3% ∆ employees 82% -2% 0% 2% -1% ∆ net interest income 70% 41% -2% 1% -14% ∆ pre-provision profit -4% 90% -71% -360% n/m Assets (¥tn) 186.2 186.2 190.7 193.5 200.1 Selected items as % of total assets: Loans, net 51% 51% 51% 51% 45% Other assets 49% 49% 49% 9% 55% Customer deposits 68% 68% 68% 66% 68% Other liabilities 27% 27% 28% 31% 28% Common equity 5% 5% 4% 3% 4% Revenue (¥tn) 2.7 4.3 4.1 2.5 4.4 % of revenue by type: Net interest income 61% 54% 56% 93% 45% Non-interest income 39% 46% 44% 7% 55% % of revenue by segment (based on JGAAP): Retail banking 30% 33% 37% 40% 40% Corporate banking 57% 53% 50% 50% 43% Trust assets 4% 5% 5% 5% 4% Global markets 11% 8% 8% 12% 15% Other -1% 0% -1% -6% -2% Adj. pre-provision income margin by selected segment (based on JGAAP):2 Retail banking 35% 33% 29% 26% 31% Corporate banking 54% 53% 48% 47% 43% Trust assets 38% 46% 50% 45% 42% Global markets 86% 84% 80% 84% 88% Pre-provision margin 46% 44% 38% 34% 39% Selected income statement items (¥tn): Pre-provision profit 0.8 1.5 0.4 -1.1 1.9 Loss provision 0.1 0.4 0.4 0.6 0.6 Net charge-offs 0.1 0.3 0.4 0.6 0.5 Net income to common 0.2 0.3 -0.6 -1.5 0.8 Selected credit data: Loan loss reserve ratio 1.1% 1.2% 1.1% 1.2% 1.4% NPLs/gross loans3 2.1% 1.8% 1.7% 1.8% 2.2% Net charge-off ratio 0.2% 0.3% 0.4% 0.6% 0.5% Net interest margin 1.1% 1.2% 1.2% 1.2% 1.1% Return on tang equity 3% 5% n/m n/m 15% Tang equity/assets (avg) 3% 4% 3% 3% 3% Tier 1 capital ratio (JGAAP) 7% 8% 8% 8% 11% ∆ shares out (avg) 25% 24% 3% 5% 14%

Based on U.S. GAAP, unless stated otherwise. 2006 figures reflect merger of Mitsubishi Tokyo Financial Group with UFJ Holdings in October 2005. Reflects “operating profit” per JGAAP: figures exclude, among others, provisions for credit losses, gains/losses on trading assets/securities and foreign exchange, as well as impairments. 3 Includes nonaccrual/restructured loans, and accruing loans past due 90 days. 2

MAJOR HOLDERS Japan-based investors ~67% | Non-Japan investors ~33%

RATINGS

      

THE BOTTOM LINE Mitsubishi UFJ Financial has an enviable position in the Japanese retail banking market where it remains the dominant player. A strong domestic deposit base has enabled the company to not only withstand the recent financial crisis but also to expand in the U.S. via a $9 billion investment in Morgan Stanley and recent community bank acquisitions. While poor historic returns on equity may explain a valuation below tangible book, they may not justify it. The risk-reward is attractive. © 2008-2010 by BeyondProxy LLC. All rights reserved.

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October 29, 2010 – Page 71 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

…additional insight into Mitsubishi UFJ Financial: OUR ESTIMATE OF THE EQUITY FAIR VALUE RANGE (¥ in billions)

Valuation methodology

Conservative case metrics: Tangible common equity as of 3/31/2010 Fair value multiple Estimated equity value Base case metrics: "Normalized" net income to common Fair value multiple Estimated equity value Aggressive case metrics: LTM pre-provision, pretax profit (year to March 2010) Fair value multiple Estimated equity value Estimated fair value of the equity of MUFG (¥ in billions)3 Estimated fair value of the equity of MUFG (US$ in billions)3 Implied equity fair value to tangible book Implied dividend yield based on guidance for FYE Mar. 2011 Implied ratios based on net income to common during… …year to March 2011 (guidance based on JGAAP) …year to March 2010 (actual reported U.S. GAAP net income)

Conservative

Base Case

Aggressive

1.0x tangible common equity

10x “normalized” net income (based on 15% return on tangible common equity)1

6x LTM pre-provision, pretax profit2

¥6,927 1.0x ¥6,927 ¥1,039 10x ¥10,391

¥6,930 billion ¥490 per share $85 billion $6 per ADS 1.0x 2%

¥10,390 billion ¥734 per share $127 billion $9 per ADS 1.5x 2%

¥1,930 6x ¥11,579 ¥11,580 billion ¥818 per share $142 billion $10 per ADS 1.7x 1%

17x 8x

26x 12x

29x 14x

The return on tangible common equity was 15% in the year ended March 2010. Based on year ended March 2010. Pre-provision, pretax profit is stated before provision for credit losses, income taxes, minority interests, preferred dividends. 3 Based on 14.2 billion shares outstanding (1 ADS = 1 share). Estimated fair value in US$ is based on a conversion of the recent exchange rate at 1US$=¥81.53. Source: Company filings, Manual of Ideas analysis, assumptions and estimates. 2

MANAGEMENT GUIDANCE FOR CURRENT FISCAL YEAR ENDING MARCH 31, 2011

Source: Company presentation dated September 8, 2010; available at http://bit.ly/9DWhOJ

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October 29, 2010 – Page 72 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Mitsubishi UFJ Financial – LOAN AND DEPOSIT TRENDS

Source: Company presentation dated September 8, 2010; available at http://bit.ly/9DWhOJ

COMPARISON WITH MIZUHO AND SUMITOMO MITSUI (SMFG)

Source: Company presentation dated September 8, 2010; available at http://bit.ly/9DWhOJ

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October 29, 2010 – Page 73 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Roma Financial (Nasdaq: ROMA) Robbinsville, NJ, 609-223-8300

Financial: S&Ls/Savings Banks Trading Data

www.romabank.com

Consensus EPS Estimates

Price: $10.21 (as of 10/22/10) 52-week range: $9.99 - $12.96 Market value: $314 million (incl. MHC) Shares out: 30.7 million (incl. MHC shares) Ownership Data

This quarter Next quarter

Valuation

Latest $0.07 0.06

Month Ago $0.07 0.06

# of Ests 1 1

P/E FYE 12/31/09 P/E FYE 12/31/10 P/E FYE 12/31/11 P/E FYE 12/30/12

113x 46x 43x n/a

P / tangible book

1.4x

FYE 12/31/10

0.22

Insider ownership: 77% (73% by MHC)

FYE 12/31/11

0.24

Insider buys (last six months): 2 Insider sales (last six months): 1 Institutional ownership: 12%

FYE 12/30/12 LT growth

n/a n/a

Latest EPS Surprise Report date: Estimated EPS: Actual EPS:

7/23/10 $0.05 $0.05

Operating Performance and Financial Position ($ millions, except per share data) Interest income Interest expense Pretax income Net income Diluted EPS Shares out (avg) Cash from ops Cash ST investments LT investments Fixed assets, net Loans, other assets Intangible assets Total assets Short-term debt Long-term debt Deposits, other liab. Preferred stock Common equity

12/31/03 31 8 12 8 0.24 33

12/31/04 31 7 12 8 0.33 23

8 6 18 332 21 335 0 712 n/a n/a 580 0 131

Fiscal Years Ended 12/31/05 12/31/06 12/31/07 35 41 46 11 15 18 11 8 11 8 5 7 0.33 0.19 0.23 23 27 32 7 6 24 361 29 379 0 798 n/a n/a 659 0 139

9 7 59 358 31 420 0 876 n/a n/a 641 0 235

12/31/08 48 20 7 5 0.15 31

12/31/09 55 22 4 3 0.09 31

LTME 6/30/10 59 20 6 4 0.14 31

FQE 6/30/09 13 6 1 1 0.02 31

FQE 6/30/10 15 5 2 2 0.05 31

7 8 76 433 40 520 0 1,077 n/a n/a 866 0 211

6 10 44 633 39 586 0 1,312 65 n/a 1,097 0 215

6 8 150 648 41 609 0 1,457 71 n/a 1,200 0 217

2 8 87 549 40 557 0 1,240 n/a n/a 988 0 212

4 8 150 648 41 609 0 1,457 71 n/a 1,200 0 217

9 7 91 317 33 459 0 907 n/a n/a 689 0 218

Ten-Year Stock Price Performance and Trading Volume Dynamics

$20 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 Sep 06

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October 29, 2010 – Page 74 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

BUSINESS OVERVIEW

SELECTED OPERATING DATA

FYE December 31 2006 2007 Total assets ($mn) 876 907 Change (y-y) 10% 4% Selected items as % of assets: Cash equivalents 7% 11% Investment securities 22% 16% Mortgage-backed securities 17% 16% Loans, net 48% 51% Real estate owned 0% 0% Other assets 6% 7% Deposits: Noninterest bearing 3% 3% Deposits: Interest checking 11% 11% Deposits: Savings and club 21% 19% Deposits: CDs 36% 39% Other liabilities 2% 4% Total liabilities 73% 76% Common equity 27% 24% Selected income statement data ($mn): Interest income 41 46 Interest expense (15) (18) Loan loss provision (0) (1) Non-interest income 4 4 Non-interest expense (21) (20) Pretax income 8 11 Pretax pre-provision income 8 12 Selected performance ratios: Return on average assets .6% .8% Return on average equity 2.9% 3.1% Net interest margin 3.3% 3.4% Efficiency ratio 1 72.8% 63.4% Breakdown of loan portfolio (period end): Conventional 1-4 family 48% 47% Commercial and multi-family 15% 17% Construction 6% 8% Home equity 30% 28% Consumer loans 0% 0% Business loans 1% 1% Selected troubled loan statistics (period end): Non-performing loans / loans .1% 1.5% Non-performing loans / assets .0% .8% Non-perform. assets / assets .0% .8% Loan loss allowance / loans .3% .3% Allowance / troubled loans 322% 23.3% 21% 16% ∆ shares out

Roma is the parent of Robbinsville, New Jersey-based Roma Bank, a federally-chartered savings bank founded in 1920.

INVESTMENT HIGHLIGHTS •

• •

•

73% of common stock held by Roma Financial Corp., MHC. The economics of these shares belong entirely to the holders of the other 27% of Roma stock, creating a situation in which “true” intrinsic value may be higher than “apparent” value. Second-step conversion may unlock value. Roma will likely wait with a conversion until it can sell the MHC shares at a price exceeding the recent price. Acquired Sterling Bank for $15 million in July. Sterling had deposits of $331 million, loans of $287 million, and tangible book of $16 million. The deal expands Roma’s network from 14 to 24 branches in Mercer, Burlington, Camden and Ocean Counties. The integration has been “successfully achieved.” Post-merger capital “strong,” as confirmed by continued dividend payments at rate of $0.08 per share per quarter, implying a 3% annualized yield. New buyback suggests management is aware of and not satisfied with undervaluation. Roma authorized the “very attractive” repurchase of 5% of the non-MHC shares in September. The company had purchased 170K shares at $12 per share in Q2. “True” market value of ~$80 million, implying MV to assets ratio of less than 5%. If Roma earns a 1% spread on assets, it will trade at 5x earnings.

INVESTMENT RISKS & CONCERNS •

Continued declines in real estate prices would strain Roma’s balance sheet, potentially forcing the company to pursue a second-step conversion at an unfavorable exchange ratio, resulting in dilution.

2008 1,077 19%

2009 1,312 22%

1H10 1,457 17%

7% 8% 28% 48% 0% 7% 3% 9% 19% 40% 9% 80% 20%

4% 26% 19% 45% 0% 7% 2% 10% 21% 44% 6% 84% 16%

10% 22% 19% 42% 0% 6% 3% 9% 22% 43% 9% 85% 15%

48 (20) (1) 4 (25) 7 8

55 (22) (3) 3 (29) 4 7

30 (10) (2) 3 (16) 5 7

.5% 2.2% 3.2% 79.0%

.2% 1.2% 2.9% 89.6%

.4% 1.4% 3.3% 70.9%

44% 24% 5% 25% 0% 1%

42% 29% 4% 22% 0% 2%

42% 29% 4% 22% 0% 3%

2.0% 1.0% 1.0% .4% 21.4% -3

2.5% 1.1% 1.3% .9% 35.4% 0%

3.3% 1.4% 1.6% 1.2% 35.8% 0%

THRIFT CONVERSION COMPARABLES – “TRUE” METRICS Institution / Ticker TFS Financial / TFSL Investors Bancorp / ISBC Capitol Federal / CFFN Beneficial Mutual / BNCL Northfield Bancorp / NFBK Kearny Financial / KRNY Rockville Financial / RCKB Meridian Interstate / EBSB Clifton Savings / CSBK Waterstone / WSBF Roma Financial / ROMA

MHC Own. 74% 57% 70% 56% 56% 75% 55% 58% 64% 74% 73%

MV ($mn) 741 589 541 323 216 152 102 99 80 33 88

TBV/ MV 238% 146% 178% 164% 178% 266% 157% 196% 219% 531% 247%

MV/ Assets 7% 7% 6% 7% 10% 7% 6% 6% 7% 2% 5%

TBV/ Assets 16% 10% 11% 11% 17% 18% 10% 11% 16% 9% 15%

Efficiency ratio is calculated as non-interest expenses divided by the sum of net interest income and non-interest income.

MAJOR HOLDERS CEO <1% | Other insiders 1% | Roma Financial, MHC 73%

RATINGS

      

THE BOTTOM LINE Roma Financial is nearly three-fourths owned by an MHC, implying that the economics attributable to Roma shareholders other than the MHC are significantly more attractive than they may initially appear. When adjusting for the MHC ownership and the post-Q2 acquisition of ~$370 million in assets from troubled Sterling Bank, Roma trades at a market value to total asset ratio of less than 5%. We find this valuation attractive for a well-capitalized, well-managed bank in the State of New Jersey. Roma has remained profitable throughout the crisis and is not subject to a regulatory order. The bank pays a dividend, and has been buying back stock at prices well below estimated fair value. We view the investment case as compelling. © 2008-2010 by BeyondProxy LLC. All rights reserved.

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October 29, 2010 – Page 75 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

…additional insight into Roma Financial: OUR ESTIMATE OF THE EQUITY FAIR VALUE RANGE ($ in billions) Valuation methodology

Conservative

Base Case

Aggressive

8x LTM pre-provision profit

5x “normalized” net income (assuming bank earns 1% of assets)

20% discount to tangible common equity

Conservative case metrics: LTM pretax, pre-provision income

$11 million

Fair value multiple

Estimated equity value

$86 million

Base case metrics: Assets as of 6/30/2010 1

$1.8 billion

Assumed net income as % of assets

1.0%

Estimated "normalized" net income

$18 million

Fair value multiple

Estimated equity value

$146 million

Aggressive case metrics: Tangible common equity as of 6/30/2010

$217 million

Fair value multiple

0.8x

Estimated equity value

$173 million $86 million $11 per share

Estimated fair value of the equity of Roma 2

$146 million $18 per share

$173 million $21 per share

Est. equity fair value to tangible book value

.4x

.7x

.8x

Est. equity fair value to pretax, pre-provision income

14x

16x

Est. equity fair value to total assets 1

Pro forma for $369 million in assets added with the acquisition of Sterling Banks in July. 2 Based on 8.2 million shares outstanding, i.e., excluding 22.6 million shares held by Roma Financial Corp., MHC. Source: Company filings, Manual of Ideas analysis, assumptions and estimates.

ROMA – LOAN ORIGINATIONS ($ in millions) 2009 Loan originations: Real estate mortgage - one-to-four family Real estate mortgage - multi-family and commercial Commercial business Construction Consumer: Home equity loans and second mortgage Passbook or certificate Other Total loan originations Loan purchases Loans sold (mortgage loans) Loan principal repayments Total loans sold and principal repayments Increase (decrease) due to other items Net increase in loan portfolio

Years Ended December 31, 2008 2007

2006

91 33 1 10

35 59 3 28

34 27 1 24

38 18 1 13

30 0 165 11 9 98 107 -

42 0 167 4 101 105 -

40 1 126 0 86 87 -

41 2 1 115 — 1 72 73 —

Source: Company filings, Manual of Ideas analysis.

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October 29, 2010 – Page 76 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

…additional insight into Roma Financial: ROMA vs. OTHER BANKING INSTITUTIONS — PERFORMANCE AND CONDITION RATIOS All Banks in New Jersey 1

Roma Bank

All U.S. Banks 2

YTD

12/31/2009

6/30/2010

12/31/2009

6/30/2010

12/31/2009

% of unprofitable institutions

n/m

34%

15%

20%

31%

% of institutions with earnings gains

n/m

53%

80%

61%

40%

Yield on earning assets

4.9%

4.7%

5.0%

4.6%

4.8%

Cost of funding earning assets

2.0%

1.5%

2.3%

2.0%

1.0%

1.3%

Net interest margin

Performance Ratios (annualized)

3.0%

3.2%

2.6%

2.7%

3.8%

3.5%

Noninterest income to earning assets

.5%

1.2%

1.0%

2.2%

2.3%

Noninterest expense to earning assets

2.6%

2.3%

2.1%

3.4%

Net operating income to assets

.4%

.5%

.6%

.1%

Return on assets (ROA)

.4%

.5%

.6%

.7%

.6%

.1%

Pretax return on assets

.6%

.7%

1.0%

1.1%

.9%

.1%

Return on equity (ROE)

2.2%

3.1%

6.1%

7.2%

5.5%

.7%

Retained earnings to avg equity (YTD only)

2.2%

3.1%

2.5%

4.5%

3.1%

-2.7%

.5%

.6%

.4%

.5%

2.7%

2.5%

123.8%

117.3%

178.3%

140.1%

90.5%

133.0%

Net charge-offs to loans Credit loss provision to net charge-offs Earnings coverage of net loan charge-offs Efficiency ratio Assets per employee ($ millions) Cash dividends to net income (YTD only)

3.7x

3.9x

6.0x

5.1x

1.5x

74.7%

70.5%

55.9%

54.9%

55.4%

55.6%

5.7

5.5

8.2

8.4

6.5

6.4

.0%

58.6%

37.9%

43.2%

480.6%

Condition Ratios Loss allowance to loans

.4%

.5%

1.0%

1.1%

3.4%

3.1%

13.8%

14.0%

40.6%

38.5%

65.1%

57.7%

Noncurrent assets plus OREO to assets

1.6%

1.9%

3.3%

3.4%

Noncurrent loans to loans

3.2%

3.4%

2.6%

2.9%

5.2%

5.4%

Net loans and leases to deposits

59.0%

56.4%

87.9%

88.3%

78.2%

76.5%

Net loans and leases to core deposits

71.5%

68.6%

108.3%

108.4%

106.4%

105.8%

Equity capital to assets

15.8%

14.2%

9.3%

9.7%

11.3%

11.0%

Core capital (leverage) ratio

15.8%

14.2%

8.6%

9.0%

8.8%

8.6%

Tier 1 risk-based capital ratio

30.3%

28.0%

16.0%

16.8%

12.4%

11.7%

Total risk-based capital ratio

30.7%

28.5%

17.1%

17.9%

15.1%

14.3%

Average assets

1,133

1,269

169,700

178,161

13,184,179

13,294,355

Average earning assets

Loss allowance to noncurrent loans

Memoranda ($ in millions)

1,044

1,175

158,472

166,427

11,363,780

11,400,485

Average equity

189

191

15,696

16,935

1,462,915

1,387,886

Average loans

535

567

98,497

100,872

7,360,802

7,502,542

Number of institutions reporting: 123 in 1H10 and 123 in 2009. 2 Number of institutions reporting: 7,830 in 1H10 and 8,012 in 2009. 3 OREO = other real estate owned. Source: FDIC, Manual of Ideas analysis.

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October 29, 2010 – Page 77 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Waterstone Financial (Nasdaq: WSBF) Wauwatosa, WI, 414-761-1000

Financial: Regional Banks Trading Data

www.waterstonefinancialgroup.com

Consensus EPS Estimates

Price: $3.82 (as of 10/22/10) 52-week range: $1.75 - $4.52 Market value: $119 million (incl. MHC) Shares out: 31.3 million (incl. MHC)

Valuation

Latest $0.01 0.02

Month Ago $0.04 0.05

FYE 12/31/10

0.00

0.11

Insider ownership: 76% (74% by MHC)

FYE 12/31/11

0.23

0.32

Insider buys (last six months): 1 Insider sales (last six months): 0 Institutional ownership: 6%

FYE 12/30/12 LT growth

0.38 n/a

0.43 n/a

1 n/a

Ownership Data

This quarter Next quarter

# of Ests 1 1

P/E FYE 12/31/09 P/E FYE 12/31/10 P/E FYE 12/31/11 P/E FYE 12/30/12

n/m n/m 17x 10x

P / tangible book

0.7x

Latest EPS Surprise Report date: Estimated EPS: Actual EPS:

8/6/10 $0.01 -$0.04

6/30/04 66 32 16 11 0.36 29

6/30/05 74 36 17 9 0.31 29

11 11 22 121 16 1,070 0 1,240 n/a n/a 1,117 0 123

13 10 25 107 24 1,221 0 1,386 n/a n/a 1,249 0 133

Fiscal Years Ended 12/31/05 12/31/06 12/31/07 42 92 97 21 54 62 4 13 1 3 8 2 0.08 0.24 0.05 33 33 32 10 9 22 145 25 1,311 0 1,511 n/a n/a 1,280 0 232

10 27 64 147 33 1,378 0 1,649 n/a n/a 1,407 0 241

(0) 6 32 229 32 1,413 0 1,710 n/a n/a 1,508 0 202

12/31/08 104 63 (24) (26) (0.87) 31

12/31/09 99 55 (11) (10) (0.33) 31

LTME 6/30/10 94 46 (10) (9) (0.29) 31

FQE 6/30/09 25 14 2 1 0.04 30

FQE 6/30/10 22 10 (1) (1) (0.04) 31

24 15 31 235 31 1,574 0 1,885 n/a n/a 1,714 0 171

(12) 57 36 287 29 1,459 0 1,868 74 434 1,200 0 169

(21) 100 31 309 29 1,412 0 1,881 58 434 1,216 0 173

9 51 66 265 30 1,517 0 1,928 n/a n/a 1,754 0 173

(25) 100 31 309 29 1,412 0 1,881 58 434 1,216 0 173

Ten-Year Stock Price Performance and Trading Volume Dynamics

$20 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 Sep 06

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Sep 07

Sep 08

Sep 09

Sep 10

October 29, 2010 – Page 78 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

BUSINESS OVERVIEW

SELECTED OPERATING DATA

Waterstone Financial is the parent of WaterStone Bank, a Wisconsin chartered savings bank with eight banking offices in the Milwaukee, Washington and Waukesha counties.

INVESTMENT HIGHLIGHTS •

•

Cheaper than it may appear, as 74% of stock is held by Lamplighter, MHC.* Due to mutual holding company peculiarities, the economics of the shares held by Lamplighter belong to the holders of the other 26% of Waterstone common. As a result, Waterstone should be viewed as having 8.2 million rather than 31.3 million shares outstanding. Low exposure to commercial real estate, with the latter accounting for only 3% of loans. Meanwhile, first mortgage loans secured by one-to-four and over four-family residences comprised 45% and 39%, respectively, of gross loans receivable. “True” market value of ~$30 million, implying MV to assets ratio of less than 2%. If WSBF earns a 1% spread on assets, it will trade at 2x earnings.

INVESTMENT RISKS & CONCERNS •

•

Consented to OTS cease-and-desist order in ‘09. The bank must maintain Tier 1 capital of 8.5+% and total risk capital of 12+%. It also must adopt a twoyear capital plan, which could result in dilution. Relatively low market share in core MilwaukeeWaukesha-West Allis metro area, with 2.4% of total deposits, behind Marshall & Ilsley (29.6%), US Bank (22.6%), JPM Chase (7.5%), Associated Bank (4.7%), PNC (2.6%), Wells Fargo (2.4%).**

THRIFT CONVERSION COMPARABLES – “TRUE” METRICS Institution / Ticker TFS Financial / TFSL Investors Bancorp / ISBC Capitol Federal / CFFN Beneficial Mutual / BNCL Northfield Bancorp / NFBK Kearny Financial / KRNY Rockville Financial / RCKB Meridian Interstate / EBSB Roma Financial / ROMA Clifton Savings / CSBK Waterstone / WSBF *

MHC Own. 74% 57% 70% 56% 56% 75% 55% 58% 73% 64% 74%

MV ($mn) 741 589 541 323 216 152 102 99 88 80 33

TBV/ MV 238% 146% 178% 164% 178% 266% 157% 196% 247% 219% 531%

MV/ Assets 7% 7% 6% 7% 10% 7% 6% 6% 6% 7% 2%

TBV/ Assets 16% 10% 11% 11% 17% 18% 10% 11% 15% 16% 9%

MHC = mutual holding company. Source: FDIC, as of June 30, 2010. Detailed data at http://bit.ly/2aTwsN

FYE December 31 2006 2007 Total assets ($mn) 1,649 1,710 Change (y-y) 9% 4% Selected items as % of assets: Cash equivalents 4% 1% Securities 7% 11% Loans, net 83% 83% RE owned 0% 0% FHLB stock 1% 1% Demand deposits 4% 3% MM and savings 6% 7% Time deposits 54% 48% Borrowings 20% 28% Common equity 15% 12% Selected income statement data ($mn): Interest income 92 97 Interest expense (54) (62) Loan loss provision (2) (12) Noninterest income 5 7 Noninterest expense (29) (29) Pretax income 13 1 Pretax pre-provision income 15 13 Net interest margin 2.5% 2.2% Diluted EPS ($) 0.24 0.05 Loan portfolio breakdown (period end): 1-4 family mortgage 44% 46% >4 family mortgage 34% 32% Home equity 6% 6% Commercial RE 4% 4% Construction & land 12% 11% Consumer loans 0% 0% Business loans 0% 2% Troubled loan statistics: Loan loss allowance / loans .5% .9% Net charge-offs / loans (ann.) .0% .4% Allowance / non-accrual loans 24.9% 16.0% Non-accrual loans / loans 2.1% 5.7% WaterStone Bank capital ratios (period end): Total capital / risk assets 21.4% 13.4% Tier 1 capital / risk assets 20.8% 12.5% Tier 1 capital / avg assets 14.5% 10.1% 0% -5% ∆ shares out 1

2008 1,885 10%

2009 1,868 -1%

1H10 1,881 -2%

1% 10% 82% 1% 1% 3% 5% 55% 26% 9%

4% 11% 77% 3% 1% 3% 5% 54% 27% 9%

6% 11% 75% 3% 1% 3% 5% 54% 26% 9%

104 (63) (38) 6 (34) (24) 14 2.3% (0.87)

99 (55) (27) 12 (41) (12) 15 2.4% (0.33)

45 (20) (13) 10 (23) (0) 12 2.8% (0.03)

49% 32% 6% 3% 8% 0% 3%

46% 36% 6% 3% 5% 0% 3%

45% 39% 5% 3% 4% 0% 3%

1.6% 1.7% 23.4% 6.9%

2.0% 1.5% 37.8% 5.3%

2.5% .9% 35.4% 7.0%

12.8% 11.6% 8.9% -3%

13.7% 12.5% 8.7% 0%

13.7% 12.4% 9.0% 0%

MAJOR HOLDERS CEO <1% | Other insiders 4% | Lamplighter, MHC 74%

RATINGS

      

THE BOTTOM LINE Waterstone is one of the most interesting “thrift conversions” we have come across, as the related MHC holds nearly 74% of shares outstanding, implying large “leverage” for the other “true” owners of the company. When adjusted for the MHC ownership, Waterstone trades at a market value to tangible asset ratio of less than 2%. This implies large upside for equity holders in a more normalized earnings environment. A second-step conversion in which shares held by the MHC would be sold in a public offering would strengthen Waterstone’s capital ratios, which remain above the regulatory “well capitalized” thresholds (notwithstanding a cease-and-desist order in 2009). While a second-step conversion would in all likelihood represent a positive catalyst, there is some residual risk that the Lamplighter shares could be offered at a “below-market” price, diluting the upside for current holders. While not a “slam dunk,” we view the risk-reward tradeoff as compelling. © 2008-2010 by BeyondProxy LLC. All rights reserved.

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October 29, 2010 – Page 79 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

WATERSTONE – OUR ESTIMATE OF THE EQUITY FAIR VALUE RANGE Conservative

Base Case

Aggressive

4x LTM pretax preprovision profit

5x “normalized” net income (assuming bank earns 1% of assets)

25% discount to tangible common equity

($ in billions) Valuation methodology Conservative case metrics: LTM pretax, pre-provision income Fair value multiple Estimated equity value Base case metrics: Assets as of 6/30/2010 Assumed net income as % of assets Estimated “normalized” net income Fair value multiple Estimated equity value Aggressive case metrics: Tangible common equity as of 6/30/2010 Fair value multiple Estimated equity value

$19 million 4x $78 million $1.9 billion 1.0% $19 million 5x $94 million

$78 million $9 per share .45x 4.0x 4%

Estimated fair value of the equity of Waterstone1 Est. equity fair value to tangible book value Est. equity fair value to pretax, pre-provision income Est. equity fair value to total assets

$173 million 0.75x $130 million $130 million $16 per share .75x 6.7x 7%

$94 million $11 per share .54x 4.8x 5%

Based on 8.2 million shares outstanding, i.e., excluding 23.1 million shares held by Lamplighter Financial, MHC. Source: Company filings, Manual of Ideas analysis, assumptions and estimates.

WATERSTONE – AVERAGE BALANCE SHEETS, INTEREST AND YIELDS/COSTS Six Months Ended June 30, ($ in millions) Average Balance

2010 Interest

Assets Interest-earning assets: Loans receivable, net Mortgage related securities 2 Debt,2 fed funds, investments Total interest-earning assets Noninterest-earning assets Total assets

1,435 108 190 1,733 96 1,829

41 3 2 45

Liabilities and equity Interest-bearing liabilities: Demand accounts Money market and savings Time deposits Total interest-bearing deposits Borrowings Total interest-bearing liabilities Noninterest-bearing liabilities Total liabilities Equity Total liabilities and equity

63 100 1,013 1,176 475 1,651 10 1,661 168 1,829

0 0 11 11 9 21

Net interest income Net interest rate spread

Average Balance

5.70% 5.36% 1.75% 5.25%

1,554 133 144 1,832 86 1,917

44 4 2 50

0.07% 0.47% 2.18% 1.92% 4.01% 2.52%

54 106 1,062 1,222 515 1,737 9 1,747 170 1,917

0 0 19 19 10 29

24 3

Net interest-earning assets 4 Net interest margin 5

2009 Interest

Yield or Cost

5.76% 5.70% 2.33% 5.48%

0.07% 0.54% 3.57% 3.15% 3.91% 3.37%

21 2.72%

2.11% 94

2.84%

2.28%

Includes net deferred loan fee amortization income of $357,000 and $534,000 for the six months ended June 30, 2010 and 2009, respectively. 2 Average balance of mortgage related and debt securities is based on amortized historical cost. 3 Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. 4 Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. 5 Net interest margin represents net interest income divided by average total interest-earning assets. Source: Company filings, Manual of Ideas analysis.

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October 29, 2010 – Page 80 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

…additional insight into Waterstone Financial: WATERSTONE vs. OTHER BANKING INSTITUTIONS — PERFORMANCE AND CONDITION RATIOS All Banks in Wisconsin 1

WaterStone Bank

All U.S. Banks 2

YTD

12/31/2009

6/30/2010

12/31/2009

6/30/2010

12/31/2009

6/30/2010

% of unprofitable institutions

n/m

26.0%

18.2%

30.7%

20.3%

% of institutions with earnings gains

n/m

35.6%

56.8%

40.3%

61.1%

Yield on earning assets

5.6%

5.3%

5.1%

4.9%

4.8%

Cost of funding earning assets

3.1%

2.4%

1.8%

1.4%

1.3%

1.0%

Net interest margin

2.5%

2.9%

3.3%

3.5%

3.8%

Noninterest income to earning assets

0.6%

1.3%

1.1%

2.3%

2.2%

Performance Ratios (annualized)

Noninterest expense to earning assets

2.2%

2.8%

2.9%

3.0%

3.4%

Net operating income to assets

-0.5%

-0.2%

-0.7%

-0.2%

0.1%

0.6%

Return on assets (ROA)

-0.6%

-0.2%

-0.6%

-0.2%

0.1%

0.6%

Pretax return on assets

-0.7%

-0.2%

-1.0%

-0.3%

0.1%

0.9%

Return on equity (ROE)

-6.8%

-1.7%

-5.8%

-1.4%

0.7%

5.5%

Retained earnings to average equity (YTD only)

-6.8%

-1.7%

-7.3%

-2.7%

3.1%

1.5%

0.9%

2.7%

2.4%

2.5%

2.7%

114.2%

189.0%

124.8%

107.1%

133.0%

90.5%

Net charge-offs to loans Credit loss provision to net charge-offs Earnings coverage of net loan charge-offs Efficiency ratio Assets per employee ($ millions) Cash dividends to net income (YTD only)

0.65x

1.67x

0.67x

0.85x

1.45x

71.8%

68.4%

65.5%

64.1%

55.6%

55.4%

3.6

3.3

5.1

5.0

6.4

6.5

0.0%

-24.1%

-86.9%

480.6%

43.2%

Condition Ratios Loss allowance to loans

1.9%

2.4%

2.7%

2.9%

3.1%

3.4%

37.8%

35.4%

59.0%

63.3%

57.7%

65.1%

Noncurrent assets plus OREO to assets 3

6.8%

7.9%

4.0%

4.1%

3.4%

3.3%

Noncurrent loans to loans

5.1%

6.7%

4.6%

5.4%

5.2%

Net loans and leases to deposits

121.9%

117.5%

93.0%

90.4%

76.5%

78.2%

Net loans and leases to core deposits

153.7%

152.3%

109.2%

105.6%

105.8%

106.4%

8.8%

8.9%

10.0%

10.4%

11.0%

11.3%

Loss allowance to noncurrent loans

Equity capital to assets Core capital (leverage) ratio

8.7%

9.0%

8.7%

8.9%

8.6%

8.8%

Tier 1 risk-based capital ratio

12.5%

12.4%

11.1%

11.7%

12.4%

Total risk-based capital ratio

13.7%

13.2%

13.8%

14.3%

15.1%

Average assets

1,895

1,856

156,403

152,194

13,294,355

13,184,179

Average earning assets

Memoranda ($ in millions)

1,752

1,703

142,735

137,899

11,400,485

11,363,780

Average equity

165

15,161

15,521

1,387,886

1,462,915

Average loans

1,522

1,454

117,908

110,386

7,502,542

7,360,802

Number of institutions reporting: 280 in 1H10 and 281 in 2009. 2 Number of institutions reporting: 7,830 in 1H10 and 8,012 in 2009. 3 OREO = other real estate owned. Source: FDIC, Manual of Ideas analysis.

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October 29, 2010 – Page 81 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Other Investment Candidates in Banking Industry Bank of America (NYSE: BAC) Charlotte, NC, 704-386-5681

Financial: Money Center Banks, Member of S&P 500 Trading Data

www.bankofamerica.com

Consensus EPS Estimates

Price: $11.44 (as of 10/22/10) 52-week range: $11.17 - $19.86 Market value: $115 billion Shares out: 10.0 billion

This quarter Next quarter

Ownership Data

Valuation

Latest $0.24 0.29

Month Ago $0.19 0.29

# of Ests 26 16

P/E FYE 12/31/09 P/E FYE 12/31/10 P/E FYE 12/31/11 P/E FYE 12/30/12

n/m 11x 8x 6x

P / tangible book

1.0x

FYE 12/31/10

1.08

0.94

Insider ownership: <1%

FYE 12/31/11

1.47

1.52

Insider buys (last six months): 12 Insider sales (last six months): 6 Institutional ownership: 64%

FYE 12/30/12 LT growth

2.04 8.7%

2.23 10.0%

24 3

Latest EPS Surprise Report date: Estimated EPS: Actual EPS:

10/19/10 $0.16 $0.27

12/31/03 31 11 16 11 3.55 3.0 23 27 153 96 6 423 15 719 78 90 503 0 48

12/31/04 43 15 21 14 3.64 3.8 (4) 29 197 225 8 600 52 1,110 120 115 775 0 100

Fiscal Years Ended 12/31/05 12/31/06 12/31/07 59 79 87 28 44 53 24 32 21 16 21 15 4.04 4.59 3.29 4.0 4.5 4.4 (12) 15 11 37 36 43 294 302 303 245 216 283 8 9 11 656 817 984 51 78 91 1,292 1,460 1,716 241 218 221 116 162 220 834 945 1,128 0 3 4 101 132 142

12/31/08 86 40 3 2 0.54 4.6 4 33 226 371 13 1,071 104 1,818 207 299 1,135 38 139

12/31/09 78 31 (4) (2) (0.29) 7.7 130 121 396 436 16 1,136 118 2,223 255 482 1,254 37 194

LTME 9/30/10 75 24 (5) (7) (0.81) 8.3 n/a 131 498 429 14 1,156 99 2,328 297 529 1,272 18 212

FQE 9/30/09 19 7 (3) (2) (0.26) 8.6 23 152 416 392 15 1,159 117 2,251 250 509 1,235 59 199

FQE 9/30/10 18 6 (6) (8) (0.77) 10.0 n/a 131 498 429 14 1,156 99 2,328 297 529 1,272 18 212

Ten-Year Stock Price Performance and Trading Volume Dynamics

$60

$50

$40

$30

$20

$10

$0 Sep 01

Sep 02

Sep 03

Sep 04

Sep 05

Sep 06

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October 29, 2010 – Page 82 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

BUSINESS OVERVIEW

SELECTED OPERATING DATA1

Bank of America (BofA) operates through seven segments: Global Banking and Markets (32% of assets; 3Q10 net income: $1.4 billion): #2 share of global investment banking revenue YTD. BofA acquired Merrill Lynch in January 2009. Deposits (19% of assets; 3Q10 net income: $0.2 billion): #1 in U.S. retail deposits with ~5,900 branches in the U.S. Global Commercial Banking (13% of assets; 3Q10 net income: $0.6 billion): Largest commercial bank in the U.S. Global Wealth Mgmt (12% of assets; 3Q10 net income: $0.3 billion): Top wealth manager ($2.2 trillion of client assets). Home Loans and Insurance (9% of assets; 3Q10 net income: -$0.3 billion): #1 mortgage servicer, #2 mortgage originator and #1 home equity originator in the U.S. during 1H10. Global Card Services (7% of assets; 3Q10 net income: $0.5 billion): #2 market share in U.S. credit cards, #1 in Europe. All Other (8% of assets; 3Q10 net income: $0.3 billion): Consists of equity investments, certain residential mortgages, central costs, businesses in liquidation and other items.

INVESTMENT HIGHLIGHTS •

•

• •

Among top “superinvestor” holdings per 13-F filings as of June 30 (at a share price of ~$14.50). Accordingly, BofA is the #1 holding of Tepper’s Appaloosa (13% of 13-F funds), #2 at Paulson (11%) and #6 at Berkowitz’s Fairholme (6%). October sell-off a buying opportunity? The ~15% share price slide ($15+ billion market value loss) is a possible overreaction to recent claims tied to mortgage “put-backs” and “faulty” foreclosures. Shares trade at 1.0x tangible book and 10x 3Q10 annualized net income excluding a goodwill charge. “Does not expect to issue common stock to meet new standards of Basel III,” based on BofA.

INVESTMENT RISKS & CONCERNS •

• •

Legal risks tied to mortgage repurchase requests and “faulty” foreclosures. BofA had $13 billion of unresolved loan repurchase claims (related reserves: $4 billion) at 9/30, but may be liable for much more if mortgage investors prove BofA made improper loan warranties. Claims of faulty foreclosures due to process errors may lead to additional liability. $132 billion of “run-off” loans at 9/30, as reported by BofA (29% home equity, 24% res. mortgage). U.S. accounts for ~80% of assets, making BofA highly dependent on the American consumer.

FYE December 31 2007 2008 2009 ∆ tangible book per share -5% -38% 23% ∆ total assets 18% 6% 22% ∆ employees 3% 15% 18% ∆ net interest income -1% 32% 4% ∆ pre-provision profit2 -21% 7% 69% Assets ($tn) 1.7 1.8 2 2 Selected items as % of to al assets: Securities /trading assets 31% 31% 34% Loans, net 50% 50% 39% Other assets 18% 19% 27% Customer deposits 47% 49% 45% Other liabilities 45% 44% 47% Common equity 8% 8% 9% Revenue ($bn) 66.8 72.8 119.6 % of revenue by type: Net interest income 51% 62% 39% Non-interest income 49% 38% 61% % of revenue by segment (fully tax-equivalent basis): Global banking and markets3 -2% -5% 17% Deposits 24% 24% 12% Global commercial banking3 22% 23% 19% Global wealth/investment mgmt 11% 11% 15% Home loans and insurance 5% 13% 14% Global card services 40% 42% 24% Net income margin by selected segment (fully tax-equivalent basis): Global banking and markets3 291% 128% 35% Deposits 31% 31% 18% Global commercial banking3 28% 27% 13% Global wealth/investment mgmt 26% 18% 14% Home loans and insurance 3% -27% -23% Global card services 15% 4% -19% Total net margin 22% 5% 5% Selected income statement items ($bn): Pre-provision profit2 29.3 31.3 52.9 Loss provision 8.4 26.8 48.6 Net charge-offs 6.5 16.2 33.7 Net income to common2 14.8 2.6 -2.2 Selected credit data: Loan loss reserve ratio 1.3% 2.5% 4.1% NPLs to gross loans4 0.6% 1.8% 3.7% Net charge-off ratio 0.8% 1.8% 3.6% Net interest margin 2.6% 3.0% 2.7% Return on assets 0.9% 0.2% 0.3% Return on tang equity 28% 6% n/m Tang equity/assets (avg) 4% 3% 3% Tier 1 capital ratio 7% 9% 10% ∆ shares out (avg) -2% 4% 68%

YTD 9/30/10 19% 3% 1% -8% -31% 2.3 38% 3 % 24% 42% 49% 9% 88.7 45% 55% 26% 12% 9% 14% 11% 22% 24% 15% 26% 9% -39% 12%2 11%2 36.9 23.3 27.6 8.4 4.7% 3.5% 3.8% 2.8% 0.5%2 11%2 4% 11% 31%

Figures reflect acquisitions of Merrill Lynch (2009) and Countrywide (2008). YTD figures are on a “managed basis” (includes the impact of card securitization activity; fully-taxable revenue); 2007-09 is based on GAAP. 2 YTD excludes a $10.4 billion goodwill impairment charge taken in 3Q10. 3 2007-09 and YTD may not be comparable. 4 NPL=non-performing loans.

RATINGS

      

THE BOTTOM LINE With the BofA share price down nearly 15% in October, investors have the opportunity to buy the company at a 20+% discount to the price at June 30, when “superinvestors” Paulson, Tepper and Berkowitz reported owning large stakes. While recent issues related to mortgage repurchase requests and “faulty” foreclosures may have increased risk, valuation is enticing. © 2008-2010 by BeyondProxy LLC. All rights reserved.

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October 29, 2010 – Page 83 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Bank of America – OUR ESTIMATE OF THE EQUITY FAIR VALUE RANGE

Valuation methodology Conservative case metrics: Tangible common equity as of 9/30/2010 Fair value multiple Estimated equity value Base case metrics: "Normalized" net income to common Fair value multiple Estimated equity value Aggressive case metrics: 3Q10 annualized pre-provision, pretax profit2 Fair value multiple Estimated equity value

Conservative

Base Case

Aggressive

1.0x tangible common equity

10x “normalized” net income (based on 15% return on tangible common equity)1

6x 3Q10 annualized pre-provision, pretax profit2

$114 billion 1.0x $114 billion $17 billion 10x $171 billion

Estimated fair value of the equity of Bank of America3 Implied equity fair value to tangible book Implied equity value to 3Q10 annualized net income4

$114 billion $11 per share 1.0x 10x

$171 billion $17 per share 1.5x 16x

$41 billion 6x $244 billion $244 billion $24 per share 2.1x 22x

The annualized return on tangible common equity was ~11% in 1Q-3Q10, excluding goodwill impairment charges. Pre-provision, pretax profit is stated before the provision for credit losses, income taxes, minority interests, and preferred dividends. It is stated before a $10.4 billion goodwill impairment charge in 3Q10 "related to limits to be placed on debit interchange fees under the financial reform legislation enacted in July 2010, which will reduce future revenue in the Global Card Services business." 3 4 Based on 10.0 billion common shares outstanding. Net income excludes the above-mentioned goodwill impairment charge. Source: Company filings, Manual of Ideas analysis, assumptions and estimates. 2

BUSINESS SEGMENT PROFITABILITY

Periods prior to January 1, 2010 are presented on a managed basis and assumes that credit card loans that were securitized were not sold and presented earnings on these loans in a manner similar to the way loans that have not been sold (i.e., held loans) were presented. Source: Company presentation dated October 19, 2010; available at http://bit.ly/aF1mix

BALANCE SHEET DRIVERS OF NET INTEREST INCOME

Source: Company presentation dated October 19, 2010; available at http://bit.ly/aF1mix

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Value-oriented Equity Investment Ideas for Sophisticated Investors

…additional insight into Bank of America: SELECTED CAPITAL MEASURES

Source: Company presentation dated October 19, 2010; available at http://bit.ly/aF1mix

SELECTED CREDIT TRENDS

Credit card shown on a managed basis prior to 2010. FHA insured loans are excluded for comparison purposes. Includes commercial domestic excluding small business and commercial foreign. Source: Company presentation dated October 19, 2010; available at http://bit.ly/aF1mix

2 3

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October 29, 2010 – Page 85 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

BNP Paribas (Paris: BNP, OTC: BNPQY) Paris, France, +33-140-146-358

Financial: Major International Banks Trading Data

www.bnpparibas.com

Consensus EPS Estimates

Price: €53.14 (as of 10/22/10) 52-week range: €40.81 - €60.38 Market value: €63 billion Shares out: 1.2 billion Ownership Data

Valuation

This quarter Next quarter

Latest n/a n/a

Month Ago n/a n/a

# of Ests n/a n/a

P/E FYE 12/31/09 P/E FYE 12/31/10 P/E FYE 12/31/11 P/E FYE 12/30/12

11x 12x 11x n/a

P / tangible book

1.1x

FYE 12/31/10

€ 4.38

n/a

Insider ownership: <1%

FYE 12/31/11

€ 4.97

n/a

Insider buys (last six months): n/a Insider sales (last six months): n/a Institutional ownership: n/a

FYE 12/30/12 LT growth

n/a n/a

Latest EPS Surprise Report date: Estimated EPS: Actual EPS:

n/a n/a n/a

Operating Performance and Financial Position (€ billions, except per share data) Interest income Interest expense Pretax income Net income Diluted EPS Shares out (avg) Cash from ops Cash Fin. assets-for sale Fin. assets-other Fixed assets, net Loans, other assets Intangible assets Total assets Debt - subordinated Debt - other Deposits, other liab. Minority interest Common equity

12/31/03 27 21 6 4 4.28 873

12/31/04 28 17 7 5 5.85 841

6 5 n/a n/a 7 222 6 783 13 83 211 5 28

6 7 76 540 8 285 8 1,003 13 78 312 5 32

Fiscal Years Ended 12/31/05 12/31/06 12/31/07 32 45 59 24 36 49 8 11 11 6 7 8 6.97 7.95 8.42 830 894 898 (3) 7 93 700 9 346 9 1,258 17 85 366 5 41

15 10 97 745 13 468 12 1,440 18 122 443 5 50

13 19 113 932 13 516 12 1,695 19 141 517 6 54

12/31/08 59 45 4 3 2.97 925

12/31/09 47 25 9 6 5.20 1,058

LTME 6/30/10 47 24 12 7 6 1,078

1HE 6/30/09 23 14 5 3 2.87 972

1HE 6/30/10 24 12 8 4 3.57 1,183

30 39 131 1,192 15 564 13 2,076 18 158 600 6 53

32 56 221 829 17 768 13 2,058 28 211 826 11 70

17 64 226 952 17 788 14 2,237 28 205 832 11 73

31 50 206 1,011 11 819 13 2,289 30 212 847 10 65

16 64 226 952 17 788 14 2,237 28 205 832 11 73

Ten-Year Stock Price Performance and Trading Volume (adjusted for dividends)

€100 €90 €80 €70 €60 €50 €40 €30 €20 €10 €0 Oct 03

Oct 04

Oct 05

Oct 06

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October 29, 2010 – Page 86 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

BUSINESS OVERVIEW

SELECTED OPERATING DATA1

BNP Paribas has three segments: Retail Banking (1H10 pre-tax income: €2.5 billion): covers French retail banking (FRB), Italian Retail Banking (BNL banca commerciale) and the new personal and business retail banking entity in Belgium and Luxembourg (Belux Retail Banking). It also includes retail financial services, which is split into two sub-divisions: Personal Finance providing credit solutions to private individuals and Equipment Solutions providing credit and other services to corporates. It also includes retail banking activities in the U.S. (BancWest) and in emerging markets. Corporate and Investment Banking (1H10 pre-tax income: €3.0 billion): includes Advisory & Capital Markets (equities and equity derivatives, fixed income & forex, corporate finance) and financing. Investment Solutions (1H10 pre-tax income: €0.9 billion): includes Private Banking; Investment Partners – covering all of the group’s asset Management businesses; Personal Investors – providing private individuals with independent financial advice and investment services; securities services to management companies, financial institutions and other corporations; and Insurance and real estate services. Other Activities (1H10 pre-tax income: €1.1 billion): mainly comprises private equity, principal investments, the Klépierre property investment company, and corporate functions. BNP acquired 75% of Fortis Banque for €5.7 billion in May 2009. The Belgian government owns a blocking minority interest of 25% plus one share.

INVESTMENT HIGHLIGHTS •

•

Acquisition of Fortis expands business into Belgium and Luxembourg, from existing domestic markets in France and Italy. “Fortis’ integration successful, synergies ahead of the announced schedule.” BNP is targeting a €900 million of synergies by 2012, of which the majority has yet to materialize. This indicates net income may continue to grow from 1H10. Shares trade at 1.1x tangible book despite midteens returns on equity in the first half of 2010 and a strong and defensible position in core domestic baking markets of France and Belgium.

INVESTMENT RISKS & CONCERNS •

Execution risk. While BNP may have earnings upside potential from Fortis-related synergies, only €120 million of synergies have been realized by yearend 2009. Expected total restructuring costs are €1.3 billion, of which ~60% is expected in 2010.

FYE December 31 ∆ total assets ∆ interest income ∆ diluted EPS Assets (€tn) Selected items as % of total assets: Financial assets - at fair value Financial assets – available for sale Loans, net Customer deposits Debt Common equity Tangible common equity Revenue (€bn) % of revenue by segment: French retail banking BNL banca commerciale Belux retail banking Personal Finance Other activities Total Retail Banking Advisory & capital markets Financing Total Corporate and Investment Banking Investment Solutions Other Activities Pre-tax income by segment (€bn): French retail banking BNL banca commerciale Belux retail banking Personal Finance Other activities Total Retail Banking Advisory & capital markets Financing Total Corporate and Investment Banking Investment Solutions Other Activities Total pre-tax income Total pre-tax income margin % of revenue by geography: France Other European Countries Americas Other Tier 1 capital ratio ∆ shares out (avg)

YTD 6/30/10 -2% 4% 24% 2.2 43% 10% 35% 37% 10% 3% 3% 22.7 15% 7% 7% 11% 12% 52% 19% 10% 28% 13% 7% 1.0 0.2 0.4 0.4 0.5 2.5 1.6 1.4 3.0 0.9 1.1 7.5 33% 36% 43% 13% 8% 11% 22%

MAJOR HOLDERS Insiders <1% | Belgian government 10%

RATINGS

      

THE BOTTOM LINE BNP made a transformative acquisition in 2009 when it acquired 75% of Fortis, which expanded its business into Belgium and Luxembourg, from existing domestic markets in France and Italy. About 40% of 1H10 pre-tax profit is from investment/ corporate banking and about one third from retail banking. Shares appear inexpensive trading near tangible book and 7-8x 2Q10 annualized net income. If BNP can sustain the mid-teens ROE it generated in 1H10, investors may get rewarded. © 2008-2010 by BeyondProxy LLC. All rights reserved.

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October 29, 2010 – Page 87 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

…additional insight into BNP Paribas: OUR ESTIMATE OF THE EQUITY FAIR VALUE RANGE

Valuation methodology

Conservative

Base Case

Aggressive

1.0x tangible common equity

10x “normalized” net income (based on 15% return on tangible common equity)1

15x “normalized” net income (based on 15% return on tangible common equity)1

Conservative case metrics: Tangible common equity as of 6/30/2010

€58 billion

Fair value multiple

1.0x

Estimated equity value

€58 billion

Base case metrics: "Normalized" net income to common

€9 billion

Fair value multiple

10x

Estimated equity value

€88 billion

Aggressive case metrics: "Normalized" net income to common

€9 billion

Fair value multiple

15x

Estimated equity value

€132 billion

Estimated fair value of the equity of BNP Paribas2

€58 billion

€88 billion

€132 billion

€49 per share

€74 per share

€111 per share

Implied equity fair value to tangible book

1.0x

1.5x

2.3x

Implied equity value to 2Q10 annualized net income

6.9x

10.4x

15.6x

After-tax ROE was 14% in 1H10 as reported by BNP. Based on 1.19 billion common shares outstanding. Source: Company filings, Manual of Ideas analysis, assumptions and estimates.

OVERVIEW OF BNP PARIBAS, INCLUDING FORTIS

* Operating divisions. ** Including 2/3 of Private Banking for FRB (including PEL/CEL effects), BNL bc and BeLux RB. Source: Company presentation dated September 29, 2010; available at http://bit.ly/9SHnTb

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October 29, 2010 – Page 88 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

…additional insight into BNP Paribas: NET INCOME VERSUS SELECTED PEERS, H1 2010

Average exchange rates in 1H10. Source: Company presentation dated September 29, 2010; available at http://bit.ly/9SHnTb

RETURN ON EQUITY VERSUS SELECTED PEERS, H1 2010

* 2Q10 figure. Source: Company presentation dated September 29, 2010; available at http://bit.ly/9SHnTb

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October 29, 2010 – Page 89 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Citigroup (NYSE: C) New York, NY, 212-559-1000

Financial: Money Center Banks, Member of S&P 500 Trading Data

www.citigroup.com

Consensus EPS Estimates

Price: $4.11 (as of 10/22/10) 52-week range: $3.11 - $5.07 Market value: $119 billion Shares out: 29.0 billion

Valuation

Latest $0.08 0.10

Month Ago $0.08 0.11

FYE 12/31/10

0.39

Insider ownership: <1%

FYE 12/31/11

0.46

Insider buys (last six months): 13 Insider sales (last six months): 10 Institutional ownership: 43%

FYE 12/30/12 LT growth

0.55 25.0%

0.56 25.0%

17 1

This quarter Next quarter

Ownership Data

# of Ests 21 10

P/E FYE 12/31/09 P/E FYE 12/31/10 P/E FYE 12/31/11 P/E FYE 12/30/12

n/m 11x 9x 7x

P / tangible book

1.0x

Latest EPS Surprise Report date: Estimated EPS: Actual EPS:

10/18/10 $0.06 $0.07

Operating Performance and Financial Position ($ billions, except per share data) Interest income Interest expense Pretax income Net income Diluted EPS Shares out (avg)

12/31/03 55 17 26 18 3.27 5.1

12/31/04 64 22 23 17 3.07 5.1

(15) 21 427 n/a n/a 774 41 1,264 181 163 822 1 97

(2) 24 505 n/a n/a 908 47 1,484 210 208 957 1 108

Fiscal Years Ended 12/31/05 12/31/06 12/31/07 76 94 121 37 56 76 34 29 1 25 21 3 3.82 4.09 0.53 5.1 4.9 4.9 32 24 545 n/a n/a 878 48 1,494 242 217 922 1 111

(0) 27 719 n/a n/a 1,089 49 1,884 349 288 1,127 1 119

12/31/08 106 53 (50) (30) (6.39) 5.3

12/31/09 77 28 (16) (9) (0.76) 11.6

LTME 9/30/10 78 25 (3) 1 (0.02) 15.9

FQE 9/30/09 19 7 (4) (3) (0.23) 12.1

FQE 9/30/10 19 6 3 2 0.09 28.9

96 29 732 256 n/a 874 47 1,938 205 292 1,299 71 71

(56) 25 732 306 n/a 752 41 1,857 154 340 1,210 0 152

n/a 26 727 340 n/a 852 37 1,983 192 387 1,241 0 163

6 26 756 246 n/a 820 41 1,889 178 380 1,190 0 141

n/a 26 727 340 n/a 852 37 1,983 192 387 1,241 0 163

(71) 38 882 215 n/a 988 64 2,187 304 340 1,430 0 113

Ten-Year Stock Price Performance and Trading Volume Dynamics

$70 $60 $50 $40 $30 $20 $10 $0 Sep 01

Sep 02

Sep 03

Sep 04

Sep 05

Sep 06

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October 29, 2010 – Page 90 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

BUSINESS OVERVIEW

SELECTED OPERATING DATA1

Citigroup operates through three major segments: Citicorp (63% of assets; 3Q10 net income: $3.6 billion): Strong non-U.S. presence with ~26% of segment assets in Asia, ~19% in EMEA and ~12% in Latin America. Includes Regional Consumer Banking (4,200+ branches; retail/local commercial banking, Citi cards, branch services), Securities and Banking (investment banking and related services) and Transaction Services (clearing, custody and related services). Citi Holdings (22% of assets; 3Q10 net income: -$1.1 bn): Consists of non-core assets that management plans to “exit as quickly as practicable.” Includes Local Consumer Lending (~70% of segment assets, mostly U.S. mortgages; 1,800+ branches in North America), a Special Asset Pool (~23% of segment assets, mostly corporate/mortgage loans) and Brokerage/Asset Mgmt (~7% of segment assets including a 49% stake in MS Smith Barney: $10+ billion carrying value). Corporate/Other (15% of assets; 3Q10 net income: -$0.3 billion): Central functions and discontinued operations.

FYE December 31 ∆ tangible book per share ∆ total assets ∆ employees ∆ net interest income ∆ pre-provision profit Assets ($tn) Selected items as % of total assets: Securities/trading assets Loans, net Other assets Customer deposits Other liabilities Common equity Revenue ($bn) % of revenue by type: Net interest income Non-interest income % of revenue by segment: Citicorp - regional consumer banking Citicorp - securities and banking Citicorp - transaction services Citi Holdings Corporate and other Net income margin by segment: Citicorp - regional consumer banking Citicorp - securities and banking Citicorp - transaction services Citi Holdings Corporate and other Total net margin Selected income statement items ($bn): Pre-provision profit Loss provision Net charge-offs Net income to common Selected credit data: Loan loss reserve ratio NPLs/gross loans2 Net charge-off ratio – consumer loans Net charge-off ratio – corporate loans Net interest margin Return on assets Return on tang equity Tang equity/assets (avg) Tier 1 capital ratio ∆ shares out (avg)

INVESTMENT HIGHLIGHTS •

•

“Has the ability to earn a dollar a share, which would put it at $10” according to Bruce Berkowitz of Fairholme.* A $1.00 EPS implies a 20+% ROE. Citigroup accounts for 8% of Fairholme funds. A “superinvestor” favorite. Berkowitz, Paulson, Ackman, Tepper and Falcone, among others, owned Citigroup as of June 30 (at a share price of ~$3.75) which was one of their top respective 13-F holdings. Market doesn’t “fully appreciate” according to Bill Ackman of Pershing Square:** 1) a “$21 billion operating deferred tax asset” and 2) “$24-30 billion of excess capital supporting the wind down of Citi Holdings that will be available to be returned to shareholders as these assets are liquidated.” Guiding for Citi Holdings’ assets of “below $400 billion” by yearend 2010 (<20% of total assets).

INVESTMENT RISKS & CONCERNS • • •

Citi Holdings’ assets (~22% of total) may require further significant write-downs. Management’s plan to sell or run-off assets carries execution risks. May not begin returning capital to shareholders before 2012, as stated by management. This may contrast with assertions of a “strong balance sheet.” Overhang from share sales by U.S. government (plans to sell up to 1.5 billion shares by 12/31/10).

2007 -29% 16% 11% 15% -48% 2.2

2008 -59% -11% -14% 18% -195% 1.9

2009 -6% -4% -18% - % n/m 1.9

YTD 9/30/10 -1% 5% -7% -9 -30% 2.0

50% 35% 15% 38% 57% 5% 77.3

44% 34% 22% 40% 56% 4% 51.6

49% 30% 21% 45% 47% 8% 80.3

48% 31% 21% 4 % 49% 8% 68.2

59% 41%

104% -4%

61% 39%

37% 33% 10% 23% -3%

53% 48% 19% -16% -4%

31% 34% 12% 36% -13%

36% 29% 11% 22% 2%

21% 27% 30% -54% -3% 5%

-10% 25% 34% 443% 4% -54%

10% 34% 38% -30% -10% -2%

14% 32% 37% -20% 0% 14%

18.6 16.8 9.9 3.6

-17.6 33.7 19.0 -29.4

32.5 38.8 30.7 -9.2

33.3 20.6 24.0 9.3

2.1% 1.2% 1.9% 0.3% 2.4% 0.2% 6% 3% 7% 0%

4.3% 3.2% 3.3% 0.8% 3.1% n/m n/m 2% 12% 7%

6.1% 5.4% 5.4% 3.1% 3.0% n/m n/m 4% 12% 120%

6.7% 3.4% n/a n/a 3.1% 0.6% 11% 6% 13% 276%

YTD figures are on a “managed basis” (includes the impact of card securitization activity), while 2007-09 figures are on a GAAP basis. NPL=non-performing loans (referred to as “non-accrual” loans by Citigroup).

RATINGS

      

Source: WealthTrack interview 8/27/10 (transcript: http://bit.ly/d7wNVn). Source: Pershing Square 1Q10 investor letter.

THE BOTTOM LINE Citigroup – a superinvestor favorite owned by the likes of Berkowitz, Paulson and Ackman – may have earning power of $1 per share, which implies a P/E of ~4x. While this sounds optimistic, investors could be missing the positive earnings/capital impact from asset reductions at Citi Holdings. As this “bad” segment reduces in size, the high-ROE Citicorp segment should increasingly drive overall company performance. Moreover, potential excess capital from Citi Holdings may get released. © 2008-2010 by BeyondProxy LLC. All rights reserved.

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October 29, 2010 – Page 91 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

…additional insight into Citigroup: OUR ESTIMATE OF THE EQUITY FAIR VALUE RANGE ($ in billions)

Valuation methodology

Conservative

Base Case

Aggressive

1.0x tangible common equity

10x “normalized” net income to common (based on implied net income assuming a 15% return on tangible common equity)1

6x 3Q10 annualized preprovision, pretax profit2

Conservative case metrics: Tangible common equity as of 9/30/2010 Fair value multiple Estimated equity value

$125 billion 1.0x $125 billion

Base case metrics: “Normalized” net income to common3

$19 billion

Fair value multiple

10x

Estimated equity value

$188 billion

Aggressive case metrics: 3Q10 annualized pre-provision, pretax profit

$37 billion

Fair value multiple

Estimated equity value

$221 billion $125 billion

$188 billion

$221 billion

$4.30 per share

$6.50 per share

$7.60 per share

Implied equity fair value to tangible book

1.0x

1.5x

1.8x

Implied value to 3Q10 annualized net income

14x

22x

26x

Estimated fair value of the equity of Citigroup4

The annualized return on tangible common equity is ~11% based on YTD 2010 through September. Pre-provision, pretax profit is stated before the provision for credit losses, income taxes, minority interests, and preferred dividends. 3 3Q10 net income was $3.3 billion ($13.2 billion annualized) excluding the Citi Holdings segment. 4 Based on 29.0 billion common shares outstanding. Source: Company filings, Manual of Ideas analysis, assumptions and estimates. 2

KEY CAPITAL METRICS

Preliminary. Source: Company presentation dated October 18, 2010; available at http://citi.us/cRa1vl

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October 29, 2010 – Page 92 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

…additional insight into Citigroup: SELECTED TROUBLED LOAN STATISTICS

Periods prior to 1Q10 are on a managed basis. Loan loss reserves include provision for unfunded lending commitments and credit reserve builds/releases. Source: Company presentation dated October 18, 2010; available at http://citi.us/cRa1vl

CONSUMER CREDIT TRENDS 1

Periods prior to 1Q10 are on a managed basis. Note: LLR and NCL ratios exclude loans recorded at fair value since 1Q10. SAP consumer NCLs are booked in North America. Source: Company presentation dated October 18, 2010; available at http://citi.us/cRa1vl

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October 29, 2010 – Page 93 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

HSBC Holdings (London: HSBA, NYSE: HBC, Hong Kong: 005) London, EN, United Kingdom, 44-20-799-8888

Financial: Regional Banks Trading Data

www.hsbc.com

Consensus EPS Estimates

Price: $52.21 (as of 10/22/10) 52-week range: $43.25 - $64.42 Market value: $184 billion Shares out: 3.5 billion

This quarter Next quarter

Ownership Data

Valuation

Latest n/a n/a

Month Ago n/a n/a

# of Ests n/a n/a

P/E FYE 12/31/09 P/E FYE 12/31/10 P/E FYE 12/31/11 P/E FYE 12/30/12

31x 14x 10x n/a

P / tangible book

1.7x

FYE 12/31/10

3.66

Insider ownership: <1%

FYE 12/31/11

5.17

6.04

Insider buys (last six months): 0 Insider sales (last six months): 0 Institutional ownership: 3%

FYE 12/30/12 LT growth

n/a 30.7%

Latest EPS Surprise

n/a 1

Report date: Estimated EPS: Actual EPS:

n/a n/a n/a

Operating Performance and Financial Position ($ billions, except per share data) Interest income Interest expense Pretax income Net income Diluted EPS Shares out (avg)

12/31/03 40 14 10 7 3.43 2.1

12/31/04 50 19 17 13 5.66 2.2

18 8 2 904 16 76 29 1,034 154 21 785 0 74

60 10 117 825 16 262 36 1,266 191 38 948 0 90

Fiscal Years Ended 12/31/05 12/31/06 12/31/07 60 76 92 29 41 55 20 21 23 15 16 19 6.74 6.93 8.17 2.2 2.2 2.3 7 14 246 846 15 251 35 1,407 226 46 1,042 0 94

79 13 333 n/a 16 1,461 37 1,861 230 23 1,499 0 108

12/31/08 91 49 8 6 2.33 2.4

12/31/09 62 21 6 6 1.69 3.3

LTME 6/30/10 58 53 13 10 2.57 3.3

FQE 6/30/08 47 26 10 8 3.25 2.3

FQE 6/30/10 29 9 10 7 1.89 3.5

30 52 427 n/a 14 2,006 27 2,527 180 29 2,225 0 94

7 61 421 n/a 14 1,839 30 2,364 147 30 2,059 0 128

71 72 404 n/a 13 1,902 28 2,418 154 28 2,101 0 136

n/a 13 478 n/a 16 1,998 41 2,547 230 32 2,158 0 127

39 72 404 n/a 13 1,902 28 2,418 154 28 2,101 0 136

91 22 457 n/a 16 1,821 40 2,354 247 25 1,955 0 128

Ten-Year Stock Price Performance and Trading Volume Dynamics

$120

$100

$80

$60

$40

$20

$0 Sep 01

Sep 02

Sep 03

Sep 04

Sep 05

Sep 06

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October 29, 2010 – Page 94 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

BUSINESS OVERVIEW

SELECTED OPERATING DATA1 FYE December 31 ∆ book value per share ∆ total assets ∆ employees ∆ diluted EPS ∆ dividend/share Assets ($tn) Selected items as % of total assets: Loans, net2 Customer deposits Common equity Tangible common equity % of total assets by segment: Global banking and markets Personal financial services Commercial banking Private banking Other Intra-HSBC items3 Pretax income by segment ($bn): Global banking and markets Personal financial services Commercial banking Private banking Other Total pretax income Net income to common ($bn) IS provision for credit losses ($bn) % of total assets by geography: Europe North America Hong Kong Other Intra-HSBC items3 Select credit data: Loan loss reserve ratio NPLs to gross loans4 Loan loss reserve/NPLs Net interest margin Return on tang equity Tang equity/assets (avg) Tier 1 capital ratio ∆ shares out (avg)

HSBC operates in five main segments: Global Banking and Markets (~75% of total assets*; 1H10 pretax income: $5.6 billion): provides wholesale banking services such as capital markets, advisory and transaction services, asset management and principal investing. Personal Financial Services (~20% of assets; pretax income: $1.2 billion): provides ~98 million individual and selfemployed customers with financial services in over 60 markets worldwide. Typical offerings are personal banking and wealth management services. HSBC is a major global credit card issuer with 100+ million credit cards in force. Commercial Banking (~10% of assets; pretax income: $3.2 billion): 3+ million customers in 63 countries; products include lending, cash management, trade, treasury, insurance, wealth management, cards and other services. Private Banking (~5% of assets; pretax income: $0.6 billion): provides private banking and trustee services. Other (8% of assets; pretax income: $0.5 billion)

INVESTMENT HIGHLIGHTS •

• •

•

Strong, global financial services brand with a history of success in Europe and the U.S., as well as Asia (17% of assets are located in Hong Kong). Managed to stay profitable through the cycle, averaging $5 billion of net income to common after special items in each of 2008 and 2009. Grew “underlying” pretax income by ~30% y-y to $9.6 billion in 1H10. While net operating income declined 11%, HSBC cut loan loss provisions by ~50% to $7.5 billion. Operating costs rose 5%. Assuming a 15% return on tangible equity puts HSBC at an 11x P/E, based on implied net income of ~$16 billion (1H10 annualized net income: $13+ billion). HSBC generated nearly $20 billion of net income in 2007 on a similar-size asset base as now. Owns significant equity investments including a 19% stake in Bank of Communications and a 17% stake in Ping An Insurance, both based in China. 1H10 share of profit in associates: $1.2 billion.

•

Shares trade at 1.7x tangible book. While HSBC has a leading emerging markets presence and good historic returns on equity, the shares are not cheap. Upcoming exits by both Chairman Green and CEO Geoghegan, with the former going into politics and the latter retiring. Douglas Flint (55) becomes new Chairman in December and Stuart Gulliver (51) the new CEO “early next year.”

2007 16% 27% 6% 17% 14% 2.4

2008 -31% 7% -1% -71% 7% 2.5

2009 -4% -6% -7% -17% -63% 2.4

1H10 11% 0% -3% 81% 0% 2.4

47% 48% 6% 4%

42% 47% 5% 4%

37% 44% 4% 3%

38% 49% 5% 4%

37% 47% 6% 5%

53% 29% 12% 4% 2% 0%

58% 25% 11% 4% 2% 0%

79% 21% 10% 5% 6% -21%

71% 23% 11% 5% 6% -17%

74% 21% 11% 5% 8% -18%

5.8 9.5 6.0 1.2 -0.4 22.1 15.7 10.6

6.1 5.9 7.1 1.5 3.5 24.2 19.0 17.2

3.5 -11.0 7.2 1.4 8.2 9.3 5.5 24.9

10.5 -2.1 4.3 1.1 -6.7 7.1 5.6 26.5

5.6 1.2 3.2 0.6 0.5 11.1 6.6 7.5

45% 28% 15% 13% 0%

50% 22% 14% 14% 0%

55% 24% 16% 15% -10%

54% 20% 17% 16% -7%

53% 21% 17% 17% -8%

1.5% 1.6% 1.0 3.1% 24% 4% 9% 2%

1.9% 2.0% 1.0 2.9% 24% 4% 9% 3%

2.5% 2.6% 0.9 2.9% 7% 3% 8% 2%

2.8% 3.3% 0.8 2.9% 7% 3% 11% 20%

2.4% 3.0% 0.8 2.8% 12% 4% 10% 13%

1 Based on IFRS. 2 Excludes loans and advances to banks. Yearend 2009 geographic breakdown: ~50% Europe, ~23% North America, and ~20% Asia. 3 2006 and 2007 breakdown includes full allocation to segments. 4 NPL=non-performing loans (“customer impaired loans”).

MAJOR HOLDERS Insiders <1% | FMR <1% | Dodge & Cox <1% | CapRe <1%

RATINGS

INVESTMENT RISKS & CONCERNS

2006 15% 24% 11% 3% 10% 1.9

      

Stated on a segment level; “Intra-HSBC assets” comprised negative 18%.

THE BOTTOM LINE HSBC benefits from a strong global brand that has enabled it to develop major financial services businesses in Europe, the U.S. and Asia (out of Hong Kong). Attractive growth prospects, and a rapidly improving business performance in the first half of the year, are certainly factors contributing to a valuation of 1.7x tangible book. While a premium valuation is deserved, we are not compelled to own the shares at this price. Compared to some of its peers, HSBC looks rather expensive. © 2008-2010 by BeyondProxy LLC. All rights reserved.

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October 29, 2010 – Page 95 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

…additional insight into HSBC: OUR ESTIMATE OF THE EQUITY FAIR VALUE RANGE

Valuation methodology

Conservative

Base Case

Aggressive

1.0x tangible common equity

10x “normalized” net income (based on 15% return on tangible common equity)1

15x “normalized” net income (based on 15% return on tangible common equity)1

$16 billion

Conservative case metrics: Tangible common equity as of 6/30/2010

$108 billion

Fair value multiple

1.0x

Estimated equity value

$108 billion

Base case and aggressive case metrics: "Normalized" net income to common Fair value multiple

10x

15x

$162 billion

$243 billion

$108 billion $31 per ADS

$162 billion $46 per ADS

$243 billion $69 per ADS

1.0x

1.5x

2.3x

…1H10 (annualized)

12x

18x

…year to June 2010

12x

18x

27x

…2006-09 (average)

14x

21x

…2006-09 (peak: 2007)

13x

Estimated equity value Estimated fair value of the equity of HSBC2 Implied equity fair value to tangible book Implied ratios based on net income to common in…

Average returns on tangible common equity through the cycle were ~15% (2006-09 period). The 1H10 annualized return on tangible common equity is ~12%. 2 Based on 3.5 billion ADS outstanding (1ADS=5 shares). Source: Company filings, Manual of Ideas analysis, assumptions and estimates.

KEY FINANCIAL TARGETS

On an underlying basis: underlying results eliminate the effects of foreign currency translation differences, acquisitions and disposals of businesses and changes in fair value (FV) of own debt due to credit spread. This excludes the changes in FV of own debt due to credit spread. Source: Company presentation dated September 13, 2010; available at http://bit.ly/cq8Y3v

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October 29, 2010 – Page 96 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

…additional insight into HSBC: HSBC PERSONAL FINANCIAL SERVICES – LOSS IMPAIRMENT CHARGES AND OTHER CREDIT RISK PROVISIONS

LICs for H1 2009 and H2 2009 on an underlying basis. 2 LICs as a % of average advances on a net basis. Source: Company presentation dated September 13, 2010; available at http://bit.ly/cq8Y3v

Rest of Asia-Pacific.

HSBC IN “NEW NORMAL”

Source: Company presentation dated September 13, 2010; available at http://bit.ly/cq8Y3v

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October 29, 2010 – Page 97 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

ING Group (Amsterdam: INGA, NYSE: ING) Amsterdam, Netherlands, 31-20-541-5411

Financial: Insurance (Life) Trading Data

www.ing.com

Consensus EPS Estimates

Price: $11.15 (as of 10/22/10) 52-week range: $6.78 - $17.71 Market value: $43 billion Shares out: 3,832 million

This quarter Next quarter

Ownership Data

Valuation

Latest n/a n/a

Month Ago n/a n/a

# of Ests n/a n/a

P/E FYE 12/31/09 P/E FYE 12/31/10 P/E FYE 12/31/11 P/E FYE 12/30/12

n/m 7x 5x n/a

P / tangible book

0.8x

FYE 12/31/10

1.68

Insider ownership: 1%

FYE 12/31/11

2.33

Insider buys (last six months): 0 Insider sales (last six months): 0 Institutional ownership: 2%

FYE 12/30/12 LT growth

n/a n/a

Latest EPS Surprise Report date: Estimated EPS: Actual EPS:

n/a n/a n/a

Operating Performance and Financial Position ($ billions, except per share data) Interest income Interest expense Pretax income Net income Diluted EPS Shares out (avg)

12/31/03 91 2 8 6 2.41 2.6

12/31/04 96 1 12 9 3.40 2.8

91 n/a n/a n/a 4 131 0 1,097 0 148 916 3 30

106 n/a n/a n/a 8 1,225 1 1,234 33 117 1,050 0 34

Fiscal Years Ended 12/31/05 12/31/06 12/31/07 100 104 109 1 1 2 12 14 15 10 11 13 3.59 3.82 4.86 2.8 2.8 2.8 49 n/a n/a n/a 8 1,619 5 1,632 45 123 1,411 0 52

13 n/a n/a n/a 9 1,714 5 1,727 42 119 1,513 0 54

12/31/08 88 1 (7) (4) (1.85) 2.7

12/31/09 66 1 (1) (0) (1.06) 2.7

LTME 6/30/10 72 1 5 5 0.18 3.0

FQE 6/30/09 14 0 (0) 0 0.11 2.6

FQE 6/30/10 21 0 2 2 0.45 3.8

18 n/a n/a n/a 9 1,853 10 1,871 44 150 1,642 0 35

(39) n/a n/a n/a 9 1,617 8 1,634 33 183 1,367 0 51

(39) n/a n/a 731 9 1,044 9 1,792 38 191 1,498 0 66

(1) n/a n/a 640 9 1,015 9 1,673 37 188 1,403 0 45

(43) n/a n/a 731 9 1,044 9 1,792 38 191 1,498 0 66

16 n/a n/a n/a 9 1,832 8 1,849 38 105 1,653 0 52

Ten-Year Stock Price Performance and Trading Volume Dynamics

$50 $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 Sep 01

Sep 02

Sep 03

Sep 04

Sep 05

Sep 06

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October 29, 2010 – Page 98 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

BUSINESS OVERVIEW

SELECTED OPERATING DATA — ING (GROUP)

ING Group operates in two segments: Banking (75% of assets; 1H10 net income: €2.3 bn): Includes Retail Banking (€183bn risk-weighted assets; ~60% of segment profit, largely from Netherlands, Belgium and ING Direct), Commercial Banking (€138bn RWAs; ~35% of segment profit, mainly from Netherlands/Belgium), Real Estate (€18bn RWAs; ~breakeven) and central functions. Insurance (25% of assets; 1H10 net income: €68 mn): Includes life and non-life insurance. ING is #3 U.S. provider of defined contribution retirement plans and the #2 provider of pensions in Latin America. €375 billion in AUM at 6/10.

1 2

INVESTMENT HIGHLIGHTS

•

EU-mandated separation of banking/insurance segments by yearend 2013 creates value-catalyst, as the sum of the two parts appears to materially exceed the recent market value of the company. Aims to have the “businesses operating on an arm’s-length, stand-alone basis” by end of 2010. Insurance divestment options: IPO, sale or spin-off. Value of bank business alone may approximate recent market value based on 10x “normalized” net income of €3 billion. While segment tangible equity of €31 billion may be overstated relative to a standalone basis, it indicates potential value. Insurance business may be worth €20+ billion assuming 10x net income of €2+ billion – it made €4 billion in 2006/07 when it had ~€320 million of assets, which approximates the recent asset base. Reported segment tangible equity is €17 billion with deferred acquisition costs, and €5 billion without. Retained earnings/divestment proceeds to allow non-dilutive buyback of Dutch gov’t investment and, subsequently, a potential return of capital.

INVESTMENT RISKS & CONCERNS •

• •

2008 1% -103% -7% -3% 1,332

2009 -13% n/m -8% 3% 1,164

1H10 7% n/m -2% 87% 1,273

2.8% 1.6% 9.2 9.2 125

1.3% -0.1% -0.3 -0.7 116

2.9% 1.4% 0.7 -0.9 107

3.3% 1.8% 2.2 2.4 106

"Underlying net result" (excl. divestments and special items; after minority). Excludes insurance-related deferred acquisition costs (€11.9 billion at 6/10).

FYE December 31 Δ assets Δ adj. net income Assets (€bn) Selected items as % of total assets: Loans and advances Investments/trading assets Customer deposits Common shareholders' equity Tangible common shareholders' equity Risk-weighted assets (€bn) Basel II Tier 1 ratio Adj. net income (€bn) IFRS net income (€bn) Interest margin Underlying cost/income ratio

In 2008, ING received €10 billion of core Tier 1 equity from the Dutch state (€5 billion was repaid after a rights issue in 2009). Terms on the other €5 billion allow the Dutch state to put the securities to ING at the issue price (€10/security). After receipt of the state aid, ING has to divest by 2013 its insurance business, including investment management, and certain Dutch retail banking and ING Direct operations.

•

2007 7% 19% 4% -3% 1,313

SELECTED OPERATING DATA — ING BANKING

DUTCH GOVERNMENT AID

•

FYE December 31 2005 2006 Δ assets 20% 6% Δ adj. net income1 26% 23% Δ employees 4% 3% ∆ shares out (avg) 0% -1% Assets (€bn) 1,159 1,226 Selected items as % of total assets: Common equity 3.2% 3.1% Tang common equity2 2.0% 2.0% Adj. net income (€bn) 1 6.2 7.7 IFRS net income (€bn) 7.2 7.7 Employees (FTEs, k) 117 120

Above-outlined sum-of-parts valuation ignores potential adjustments required in a separation, including higher stand-alone capital requirements. Regulatory/execution risks tied to business split. Are loan loss/insurance claim reserves adequate?

2007 11% 4 994

2008 4% -82% 1,035

2009 -15% 33% 882

1H10 5% 274% 955

53% 37% 53% 3% 2% 403 n/a 4.0 3.6 0.9% 65%

58% 31% 52% 2% 2% 343 9% 0.7 0.5 1.1% 65%

63% 26% 54% 3% 3% 332 10% 1.0 -0.3 1.3% 54%

61% 27% 55% 3% 3% 344 11% 2.1 2.3 1.4% 55%

SELECTED OPERATING DATA — ING INSURANCE

FYE December 31 Δ assets Δ adj. net income Assets (€bn) Selected items as % of total assets: Investments/trading assets Insurance contract liabilities Common shareholders’ equity Tangible common shareholders' equity1 Adj. net income (€bn) IFRS net income (€bn)

2007 -4% 34% 322

2008 -3% -120% 312

2009 -7% -79% 290

YTD 6/30/10 12% n/m 322

79% 82% 6% 1% 5.2 3.9

69% 77% 4% -1% -1.0 -1 2

75% 83% 5% 0% -0.2 -0.6

78% 84% 6% 1% 0.1 0.1

Excludes deferred acquisition costs (€11.9 billion at 6/10).

MAJOR HOLDERS Insiders <1% | ABN Amro 5% | Fortis 5% | Fisher <1%

RATINGS

      

THE BOTTOM LINE As a result of receiving Dutch state aid, ING is required by the EU to divest its insurance business. This sets up a catalyst as the sum-of-the parts valuation materially exceeds recent market value. While risks related to a separation (and the underlying business) remain, recent market value appears to be at a significant discount to the earning power of ING’s banking and insurance franchises. The insurance business should be ready for divestment by yearend 2010 according to management. © 2008-2010 by BeyondProxy LLC. All rights reserved.

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October 29, 2010 – Page 99 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

…additional insight into ING Group: OUR ESTIMATE OF THE EQUITY FAIR VALUE RANGE

Valuation methodology

Conservative case metrics: Tangible common equity as of 6/30/20101 Fair value multiple Estimated equity value Base and aggressive case metrics: “Normalized” net income2 Fair value multiple Estimated equity value Applies to all cases: Less: PV cost of repurchasing €5 billion Dutch gov't investment3 4

Estimated fair value of the equity of ING

Implied equity value to tangible book (DACs subtracted from book) Implied equity value to tangible book (DACs not subtracted from book) Implied ratios based on IFRS net income during… …2Q10 (annualized) …2004-07 (average) …2004-07 (peak: 2007)

Conservative

Base Case

Aggressive

1.0x tangible common equity1

10x “normalized” net income2 (may correspond to “sumof-parts” valuation taking into account earnings recovery potential in insurance business)

15x “normalized” net income2

€6 billion 10x €60 billion

€6 billion 15x €90 billion

-€5 billion €18 billion €5 per share 0.8x 0.5x

-€ 5 billion €55 billion €14 per share 2.4x 1.6x

-€5 billion €85 billion €22 per share 3.6x 2.4x

4.2x 2.5x 2.0x

12.6x 7.3x 6.0x

19.5x 11.3x 9.2x

€23 billion 1.0x €23 billion

Tangible equity is stated after subtracting insurance-related deferred acquisition costs (DACs). Average IFRS net income during 2004-07 was €7.5 billion. Peak net income was €9.2 billion in 2007 when ING's total assets roughly approximated the recent asset base. 2Q10 annualized net income is €4.4 billion with no contribution from the roughly break-even insurance business. 3 As we are not increasing the share count to reflect dilution from the Dutch government investment, we effectively treat it as debt that will be settled with cash. This is consistent with ING statements that proceeds from disposals and retained earnings will be applied to repurchasing the €5 billion government investment. 4 Based on 3.8 billion common shares outstanding. Source: Company filings, Manual of Ideas analysis, assumptions and estimates. 2

FUNDING MIX OF ING BANK, 2007 – H1 2010 *

Source: Company presentation dated September 30, 2010; available at http://bit.ly/bUC2c4

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…additional insight into ING Group: ING DIRECT – NET INFLOW IN FUNDS ENTRUSTED (€ in billions)

Source: Company presentation dated September 30, 2010; available at http://bit.ly/bUC2c4

NET INTEREST MARGIN COMPOSITION AND TREND

Interest margin defined as total interest result bank divided by average total assets bank. Source: Company presentation dated September 30, 2010; available at http://bit.ly/bUC2c4

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Value-oriented Equity Investment Ideas for Sophisticated Investors

JPMorgan Chase (NYSE: JPM) New York, NY, 212-270-6000

Financial: Regional Banks, Member of S&P 500 Trading Data

www.jpmorganchase.com

Consensus EPS Estimates

Price: $37.70 (as of 10/22/10) 52-week range: $35.16 - $48.20 Market value: $148 billion Shares out: 3.9 billion

This quarter Next quarter

Ownership Data

Valuation

Latest $1.00 1.07

Month Ago $0.91 1.04

# of Ests 25 13

P/E FYE 12/31/09 P/E FYE 12/31/10 P/E FYE 12/31/11 P/E FYE 12/30/12

17x 10x 8x 7x

P / tangible book

1.4x

FYE 12/31/10

3.84

3.61

Insider ownership: 1%

FYE 12/31/11

4.62

4.57

Insider buys (last six months): 9 Insider sales (last six months): 3 Institutional ownership: 76%

FYE 12/30/12 LT growth

5.44 7.5%

5.39 8.0%

21 4

Latest EPS Surprise Report date: Estimated EPS: Actual EPS:

10/13/10 $0.90 $1.01

Operating Performance and Financial Position ($ billions, except per share data) Interest income Interest expense Pretax income Net income Diluted EPS Shares out (avg)

12/31/03 24 11 10 7 3.24 2.0

12/31/04 30 14 6 4 1.48 2.8

14 20 347 102 6 280 15 771 113 67 544 1 45

(15) 35 420 142 9 494 58 1,157 128 154 770 0 105

Fiscal Years Ended 12/31/05 12/31/06 12/31/07 45 59 71 26 38 45 12 21 22 8 14 15 2.32 3.82 4.33 3.5 3.5 3.4 (30) 37 460 122 9 512 58 1,199 126 162 804 0 107

(50) 40 526 166 9 551 60 1,352 162 162 912 0 116

12/31/08 73 34 4 5 0.81 3.5

12/31/09 66 15 13 9 2.24 3.9

LTME 9/30/10 64 13 20 14 3.59 3.9

FQE 9/30/09 16 4 5 3 0.80 3.9

FQE 9/30/10 16 3 6 4 1.01 4.0

23 27 851 124 10 1,100 63 2,175 193 281 1,534 32 135

122 26 670 120 11 1,137 69 2,032 261 282 1,324 8 157

n/a 24 742 127 11 1,174 63 2,142 314 333 1,321 8 166

8 21 655 128 11 1,159 67 2,041 310 290 1,279 8 154

n/a 24 742 127 11 1,174 63 2,142 314 333 1,321 8 166

n/a 40 674 170 9 609 60 1,562 154 213 1,072 0 123

Ten-Year Stock Price Performance and Trading Volume Dynamics

$70 $60 $50 $40 $30 $20 $10 $0 Sep 01

Sep 02

Sep 03

Sep 04

Sep 05

Sep 06

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October 29, 2010 – Page 102 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

BUSINESS OVERVIEW

SELECTED OPERATING DATA1

JPMorgan Chase operates in seven segments: Investment Bank (24% of equity; 13% ROE):* Ranks #1 in YTD global investment banking fees with ~9% market share. Retail Financial Services (17% of equity; 13% ROE): ~5,200 branches with $335 billion of avg deposits in 3Q10 (#3 share in the U.S.). Ranks #3 in mortgage originations (~9% share). Card Services (9% of equity; 19% ROE): ~20% share of allpurpose credit card balances. Chase is #1 Visa card issuer. Commercial Banking (5% of equity; 23% ROE): Top 3 assetbased lending lead arranger in the U.S. in 2009. Asset management (4% of equity; 26% ROE): $1.26 trillion of assets under management as of September 2010 (flat y-y). Treasury & Securities Services (4% of equity; 15% ROE): Ranks #2 in global assets under custody ($15.9 trillion as of 9/2010, up 7% y-y). Ranks #1 in US$ clearing (20+% share). Corporate/Private Equity (37% of equity; n/a): Comprises all functions that are centrally managed as well as a private equity portfolio with a $9.4 billion carrying value at 9/2010.

INVESTMENT HIGHLIGHTS •

• •

Targets $22-24 billion of “steady-state” net income (2009: $11.7 billion) based on the following segment ROE targets: IB (17%), RFS (30%), CS (20%), CB (20%), AM (35%), and T&SS (30%). Grew tangible common equity per share at a 14% CAGR since yearend 2005 to $26+ per share as of September 2010, despite the financial crisis. Strong capital position due to a 9.5% Tier 1 common capital ratio and ability to absorb credit losses from high and growing earnings (3Q10 preprovision profit is >2x net charge-offs). To “return to dividend payout ratio of 30-40% of normalized earnings” over time, with initial dividend raise expected “hopefully in early 2011.” Bought back $2.2 billion common stock in 3Q10.

INVESTMENT RISKS & CONCERNS • • • *

“Steady-state” ROE targets may be optimistic given the potential for higher capital requirements and inherent volatility in main operating businesses. “Expect mortgage credit losses to remain at these high levels for the next several quarters.” $1.0 trillion of off-balance sheet credit exposure at yearend 2009 (mostly credit card-related).

Based on average equity in 3Q10 and 3Q10 annualized return on equity.

FYE December 31 2005 2006 ∆ tang. book per share 5% 15% ∆ total assets 4% 13% ∆ employees 5% 3% ∆ net interest income 32% 3% ∆ pre-provision profit 38% 7% ∆ diluted EPS 3% 37% Assets ($tn) 1.2 1.4 Selected items as % of total assets: Securities/trading assets 47% 50% Loans, net 34% 35% Other assets 19% 15% Customer deposits 46% 47% Other liabilities 45% 44% Common equity 9% 9% Revenue ($bn) 59.1 65.1 % of revenue by type: Net interest income 45% 42% Non-interest income 55% 58% % of revenue by segment: Investment bank 25% 29% Retail financial services 25% 23% Card services 26% 23% Commercial banking 6% 6% Asset management 10% 10% Other2 9% 9% Net income margin by selected segment: Investment bank 25% 20% Retail financial services 23% 22% Card services 12% 22% Commercial banking 28% 27% Asset management 21% 21% Total net margin 18% 22% Selected income statement items ($bn): Pre-provision profit 23.6 25.4 Loss provision 7.3 5.5 Net charge-offs 7.6 5.3 Net income to common3 10.5 14.4 Selected credit data: Loan loss reserve ratio 1.7% 1.5% NPLs/gross loans4 0.6% 0.4% Net charge-off ratio 1.7% 1.1% Net interest margin 1.9% 1.8% Return on assets 0.8% 1.1% Return on tang equity 22% 28% Tang equity/assets (avg) 4% 4% Tier 1 capital ratio 9% 9% ∆ shares out (avg) 25% 0%

2007 17% 16% 4% 19% 24% 8% 1.6

2008 3% 39% 25% 43% -7% -69% 2.2

2009 17% -7% -1% 28% 92% 67% 2.0

YTD 9/30/10 18% 5% 7% -13% -23% 88% 2.1

53% 33% 14% 47% 45% 8% 74.8

48% 33% 19% 46% 47% 6% 72.8

53% 30% 17% 46% 46% 8% 108.6

55% 31% 14% 42% 50% 8% 78.1

43% 57%

64% 36%

55% 45%

50% 50%

24% 23% 20% 5% 12% 15%

17% 32% 23% 7% 10% 11%

26% 30% 19% 5% 7% 13%

26% 30% 17% 6% 8% 14%

17% 17% 19% 28% 23% 21%

-10% 4% 5% 30% 18% 8%

25% 0% -11% 22% 18% 11%

26% 8% 6% 35% 19% 16%

31.3 9.2 6.9 14.9

29.3 24.6 13.4 4.7

56.3 38.5 29.4 8.8

33.0 13.6 18.6 11.3

1.8% 0.7% 1.3% 2.1% 1.1% 25% 4% 8% -2%

3.1% 1.2% 2.1% 2.7% 0.3% 7% 4% 11% 0%

5.0% 2.8% 3.9% 3.0% 0.6% 11% 4% 11% 10%

4.9% 2.2% 3.5% 3.1% 0.8% 16% 5% 12% 4%

Figures reflect purchase of Bank One (2004) and WaMu (2008) and are on a “managed” basis (includes securitized credit card loans; fully-taxable revenue). Includes Treasury & Securities Services and Corporate/Private Equity. 3 2009 net income by geography: EMEA (47%), U.S. (38%), Asia (10%). 2

RATINGS

      

THE BOTTOM LINE JPMorgan Chase is a premier global financial services franchise with each standalone business holding a top 3 competitive position. Shares appear undervalued based on management’s “steady-state” ROE targets of 20+% and prospects to re-invest incremental capital at high rates of return. Assuming a more modest normalized ROE of 15%, however, shares are fairly valued trading at 1.5x tangible book and 10x implied net income of ~$15 billion. The risk-reward is not compelling. © 2008-2010 by BeyondProxy LLC. All rights reserved.

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October 29, 2010 – Page 103 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

…additional insight into JPMorgan Chase: OUR ESTIMATE OF THE EQUITY FAIR VALUE RANGE

Valuation methodology

Conservative

Base Case

Aggressive

1.0x tangible common equity

10x “normalized” net income to common (assumes 15% return on tangible equity)1

6x LTM pretax preprovision profit

Conservative case metrics: Tangible common equity as of 9/30/2010 Fair value multiple Estimated equity value Base case metrics: "Normalized" net income to common Fair value multiple Estimated equity value Aggressive case metrics: LTM pre-provision profit (year to September 2010) Fair value multiple Estimated equity value Estimated fair value of the equity of JPMorgan2 Implied equity fair value to tangible book Implied ratios based on net income to common during… …year to September 2010 …3Q10 (annualized) …2005-09 (average) …2005-09 (peak)

$103 billion 1.0x $103 billion $15 billion 10x $155 billion $46 billion 6x $277 billion $103 billion $26 per share

$155 billion $39 per share

$277 billion $70 per share

1.0x

1.5x

2.7x

7x 6x 10x 7x

11x 10x 14x 10x

19x 17x 26x 19x

The annualized return on tangible common equity was 15% in 3Q10. The average return on tangible common equity was 18% during 2005-09. Based on 3.97 billion common shares outstanding. Source: Company filings, Manual of Ideas analysis, assumptions and estimates.

JPMORGAN CHASE – FINANCIAL HIGHLIGHTS, Q3 2010

Managed basis. 2 Tier 1 common is defined as Tier 1 capital less perpetual preferred, noncontrolling interests and trust preferred capital debt securities. Allowance for loan losses to end-of-period loans excludes loans accounted for at fair value, loans held-for-sale, and certain other items. Source: Company presentation dated October 13, 2010; available at http://bit.ly/ccah0n

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October 29, 2010 – Page 104 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

JPMORGAN CHASE – CONSUMER CREDIT DELINQUENCY TRENDS, Q1 2008 – Q3 2010 3

On managed basis. 2 “Payment holiday” in 2Q09 impacted 30+ day and 30-89 day delinquency trends in 3Q09. Source: Company presentation dated October 13, 2010; available at http://bit.ly/ccah0n

Excl. purchased credit-impaired loans.

JPMORGAN CHASE – MANAGEMENT OUTLOOK

Source: Company presentation dated October 13, 2010; available at http://bit.ly/ccah0n

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October 29, 2010 – Page 105 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Royal Bank of Scotland (London: RBS, NYSE: RBS) Edinburgh, SC, United Kingdom, 44-131-556-855

Financial: Money Center Banks Trading Data

www.rbs.com

Consensus EPS Estimates

Price: $14.48 (as of 10/22/10) 52-week range: $9.07 - $18.00 Market value: $42 billion Shares out: 2.9 billion

This quarter Next quarter

Ownership Data

Valuation

Latest n/a n/a

Month Ago n/a n/a

# of Ests n/a n/a

P/E FYE 12/31/09 P/E FYE 12/31/10 P/E FYE 12/31/11 P/E FYE 12/30/12

n/m n/a n/a n/a

P / tangible book

0.4x

FYE 12/31/10

n/a

Insider ownership: 69%

FYE 12/31/11

n/a

Insider buys (last six months): 0 Insider sales (last six months): 0 Institutional ownership: 0%

FYE 12/30/12 LT growth

n/a n/a

Latest EPS Surprise Report date: Estimated EPS: Actual EPS:

n/a n/a n/a

12/31/03 22 9 7 4 9.04 0.5

12/31/04 27 12 9 6 13.11 0.5

25 10 0 496 22 178 21 728 n/a 27 659 0 42

8 7 29 670 26 179 31 942 n/a 33 855 0 54

Fiscal Years Ended 12/31/05 12/31/06 12/31/07 34 40 52 18 23 32 12 14 15 9 10 12 17.52 17.27 20.52 0.5 0.6 0.6 7 8 153 806 29 217 32 1,244 n/a 45 1,142 0 57

28 10 187 913 29 226 30 1,395 n/a 44 1,287 0 64

41 29 916 n/a 30 1,893 80 2,948 n/a 61 2,802 0 85

12/31/08 79 49 (43) (39) (54.67) 0.8

12/31/09 42 21 (6) (6) (2.03) 2.6

LTME 6/30/10 36 31 (3) (4) (0.95) 3.3

FQE 3/31/09 12 6 (1) (1) (0.43) 2.8

FQE 6/30/10 19 7 2 1 0.34 5.4

n/a 20 n/a n/a 30 3,763 32 3,846 n/a 79 3,673 0 94

(2) 84 n/a n/a 31 2,573 29 2,717 n/a 60 2,532 0 124

55 47 n/a n/a 28 2,435 23 2,533 n/a 44 2,366 0 123

n/a 34 n/a n/a 31 3,488 32 3,584 n/a 78 3,417 0 90

(15) 47 n/a n/a 28 2,435 23 2,533 n/a 44 2,366 0 123

Ten-Year Stock Price Performance and Trading Volume Dynamics

$250

$200

$150

$100

$50

$0 Sep 08

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October 29, 2010 – Page 106 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

BUSINESS OVERVIEW

SELECTED OPERATING DATA1 FYE December 31 Total assets (£bn) Selected items as % of total assets: Loans, net Other assets Customer deposits Other liabilities Common shareholders' equity Net tangible equity per ordinary and B share (p) Tier 1 capital ratio (core) Selected income statement items (£bn): Company: Revenue Adj. pretax, pre-provision income2 Credit loss provision Adj. pretax income Net income to common and B shareholders “Core”: Revenue Adj. pretax, pre-provision income2 Credit loss provision Adj. pretax income “Non-Core”: Revenue Adj. pretax, pre-provision income2 Credit loss provision Adj. pretax income % of “Core” revenue by type: Net interest income Non-interest income % of “Non-Core” revenue by type: Net interest income Non-interest income Headcount, period-end (K)

Royal Bank of Scotland (RBS) has two main segments: Core Bank (70% of risk-weighted assets*): Includes U.K. Retail (#2 in current accounts), U.K. Corporate (#1 in commercial banking), Wealth (#1 in U.K. private banking; owns Coutts), Global Banking & Markets (major i-bank), Global Transaction Services (strong in cash mgmt and trade finance), Ulster Bank (#3 bank in Ireland), U.S. Retail and Commercial (3.9 million retail and 500K corporate clients), and Insurance (#1 in U.K. home and motor insurance). Non-Core (29% of company risk-weighted assets): Covers businesses that do not meet strategic goals. It includes both “stressed” and “non-stressed” assets within insurance, structured credit, commercial real estate, leveraged loans, securitizations, U.K./Ireland and U.S. mortgages, asset, project and export finance, as well as other businesses. The U.K. government became the majority shareholder in 2008 taking an initial 58% stake. The U.K.’s recent ~68% stake rises to ~83% if its “B” shares are assumed converted.

INVESTMENT HIGHLIGHTS •

•

Strategy: Create “sustainable value” by growing the “Core Bank” around customer-driven franchises. The Non-Core segment is the “primary driver of risk reduction” and is being “radically” restructured. Future business mix: targeting 2/3 Retail & Commercial, 1/3 Global Banking & Markets. Approximate geographic split target: U.K. ~55%, U.S. ~25%, E.U. 10-15%, Rest of World 5-10%. Recent market value to “normalized” earnings is less than 6x, assuming a 15% return on total tangible common equity at June 30. Shares trade at ~0.9x tangible book (adjusted to include B shares). Targets a 15+%”sustainable” core-business ROE by 2013. “Core” ROE was 13% in 2009 based on attributable profit at 28% tax on core tangible equity (~70% of total tangible equity based on RWAs*). U.K. government “wants RBS to operate on a commercial basis” and plans to “sell its interests in RBS and other banks at the earliest attractive time.”

INVESTMENT RISKS & CONCERNS •

•

Risks related to U.K. government control include a potential value transfer from common holders to other stakeholders. RBS is prohibited from paying discretionary dividends through at least April 2012. Execution risk. RBS is managing sizeable “core” and “non-core” asset groups at the same time.

Based on total risk-weighted assets (RWAs) of £597 billion at June 30, 2010, before a £123 million benefit from the Asset Protection Scheme.

2009 1,522

1H10 1,581

45% 55% 42% 54% 5% 51.3 11.0%

43% 57% 40% 55% 5% 52.8 10.5%

29.4 7.7 -13.9 -6.2 -3.6

17.7 6.7 -5.2 1.6 0.0

31.7 13.0 -4.7 8.3

15.9 6.5 -2.1 4.5

-2.3 -5.3 -9.2 -14.6

1.8 0.2 -3.1 -2.9

39% 61%

-54% 154% 161

54% 46% 157

Figures are based on pro-forma results which include only those business units of ABN AMRO that have been retained by RBS. “Operating profit before impairment losses” (“impairment” ~ credit loss provision): also stated after insurance net claims and before tax, amortization of purchased intangible assets, integration and restructuring costs, gain on redemption of own debt, strategic disposals, bonus tax, APS credit default swap fair value changes and write-down of goodwill and intangibles.

•

Forced asset sales to comply with EC State Aid requirements include RBS Insurance and other businesses (with a total £48 billion of assets as of June 30) that are to be disposed by yearend 2013.

MAJOR HOLDERS Insiders <1% | U.K. government ~83% (fully diluted)

RATINGS

      

THE BOTTOM LINE Royal Bank of Scotland stumbled in the wake of an acquisition spree culminating in the purchase of ABN Amro at the height of the credit boom in 2007. Following the U.K. government’s rescue in 2008, new management is restructuring the company with the goal of reaching a 15+% “sustainable” ROE from core businesses by 2013. Given strong business franchises and improving recent performance, a valuation at ~0.9x tangible book is undemanding. While risk remains non-negligible (~30% of risk-weighted assets are in the non-core, i.e. “bad” segment), material upside potential makes the risk-reward appealing. © 2008-2010 by BeyondProxy LLC. All rights reserved.

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October 29, 2010 – Page 107 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

…additional insight into Royal Bank of Scotland: OUR ESTIMATE OF THE EQUITY FAIR VALUE RANGE

Valuation methodology

Conservative

Base Case

Aggressive

1.0x tangible common equity1

10x “normalized” net income (based on 15% return on tangible common equity)

8x 1H10 annualized adj. pretax, preprovision profit2

Conservative case metrics: Tangible common equity as of 6/30/20101 Fair value multiple Estimated equity value Base case metrics: "Normalized" net income to common Fair value multiple Estimated equity value Aggressive case metrics: Adj. pretax, pre-provision profit (1H10 annualized)2 Fair value multiple Estimated equity value Estimated fair value of the equity of RBS (£ billions)3 Estimated fair value of the equity of RBS (US$ billions)3 Implied equity fair value to tangible book Implied fair value to adj. pretax, pre-provision income (H1 ann.)2 Implied fair value to adj. pretax income (H1 ann.)

£58 billion 1.0x £58 billion £9 billion 10x £86 billion

£58 billion £0.53 per share $90 billion $17 per ADS 1.0x 4.3x 18x

£86 billion £0.79 per share $136 billion $25 per ADS 1.5x 6.4x 27x

£13 billion 8x £108 billion £108 billion £0.99 per share $169 billion $31 per ADS 1.9x 8.0x 34x

Includes 51.0 billion of class B shares issued to the UK government in December 2009 for £25.5 billion. Based on reported, pro-forma “operating profit before impairments” (stated after insurance net claims and before “impairments” (~credit loss provisions), tax, amortization of purchased intangible assets, integration and restructuring costs, gain on redemption of own debt, strategic disposals, bonus tax, Asset Protection Scheme credit default swap – fair value changes and write-down of goodwill and other intangible assets. 3 Based on 109 billion common shares outstanding, assuming full conversion of class B shares held by UK government (1 ADS = 20 shares). Estimated fair value in US$ is based on a conversion of the recent exchange rate at 1£=US$1.57. Source: Company filings, Manual of Ideas analysis, assumptions and estimates. 2

STRATEGIC PLAN – CURRENT POSITION VERSUS 2013 TARGETS

1 As at 1 January 2008. 2 As at October 2008. 3 Amount of unsecured wholesale funding under one year. H110 includes £92bn of bank deposits and £106bn of other wholesale funding. 2013 target is for <£65bn of bank deposits, <£85bn of other wholesale funding. 4 As at December 2008. 5 Eligible assets held for contingent liquidity purposes including cash, government issued securities and other securities eligible with central banks. 6 Funded tangible assets divided by Tier 1 Capital. 7 As at June 2008 8 Group return on tangible equity for 2008. 9 Indicative: Core attributable profit taxed at 28% on attributable core spot tangible equity (70% of Group tangible equity based on RWAs). 10 Adjusted cost: income ratio net of insurance claims. 11 2008. Source: Company presentation dated September 14, 2010; available at http://bit.ly/aoLLh7

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October 29, 2010 – Page 108 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

…additional insight into Royal Bank of Scotland: IMPAIRMENT TRENDS

Source: Company presentation dated September 13, 2010; available at http://bit.ly/acCDe0

CAPITAL ADEQUACY SNAPSHOT VS. PEERS

Source: Company presentation dated September 14, 2010; available at http://bit.ly/aoLLh7

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October 29, 2010 – Page 109 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Wells Fargo (NYSE: WFC) San Francisco, CA, 866-249-3302

Financial: Regional Banks, Member of S&P 500 Trading Data

www.wellsfargo.com

Consensus EPS Estimates

Price: $26.11 (as of 10/22/10) 52-week range: $23.02 - $34.25 Market value: $137 billion Shares out: 5,244 million

This quarter Next quarter

Ownership Data

Valuation

Latest $0.60 0.64

Month Ago $0.57 0.62

# of Ests 28 17

P/E FYE 12/31/09 P/E FYE 12/31/10 P/E FYE 12/31/11 P/E FYE 12/30/12

15x 12x 9x 7x

P / tangible book

1.8x

FYE 12/31/10

2.19

2.10

Insider ownership: 0%

FYE 12/31/11

2.81

2.85

Insider buys (last six months): 7 Insider sales (last six months): 7 Institutional ownership: 77%

FYE 12/30/12 LT growth

3.59 9.5%

3.62 9.5%

26 2

Latest EPS Surprise Report date: Estimated EPS: Actual EPS:

10/20/10 $0.55 $0.60

Operating Performance and Financial Position ($ billions, except per share data) Interest income Interest expense Pretax income Net income Diluted EPS Shares out (avg)

12/31/03 19 3 9 6 1.83 3

12/31/04 21 4 11 7 2.05 3

31 16 13 69 4 269 17 388 0 64 290 0 34

6 13 14 72 4 306 19 428 0 74 316 0 38

Fiscal Years Ended 12/31/05 12/31/06 12/31/07 26 32 35 7 12 14 12 13 12 8 8 8 2.25 2.47 2.38 3 3 3 (12) 15 16 83 4 339 23 482 20 80 341 0 40

28 15 12 76 5 345 29 482 12 86 338 0 45

12/31/08 35 10 3 2 0.70 3

12/31/09 56 10 13 8 1.75 5

LTME 9/30/10 54 8 14 9 1.68 5

FQE 9/30/09 14 2 4 3 0.56 5

FQE 9/30/10 13 2 5 3 0.60 5

(5) 24 121 179 11 920 55 1,310 62 267 881 31 68

29 27 100 218 11 835 52 1,244 26 204 902 8 103

n/a 16 106 224 10 827 38 1,221 51 163 883 9 115

7 17 77 226 11 844 53 1,229 31 214 861 32 91

n/a 16 106 224 10 827 38 1,221 51 163 883 9 115

9 15 10 101 5 414 30 575 23 98 407 0 47

Ten-Year Stock Price Performance and Trading Volume Dynamics

$50 $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 Sep 01

Sep 02

Sep 03

Sep 04

Sep 05

Sep 06

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October 29, 2010 – Page 110 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

BUSINESS OVERVIEW

SELECTED OPERATING DATA1

Wells Fargo operates in three segments: Community Banking (~65% of total assets; 3Q10 net income: $2.0 billion; annualized ROA: 1.02%): provides financial services to consumers and small businesses in the U.S., including mortgage loans, investments, and other services. Wholesale Banking (~30% of assets; net income: $1.4 billion; ROA: 1.58%): provides financial services to businesses in the U.S. with annual revenue in excess of $10 million as well as to global financial institutions. Wealth, Brokerage & Retirement (~10% of assets; net income: $0.3 billion; ROA: 0.73%): includes high net worth client services, retail brokerage and retirement planning.

INVESTMENT HIGHLIGHTS •

•

Serves 1 in 3 U.S. households. Retail network of ~6,500 banks is largest in the U.S. The company is also #1 in mortgage originations, small business and commercial real estate lending and brokerage. It is #2 in banking deposits and debit cards. “Balance sheet stronger than ever” according to management. Wells’ Tier 1 common ratio is ~8% and is expected to be above 7% on the proposed Basel III basis “within next few quarters.” Wachovia merger risk diminished: “better credit experience, abundant revenue synergies, expense savings on track.” Wells acquired most of its loan losses when it bought Wachovia in 2008. Balanced business exposures. Consumer and commercial loans represent 58% and 38% of total portfolio, respectively. The split between net interest and non-interest income is 53/47.

INVESTMENT RISKS & CONCERNS •

•

• •

Trade at 2.1x adjusted tangible book and 11x Q3 annualized net income (we adjust common equity of $115 billion by subtracting goodwill, MSRs, intangibles and minor items to arrive at $65 billion). Legal risks tied to mortgage repurchase requests and “faulty” foreclosures. Management on 10/20: “We remain confident in our foreclosure and mortgage securitization policies, practices and controls, and adequacy of repurchase reserve.” Limited further earnings improvement from Wachovia synergies as ~85% of $5.0 billion in targeted annual savings have been realized. Nonaccrual loans and other NPAs are 4.6% of total loans, while loan loss reserves are 3.2%.

FYE December 31 2005 2006 ∆ book value per share 8% 12% ∆ avg assets 9% 9% ∆ avg loans 10% 4% ∆ avg “core” deposits2 9% 7% ∆ employees 5% 3% ∆ net interest income 8% 8% ∆ pre-provision profit3 12% 7% Assets ($tn) 0.5 0.5 Selected items as % of total assets: Loans, net 65% 66% “Core” deposits2 53% 60% Common equity 8% 9% % of loans by major type: Commercial/real estate 35% 38% Consumer 63% 60% Revenue ($bn) 32.9 35.7 % of revenue by type: Net interest income 56% 56% Non-interest income 44% 44% Selected income statement items ($bn): Pre-provision profit3 13.9 14.9 Loss provision 2.4 2.2 Net charge-offs 2.3 2.3 Net income to common 7.7 8.4 Selected credit data: Loan loss reserve ratio 1.2% 1.2% Net charge-off ratio 0.8% 0.7% Net interest margin 4.9% 4.8% Return on assets 1.7% 1.7% Tang equity/assets4 3.9% 3.4% Tier 1 capital ratio 8.3% 8.9% Efficiency ratio5 58% 58% ∆ shares out (avg) 0% 0%

2007 6% 7 12% 13% 1% 5% 12% 0.6

2008 12% 16% 16% 7% 76% 20% 16% 1.3

2009 24% 96% 107% 123% -5% 84% 106% 1.

YTD 9/30/10 10% -4% -7% 1% -1% -3% -11% 1.2

66% 54% 8%

66% 57% 5%

63% 63% 8%

62% 63% 9%

40% 58% 39.4

41% 55% 41.9

39% 57% 88.7

38% 58% 63.7

53% 47%

60% 40%

52% 48%

53% 47%

16.6 4.9 3.5 8.1

19.2 16.0 7.8 2.4

39.7 21.7 18.2 8.0

26.6 12.8 13.9 8.4

1.4% 1.0% 4.7% 1.6% 3.0% 7.6% 58% -1%

2.4% 2.0% 4.8% 0.4% 0.0% 7.8% 54% 1%

3.1% 2.2% 4.3% 1.0% 4.1% 9.3% 55% 35%

3.2% 2.1% 4.3% 1.0% 5.3% 10.9% 58% 17%

Wachovia’s results are included as of 12/31/08, but not in 2008 averages. Includes noninterest−bearing deposits, interest−bearing checking, savings certificates, market rate and other savings, and certain foreign deposits. 3 Pretax; defined as total revenue less non-interest expense. 4 Tangible book equals common equity less goodwill less MSRs less core deposit, customer relationship, other intangibles less FAS107 net difference. 5 Noninterest expense divided by total revenue. 2

•

$119 billion “non-strategic loan portfolio risk,” two-thirds of which are “pick-a-pay” mortgages.

MAJOR HOLDERS Insiders <1% | Berkshire 6% | FMR 4% | State Street 3%

RATINGS

      

THE BOTTOM LINE Wells Fargo appears to have digested the ill-timed acquisition of Wachovia in late 2008 thanks largely to significant preprovision earning power inherent in the franchise. CEO Stumpf (in the position since mid-2007) and his team deserve credit for achieving merger synergy targets and delivering good returns on equity (and assets) in a tough period. However, the recent valuation of more than 2x adjusted tangible book makes the risk-reward unattractive. With 85% of Wachovia-related synergies realized, a large improvement in earnings will depend to a great extent on factors beyond management control. © 2008-2010 by BeyondProxy LLC. All rights reserved.

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October 29, 2010 – Page 111 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Wells Fargo – OUR ESTIMATE OF THE EQUITY FAIR VALUE RANGE ($ in billions) Valuation methodology Conservative case metrics: Tangible common equity as of 9/30/2010 Fair value multiple Estimated equity value Base case metrics: “Normalized” net income to common Fair value multiple Estimated equity value Aggressive case metrics: LTM pre-provision, pretax profit (year to Sep. 2010) Fair value multiple Estimated equity value Estimated fair value of the equity of Wells Fargo3 Implied equity fair value to tangible book Implied equity value to 3Q10 annualized net income to common

Conservative

Base Case

Aggressive

1.5x tangible common equity1

10x “normalized” net income (based on 20% RoTCE)1

6x LTM pre-provision, pretax profit2

$65 billion 1.5x $97 billion $13 billion 10x $129 billion

$97 billion $18 per share 1.5x 7.7x

$129 billion $25 per share 2.0x 10.3x

$36 billion 6x $219 billion $219 billion $42 per share 3.4x 17.4x

Applying a premium to tangible book appears warranted given that Wells Fargo is generating mid-teens returns on common equity through the cycle (2005-09 period). It is also achieving industry-leading returns on total assets, which indicates it operates at less risk. 2 Pre-provision profit is stated before the provision for credit losses, income taxes, minority interests, and preferred dividends. 3 Based on 5.3 billion common shares outstanding. Source: Company filings, Manual of Ideas analysis, assumptions and estimates.

CALCULATION OF RETURN ON AVERAGE TANGIBLE COMMON EQUITY

Tangible common equity includes total equity, less preferred equity, goodwill and intangible assets (excluding MSRs), net of related deferred taxes, and noncontrolling interests. The methodology of determining tangible common equity may differ among companies. WFC management has presented its return on average tangible common equity along with other financial measures as part of its review of quarterly results. Source: Company presentation dated September 13, 2010; available at http://bit.ly/bDEDJ4

CALCULATION OF TIER 1 COMMON EQUITY

Tier 1 common equity includes Wells Fargo stockholders’ equity, less preferred equity, goodwill and intangible assets (excluding MSRs), net of related deferred taxes, adjusted for specified Tier 1 regulatory capital limitations covering deferred taxes MSRs and cumulative other comprehensive income. Under the guidelines for risk-based capital, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several risk categories according to the obligor or the guarantor or the nature of any collateral. The dollar amount in each risk category is multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total risk-weighted assets. Source: Company presentation dated September 13, 2010; available at http://bit.ly/bDEDJ4

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October 29, 2010 – Page 112 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

…additional insight into Wells Fargo: WELLS FARGO AND WACHOVIA FOOTPRINT

Source: Company presentation dated September 13, 2010; available at http://bit.ly/bDEDJ4

QUARTERLY CREDIT LOSSES

Source: Company presentation dated September 13, 2010; available at http://bit.ly/bDEDJ4

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October 29, 2010 – Page 113 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

100 Profitable Banks Traded in the U.S. In Alphabetical Order Company / Ticker Arrow Financial / AROW BancFirst / BANF Banco Latino Amer. / BLX Banco Macro / BMA Bancolombia / CIB BancorpSouth / BXS Bank of America / BAC Bank of Hawaii / BOH Bank of Marin / BMRC Bar Harbor Bank / BHB Barclays / BCS BB&T Corp. / BBT BBVA Frances / BFR BOK Financial / BOKF Boston Private / BPFH Brookline Bancorp / BRKL Century Bancorp / CNBKA CIT Group / CIT Citigroup / C Citizens & Northern / CZNC City Holding / CHCO City National / CYN CNB Financial / CCNE Columbia Banking / COLB Comerica / CMA Community Bank Sys. / CBU Community Trust / CTBI Credicorp / BAP CVB Financial / CVBF Danvers Bancorp / DNBK Deutsche Bank / DB Dime Community / DCOM East West Bancorp / EWBC F.N.B. / FNB Fifth Third Bancorp / FITB First Bancorp / FBNC First Bancorp / FNLC First Busey / BUSE First Commonwealth / FCF First Community / FCBC First Financial / FFBC First Financial Bank / FFIN First Interstate / FIBK First Merchants / FRME First Midwest / FMBI First Niagara / FNFG First of Long Island / FLIC FirstMerit Corp. / FMER Fulton Financial / FULT German American / GABC

Price ($) 26 41 15 44 66 14 12 45 34 28 18 23 10 45 7 10 23 41 4 14 33 52 14 19 38 23 28 126 8 15 57 14 17 9 12 13 14 5 6 14 17 47 13 8 12 12 25 18 10 18

YTD Price ∆ 6% 9% 10% 49% 45% -40% -20% -4% 4% 2% 4% -11% 62% -6% 18% -1% 6% 50% 19% 43% 1% 14% -14% 19% 29% 20% 13% 64% -9% 18% -12% 22% 5% 31% 24% -6% -8% 23% 21% 16% 16% -13% na 34% 12% -17% -1% -11% 9% 8%

Market Value ($mn) 288 622 559 2,635 13,032 1,170 120,206 2,192 178 105 54,879 15,689 1,823 3,052 516 582 130 8,271 114,445 166 508 2,707 167 756 6,732 771 419 10,075 837 324 52,206 493 2,448 1,021 9,659 220 138 319 486 248 980 983 540 203 906 2,415 218 1,958 1,895 195

MV/ Total Assets 15% 13% 13% 34% 38% 9% 5% 17% 15% 10% 2% 10% 25% 13% 9% 22% 5% 15% 6% 12% 19% 13% 13% 18% 12% 14% 13% 42% 12% 13% 2% 12% 12% 12% 9% 7% 10% 9% 8% 11% 15% 29% 7% 5% 12% 12% 14% 13% 11% 15%

P/E Last FY 13x 19x 10x 11x 20x 14x nm 15x 15x 9x 13x 20x 7x 15x nm 30x 13x nm nm nm 12x >99x 14x nm nm 18x 17x 21x 14x 49x 6x 18x 42x 28x 18x 4x 12x nm nm nm 3x 18x 12x nm nm 25x 14x 20x 31x 16x

This FY 14x 16x 13x 13x 19x >99x 13x 13x 14x 10x 9x 20x 11x 13x 62x 21x 11x 19x 10x 10x 13x 24x 13x 37x 45x 13x 14x 18x 12x 17x na 12x 21x 15x 29x 17x 13x 21x 33x 13x 16x 18x 17x 23x 42x 14x 11x 16x 16x 15x

P/E (Est.) Next In FY 2 Yrs 14x 12x 16x 13x 9x 8x 12x 11x 15x 13x 16x 10x 8x 6x 14x 12x 13x 11x 8x 8x 7x na 11x 8x 12x 10x 12x 10x 16x 11x 19x 18x 10x 8x 16x 13x 9x 7x 9x 9x 12x 11x 16x 13x 12x 10x 26x 17x 18x 12x 12x 11x 13x 12x 15x 13x 11x 10x 16x 14x na na 11x 11x 13x 10x 12x 10x 12x 9x 11x 10x 12x 11x 16x 9x 14x 10x 11x 9x 13x 10x 16x 15x 14x 9x 14x 6x 17x 11x 11x 10x 12x 12x 13x 11x 12x 9x 14x 13x

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Price/ Tang. Book 2.1x 1.5x .8x 4.0x 3.7x 1.2x 1.2x 2.3x 1.5x 1.1x .8x 1.7x 2.7x 1.5x 1.5x 1.3x .9x 1.0x 1.0x 1.3x 2.0x 2.0x 1.7x 1.3x 1.2x 2.7x 1.6x 4.1x 1.4x 1.2x 1.3x 1.9x 1.5x 2.1x 1.4x 1.0x 1.4x 1.7x 1.0x 1.4x 1.5x 2.7x 1.1x .9x 1.3x 1.4x 1.7x 1.9x 1.4x 1.8x

Div. Yield 4% 2% 2% 2% 6% % 4% 2% 4% 1% 3% 7% 2% 1% 3% 2% 3% 4% 1% 5% % 1% 4% 4% 4% 1% 4% % 5% % 2% 6% 3% 1% 3% 2% 3% 4% 1% % 5% 4% 4% 1% 3%

Insider Own. 5% 53% 25% 41% 43% 12% <1% 1% 3% 2% 12% <1% 76% 63% 2% 4% 36% <1% <1% 2% 4% 13% 6% 2% <1% 4% 4% 36% 19% 17% <1% 17% 2% 1% <1% 11% 15% 19% 11% 16% 1% 7% 66% 2% 2% <1% 25% <1% 2% 7%

Website www.arrowfinancial.com www.bancfirst.com www.bladex.com www.macro.com.ar www.grupobancolombia.com bancorpsouthonline.com www.bankofamerica.com www.boh.com www.bankofmarin.com www.bhbt.com www.barclays.co.uk www.bbt.com www.bancofrances.com.ar www.bokf.com www.bostonprivate.com www.brooklinebank.com www.century-bank.com www.cit.com www.citigroup.com www.cnbankpa.com www.cityholding.com www.cnb.com www.bankcnb.com www.columbiabank.com www.comerica.com www.communitybankna.com www.ctbi.com www.credicorpnet.com www.cbbank.com www.danversbank.com www.db.com www.dimewill.com www.eastwestbank.com www.fnbcorporation.com www.53.com www.firstbancorp.com www.thefirstbancorp.com www.busey.com www.fcbanking.com www.fcbresource.com www.bankatfirst.com www.ffin.com www.firstinterstatebank.com www.firstmerchants.com www.firstmidwest.com www.fnfg.com www.fnbli.com www.firstmerit.com www.fult.com germanamericanbancorp.com October 29, 2010 – Page 114 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Company / Ticker Hancock Holding / HBHC HSBC Holdings / HBC Huntington / HBAN Iberiabank / IBKC JPMorgan Chase / JPM KeyCorp / KEY Lakeland Financial / LKFN M&T Bank / MTB MB Financial / MBFI Meridian Interstate / EBSB Mitsubishi UFJ / MTU NASB Financial / NASB National Penn / NPBC NBT Bancorp / NBTB NewAlliance / NAL Northern Trust / NTRS Northwest Bancorp / NWBI NY Community / NYB Old National Bancorp / ONB Park National / PRK Peapack-Gladstone / PGC People's United / PBCT Prosperity / PRSP Renasant / RNST Rockville Financial / RCKB S&T Bancorp / STBA S.Y. Bancorp / SYBT Santander Brasil / BSBR Santander Chile / SAN SCBT Financial / SCBT Signature Bank / SBNY Simmons First / SFNC Southwest Bancorp / OKSB State Bancorp/NY / STBC State Street / STT Sterling Bancorp / STL Susquehanna / SUSQ TFS Financial / TFSL Tompkins Financial / TMP TrustCo Bank NY / TRST UMB Financial / UMBF Umpqua Holdings / UMPQ Univest Corp. of PA / UVSP Valley National / VLY Wainwright B & T / WAIN Washington Federal / WFSL Webster Financial / WBS Wells Fargo / WFC WestAmerica / WABC Wintrust Financial / WTFC

Price ($) 31 52 6 52 37 8 19 75 17 11 5 17 6 22 13 49 11 17 10 64 12 13 32 16 12 19 24 15 92 31 39 29 13 9 40 9 9 9 41 5 35 11 19 13 19 15 18 24 54 31

YTD Price ∆ -30% -8% 56% -3% -11% 45% 10% 12% -16% 23% -6% -25% 12% 9% 5% -7% -1% 14% -19% 9% -2% -21% -21% 20% 10% 10% 14% 8% 42% 11% 21% 3% 90% 28% -8% 32% 46% -28% 11% -13% -10% -17% 8% -6% 158% -22% 49% -13% -3% 2%

Market Value ($mn) 1,129 184,113 4,079 1,408 145,844 7,069 306 8,960 897 242 65,412 137 815 766 1,322 11,800 1,235 7,195 873 979 109 4,877 1,495 408 226 518 332 57,197 16,726 391 1,589 492 255 152 20,100 252 1,118 2,682 441 420 1,432 1,272 314 2,032 138 1,703 1,387 123,404 1,563 976

MV/ Total Assets 13% 8% 8% 14% 7% 8% 12% 13% 8% 14% 3% 10% 9% 14% 15% 15% 15% 17% 11% 14% 7% 22% 16% 11% 14% 13% 18% 28% 39% 11% 15% 16% 8% 9% 12% 11% 8% 25% 14% 11% 13% 12% 15% 14% 14% 12% 8% 10% 33% 7%

P/E Last FY 13x 31x nm 7x 17x nm 15x 26x nm 63x 6x 7x nm 15x 27x 15x 37x 15x 72x 13x 19x 44x 13x 19x 22x >99x 20x 8x 19x 41x 30x 16x 22x nm 12x 25x nm >99x 14x 15x 16x nm 25x 20x 30x 33x nm 13x 13x 14x

This FY 24x 14x 38x 26x 10x >99x 14x 14x 76x 20x 14x 39x 59x 13x 19x 17x 20x 14x 21x 14x 17x 34x 12x 21x 17x 15x 15x 17x 18x 7x 18x 18x 20x 38x 12x 23x 66x 97x 13x 15x 16x 62x 21x 16x 16x 14x 41x 11x 17x 27x

P/E (Est.) Next In FY 2 Yrs 16x 13x 10x na 13x 9x 18x 13x 8x 7x 20x 11x 11x 9x 13x 11x 13x 9x 19x 17x 10x na 67x 23x 14x 9x 13x 12x 17x 15x 14x 12x 16x 14x 12x 11x 17x 11x 12x 10x 11x 8x 22x 18x 11x 10x 14x 12x 16x 15x 12x 9x 14x 11x 13x 11x 16x 14x 16x 13x 15x 13x 17x 16x 20x 12x 21x 15x 11x 9x 14x 9x 19x 10x 79x 46x 12x 11x 13x 11x 16x 14x 18x 15x 16x 14x 15x 13x 14x 13x 14x 10x 18x 13x 8x 6x 15x 15x 14x 10x

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Price/ Tang. Book 1.4x 1.7x 1.3x 1.3x 1.4x 1.0x 1.3x 2.4x 1.3x 1.2x .8x .8x 1.3x 1.9x 1.5x 1.9x 1.1x 2.5x 1.3x 1.7x 1.1x 1.3x 3.3x 1.8x 1.4x .9x 2.1x 2.4x 5.1x 1.5x 1.8x 1.6x .9x 1.3x 2.5x 1.5x 1.2x 1.5x 2.0x 1.6x 1.6x 1.3x 1.5x 2.2x 2.0x 1.1x 1.4x 2.1x 4.2x 1.2x

Div. Yield 3% 3% 1% 3% 1% % 3% 4% % 1% 4% 2% 2% 4% 6% 3% 6% 2% 5% 2% 4% 2% 3% 3% 2% 3% 1% 2% % 4% % 3% 3% 5% 2% 2% 4% 6% 2% 1% % 1% 3% 1%

Insider Own. 3% <1% <1% 5% <1% <1% 9% 10% 5% 59% 5% 63% 2% 3% 9% 6% 64% 3% 2% 3% 17% <1% 8% 4% 56% 3% 8% <1% <1% 3% 1% 8% 6% 15% <1% 5% 1% 74% 15% 4% 20% 1% 5% 5% 30% <1% 1% <1% 4% 2%

Website www.hancockbank.com www.hsbc.com www.huntington.com www.iberiabank.com www.jpmorganchase.com www.keycorp.net www.lakecitybank.com www.mtb.com www.mbfinancial.com www.ebsb.com www.mufg.jp www.nasb.com www.natpennbank.com www.nbtbancorp.com www.newalliancebank.com www.northerntrust.com northwestsavingsbank.com www.mynycb.com www.oldnational.com www.parknationalcorp.com www.pgbank.com www.peoples.com www.prosperitybanktx.com www.renasantbank.com www.rockvillebank.com www.stbancorp.com www.syb.com www.santander.com.br www.santandersantiago.cl www.scbandt.com www.signatureny.com www.simmonsfirst.com www.oksb.com www.statebankofli.com www.statestreet.com www.sterlingbancorp.com www.susquehanna.net www.thirdfederal.com www.tompkinstrustco.com www.trustcobank.com www.umb.com www.umpquabank.com www.univest.net valleynationalbank.com www.wainwrightbank.com www.washingtonfederal.com www.websteronline.com www.wellsfargo.com www.westamerica.com www.wintrust.com

October 29, 2010 – Page 115 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

By Market Value Company / Ticker HSBC Holdings / HBC JPMorgan Chase / JPM Wells Fargo / WFC Bank of America / BAC Citigroup / C Mitsubishi UFJ / MTU Santander Brasil / BSBR Barclays / BCS Deutsche Bank / DB State Street / STT Santander Chile / SAN BB&T Corp. / BBT Bancolombia / CIB Northern Trust / NTRS Credicorp / BAP Fifth Third Bancorp / FITB M&T Bank / MTB CIT Group / CIT NY Community / NYB KeyCorp / KEY Comerica / CMA People's United / PBCT Huntington / HBAN BOK Financial / BOKF City National / CYN TFS Financial / TFSL Banco Macro / BMA East West Bancorp / EWBC First Niagara / FNFG Bank of Hawaii / BOH Valley National / VLY FirstMerit Corp. / FMER Fulton Financial / FULT BBVA Frances / BFR Washington Federal / WFSL Signature Bank / SBNY WestAmerica / WABC Prosperity / PRSP UMB Financial / UMBF Iberiabank / IBKC Webster Financial / WBS NewAlliance / NAL Umpqua Holdings / UMPQ Northwest Bancorp / NWBI BancorpSouth / BXS Hancock Holding / HBHC Susquehanna / SUSQ F.N.B. / FNB First Financial Bank / FFIN First Financial / FFBC

Price ($) 52 37 24 12 4 5 15 18 57 40 92 23 66 49 126 12 75 41 17 8 38 13 6 45 52 9 44 17 12 45 13 18 10 10 15 39 54 32 35 52 18 13 11 11 14 31 9 9 47 17

YTD Price ∆ -8% -11% -13% -20% 19% -6% 8% 4% -12% -8% 42% -11% 45% -7% 64% 24% 12% 50% 14% 45% 29% -21% 56% -6% 14% -28% 49% 5% -17% -4% -6% -11% 9% 62% -22% 21% -3% -21% -10% -3% 49% 5% -17% -1% -40% -30% 46% 31% -13% 16%

Market Value ($mn) 184,113 145,844 123,404 120,206 114,445 65,412 57,197 54,879 52,206 20,100 16,726 15,689 13,032 11,800 10,075 9,659 8,960 8,271 7,195 7,069 6,732 4,877 4,079 3,052 2,707 2,682 2,635 2,448 2,415 2,192 2,032 1,958 1,895 1,823 1,703 1,589 1,563 1,495 1,432 1,408 1,387 1,322 1,272 1,235 1,170 1,129 1,118 1,021 983 980

MV/ Total Assets 8% 7% 10% 5% 6% 3% 28% 2% 2% 12% 39% 10% 38% 15% 42% 9% 13% 15% 17% 8% 12% 22% 8% 13% 13% 25% 34% 12% 12% 17% 14% 13% 11% 25% 12% 15% 33% 16% 13% 14% 8% 15% 12% 15% 9% 13% 8% 12% 29% 15%

P/E Last FY 31x 17x 13x nm nm 6x 8x 13x 6x 12x 19x 20x 20x 15x 21x 18x 26x nm 15x nm nm 44x nm 15x >99x >99x 11x 42x 25x 15x 20x 20x 31x 7x 33x 30x 13x 13x 16x 7x nm 27x nm 37x 14x 13x nm 28x 18x 3x

This FY 14x 10x 11x 13x 10x 14x 17x 9x na 12x 18x 20x 19x 17x 18x 29x 14x 19x 14x >99x 45x 34x 38x 13x 24x 97x 13x 21x 14x 13x 16x 16x 16x 11x 14x 18x 17x 12x 16x 26x 41x 19x 62x 20x >99x 24x 66x 15x 18x 16x

P/E (Est.) Next In FY 2 Yrs 10x na 8x 7x 8x 6x 8x 6x 9x 7x 10x na 13x 11x 7x na na na 11x 9x 16x 14x 11x 8x 15x 13x 14x 12x 15x 13x 12x 9x 13x 11x 16x 13x 12x 11x 20x 11x 18x 12x 22x 18x 13x 9x 12x 10x 16x 13x 79x 46x 12x 11x 13x 10x 11x 10x 14x 12x 15x 13x 13x 11x 12x 9x 12x 10x 14x 10x 15x 13x 15x 15x 11x 10x 16x 14x 18x 13x 18x 13x 17x 15x 18x 15x 16x 14x 16x 10x 16x 13x 19x 10x 12x 10x 16x 15x 13x 10x

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Price/ Tang. Book 1.7x 1.4x 2.1x 1.2x 1.0x .8x 2.4x .8x 1.3x 2.5x 5.1x 1.7x 3.7x 1.9x 4.1x 1.4x 2.4x 1.0x 2.5x 1.0x 1.2x 1.3x 1.3x 1.5x 2.0x 1.5x 4.0x 1.5x 1.4x 2.3x 2.2x 1.9x 1.4x 2.7x 1.1x 1.8x 4.2x 3.3x 1.6x 1.3x 1.4x 1.5x 1.3x 1.1x 1.2x 1.4x 1.2x 2.1x 2.7x 1.5x

Div. Yield 3% 1% 1% % 1% % 3% 2% 2% % 4% 6% % 1% 5% 1% 2% 1% 3% 2% % 5% 4% 6% 4% 1% 7% 1% 3% 2% 2% 3% % 2% 2% 4% 6% 3% % 5% 3% 2%

Insider Own. <1% <1% <1% <1% <1% 5% <1% 12% <1% <1% <1% <1% 43% 6% 36% <1% 10% <1% 3% <1% <1% <1% <1% 63% 13% 74% 41% 2% <1% 1% 5% <1% 2% 76% <1% 1% 4% 8% 20% 5% 1% 9% 1% 64% 12% 3% 1% 1% 7% 1%

Website www.hsbc.com www.jpmorganchase.com www.wellsfargo.com www.bankofamerica.com www.citigroup.com www.mufg.jp www.santander.com.br www.barclays.co.uk www.db.com www.statestreet.com www.santandersantiago.cl www.bbt.com www.grupobancolombia.com www.northerntrust.com www.credicorpnet.com www.53.com www.mtb.com www.cit.com www.mynycb.com www.keycorp.net www.comerica.com www.peoples.com www.huntington.com www.bokf.com www.cnb.com www.thirdfederal.com www.macro.com.ar www.eastwestbank.com www.fnfg.com www.boh.com valleynationalbank.com www.firstmerit.com www.fult.com www.bancofrances.com.ar www.washingtonfederal.com www.signatureny.com www.westamerica.com www.prosperitybanktx.com www.umb.com www.iberiabank.com www.websteronline.com www.newalliancebank.com www.umpquabank.com northwestsavingsbank.com bancorpsouthonline.com www.hancockbank.com www.susquehanna.net www.fnbcorporation.com www.ffin.com www.bankatfirst.com October 29, 2010 – Page 116 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Company / Ticker Park National / PRK Wintrust Financial / WTFC First Midwest / FMBI MB Financial / MBFI Old National Bancorp / ONB CVB Financial / CVBF National Penn / NPBC Community Bank Sys. / CBU NBT Bancorp / NBTB Columbia Banking / COLB BancFirst / BANF Brookline Bancorp / BRKL Banco Latino Amer. / BLX First Interstate / FIBK S&T Bancorp / STBA Boston Private / BPFH City Holding / CHCO Dime Community / DCOM Simmons First / SFNC First Commonwealth / FCF Tompkins Financial / TMP TrustCo Bank NY / TRST Community Trust / CTBI Renasant / RNST SCBT Financial / SCBT S.Y. Bancorp / SYBT Danvers Bancorp / DNBK First Busey / BUSE Univest Corp. of PA / UVSP Lakeland Financial / LKFN Arrow Financial / AROW Southwest Bancorp / OKSB Sterling Bancorp / STL First Community / FCBC Meridian Interstate / EBSB Rockville Financial / RCKB First Bancorp / FBNC First of Long Island / FLIC First Merchants / FRME German American / GABC Bank of Marin / BMRC CNB Financial / CCNE Citizens & Northern / CZNC State Bancorp/NY / STBC First Bancorp / FNLC Wainwright B & T / WAIN NASB Financial / NASB Century Bancorp / CNBKA Peapack-Gladstone / PGC Bar Harbor Bank / BHB

Price ($) 64 31 12 17 10 8 6 23 22 19 41 10 15 13 19 7 33 14 29 6 41 5 28 16 31 24 15 5 19 19 26 13 9 14 11 12 13 25 8 18 34 14 14 9 14 19 17 23 12 28

YTD Price ∆ 9% 2% 12% -16% -19% -9% 12% 20% 9% 19% 9% -1% 10% na 10% 18% 1% 22% 3% 21% 11% -13% 13% 20% 11% 14% 18% 23% 8% 10% 6% 90% 32% 16% 23% 10% -6% -1% 34% 8% 4% -14% 43% 28% -8% 158% -25% 6% -2% 2%

Market Value ($mn) 979 976 906 897 873 837 815 771 766 756 622 582 559 540 518 516 508 493 492 486 441 420 419 408 391 332 324 319 314 306 288 255 252 248 242 226 220 218 203 195 178 167 166 152 138 138 137 130 109 105

MV/ Total Assets 14% 7% 12% 8% 11% 12% 9% 14% 14% 18% 13% 22% 13% 7% 13% 9% 19% 12% 16% 8% 14% 11% 13% 11% 11% 18% 13% 9% 15% 12% 15% 8% 11% 11% 14% 14% 7% 14% 5% 15% 15% 13% 12% 9% 10% 14% 10% 5% 7% 10%

P/E Last FY 13x 14x nm nm 72x 14x nm 18x 15x nm 19x 30x 10x 12x >99x nm 12x 18x 16x nm 14x 15x 17x 19x 41x 20x 49x nm 25x 15x 13x 22x 25x nm 63x 22x 4x 14x nm 16x 15x 14x nm nm 12x 30x 7x 13x 19x 9x

This FY 14x 27x 42x 76x 21x 12x 59x 13x 13x 37x 16x 21x 13x 17x 15x 62x 13x 12x 18x 33x 13x 15x 14x 21x 7x 15x 17x 21x 21x 14x 14x 20x 23x 13x 20x 17x 17x 11x 23x 15x 14x 13x 10x 38x 13x 16x 39x 11x 17x 10x

P/E (Est.) Next In FY 2 Yrs 12x 10x 14x 10x 17x 11x 13x 9x 17x 11x 11x 10x 14x 9x 12x 11x 13x 12x 26x 17x 16x 13x 19x 18x 9x 8x 14x 9x 12x 9x 16x 11x 12x 11x 11x 11x 17x 16x 14x 10x 12x 11x 13x 11x 13x 12x 14x 12x 16x 13x 14x 11x 16x 14x 16x 9x 16x 14x 11x 9x 14x 12x 20x 12x 14x 9x 11x 9x 19x 17x 16x 15x 11x 10x 12x 12x 14x 6x 14x 13x 13x 11x 12x 10x 9x 9x 21x 15x 12x 11x 14x 13x 67x 23x 10x 8x 11x 8x 8x 8x

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Price/ Tang. Book 1.7x 1.2x 1.3x 1.3x 1.3x 1.4x 1.3x 2.7x 1.9x 1.3x 1.5x 1.3x .8x 1.1x .9x 1.5x 2.0x 1.9x 1.6x 1.0x 2.0x 1.6x 1.6x 1.8x 1.5x 2.1x 1.2x 1.7x 1.5x 1.3x 2.1x .9x 1.5x 1.4x 1.2x 1.4x 1.0x 1.7x .9x 1.8x 1.5x 1.7x 1.3x 1.3x 1.4x 2.0x .8x .9x 1.1x 1.1x

Div. Yield 6% 1% % % 3% 4% 1% 4% 4% % 2% 3% 4% 3% 1% 4% 4% 3% 1% 3% 5% 4% 4% 2% 3% 1% 3% 4% 3% 4% 1% 4% 3% 2% 2% 4% 1% 3% 2% 5% 3% 2% 6% 2% 2% 2% 4%

Insider Own. 3% 2% 2% 5% 2% 19% 2% 4% 3% 2% 53% 4% 25% 66% 3% 2% 4% 17% 8% 11% 15% 4% 4% 4% 3% 8% 17% 19% 5% 9% 5% 6% 5% 16% 59% 56% 11% 25% 2% 7% 3% 6% 2% 15% 15% 30% 63% 36% 17% 2%

Website www.parknationalcorp.com www.wintrust.com www.firstmidwest.com www.mbfinancial.com www.oldnational.com www.cbbank.com www.natpennbank.com www.communitybankna.com www.nbtbancorp.com www.columbiabank.com www.bancfirst.com www.brooklinebank.com www.bladex.com www.firstinterstatebank.com www.stbancorp.com www.bostonprivate.com www.cityholding.com www.dimewill.com www.simmonsfirst.com www.fcbanking.com www.tompkinstrustco.com www.trustcobank.com www.ctbi.com www.renasantbank.com www.scbandt.com www.syb.com www.danversbank.com www.busey.com www.univest.net www.lakecitybank.com www.arrowfinancial.com www.oksb.com www.sterlingbancorp.com www.fcbresource.com www.ebsb.com www.rockvillebank.com www.firstbancorp.com www.fnbli.com www.firstmerchants.com germanamericanbancorp.com www.bankofmarin.com www.bankcnb.com www.cnbankpa.com www.statebankofli.com www.thefirstbancorp.com www.wainwrightbank.com www.nasb.com www.century-bank.com www.pgbank.com www.bhbt.com

October 29, 2010 – Page 117 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

By Stock Price Performance Company / Ticker Citigroup / C First Busey / BUSE Boston Private / BPFH Bank of America / BAC KeyCorp / KEY First Merchants / FRME Huntington / HBAN First Midwest / FMBI National Penn / NPBC First Community / FCBC Barclays / BCS Susquehanna / SUSQ Deutsche Bank / DB Fifth Third Bancorp / FITB State Street / STT Mitsubishi UFJ / MTU First Commonwealth / FCF Peapack-Gladstone / PGC MB Financial / MBFI TrustCo Bank NY / TRST Webster Financial / WBS BancorpSouth / BXS F.N.B. / FNB HSBC Holdings / HBC Northern Trust / NTRS Columbia Banking / COLB NASB Financial / NASB Old National Bancorp / ONB S&T Bancorp / STBA East West Bancorp / EWBC Sterling Bancorp / STL First Bancorp / FBNC State Bancorp/NY / STBC Washington Federal / WFSL Southwest Bancorp / OKSB Umpqua Holdings / UMPQ TFS Financial / TFSL BB&T Corp. / BBT People's United / PBCT Renasant / RNST CVB Financial / CVBF Valley National / VLY Citizens & Northern / CZNC Wells Fargo / WFC Hancock Holding / HBHC Fulton Financial / FULT JPMorgan Chase / JPM BOK Financial / BOKF City National / CYN Comerica / CMA

Price ($) 4 5 7 12 8 8 6 12 6 14 18 9 57 12 40 5 6 12 17 5 18 14 9 52 49 19 17 10 19 17 9 13 9 15 13 11 9 23 13 16 8 13 14 24 31 10 37 45 52 38

(sorted by price decline since December 31, 2007)

∆ to 52-Week Low High -21% 28% -38% 16% -33% 32% -2% 66% -34% 23% -37% 28% -38% 30% -26% 47% -20% 31% -29% 27% -16% 38% -41% 40% -13% 36% -28% 31% -19% 35% -3% 24% -28% 36% -15% 34% -12% 69% -5% 32% -40% 28% -11% 79% -29% 9% -17% 23% -7% 23% -30% 30% -27% 59% -9% 43% -29% 39% -51% 24% -34% 18% -9% 29% -29% 15% -8% 43% -55% 23% -15% 43% -1% 66% -4% 58% -4% 30% -21% 11% -16% 51% -8% 28% -40% 1% -2% 45% -12% 50% -26% 23% -5% 30% -8% 25% -30% 24% -31% 20%

Price Performance Since Since Since 12/31/09 12/31/07 12/30/05 19% -87% -92% 23% -76% -77% 18% -75% -78% -20% -71% -74% 45% -66% -76% 34% -64% -69% 56% -61% -76% 12% -60% -65% 12% -57% -64% 16% -56% -55% 4% -55% -57% 46% -53% -64% -12% -52% -36% 24% -52% -68% -8% -51% -28% -6% -50% -66% 21% -47% -56% -2% -47% -53% -16% -46% -53% -13% -45% -56% 49% -45% -62% -40% -41% -37% 31% -39% -49% -8% -38% -35% -7% -36% -6% 19% -35% -33% -25% -34% -56% -19% -33% -54% 10% -33% -49% 5% -32% -55% 32% -31% -52% -6% -31% -35% 28% -30% -46% -22% -28% -34% 90% -28% -34% -17% -28% -61% -28% -27% na -11% -26% -46% -21% -26% -11% 20% -24% -23% -9% -24% -47% -6% -23% -33% 43% -22% -46% -13% -22% -25% -30% -20% -19% 9% -15% -43% -11% -15% -6% -6% -13% -1% 14% -13% -28% 29% -12% -33%

Market Value ($mn) 114,445 319 516 120,206 7,069 203 4,079 906 815 248 54,879 1,118 52,206 9,659 20,100 65,412 486 109 897 420 1,387 1,170 1,021 184,113 11,800 756 137 873 518 2,448 252 220 152 1,703 255 1,272 2,682 15,689 4,877 408 837 2,032 166 123,404 1,129 1,895 145,844 3,052 2,707 6,732

P/E Last FY nm nm nm nm nm nm nm nm nm nm 13x nm 6x 18x 12x 6x nm 19x nm 15x nm 14x 28x 31x 15x nm 7x 72x >99x 42x 25x 4x nm 33x 22x nm >99x 20x 44x 19x 14x 20x nm 13x 13x 31x 17x 15x >99x nm

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This FY 10x 21x 62x 13x >99x 23x 38x 42x 59x 13x 9x 66x na 29x 12x 14x 33x 17x 76x 15x 41x >99x 15x 14x 17x 37x 39x 21x 15x 21x 23x 17x 38x 14x 20x 62x 97x 20x 34x 21x 12x 16x 10x 11x 24x 16x 10x 13x 24x 45x

P/E (Est.) Next In FY 2 Yrs 9x 7x 16x 9x 16x 11x 8x 6x 20x 11x 14x 6x 13x 9x 17x 11x 14x 9x 11x 9x 7x na 19x 10x na na 12x 9x 11x 9x 10x na 14x 10x 11x 8x 13x 9x 13x 11x 18x 13x 16x 10x 12x 10x 10x na 14x 12x 26x 17x 67x 23x 17x 11x 12x 9x 13x 10x 14x 9x 11x 10x 21x 15x 14x 10x 20x 12x 18x 15x 79x 46x 11x 8x 22x 18x 14x 12x 11x 10x 15x 13x 9x 9x 8x 6x 16x 13x 12x 9x 8x 7x 12x 10x 16x 13x 18x 12x

Price/ Tang. Book 1.0x 1.7x 1.5x 1.2x 1.0x .9x 1.3x 1.3x 1.3x 1.4x .8x 1.2x 1.3x 1.4x 2.5x .8x 1.0x 1.1x 1.3x 1.6x 1.4x 1.2x 2.1x 1.7x 1.9x 1.3x .8x 1.3x .9x 1.5x 1.5x 1.0x 1.3x 1.1x .9x 1.3x 1.5x 1.7x 1.3x 1.8x 1.4x 2.2x 1.3x 2.1x 1.4x 1.4x 1.4x 1.5x 2.0x 1.2x

Div. Yield 3% 1% % % 1% 1% % 1% 3% 1% % % % 1% 2% % 5% % 6% 5% 3% 2% % 3% 3% % 4% 2% 2% 1% 1% 2% 3% 3% 5% 4% 4% 6% 3% 1% 3% 1% 1% 2% 1% 1%

MV/ Total Assets 6% 9% 9% 5% 8% 5% 8% 12% 9% 11% 2% 8% 2% 9% 12% 3% 8% 7% 8% 11% 8% 9% 12% 8% 15% 18% 10% 11% 13% 12% 11% 7% 9% 12% 8% 12% 25% 10% 22% 11% 12% 14% 12% 10% 13% 11% 7% 13% 13% 12%

October 29, 2010 – Page 118 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Company / Ticker Bar Harbor Bank / BHB Bank of Hawaii / BOH Univest Corp. of PA / UVSP Lakeland Financial / LKFN FirstMerit Corp. / FMER M&T Bank / MTB UMB Financial / UMBF Banco Latino Amer. / BLX NY Community / NYB Northwest Bancorp / NWBI BancFirst / BANF Wintrust Financial / WTFC Rockville Financial / RCKB First Niagara / FNFG City Holding / CHCO SCBT Financial / SCBT First Bancorp / FNLC Brookline Bancorp / BRKL NBT Bancorp / NBTB Park National / PRK Community Trust / CTBI CNB Financial / CCNE S.Y. Bancorp / SYBT Simmons First / SFNC Prosperity / PRSP NewAlliance / NAL Dime Community / DCOM Iberiabank / IBKC Signature Bank / SBNY Tompkins Financial / TMP Bank of Marin / BMRC Century Bancorp / CNBKA Community Bank Sys. / CBU WestAmerica / WABC First Financial Bank / FFIN Arrow Financial / AROW First of Long Island / FLIC German American / GABC Wainwright B & T / WAIN First Financial / FFBC BBVA Frances / BFR Credicorp / BAP Banco Macro / BMA Santander Chile / SAN Bancolombia / CIB Santander Brasil / BSBR Danvers Bancorp / DNBK Meridian Interstate / EBSB CIT Group / CIT First Interstate / FIBK

Price ($) 28 45 19 19 18 75 35 15 17 11 41 31 12 12 33 31 14 10 22 64 28 14 24 29 32 13 14 52 39 41 34 23 23 54 47 26 25 18 19 17 10 126 44 92 66 15 15 11 41 13

∆ to 52-Week Low High -12% 17% -10% 19% -20% 16% -14% 17% -8% 36% -20% 28% -10% 26% -22% 8% -37% 10% -16% 15% -14% 16% -20% 43% -24% 11% -3% 29% -19% 15% -18% 34% -13% 31% -12% 18% -14% 17% -19% 10% -20% 15% -23% 39% -18% 6% -15% 5% -12% 36% -15% 7% -28% 3% -20% 22% -26% 11% -15% 7% -14% 7% -28% 7% -30% 14% -12% 14% -8% 19% -17% 11% -10% 12% -19% 2% -69% 1% -29% 26% -48% 2% -47% 1% -49% 8% -43% 8% -42% 3% -35% 3% -20% 12% -24% 15% -40% 4% -12% 35%

Price Performance Since Since Since 12/31/09 12/31/07 12/30/05 2% -11% 6% -4% -11% -12% 8% -11% -22% 10% -9% -6% -11% -9% -30% 12% -8% -31% -10% -8% 11% 10% -6% -16% 14% -6% 0% -1% -6% 18% 9% -5% 3% 2% -5% -43% 10% -5% -11% -17% -4% -20% 1% -4% -9% 11% -3% -4% -8% -3% -19% -1% -3% -30% 9% -3% 3% 9% -1% -38% 13% 0% -11% -14% 1% -3% 14% 1% 2% 3% 8% 3% -21% 9% 12% 5% 9% -13% 22% 12% -2% -3% 12% 3% 21% 15% 38% 11% 15% 10% 4% 16% 4% 6% 16% -20% 20% 17% 3% -3% 20% 1% -13% 25% 34% 6% 27% 11% -1% 35% 19% 8% 38% 34% 158% 42% 106% 16% 48% -4% 62% 53% 62% 64% 65% 454% 49% 79% 271% 42% 81% 107% 45% 93% 128% 8% na na 18% na na 23% na na 50% na na na na na

Market Value ($mn) 105 2,192 314 306 1,958 8,960 1,432 559 7,195 1,235 622 976 226 2,415 508 391 138 582 766 979 419 167 332 492 1,495 1,322 493 1,408 1,589 441 178 130 771 1,563 983 288 218 195 138 980 1,823 10,075 2,635 16,726 13,032 57,197 324 242 8,271 540

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P/E Last FY 9x 15x 25x 15x 20x 26x 16x 10x 15x 37x 19x 14x 22x 25x 12x 41x 12x 30x 15x 13x 17x 14x 20x 16x 13x 27x 18x 7x 30x 14x 15x 13x 18x 13x 18x 13x 14x 16x 30x 3x 7x 21x 11x 19x 20x 8x 49x 63x nm 12x

This FY 10x 13x 21x 14x 16x 14x 16x 13x 14x 20x 16x 27x 17x 14x 13x 7x 13x 21x 13x 14x 14x 13x 15x 18x 12x 19x 12x 26x 18x 13x 14x 11x 13x 17x 18x 14x 11x 15x 16x 16x 11x 18x 13x 18x 19x 17x 17x 20x 19x 17x

P/E (Est.) Next In FY 2 Yrs 8x 8x 14x 12x 16x 14x 11x 9x 13x 11x 13x 11x 16x 14x 9x 8x 12x 11x 16x 14x 16x 13x 14x 10x 16x 15x 11x 10x 12x 11x 16x 13x 12x 11x 19x 18x 13x 12x 12x 10x 13x 12x 12x 10x 14x 11x 17x 16x 11x 10x 17x 15x 11x 11x 18x 13x 15x 13x 12x 11x 13x 11x 10x 8x 12x 11x 15x 15x 16x 15x 14x 12x 12x 12x 14x 13x 14x 13x 13x 10x 12x 10x 15x 13x 12x 11x 16x 14x 15x 13x 13x 11x 16x 14x 19x 17x 16x 13x 14x 9x

Price/ Tang. Book 1.1x 2.3x 1.5x 1.3x 1.9x 2.4x 1.6x .8x 2.5x 1.1x 1.5x 1.2x 1.4x 1.4x 2.0x 1.5x 1.4x 1.3x 1.9x 1.7x 1.6x 1.7x 2.1x 1.6x 3.3x 1.5x 1.9x 1.3x 1.8x 2.0x 1.5x .9x 2.7x 4.2x 2.7x 2.1x 1.7x 1.8x 2.0x 1.5x 2.7x 4.1x 4.0x 5.1x 3.7x 2.4x 1.2x 1.2x 1.0x 1.1x

Div. Yield 4% 4% 4% 3% 4% 4% 2% 6% 4% 2% 1% 2% 5% 4% 2% 6% 3% 4% 6% 4% 5% 3% 3% 2% 2% 4% 3% 3% 2% 2% 4% 3% 3% 4% 4% 3% 2% 2% 7% 2% 2% 1% 4%

MV/ Total Assets 10% 17% 15% 12% 13% 13% 13% 13% 17% 15% 13% 7% 14% 12% 19% 11% 10% 22% 14% 14% 13% 13% 18% 16% 16% 15% 12% 14% 15% 14% 15% 5% 14% 33% 29% 15% 14% 15% 14% 15% 25% 42% 34% 39% 38% 28% 13% 14% 15% 7%

October 29, 2010 – Page 119 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

By Estimated Forward P/E Company / Ticker Deutsche Bank / DB Barclays / BCS Bar Harbor Bank / BHB JPMorgan Chase / JPM Bank of America / BAC Wells Fargo / WFC Citigroup / C Banco Latino Amer. / BLX Citizens & Northern / CZNC Century Bancorp / CNBKA HSBC Holdings / HBC Mitsubishi UFJ / MTU Lakeland Financial / LKFN State Street / STT First Bancorp / FBNC Dime Community / DCOM Peapack-Gladstone / PGC CVB Financial / CVBF First Community / FCBC First Niagara / FNFG Prosperity / PRSP BB&T Corp. / BBT Banco Macro / BMA First of Long Island / FLIC Fulton Financial / FULT CNB Financial / CCNE BBVA Frances / BFR First Bancorp / FNLC Fifth Third Bancorp / FITB Tompkins Financial / TMP S&T Bancorp / STBA F.N.B. / FNB NY Community / NYB Community Bank Sys. / CBU BOK Financial / BOKF Park National / PRK City Holding / CHCO Bank of Marin / BMRC NBT Bancorp / NBTB M&T Bank / MTB East West Bancorp / EWBC FirstMerit Corp. / FMER Santander Brasil / BSBR TrustCo Bank NY / TRST MB Financial / MBFI Community Trust / CTBI Huntington / HBAN First Financial / FFBC Bank of Hawaii / BOH S.Y. Bancorp / SYBT

P/E Last FY 6x 13x 9x 17x nm 13x nm 10x nm 13x 31x 6x 15x 12x 4x 18x 19x 14x nm 25x 13x 20x 11x 14x 31x 14x 7x 12x 18x 14x >99x 28x 15x 18x 15x 13x 12x 15x 15x 26x 42x 20x 8x 15x nm 17x nm 3x 15x 20x

This FY 11x 9x 10x 10x 13x 11x 10x 13x 10x 11x 14x 14x 14x 12x 17x 12x 17x 12x 13x 14x 12x 20x 13x 11x 16x 13x 11x 13x 29x 13x 15x 15x 14x 13x 13x 14x 13x 14x 13x 14x 21x 16x 17x 15x 76x 14x 38x 16x 13x 15x

(sorted by P/E based on estimated EPS for next fiscal year) P/E (Est.) Next In FY 2 Yrs 6x na 7x na 8x 8x 8x 7x 8x 6x 8x 6x 9x 7x 9x 8x 9x 9x 10x 8x 10x na 10x na 11x 9x 11x 9x 11x 10x 11x 11x 11x 8x 11x 10x 11x 9x 11x 10x 11x 10x 11x 8x 12x 11x 12x 12x 12x 9x 12x 10x 12x 10x 12x 11x 12x 9x 12x 11x 12x 9x 12x 10x 12x 11x 12x 11x 12x 10x 12x 10x 12x 11x 13x 11x 13x 12x 13x 11x 13x 10x 13x 11x 13x 11x 13x 11x 13x 9x 13x 12x 13x 9x 13x 10x 14x 12x 14x 11x

EPS (Actual) 2 Yrs Last Ago FY (9.67) 9.65 3.17 1.45 2.57 3.12 0.81 2.24 0.54 (0.29) 0.70 1.75 (6.39) (0.76) 1.51 1.50 1.12 (4.40) 1.63 1.84 2.33 1.69 (1.66) 0.81 1.58 1.26 4.30 3.46 1.37 3.37 0.85 0.79 (2.53) 0.64 0.76 0.56 0.15 (2.75) 0.81 0.46 1.86 2.41 2.71 1.15 2.41 4.18 1.78 1.84 (0.03) 0.31 0.61 0.98 1.29 1.45 1.44 1.22 (3.94) 0.67 2.78 2.96 2.28 0.07 0.44 0.32 0.23 1.13 1.49 1.26 2.27 2.96 0.97 4.82 1.74 2.68 2.31 2.19 1.80 1.53 5.01 2.89 (0.94) 0.39 1.46 0.90 1.41 1.86 0.45 0.37 0.43 (1.07) 1.52 1.65 (0.44) (6.14) 0.61 5.33 3.99 3.00 1.59 1.19

This FY 5.16 2.00 2.87 3.81 0.91 2.12 0.38 1.16 1.42 2.22 3.66 0.34 1.38 3.35 0.76 1.23 0.74 0.64 1.11 0.85 2.72 1.13 3.52 2.27 0.58 1.08 0.92 1.09 0.42 3.23 1.28 0.60 1.22 1.81 3.51 4.72 2.50 2.42 1.66 5.40 0.78 1.10 0.90 0.36 0.22 1.96 0.15 1.04 3.59 1.59

EPS (Est.) Next In FY 2 Yrs 9.11 na 2.69 na 3.55 3.39 4.59 5.43 1.48 2.12 2.83 3.63 0.45 0.54 1.72 1.91 1.47 1.47 2.40 2.77 5.17 na 0.45 na 1.76 2.07 3.70 4.32 1.20 1.31 1.31 1.33 1.13 1.46 0.71 0.82 1.26 1.60 1.03 1.13 2.82 3.10 1.98 2.80 3.80 4.18 2.13 2.13 0.81 1.02 1.16 1.39 0.85 1.03 1.18 1.33 1.01 1.39 3.39 3.66 1.55 2.01 0.74 0.87 1.36 1.51 1.90 2.07 3.61 4.29 5.15 6.54 2.61 3.02 2.67 3.11 1.75 1.87 5.90 6.82 1.29 1.60 1.40 1.69 1.17 1.40 0.42 0.50 1.27 1.95 2.09 2.25 0.43 0.64 1.26 1.68 3.35 3.75 1.78 2.25

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7-Yr Avg ROE 10% 19% 11% 9% 12% 16% 6% 14% 4% 8% 12% 4% 14% 10% 14% 12% 7% 17% 7% 6% 11% 12% 27% 13% 10% 12% 54% 14% 8% 15% 14% 10% 9% 10% 12% 12% 18% 14% 14% 11% 12% 12% 18% 19% 9% 12% -1% 17% 22% 17%

Div. Yield 1% 4% 1% % 1% 3% 2% 3% 3% % 2% 4% 2% 4% 3% 5% 2% 3% 2% 4% 1% 5% 7% 6% % 3% 3% 5% 6% 4% 2% 6% 4% 2% 4% 4% % 4% 5% % 4% 1% 2% 4% 3%

Price/ Tang. Book 1.3x .8x 1.1x 1.4x 1.2x 2.1x 1.0x .8x 1.3x .9x 1.7x .8x 1.3x 2.5x 1.0x 1.9x 1.1x 1.4x 1.4x 1.4x 3.3x 1.7x 4.0x 1.7x 1.4x 1.7x 2.7x 1.4x 1.4x 2.0x .9x 2.1x 2.5x 2.7x 1.5x 1.7x 2.0x 1.5x 1.9x 2.4x 1.5x 1.9x 2.4x 1.6x 1.3x 1.6x 1.3x 1.5x 2.3x 2.1x

Market Value ($mn) 52,206 54,879 105 145,844 120,206 123,404 114,445 559 166 130 184,113 65,412 306 20,100 220 493 109 837 248 2,415 1,495 15,689 2,635 218 1,895 167 1,823 138 9,659 441 518 1,021 7,195 771 3,052 979 508 178 766 8,960 2,448 1,958 57,197 420 897 419 4,079 980 2,192 332

Ins. Own. <1% 12% 2% <1% <1% <1% <1% 25% 2% 36% <1% 5% 9% <1% 11% 17% 17% 19% 16% <1% 8% <1% 41% 25% 2% 6% 76% 15% <1% 15% 3% 1% 3% 4% 63% 3% 4% 3% 3% 10% 2% <1% <1% 4% 5% 4% <1% 1% 1% 8%

MV/ Total Assets 2% 2% 10% 7% 5% 10% 6% 13% 12% 5% 8% 3% 12% 12% 7% 12% 7% 12% 11% 12% 16% 10% 34% 14% 11% 13% 25% 10% 9% 14% 13% 12% 17% 14% 13% 14% 19% 15% 14% 13% 12% 13% 28% 11% 8% 13% 8% 15% 17% 18%

October 29, 2010 – Page 120 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Company / Ticker Wainwright B & T / WAIN National Penn / NPBC Washington Federal / WFSL First Interstate / FIBK Arrow Financial / AROW First Commonwealth / FCF Wintrust Financial / WTFC Renasant / RNST Northern Trust / NTRS German American / GABC First Merchants / FRME Sterling Bancorp / STL Credicorp / BAP Valley National / VLY Bancolombia / CIB Signature Bank / SBNY WestAmerica / WABC BancorpSouth / BXS SCBT Financial / SCBT Boston Private / BPFH Rockville Financial / RCKB UMB Financial / UMBF First Busey / BUSE Santander Chile / SAN Univest Corp. of PA / UVSP Northwest Bancorp / NWBI City National / CYN CIT Group / CIT First Financial Bank / FFIN BancFirst / BANF Hancock Holding / HBHC Danvers Bancorp / DNBK Old National Bancorp / ONB First Midwest / FMBI Simmons First / SFNC NewAlliance / NAL Umpqua Holdings / UMPQ Iberiabank / IBKC Webster Financial / WBS Comerica / CMA Susquehanna / SUSQ Meridian Interstate / EBSB Brookline Bancorp / BRKL Southwest Bancorp / OKSB KeyCorp / KEY State Bancorp/NY / STBC People's United / PBCT Columbia Banking / COLB NASB Financial / NASB TFS Financial / TFSL

P/E Last FY 30x nm 33x 12x 13x nm 14x 19x 15x 16x nm 25x 21x 20x 20x 30x 13x 14x 41x nm 22x 16x nm 19x 25x 37x >99x nm 18x 19x 13x 49x 72x nm 16x 27x nm 7x nm nm nm 63x 30x 22x nm nm 44x nm 7x >99x

This FY 16x 59x 14x 17x 14x 33x 27x 21x 17x 15x 23x 23x 18x 16x 19x 18x 17x >99x 7x 62x 17x 16x 21x 18x 21x 20x 24x 19x 18x 16x 24x 17x 21x 42x 18x 19x 62x 26x 41x 45x 66x 20x 21x 20x >99x 38x 34x 37x 39x 97x

P/E (Est.) Next In FY 2 Yrs 14x 13x 14x 9x 14x 10x 14x 9x 14x 12x 14x 10x 14x 10x 14x 12x 14x 12x 14x 13x 14x 6x 14x 9x 15x 13x 15x 13x 15x 13x 15x 13x 15x 15x 16x 10x 16x 13x 16x 11x 16x 15x 16x 14x 16x 9x 16x 14x 16x 14x 16x 14x 16x 13x 16x 13x 16x 15x 16x 13x 16x 13x 16x 14x 17x 11x 17x 11x 17x 16x 17x 15x 18x 15x 18x 13x 18x 13x 18x 12x 19x 10x 19x 17x 19x 18x 20x 12x 20x 11x 21x 15x 22x 18x 26x 17x 67x 23x 79x 46x

EPS (Actual) 2 Yrs Last Ago FY 0.40 0.63 0.42 (3.61) 0.71 0.46 8.38 1.07 1.81 1.93 0.58 (0.24) 0.76 2.18 1.14 0.87 3.47 3.16 1.16 1.10 1.14 (2.17) 0.88 0.37 4.49 5.90 0.64 0.64 2.18 3.30 1.35 1.30 2.04 4.14 1.45 0.99 1.52 0.74 (4.85) (0.41) (0.09) 0.53 2.38 2.22 (1.06) (7.85) 4.72 4.92 1.60 0.75 0.44 0.30 2.11 0.50 (2.69) (0.01) 2.55 2.58 2.85 2.09 2.05 2.27 (0.15) 0.31 0.95 0.14 1.00 (0.71) 1.91 1.74 0.45 0.47 0.82 (2.36) 2.97 8.03 (6.36) (1.40) 1.26 (0.79) 0.95 (0.05) (0.09) 0.17 0.22 0.33 1.00 0.60 (2.97) (2.27) 0.12 (1.16) 0.41 0.30 0.30 (0.38) 1.18 2.38 0.17 0.05

This FY 1.17 0.11 1.09 0.73 1.81 0.17 1.17 0.77 2.90 1.20 0.34 0.41 7.21 0.77 3.50 2.17 3.24 0.07 4.30 0.11 0.69 2.21 0.23 5.07 0.91 0.57 2.19 2.17 2.68 2.56 1.25 0.88 0.47 0.29 1.58 0.66 0.18 2.02 0.43 0.85 0.13 0.53 0.47 0.67 0.02 0.24 0.39 0.52 0.45 0.09

EPS (Est.) Next In FY 2 Yrs 1.38 1.44 0.47 0.70 1.10 1.52 0.91 1.45 1.83 2.10 0.40 0.59 2.20 3.20 1.14 1.32 3.40 4.14 1.22 1.33 0.55 1.24 0.65 1.00 8.43 10.03 0.84 0.96 4.37 5.09 2.53 2.90 3.50 3.69 0.90 1.34 1.96 2.35 0.43 0.59 0.73 0.77 2.22 2.53 0.30 0.51 5.73 6.68 1.17 1.36 0.69 0.82 3.21 4.04 2.54 3.19 2.89 3.12 2.48 3.10 1.86 2.36 0.93 1.07 0.60 0.94 0.73 1.11 1.69 1.83 0.72 0.82 0.63 0.76 2.95 3.94 0.99 1.35 2.13 3.18 0.46 0.83 0.56 0.65 0.51 0.54 0.67 1.12 0.40 0.71 0.43 0.60 0.59 0.75 0.73 1.16 0.26 0.75 0.11 0.19

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7-Yr Avg ROE 10% 5% 10% 16% 16% 8% 9% 10% 16% 11% 6% 13% 18% 17% 27% 7% 24% 12% 10% -6% 6% 8% -4% 22% 13% 7% 12% 0% 15% 13% 13% 6% 9% 12% 10% 3% 5% 12% 3% 11% 7% 3% 3% 11% 4% -2% 8% 9% 14% 5%

Div. Yield 2% 1% 1% 4% 4% 1% 1% 4% 2% 3% 1% 4% 6% 2% 3% 6% 2% 1% 2% 2% 3% 4% 4% 1% 3% 2% 3% 1% 3% % 3% 2% 2% 3% % 1% % 3% 1% % 2% 5% % 3%

Price/ Tang. Book 2.0x 1.3x 1.1x 1.1x 2.1x 1.0x 1.2x 1.8x 1.9x 1.8x .9x 1.5x 4.1x 2.2x 3.7x 1.8x 4.2x 1.2x 1.5x 1.5x 1.4x 1.6x 1.7x 5.1x 1.5x 1.1x 2.0x 1.0x 2.7x 1.5x 1.4x 1.2x 1.3x 1.3x 1.6x 1.5x 1.3x 1.3x 1.4x 1.2x 1.2x 1.2x 1.3x .9x 1.0x 1.3x 1.3x 1.3x .8x 1.5x

Market Value ($mn) 138 815 1,703 540 288 486 976 408 11,800 195 203 252 10,075 2,032 13,032 1,589 1,563 1,170 391 516 226 1,432 319 16,726 314 1,235 2,707 8,271 983 622 1,129 324 873 906 492 1,322 1,272 1,408 1,387 6,732 1,118 242 582 255 7,069 152 4,877 756 137 2,682

Ins. Own. 30% 2% <1% 66% 5% 11% 2% 4% 6% 7% 2% 5% 36% 5% 43% 1% 4% 12% 3% 2% 56% 20% 19% <1% 5% 64% 13% <1% 7% 53% 3% 17% 2% 2% 8% 9% 1% 5% 1% <1% 1% 59% 4% 6% <1% 15% <1% 2% 63% 74%

MV/ Total Assets 14% 9% 12% 7% 15% 8% 7% 11% 15% 15% 5% 11% 42% 14% 38% 15% 33% 9% 11% 9% 14% 13% 9% 39% 15% 15% 13% 15% 29% 13% 13% 13% 11% 12% 16% 15% 12% 14% 8% 12% 8% 14% 22% 8% 8% 9% 22% 18% 10% 25%

October 29, 2010 – Page 121 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

By Average Annual ROE (past seven years) Company / Ticker BBVA Frances / BFR Bancolombia / CIB Banco Macro / BMA WestAmerica / WABC Santander Chile / SAN Bank of Hawaii / BOH TrustCo Bank NY / TRST Barclays / BCS Santander Brasil / BSBR Credicorp / BAP City Holding / CHCO First Financial / FFBC CVB Financial / CVBF Valley National / VLY S.Y. Bancorp / SYBT Arrow Financial / AROW Northern Trust / NTRS First Interstate / FIBK Wells Fargo / WFC First Financial Bank / FFIN Tompkins Financial / TMP NBT Bancorp / NBTB Banco Latino Amer. / BLX Lakeland Financial / LKFN Bank of Marin / BMRC NASB Financial / NASB First Bancorp / FBNC S&T Bancorp / STBA First Bancorp / FNLC Hancock Holding / HBHC BancFirst / BANF Univest Corp. of PA / UVSP First of Long Island / FLIC Sterling Bancorp / STL First Midwest / FMBI BB&T Corp. / BBT Bank of America / BAC City National / CYN CNB Financial / CCNE Dime Community / DCOM Park National / PRK HSBC Holdings / HBC BOK Financial / BOKF Community Trust / CTBI Iberiabank / IBKC FirstMerit Corp. / FMER BancorpSouth / BXS East West Bancorp / EWBC Southwest Bancorp / OKSB Bar Harbor Bank / BHB

7-Yr Avg ROE 54% 27% 27% 24% 22% 22% 19% 19% 18% 18% 18% 17% 17% 17% 17% 16% 16% 16% 16% 15% 15% 14% 14% 14% 14% 14% 14% 14% 14% 13% 13% 13% 13% 13% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 11% 11%

LTM 33 19 26 19 31 19 12 34 13 23 14 41 10 9 11 15 12 6 8 13 14 11 6 8 11 6 6 7 8 8 9 4 13 5 -3 5 -1 4 11 12 11 9 10 9 15 7 1 13 4 10

GAAP Return on Equity (%) … Years Ago 1 2 3 4 5 41 44 55 52 94 18 15 24 28 34 32 23 15 19 34 27 15 22 23 27 27 27 17 23 23 17 25 25 26 24 12 14 17 19 26 22 15 21 25 21 9 8 37 n/a n/a 23 21 23 18 17 14 10 17 18 20 56 8 13 7 12 9 14 15 19 21 8 9 16 17 20 11 16 18 17 18 16 16 14 14 16 13 17 17 18 17 2 14 31 n/a n/a 9 4 17 20 20 14 15 16 16 16 14 14 14 15 16 11 14 13 15 16 9 9 12 10 13 9 13 14 15 17 11 13 14 14 16 12 6 10 14 18 23 11 13 12 11 1 15 17 15 17 10 12 12 12 16 10 11 13 20 12 8 11 15 15 15 5 10 13 14 15 12 13 12 12 14 5 13 12 8 16 -5 7 11 18 19 5 12 14 13 15 -1 2 11 18 16 2 6 14 16 17 13 8 13 14 13 9 10 8 11 13 12 2 4 17 17 5 5 16 16 16 10 8 12 13 14 8 8 13 15 14 18 7 10 12 9 8 13 14 11 14 7 10 12 13 12 2 -5 15 16 17 4 6 10 14 14 12 12 11 12 11

6 87 36 8 27 20 22 25 19 n/a 14 23 11 20 23 17 17 16 n/a 20 15 16 16 23 15 16 19 14 16 17 14 14 15 14 17 19 15 19 16 12 16 17 15 14 14 13 11 12 18 16 10

7 6 34 56 28 19 15 23 11 n/a 10 25 10 19 24 19 18 14 n/a 19 14 16 16 24 16 15 20 15 16 16 13 13 17 13 18 18 12 22 16 14 19 17 12 14 13 14 12 16 18 14 10

P/E Last FY 7x 20x 11x 13x 19x 15x 15x 13x 8x 21x 12x 3x 14x 20x 20x 13x 15x 12x 13x 18x 14x 15x 10x 15x 15x 7x 4x >99x 12x 13x 19x 25x 14x 25x nm 20x nm >99x 14x 18x 13x 31x 15x 17x 7x 20x 14x 42x 22x 9x

This FY 11x 19x 13x 17x 18x 13x 15x 9x 17x 18x 13x 16x 12x 16x 15x 14x 17x 17x 11x 18x 13x 13x 13x 14x 14x 39x 17x 15x 13x 24x 16x 21x 11x 23x 42x 20x 13x 24x 13x 12x 14x 14x 13x 14x 26x 16x >99x 21x 20x 10x

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P/E (Est.) Next In FY 2 Yrs 12x 10x 15x 13x 12x 11x 15x 15x 16x 14x 14x 12x 13x 11x 7x na 13x 11x 15x 13x 12x 11x 13x 10x 11x 10x 15x 13x 14x 11x 14x 12x 14x 12x 14x 9x 8x 6x 16x 15x 12x 11x 13x 12x 9x 8x 11x 9x 13x 11x 67x 23x 11x 10x 12x 9x 12x 11x 16x 13x 16x 13x 16x 14x 12x 12x 14x 9x 17x 11x 11x 8x 8x 6x 16x 13x 12x 10x 11x 11x 12x 10x 10x na 12x 10x 13x 12x 18x 13x 13x 11x 16x 10x 13x 10x 20x 12x 8x 8x

Div. Yield 7% 2% 2% 3% 4% 5% 1% 4% 2% 4% 6% 3% 4% 2% 4% 1% 3% 3% 4% 3% 2% 2% 3% 6% 3% 2% 4% 4% 4% % 3% % 1% 5% 4% 6% 3% 2% 4% 3% 4% 6% % 1% 4%

Price/ Tang. Book 2.7x 3.7x 4.0x 4.2x 5.1x 2.3x 1.6x .8x 2.4x 4.1x 2.0x 1.5x 1.4x 2.2x 2.1x 2.1x 1.9x 1.1x 2.1x 2.7x 2.0x 1.9x .8x 1.3x 1.5x .8x 1.0x .9x 1.4x 1.4x 1.5x 1.5x 1.7x 1.5x 1.3x 1.7x 1.2x 2.0x 1.7x 1.9x 1.7x 1.7x 1.5x 1.6x 1.3x 1.9x 1.2x 1.5x .9x 1.1x

Market Value ($mn) 1,823 13,032 2,635 1,563 16,726 2,192 420 54,879 57,197 10,075 508 980 837 2,032 332 288 11,800 540 123,404 983 441 766 559 306 178 137 220 518 138 1,129 622 314 218 252 906 15,689 120,206 2,707 167 493 979 184,113 3,052 419 1,408 1,958 1,170 2,448 255 105

Insider Own. 76% 43% 41% 4% <1% 1% 4% 12% <1% 36% 4% 1% 19% 5% 8% 5% 6% 66% <1% 7% 15% 3% 25% 9% 3% 63% 11% 3% 15% 3% 53% 5% 25% 5% 2% <1% <1% 13% 6% 17% 3% <1% 63% 4% 5% <1% 12% 2% 6% 2%

October 29, 2010 – Page 122 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Company / Ticker Prosperity / PRSP Comerica / CMA M&T Bank / MTB German American / GABC SCBT Financial / SCBT Simmons First / SFNC F.N.B. / FNB State Street / STT Washington Federal / WFSL Fulton Financial / FULT Wainwright B & T / WAIN Renasant / RNST Deutsche Bank / DB Community Bank Sys. / CBU JPMorgan Chase / JPM Columbia Banking / COLB Wintrust Financial / WTFC Old National Bancorp / ONB MB Financial / MBFI NY Community / NYB Fifth Third Bancorp / FITB People's United / PBCT UMB Financial / UMBF Century Bancorp / CNBKA First Commonwealth / FCF Susquehanna / SUSQ Northwest Bancorp / NWBI First Community / FCBC Signature Bank / SBNY Peapack-Gladstone / PGC Danvers Bancorp / DNBK First Niagara / FNFG Rockville Financial / RCKB First Merchants / FRME Citigroup / C Umpqua Holdings / UMPQ National Penn / NPBC TFS Financial / TFSL Mitsubishi UFJ / MTU Citizens & Northern / CZNC KeyCorp / KEY Webster Financial / WBS Meridian Interstate / EBSB Brookline Bancorp / BRKL NewAlliance / NAL CIT Group / CIT Huntington / HBAN State Bancorp/NY / STBC First Busey / BUSE Boston Private / BPFH

7-Yr Avg ROE 11% 11% 11% 11% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 9% 9% 9% 9% 9% 9% 8% 8% 8% 8% 8% 7% 7% 7% 7% 7% 6% 6% 6% 6% 6% 5% 5% 5% 4% 4% 4% 3% 3% 3% 3% 0% -1% -2% -4% -6%

LTM 9 -2 8 11 17 8 4 12 6 5 10 4 15 9 9 2 7 2 0 10 -3 2 9 12 -1 0 4 -14 10 5 5 4 7 -3 -3 -3 -35 1 -9 -13 -11 -5 5 5 4 34 -15 -7 -134 -4

GAAP Return on Equity (%) … Years Ago 1 2 3 4 5 9 7 9 11 13 -2 4 13 18 17 5 9 10 14 14 11 13 10 12 12 3 7 12 13 13 8 10 10 11 11 3 5 13 13 14 -16 16 14 16 13 3 5 11 12 13 4 0 10 13 13 7 4 9 10 12 5 6 10 11 12 15 -11 18 19 13 7 9 9 8 11 6 4 13 13 8 -2 2 11 13 14 7 2 7 10 12 1 10 12 12 9 -4 2 11 10 13 8 2 7 7 9 6 -26 11 12 17 2 3 5 9 11 9 11 9 7 7 8 8 7 5 7 -3 7 8 10 11 0 5 5 10 10 3 8 8 9 5 -19 1 14 14 14 7 9 7 9 5 6 -23 11 10 14 2 -2 6 7 18 3 6 6 7 8 6 -1 5 5 3 -12 6 10 9 10 -8 -32 3 19 22 -13 4 5 9 10 -36 4 12 13 13 1 3 2 4 13 12 -21 -6 3 2 -33 8 8 9 10 -21 -20 12 14 15 -6 -22 5 8 12 2 -1 2 3 10 4 3 3 4 4 3 3 2 4 4 0 -49 -2 15 15 -73 -3 2 17 16 -15 2 6 14 -46 -96 -8 9 16 17 -8 -75 1 9 10

6 14 15 13 9 12 11 13 13 12 14 14 12 9 11 6 13 13 9 15 12 17 18 5 9 8 11 10 13 12 15 n/a 6 5 10 17 9 13 n/a 10 12 14 11 n/a 3 1 13 17 14 17 11

7 14 13 13 9 14 12 10 14 14 15 11 14 5 11 15 14 13 9 15 15 19 7 7 12 13 12 9 15 2 15 n/a 7 19 10 20 11 16 n/a 27 14 13 15 n/a 2 3 11 17 13 17 11

P/E Last FY 13x nm 26x 16x 41x 16x 28x 12x 33x 31x 30x 19x 6x 18x 17x nm 14x 72x nm 15x 18x 44x 16x 13x nm nm 37x nm 30x 19x 49x 25x 22x nm nm nm nm >99x 6x nm nm nm 63x 30x 27x nm nm nm nm nm

This FY 12x 45x 14x 15x 7x 18x 15x 12x 14x 16x 16x 21x 11x 13x 10x 37x 27x 21x 76x 14x 29x 34x 16x 11x 33x 66x 20x 13x 18x 17x 17x 14x 17x 23x 10x 62x 59x 97x 14x 10x >99x 41x 20x 21x 19x 19x 38x 38x 21x 62x

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P/E (Est.) Next In FY 2 Yrs 11x 10x 18x 12x 13x 11x 14x 13x 16x 13x 17x 16x 12x 10x 11x 9x 14x 10x 12x 9x 14x 13x 14x 12x 6x na 12x 11x 8x 7x 26x 17x 14x 10x 17x 11x 13x 9x 12x 11x 12x 9x 22x 18x 16x 14x 10x 8x 14x 10x 19x 10x 16x 14x 11x 9x 15x 13x 11x 8x 16x 14x 11x 10x 16x 15x 14x 6x 9x 7x 18x 15x 14x 9x 79x 46x 10x na 9x 9x 20x 11x 18x 13x 19x 17x 19x 18x 17x 15x 16x 13x 13x 9x 21x 15x 16x 9x 16x 11x

Div. Yield 2% 1% 4% 3% 2% 3% 5% % 1% 1% 2% 4% 4% 1% % 1% 3% % 6% % 5% 2% 2% 1% % 4% 3% 2% 1% 5% 2% 1% 2% 1% 3% 3% % % 3% 2% 1% 2% 3% 1%

Price/ Tang. Book 3.3x 1.2x 2.4x 1.8x 1.5x 1.6x 2.1x 2.5x 1.1x 1.4x 2.0x 1.8x 1.3x 2.7x 1.4x 1.3x 1.2x 1.3x 1.3x 2.5x 1.4x 1.3x 1.6x .9x 1.0x 1.2x 1.1x 1.4x 1.8x 1.1x 1.2x 1.4x 1.4x .9x 1.0x 1.3x 1.3x 1.5x .8x 1.3x 1.0x 1.4x 1.2x 1.3x 1.5x 1.0x 1.3x 1.3x 1.7x 1.5x

Market Value ($mn) 1,495 6,732 8,960 195 391 492 1,021 20,100 1,703 1,895 138 408 52,206 771 145,844 756 976 873 897 7,195 9,659 4,877 1,432 130 486 1,118 1,235 248 1,589 109 324 2,415 226 203 114,445 1,272 815 2,682 65,412 166 7,069 1,387 242 582 1,322 8,271 4,079 152 319 516

Insider Own. 8% <1% 10% 7% 3% 8% 1% <1% <1% 2% 30% 4% <1% 4% <1% 2% 2% 2% 5% 3% <1% <1% 20% 36% 11% 1% 64% 16% 1% 17% 17% <1% 56% 2% <1% 1% 2% 74% 5% 2% <1% 1% 59% 4% 9% <1% <1% 15% 19% 2%

October 29, 2010 – Page 123 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

By Market Value to Total Assets Company / Ticker Deutsche Bank / DB Barclays / BCS Mitsubishi UFJ / MTU First Merchants / FRME Bank of America / BAC Century Bancorp / CNBKA Citigroup / C First Bancorp / FBNC JPMorgan Chase / JPM Wintrust Financial / WTFC Peapack-Gladstone / PGC First Interstate / FIBK KeyCorp / KEY HSBC Holdings / HBC Webster Financial / WBS Huntington / HBAN First Commonwealth / FCF Susquehanna / SUSQ MB Financial / MBFI Southwest Bancorp / OKSB First Busey / BUSE Fifth Third Bancorp / FITB BancorpSouth / BXS Boston Private / BPFH National Penn / NPBC State Bancorp/NY / STBC NASB Financial / NASB Bar Harbor Bank / BHB Wells Fargo / WFC BB&T Corp. / BBT First Bancorp / FNLC SCBT Financial / SCBT TrustCo Bank NY / TRST Sterling Bancorp / STL First Community / FCBC Old National Bancorp / ONB Renasant / RNST Fulton Financial / FULT F.N.B. / FNB First Midwest / FMBI Lakeland Financial / LKFN Umpqua Holdings / UMPQ First Niagara / FNFG Dime Community / DCOM Comerica / CMA CVB Financial / CVBF East West Bancorp / EWBC Citizens & Northern / CZNC State Street / STT Washington Federal / WFSL

Price ($) 57 18 5 8 12 23 4 13 37 31 12 13 8 52 18 6 6 9 17 13 5 12 14 7 6 9 17 28 24 23 14 31 5 9 14 10 16 10 9 12 19 11 12 14 38 8 17 14 40 15

∆ to 52-Week Low High -13% 36% -16% 38% -3% 24% -37% 28% -2% 66% -28% 7% -21% 28% -9% 29% -5% 30% -20% 43% -15% 34% -12% 35% -34% 23% -17% 23% -40% 28% -38% 30% -28% 36% -41% 40% -12% 69% -55% 23% -38% 16% -28% 31% -11% 79% -33% 32% -20% 31% -29% 15% -27% 59% -12% 17% -2% 45% -4% 58% -13% 31% -18% 34% -5% 32% -34% 18% -29% 27% -9% 43% -21% 11% -26% 23% -29% 9% -26% 47% -14% 17% -15% 43% -3% 29% -28% 3% -31% 20% -16% 51% -51% 24% -40% 1% -19% 35% -8% 43%

Market Value ($mn) 52,206 54,879 65,412 203 120,206 130 114,445 220 145,844 976 109 540 7,069 184,113 1,387 4,079 486 1,118 897 255 319 9,659 1,170 516 815 152 137 105 123,404 15,689 138 391 420 252 248 873 408 1,895 1,021 906 306 1,272 2,415 493 6,732 837 2,448 166 20,100 1,703

Total Assets ($mn) 2,682,905 2,524,448 2,402,406 4,183 2,363,878 2,434 1,937,656 3,318 2,141,595 13,709 1,477 7,225 94,167 2,418,454 17,743 51,771 6,058 13,892 10,644 3,011 3,699 112,025 13,421 5,868 9,222 1,615 1,416 1,085 1,225,862 155,083 1,326 3,619 3,829 2,284 2,247 7,701 3,594 16,627 8,833 7,805 2,634 10,827 20,518 4,148 55,885 6,860 19,967 1,339 162,075 13,710

MV/ Total Assets 2% 2% 3% 5% 5% 5% 6% 7% 7% 7% 7% 7% 8% 8% 8% 8% 8% 8% 8% 8% 9% 9% 9% 9% 9% 9% 10% 10% 10% 10% 10% 11% 11% 11% 11% 11% 11% 11% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12%

P/E Last FY 6x 13x 6x nm nm 13x nm 4x 17x 14x 19x 12x nm 31x nm nm nm nm nm 22x nm 18x 14x nm nm nm 7x 9x 13x 20x 12x 41x 15x 25x nm 72x 19x 31x 28x nm 15x nm 25x 18x nm 14x 42x nm 12x 33x

This FY 11x 9x 14x 23x 13x 11x 10x 17x 10x 27x 17x 17x >99x 14x 41x 38x 33x 66x 76x 20x 21x 29x >99x 62x 59x 38x 39x 10x 11x 20x 13x 7x 15x 23x 13x 21x 21x 16x 15x 42x 14x 62x 14x 12x 45x 12x 21x 10x 12x 14x

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P/E (Est.) Next In FY 2 Yrs 6x na 7x na 10x na 14x 6x 8x 6x 10x 8x 9x 7x 11x 10x 8x 7x 14x 10x 11x 8x 14x 9x 20x 11x 10x na 18x 13x 13x 9x 14x 10x 19x 10x 13x 9x 20x 12x 16x 9x 12x 9x 16x 10x 16x 11x 14x 9x 21x 15x 67x 23x 8x 8x 8x 6x 11x 8x 12x 11x 16x 13x 13x 11x 14x 9x 11x 9x 17x 11x 14x 12x 12x 9x 12x 10x 17x 11x 11x 9x 18x 15x 11x 10x 11x 11x 18x 12x 11x 10x 13x 10x 9x 9x 11x 9x 14x 10x

7-Yr Avg ROE 10% 19% 4% 6% 12% 8% 6% 14% 9% 9% 7% 16% 4% 12% 3% -1% 8% 7% 9% 11% -4% 8% 12% -6% 5% -2% 14% 11% 16% 12% 14% 10% 19% 13% 7% 9% 10% 10% 10% 12% 14% 5% 6% 12% 11% 17% 12% 4% 10% 10%

Div. Yield 1% 1% % 2% 2% 1% 1% 2% 4% % 3% % 1% 1% % % 1% 3% % 6% 1% 1% 2% 4% 1% 3% 6% 2% 5% 4% 3% 3% 4% 1% 5% % 3% 2% 5% 4% 1% 4% % 3% % 1%

Price/ Tang. Book 1.3x .8x .8x .9x 1.2x .9x 1.0x 1.0x 1.4x 1.2x 1.1x 1.1x 1.0x 1.7x 1.4x 1.3x 1.0x 1.2x 1.3x .9x 1.7x 1.4x 1.2x 1.5x 1.3x 1.3x .8x 1.1x 2.1x 1.7x 1.4x 1.5x 1.6x 1.5x 1.4x 1.3x 1.8x 1.4x 2.1x 1.3x 1.3x 1.3x 1.4x 1.9x 1.2x 1.4x 1.5x 1.3x 2.5x 1.1x

Insider Own. <1% 12% 5% 2% <1% 36% <1% 11% <1% 2% 17% 66% <1% <1% 1% <1% 11% 1% 5% 6% 19% <1% 12% 2% 2% 15% 63% 2% <1% <1% 15% 3% 4% 5% 16% 2% 4% 2% 1% 2% 9% 1% <1% 17% <1% 19% 2% 2% <1% <1%

October 29, 2010 – Page 124 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Company / Ticker S&T Bancorp / STBA CNB Financial / CCNE Banco Latino Amer. / BLX City National / CYN Danvers Bancorp / DNBK BOK Financial / BOKF UMB Financial / UMBF Community Trust / CTBI M&T Bank / MTB Hancock Holding / HBHC BancFirst / BANF FirstMerit Corp. / FMER Iberiabank / IBKC Wainwright B & T / WAIN First of Long Island / FLIC Park National / PRK Tompkins Financial / TMP Meridian Interstate / EBSB Rockville Financial / RCKB NBT Bancorp / NBTB Community Bank Sys. / CBU Valley National / VLY German American / GABC Arrow Financial / AROW Northern Trust / NTRS First Financial / FFBC Bank of Marin / BMRC Univest Corp. of PA / UVSP CIT Group / CIT NewAlliance / NAL Northwest Bancorp / NWBI Signature Bank / SBNY Prosperity / PRSP Simmons First / SFNC Bank of Hawaii / BOH NY Community / NYB Columbia Banking / COLB S.Y. Bancorp / SYBT City Holding / CHCO Brookline Bancorp / BRKL People's United / PBCT TFS Financial / TFSL BBVA Frances / BFR Santander Brasil / BSBR First Financial Bank / FFIN WestAmerica / WABC Banco Macro / BMA Bancolombia / CIB Santander Chile / SAN Credicorp / BAP

Price ($) 19 14 15 52 15 45 35 28 75 31 41 18 52 19 25 64 41 11 12 22 23 13 18 26 49 17 34 19 41 13 11 39 32 29 45 17 19 24 33 10 13 9 10 15 47 54 44 66 92 126

∆ to 52-Week Low High -29% 39% -23% 39% -22% 8% -30% 24% -20% 12% -8% 25% -10% 26% -20% 15% -20% 28% -12% 50% -14% 16% -8% 36% -20% 22% -69% 1% -10% 12% -19% 10% -15% 7% -24% 15% -24% 11% -14% 17% -30% 14% -8% 28% -19% 2% -17% 11% -7% 23% -29% 26% -14% 7% -20% 16% -40% 4% -15% 7% -16% 15% -26% 11% -12% 36% -15% 5% -10% 19% -37% 10% -30% 30% -18% 6% -19% 15% -12% 18% -4% 30% -1% 66% -48% 2% -35% 3% -8% 19% -12% 14% -49% 8% -42% 3% -43% 8% -47% 1%

Market Value ($mn) 518 167 559 2,707 324 3,052 1,432 419 8,960 1,129 622 1,958 1,408 138 218 979 441 242 226 766 771 2,032 195 288 11,800 980 178 314 8,271 1,322 1,235 1,589 1,495 492 2,192 7,195 756 332 508 582 4,877 2,682 1,823 57,197 983 1,563 2,635 13,032 16,726 10,075

Total Assets ($mn) 4,139 1,325 4,412 21,231 2,529 23,737 11,062 3,209 68,154 8,500 4,628 14,523 10,377 1,012 1,598 7,093 3,162 1,728 1,602 5,415 5,448 14,113 1,341 1,960 80,049 6,607 1,186 2,089 54,917 8,712 8,136 10,383 9,609 3,025 12,856 42,011 4,289 1,860 2,639 2,659 21,950 10,940 7,160 204,962 3,336 4,727 7,671 34,688 42,975 23,830

MV/ Total Assets 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% 14% 14% 14% 14% 14% 14% 14% 14% 14% 14% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 16% 16% 17% 17% 18% 18% 19% 22% 22% 25% 25% 28% 29% 33% 34% 38% 39% 42%

P/E Last FY >99x 14x 10x >99x 49x 15x 16x 17x 26x 13x 19x 20x 7x 30x 14x 13x 14x 63x 22x 15x 18x 20x 16x 13x 15x 3x 15x 25x nm 27x 37x 30x 13x 16x 15x 15x nm 20x 12x 30x 44x >99x 7x 8x 18x 13x 11x 20x 19x 21x

This FY 15x 13x 13x 24x 17x 13x 16x 14x 14x 24x 16x 16x 26x 16x 11x 14x 13x 20x 17x 13x 13x 16x 15x 14x 17x 16x 14x 21x 19x 19x 20x 18x 12x 18x 13x 14x 37x 15x 13x 21x 34x 97x 11x 17x 18x 17x 13x 19x 18x 18x

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P/E (Est.) Next In FY 2 Yrs 12x 9x 12x 10x 9x 8x 16x 13x 16x 14x 12x 10x 16x 14x 13x 12x 13x 11x 16x 13x 16x 13x 13x 11x 18x 13x 14x 13x 12x 12x 12x 10x 12x 11x 19x 17x 16x 15x 13x 12x 12x 11x 15x 13x 14x 13x 14x 12x 14x 12x 13x 10x 13x 11x 16x 14x 16x 13x 17x 15x 16x 14x 15x 13x 11x 10x 17x 16x 14x 12x 12x 11x 26x 17x 14x 11x 12x 11x 19x 18x 22x 18x 79x 46x 12x 10x 13x 11x 16x 15x 15x 15x 12x 11x 15x 13x 16x 14x 15x 13x

7-Yr Avg ROE 14% 12% 14% 12% 6% 12% 8% 12% 11% 13% 13% 12% 12% 10% 13% 12% 15% 3% 6% 14% 10% 17% 11% 16% 16% 17% 14% 13% 0% 3% 7% 7% 11% 10% 22% 9% 9% 17% 18% 3% 8% 5% 54% 18% 15% 24% 27% 27% 22% 18%

Div. Yield 3% 5% 1% 1% 2% 2% 4% 4% 3% 2% 4% 3% 2% 4% 6% 3% 2% 4% 4% 6% 3% 4% 2% 2% 2% 4% 2% 4% 2% 3% 4% 6% % 3% 4% 3% 5% 3% 7% 3% 3% 2% 2% -

Price/ Tang. Book .9x 1.7x .8x 2.0x 1.2x 1.5x 1.6x 1.6x 2.4x 1.4x 1.5x 1.9x 1.3x 2.0x 1.7x 1.7x 2.0x 1.2x 1.4x 1.9x 2.7x 2.2x 1.8x 2.1x 1.9x 1.5x 1.5x 1.5x 1.0x 1.5x 1.1x 1.8x 3.3x 1.6x 2.3x 2.5x 1.3x 2.1x 2.0x 1.3x 1.3x 1.5x 2.7x 2.4x 2.7x 4.2x 4.0x 3.7x 5.1x 4.1x

Insider Own. 3% 6% 25% 13% 17% 63% 20% 4% 10% 3% 53% <1% 5% 30% 25% 3% 15% 59% 56% 3% 4% 5% 7% 5% 6% 1% 3% 5% <1% 9% 64% 1% 8% 8% 1% 3% 2% 8% 4% 4% <1% 74% 76% <1% 7% 4% 41% 43% <1% 36%

October 29, 2010 – Page 125 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Banking Glossary and Definitions The following definitions originate from the FDIC, company filings and other sources, and are edited by The Manual of Ideas research team. Basel III. New international regulatory framework for banks. The following is an overview of this framework, as summarized by Citigroup: Basel I to Basel III:

Basel III Phase-In:

C&D (construction and development loans). Construction and land development loans secured by real estate held in domestic offices. C&I (commercial and industrial loans). Excludes loans secured by real estate, loans to individuals, loans to depository institutions and foreign governments, loans to states and political subdivisions and lease financing receivables. Capital measures. A bank is deemed… •

Well capitalized if the bank (i) has a total risk-based capital ratio of 10.0% or greater; and (ii) has a Tier 1 risk-based capital ratio of 6.0% or greater; and (iii) has a leverage ratio of 5.0% or greater; and (iv) is

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October 29, 2010 – Page 126 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

not subject to any written agreement, order, capital directive, or prompt corrective action directive issued by the FDIC. •

Adequately capitalized if the bank (i) has a total risk-based capital ratio of 8.0% or greater; and (ii) has a Tier 1 risk-based capital ratio of 4.0% or greater; and (iii) has (a) a leverage ratio of 4.0% or greater, or (b) a leverage ratio of 3.0% or greater if the bank is rated composite 1 under the CAMELS rating system in the most recent examination of the bank and is not experiencing or anticipating significant growth, and (iv) does not meet the definition of a well capitalized bank.

•

Undercapitalized if the bank (i) has a total risk-based capital ratio that is less than 8.0%; or (ii) has a Tier 1 risk-based capital ratio that is less than 4.0% or (iii) (a) has a leverage ratio that is less than 4.0%; or (b) has a leverage ratio that is less than 3.0% if the bank is rated composite 1 under the CAMELS rating system in the most recent examination of the bank and is not experiencing or anticipating significant growth.

•

Significantly undercapitalized if the bank has (i) a total risk-based capital ratio less than 6.0%; or (ii) a Tier 1 risk-based capital ratio that is less than 3.0%; or (iii) a leverage ratio that is less than 3.0%.

•

Critically undercapitalized if the insured depository institution has a ratio of tangible equity to total assets that is equal to or less than 2.0%.

Core capital. See Tier 1 capital. Loan loss allowance. Each bank must maintain an allowance (reserve) for loan and lease losses adequate to absorb estimated credit losses associated with its loan and lease portfolio (includes off-balance-sheet credit instruments). Net loans and leases. Total loans and lease financing receivables minus unearned income and loan loss allowances. OREO (other real estate owned). Includes direct and indirect investments in real estate. The amount is reflected net of valuation allowances. Restructured loans and leases. Total loans and leases restructured and in compliance with modified terms. Tier 1 capital. Tier 1 (core) capital includes: common equity plus noncumulative perpetual preferred stock plus minority interests in consolidated subsidiaries less goodwill and other ineligible intangible assets. The amount of eligible intangibles (including mortgage servicing rights) included in core capital is limited in accordance with supervisory capital regulations. Tier 2 risk-based capital consists of, but is not limited to, limited subordinated debt, cumulative perpetual preferred stock, allowance for loan and lease losses, total mandatory convertible debt and a portion of unrealized gains on availablefor-sale equity securities. Total risk weighted assets includes gross risk weighted assets minus disallowed loan and lease allowance minus allocated transfer risk reserve plus unrealized loss on equity securities. Unearned income. Loan revenue received in advance of being earned.

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October 29, 2010 – Page 127 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Favorite Stock Screens For Value Investors Market Value

Enterprise Value

Relevant Financial Data Point

"Magic Formula," based on Trailing Financials 1 Synta Pharma SNTA $3.67

$149mn

$102mn

Trailing EBIT / EV 91%

Terra Nova Royalty

* Daily Journal

Company

Ticker

Price

Notable Shareholders

Industry

AIG, BlackRock

Major Drugs

TTT

$7.76

$235mn

$150mn

39%

Paradigm, RenTech

Misc. Financial Services

DJCO

$73.00

$101mn

$35mn

34%

Ashford, Fairholme

Printing & Publishing

$1,951mn

$1,839mn

EPS Yield FY0 18%

Blum, Wanger

Schools

"Magic Formula," based on This Year's EPS Estimates 1 ITT Educational ESI $61.13 2

Bridgepoint Edu.

BPI

$14.34

$784mn

$578mn

14%

FMR, Wells Fargo

Schools

Career Education

CECO

$17.51

$1,423mn

$1,112mn

17%

Blum, RS, Kornitzer

Schools

$1,951mn

$1,839mn

EPS Yield FY1 20%

Blum, Wanger

Schools

"Magic Formula," based on Next Year's EPS Estimates 1 ITT Educational ESI $61.13 2

Bridgepoint Edu.

BPI

$14.34

$784mn

$578mn

17%

FMR, Wells Fargo

Schools

Career Education

CECO

$17.51

$1,423mn

$1,112mn

19%

Blum, RS, Kornitzer

Schools

Contrarian: Biggest YTD Losers (deleveraged & profitable) 1 China Sky One CSKI $8.43 $142mn

$77mn

∆ Price YTD -63%

Pope, Guerrilla

Biotechnology & Drugs

Duoyuan Global Water

DGW

$13.56

$333mn

$119mn

-62%

Royce, Tiger Global

Misc. Capital Goods

A-Power Energy

APWR

$7.46

$338mn

$277mn

-59%

Hudson Bay, DnB

Electric Utilities

Value with Catalyst: Cheap Repurchasers of Stock 1 United Overseas Bank UOVEY $28.54

$21,491mn

n/m

∆ Shares Q-Q -20%

n/a

Regional Banks

Brasil Telecom SA

BTM

$21.25

$4,156mn

$5,553mn

-12%

Aviva, Brandes

Comms Services

Dillard's

DDS

$26.41

$1,745mn

$2,490mn

-6%

Southeastern, Smith

Retail (dep't & discount)

Profitable Dividend Payors with Decent Balance Sheets 1 Am. Capital Agency AGNC $27.90

$939mn

$865mn

Div. Yield 20%

Vanguard, BlackRock

Real Estate Operations

Fifth Street Finance

FSC

$11.53

$629mn

n/m

11%

Greenlight, Opus

Misc. Financial Services

Himax Tech

HIMX

$2.31

$411mn

$253mn

11%

FMR, RenTech

Semiconductors

Deep Value: Lots of Revenue, Low Enterprise Value 1 Tech Data TECD $42.88

$1,999mn

$1,478mn

EV/Revenue .06x

Perkins, Acadian

Computer Hardware

Ingram Micro

$17.79

$2,788mn

$2,377mn

.07x

Artisan, Tradewinds

Computer Hardware

World Fuel Services

INT

$26.84

$1,597mn

$1,301mn

.09x

Argyll, Frontier

Oil & Gas Operations

Deep Value: Neglected Gross Profiteers 1 * Zoran ZRAN

$7.71

$383mn

$4mn

EV/GP .02x

Pzena, Advisory

Semiconductors

* Stewart Information

STC

$11.09

$204mn

$141mn

.09x

Artisan, Prescott

Property & Casualty

Winn-Dixie Stores

WINN

$6.95

$385mn

$262mn

.13x

Advisory, Sterling

Retail (grocery)

Activist Targets: Potential Sales, Liquidations or Recaps 1 Qiao Xing Universal XING $1.71 $158mn

-$263mn

NCAV / MV * 206%

Shah

Comms Services

Qiao Xing Mobile

QXM

$3.71

$196mn

-$121mn

200%

Shah, Weiss, Pope

Comms Services

Audiovox

VOXX

$6.38

$146mn

$87mn

145%

Baupost, Aegis

Comms Equipment

* NCAV = net current asset value = current asset minus total liabilities

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October 29, 2010 – Page 128 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

“Magic Formula,” based on Trailing Operating Income Companies with high returns on capital employed, trading at high trailing EBIT-to-enterprise value yield ▼

▼

Move To 52-Week Low High

MV ($mn)

EV ($mn)

EV/ Sales

Trailing EBIT/ EV

EBIT/ Capital Employed

Tax Rate

Price/ Tangible Book

Insiders % Buys/ Own. Sells

Company

Ticker

Price ($)

1 2 3 4 5

Synta Pharma Terra Nova Royalty * Daily Journal ITT Educational Bridgepoint Edu.

SNTA TTT DJCO ESI BPI

3.67 7.76 73.00 61.13 14.34

-31% -39% -28% -18% -11%

89% 40% 5% 100% 92%

149 235 101 1,951 784

102 150 35 1,839 578

.7x .3x .9x 1.2x 1.0x

91% 39% 34% 33% 31%

infinite infinite infinite 1547% infinite

n/m 62% 38% 39% 42%

4.2x 1.1x 1.7x >9.9x 3.9x

44% 21% 64% 0% 1%

6/1 -/-/11 / 5 5/6

6 7 8 9 10

EarthLink ePlus Apollo Group H&R Block Unisys

ELNK PLUS APOL HRB UIS

8.75 20.55 36.00 10.78 30.78

-10% -28% -1% -6% -45%

7% 9% 109% 115% 31%

946 166 5,321 3,326 1,312

621 134 4,621 3,346 1,652

1.0x .2x .9x .9x .4x

31% 25% 30% 23% 25%

1325% infinite 711% infinite 801%

n/m 39% 46% 38% 13%

1.4x 1.0x 6.0x n/m n/m

1% 40% 15% 4% 1%

13 / 9 11 / 3 16 / 12 7/2 6/3

11 12 13 14 15

InterDigital Impax Labs Metropolitan Health Amedisys Career Education

IDCC IPXL MDF AMED CECO

29.89 21.14 3.99 25.10 17.51

-38% -66% -54% -9% -7%

3% 6% 13% 156% 105%

1,317 1,341 162 723 1,423

832 1,013 130 812 1,112

2.3x 1.4x .4x .5x .5x

26% 33% 25% 30% 29%

448% 266% 337% 281% 265%

28% 36% 38% 39% 34%

9.4x 3.5x 3.3x n/m 4.5x

2% 5% 24% 1% 0%

12 / 11 11 / 9 9/5 6/3 6/4

16 17 18 19 20

United Online InfoSpace Oshkosh SuperGen USA Mobility

UNTD INSP OSK SUPG USMO

5.73 8.49 31.63 2.35 15.65

-17% -22% -22% -27% -37%

59% 43% 41% 62% 7%

501 306 2,864 142 345

682 83 3,880 39 216

.7x .3x .4x .8x .8x

18% 18% 34% 19% 27%

infinite infinite 196% 894% 232%

39% 9% 33% n/m 38%

n/m 1.4x n/m 1.3x 2.1x

4% 1% 1% 16% 0%

2/8 10 / 8 15 / 6 -/1 5/5

21 22 23 24 25

SanDisk Amerigroup Foster Wheeler Tessera Technologies Global Cash Access

SNDK AGP FWLT TSRA GCA

36.99 43.30 24.03 19.09 3.88

-48% -52% -15% -22% -11%

37% 2% 46% 57% 139%

8,621 2,209 3,064 959 260

7,405 1,819 2,275 522 422

1.6x .3x .5x 2.0x .7x

20% 16% 18% 19% 15%

338% infinite 334% 296% infinite

22% 37% 22% 44% 38%

1.7x 2.7x 4.1x 2.0x n/m

2% 1% 0% 2% 0%

12 / 6 17 / 13 3/1 4/4 2/5

26 27 28 29 30

VirnetX Medicis Pharma Nephros Zalicus Genoptix

VHC MRX NEP ZLCS GXDX

17.61 30.29 7.27 1.33 17.33

-89% -32% -61% -43% -22%

14% 2% 59% 52% 125%

836 1,823 215 118 305

708 1,448 173 69 165

3.5x 2.2x 1.7x 1.2x .8x

15% 15% 35% 15% 30%

infinite infinite 129% 606% 124%

32% 38% 23% n/m 46%

>9.9x 4.0x 2.4x 2.4x 1.5x

29% 2% 31% 9% 1%

4/-/-/1/7/8

31 32 33 34 35

AmSurg Corinthian Colleges Forest Labs * Internet Gold ViroPharma

AMSG COCO FRX IGLD VPHM

18.23 4.77 33.92 26.64 15.36

-10% -11% -29% -68% -53%

28% 305% 0% 28% 9%

564 421 9,686 509 1,196

826 526 6,396 618 932

1.2x .3x 1.5x .7x 2.5x

27% 46% 18% 32% 17%

131% 118% 201% 119% 236%

16% 39% 29% 38% 43%

n/m 4.2x 2.4x 4.0x 7.1x

3% 0% 1% 77% 1%

9/1 7/3 7/8 -/6/4

36 37 38 39 40

* Value Line AutoChina Almost Family Aeropostale Argan

VALU AUTC AFAM ARO AGX

14.38 25.35 31.72 25.70 9.36

-17% -39% -26% -26% -21%

136% 91% 39% 25% 74%

144 499 293 2,376 127

100 337 265 2,079 56

1.8x .7x .8x .9x .3x

14% 14% 18% 20% 16%

infinite infinite 166% 137% 186%

28% 24% 41% 40% 34%

6.8x 2.5x 5.5x 4.8x 1.7x

87% 1% 11% 1% 41%

-/-/7/4 1/3 -/-

41 42 43 44 45

* Kirkland's Providence Service * Nova Measuring * KBR * Select Comfort

KIRK PRSC NVMI KBR SCSS

13.18 17.23 5.85 25.20 8.24

-18% -35% -56% -31% -43%

93% 8% 18% 2% 46%

262 223 117 3,938 457

196 358 71 2,804 374

.5x .4x 1.1x .3x .6x

28% 17% 16% 20% 13%

106% 159% 168% 121% infinite

31% 39% n/m 31% n/m

2.6x n/m 2.3x 2.4x 9.2x

27% 2% 2% 0% 4%

9/2 12 / 3 -/2/10 / 7



Company website

SEC

Proxy

* New additions are highlighted.

Price Charts

Screening criteria: ► Market value > $100 million ► ADRs and banks excluded

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October 29, 2010 – Page 129 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

“Magic Formula,” based on This Year’s EPS Estimates Companies with high returns on capital employed, trading at high earnings yields (based on this FY EPS estimates) ▼

▼

Move To 52-Week Low High

MV ($mn)

EV ($mn)

EV/ Sales

This FY EPS Yield

EBIT/ Capital Employed

Tax Rate

Price to Tangible Book

Insiders % Buys/ Own. Sells

Company

Ticker

Price ($)

1 2 3 4 5

ITT Educational Bridgepoint Edu. Career Education Impax Labs Metropolitan Health

ESI BPI CECO IPXL MDF

61.13 14.34 17.51 21.14 3.99

-18% -11% -7% -66% -54%

100% 92% 105% 6% 13%

1,951 784 1,423 1,341 162

1,839 578 1,112 1,013 130

1.2x 1.0x .5x 1.4x .4x

18% 14% 17% 15% 13%

1547% infinite 265% 266% 337%

39% 42% 34% 36% 38%

>9.9x 3.9x 4.5x 3.5x 3.3x

0% 1% 0% 5% 24%

11 / 5 5/6 6/4 11 / 9 9/5

6 7 8 9 10

Apollo Group Penwest Pharma Nephros GT Solar Corinthian Colleges

APOL PPCO NEP SOLR COCO

36.00 4.98 7.27 8.40 4.77

-1% -74% -61% -46% -11%

109% 2% 59% 12% 305%

5,321 159 215 1,260 421

4,621 146 173 983 526

.9x 4.1x 1.7x 1.6x .3x

12% 18% 19% 11% 28%

711% 158% 129% infinite 118%

46% n/m 23% 38% 39%

6.0x 5.8x 2.4x 8.3x 4.2x

15% 1% 31% 0% 0%

16 / 12 5 / 12 -/12 / 12 7/3

11 12 13 14 15

ePlus SanDisk USA Mobility InterDigital EarthLink

PLUS SNDK USMO IDCC ELNK

20.55 36.99 15.65 29.89 8.75

-28% -48% -37% -38% -10%

9% 37% 7% 3% 7%

166 8,621 345 1,317 946

134 7,405 216 832 621

.2x 1.6x .8x 2.3x 1.0x

11% 11% 12% 11% 10%

infinite 338% 232% 448% 1325%

39% 22% 38% 28% n/m

1.0x 1.7x 2.1x 9.4x 1.4x

40% 2% 0% 2% 1%

11 / 3 12 / 6 5/5 12 / 11 13 / 9

16 17 18 19 20

Forest Labs PMC-Sierra * pSivida Lincoln Educational Lihua International

FRX PMCS PSDV LINC LIWA

33.92 7.47 5.60 12.60 10.34

-29% -8% -49% -23% -39%

0% 30% 9% 124% 23%

9,686 1,719 104 329 301

6,396 1,525 86 338 216

1.5x 2.5x 3.7x .6x .9x

11% 10% 10% 20% 12%

201% infinite infinite 90% 120%

29% 22% n/m 41% 29%

2.4x 3.9x >9.9x 2.4x 2.4x

1% 1% 13% 3% 48%

7/8 16 / 8 -/11 / 4 -/-

21 22 23 24 25

* China Electric Motor Kulicke and Soffa Lam Research America's Car-Mart Almost Family

CELM KLIC LRCX CRMT AFAM

5.30 6.01 43.88 26.44 31.72

-21% -33% -27% -25% -26%

86% 59% 0% 3% 39%

110 423 5,392 287 293

72 357 4,474 332 265

.8x .6x 1.7x 1.0x .8x

16% 33% 13% 10% 10%

94% 84% 112% 219% 166%

23% n/m 16% 36% 41%

1.8x 2.2x 3.3x 1.6x 5.5x

51% 11% 1% 13% 11%

7/9 / 12 -/3 3/3 7/4

26 27 28 29 30

DeVry Veeco Instruments Microsoft Hewlett-Packard GameStop

DV VECO MSFT HPQ GME

45.15 39.08 25.38 42.87 19.13

-20% -42% -10% -13% -11%

65% 39% 24% 28% 36%

3,194 1,598 219,606 97,218 2,876

2,870 1,285 188,757 102,541 3,035

1.5x 1.9x 3.0x .8x .3x

10% 11% 9% 11% 14%

205% 131% 2834% 143% 87%

32% 10% 25% 20% 35%

6.8x 4.1x 6.7x >9.9x 6.0x

12% 1% 12% 0% 4%

10 / 6 11 / 9 14 / 11 3 / 11 2/3

31 32 33 34 35

Teradyne Aeropostale Kirkland's Gentiva Health China Valves

TER ARO KIRK GTIV CVVT

11.45 25.70 13.18 23.32 7.86

-29% -26% -18% -19% -11%

17% 25% 93% 32% 89%

2,076 2,376 262 695 288

1,658 2,079 196 736 281

1.3x .9x .5x .6x 2.2x

21% 10% 11% 12% 16%

69% 137% 106% 95% 72%

7% 40% 31% 39% 21%

2.7x 4.8x 2.6x >9.9x 2.7x

1% 1% 27% 6% 41%

12 / 5 1/3 9/2 4/1 -/-

36 37 38 39 40

Gulf Resources Dell Gilead Sciences * Cirrus Logic * GTx

GFRE DELL GILD CRUS GTXI

8.30 14.59 39.11 13.22 3.37

-24% -22% -19% -66% -44%

80% 20% 27% 60% 225%

288 28,364 31,893 914 123

232 21,176 31,579 740 94

1.7x .4x 4.0x 2.4x 1.5x

17% 9% 9% 11% 9%

67% infinite 188% 93% infinite

27% 27% 27% n/m n/m

1.8x >9.9x 6.3x 3.4x 5.2x

50% 12% 1% 1% 71%

-/13 / 7 15 / 2 12 / 13 7/1

41 42 43 44 45

Endo Pharma VirnetX Integrated Silicon * Xyratex * Cornerstone

ENDP VHC ISSI XRTX CRTX

36.59 17.61 8.94 16.18 6.22

-48% -89% -64% -39% -23%

0% 14% 56% 26% 22%

4,223 836 234 490 159

3,562 708 149 405 114

2.4x 3.5x .7x .3x 1.0x

9% 9% 18% 27% 9%

237% infinite 61% 58% infinite

26% 32% 3% 2% 32%

6.0x >9.9x 1.5x 1.5x 4.3x

0% 29% 8% 3% 71%

4/1 4/1/3 -/-/1



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October 29, 2010 – Page 130 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

“Magic Formula,” based on Next Year’s EPS Estimates Companies with high returns on capital employed, trading at high earnings yields (based on next FY EPS estimates) ▼

▼

Move To 52-Week Low High

MV ($mn)

EV ($mn)

EV/ Sales

Next FY EPS Yield

EBIT/ Capital Employed

Tax Rate

Price to Tangible Book

Insiders % Buys/ Own. Sells

Company

Ticker

Price ($)

1 2 3 4 5

ITT Educational Bridgepoint Edu. Career Education Penwest Pharma ePlus

ESI BPI CECO PPCO PLUS

61.13 14.34 17.51 4.98 20.55

-18% -11% -7% -74% -28%

100% 92% 105% 2% 9%

1,951 784 1,423 159 166

1,839 578 1,112 146 134

1.2x 1.0x .5x 4.1x .2x

20% 17% 19% 27% 13%

1547% infinite 265% 158% infinite

39% 42% 34% n/m 39%

>9.9x 3.9x 4.5x 5.8x 1.0x

0% 1% 0% 1% 40%

11 / 5 5/6 6/4 5 / 12 11 / 3

6 7 8 9 10

Apollo Group * SinoCoking Coal Metropolitan Health Nephros Corinthian Colleges

APOL SCOK MDF NEP COCO

36.00 8.10 3.99 7.27 4.77

-1% -57% -54% -61% -11%

109% 563% 13% 59% 305%

5,321 169 162 215 421

4,621 170 130 173 526

.9x 2.9x .4x 1.7x .3x

13% 22% 12% 17% 19%

711% 122% 337% 129% 118%

46% 10% 38% 23% 39%

6.0x 2.9x 3.3x 2.4x 4.2x

15% 39% 24% 31% 0%

16 / 12 -/9/5 -/7/3

11 12 13 14 15

Lihua International Forest Labs PMC-Sierra * China Electric Motor America's Car-Mart

LIWA FRX PMCS CELM CRMT

10.34 33.92 7.47 5.30 26.44

-39% -29% -8% -21% -25%

23% 0% 30% 86% 3%

301 9,686 1,719 110 287

216 6,396 1,525 72 332

.9x 1.5x 2.5x .8x 1.0x

18% 12% 11% 21% 12%

120% 201% infinite 94% 219%

29% 29% 22% 23% 36%

2.4x 2.4x 3.9x 1.8x 1.6x

48% 1% 1% 51% 13%

-/7/8 16 / 8 7/3/3

16 17 18 19 20

Lincoln Educational Kulicke and Soffa GT Solar Hewlett-Packard Endo Pharma

LINC KLIC SOLR HPQ ENDP

12.60 6.01 8.40 42.87 36.59

-23% -33% -46% -13% -48%

124% 59% 12% 28% 0%

329 423 1,260 97,218 4,223

338 357 983 102,541 3,562

.6x .6x 1.6x .8x 2.4x

20% 25% 11% 12% 11%

90% 84% infinite 143% 237%

41% n/m 38% 20% 26%

2.4x 2.2x 8.3x >9.9x 6.0x

3% 11% 0% 0% 0%

11 / 4 9 / 12 12 / 12 3 / 11 4/1

21 22 23 24 25

DeVry Veeco Instruments Microsoft SanDisk GameStop

DV VECO MSFT SNDK GME

45.15 39.08 25.38 36.99 19.13

-20% -42% -10% -48% -11%

65% 39% 24% 37% 36%

3,194 1,598 219,606 8,621 2,876

2,870 1,285 188,757 7,405 3,035

1.5x 1.9x 3.0x 1.6x .3x

11% 12% 10% 11% 15%

205% 131% 2834% 338% 87%

32% 10% 25% 22% 35%

6.8x 4.1x 6.7x 1.7x 6.0x

12% 1% 12% 2% 4%

10 / 6 11 / 9 14 / 11 12 / 6 2/3

26 27 28 29 30

* JDA Software China Valves Kirkland's Dell Aeropostale

JDAS CVVT KIRK DELL ARO

22.27 7.86 13.18 14.59 25.70

-12% -11% -18% -22% -26%

42% 89% 93% 20% 25%

931 288 262 28,364 2,376

1,057 281 196 21,176 2,079

2.1x 2.2x .5x .4x .9x

11% 18% 12% 10% 11%

170% 72% 106% infinite 137%

30% 21% 31% 27% 40%

5.1x 2.7x 2.6x >9.9x 4.8x

4% 41% 27% 12% 1%

5 / 11 -/9/2 13 / 7 1/3

31 32 33 34 35

Teradyne Gilead Sciences Gulf Resources Lam Research * USA Mobility

TER GILD GFRE LRCX USMO

11.45 39.11 8.30 43.88 15.65

-29% -19% -24% -27% -37%

17% 27% 80% 0% 7%

2,076 31,893 288 5,392 345

1,658 31,579 232 4,474 216

1.3x 4.0x 1.7x 1.7x .8x

17% 10% 18% 11% 10%

69% 188% 67% 112% 232%

7% 27% 27% 16% 38%

2.7x 6.3x 1.8x 3.3x 2.1x

1% 1% 50% 1% 0%

12 / 5 15 / 2 -/-/3 5/5

36 37 38 39 40

Gentiva Health Nat. Am. University * CSG Systems * Cirrus Logic Integrated Silicon

GTIV NAUH CSGS CRUS ISSI

23.32 6.86 18.91 13.22 8.94

-19% -33% -16% -66% -64%

32% 82% 26% 60% 56%

695 289 644 914 234

736 249 575 740 149

.6x 2.6x 1.1x 2.4x .7x

12% 10% 12% 12% 19%

95% 282% 81% 93% 61%

39% 39% 24% n/m 3%

>9.9x 5.5x >9.9x 3.4x 1.5x

6% 68% 1% 1% 8%

4/1 10 / 3 9/3 12 / 13 1/3

41 42 43 44 45

* Exceed Company China Yida * Cornerstone * Cephalon * Xyratex

EDS CNYD CRTX CEPH XRTX

7.91 9.80 6.22 64.10 16.18

-23% -20% -23% -17% -39%

53% 73% 22% 14% 26%

156 192 159 4,820 490

80 165 114 4,907 405

.2x 2.8x 1.0x 2.0x .3x

22% 21% 9% 12% 16%

56% 56% infinite 76% 58%

6% 29% 32% 28% 2%

.8x 1.7x 4.3x >9.9x 1.5x

40% 57% 71% 1% 3%

-/1/-/1 -/1 -/-



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October 29, 2010 – Page 131 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Contrarian: Biggest YTD Losers (deleveraged & profitable) Non-financial companies with no net debt, positive analyst estimates for next year's EPS, and large YTD price drop ▼ EV ($mn)

Price to Tangible Book

Next FY P/E

Insiders % Buys/ Own. Sells

Company

Ticker

1 2 3 4 5

China Sky One Duoyuan Global Water A-Power Energy Fuqi International SmartHeat

CSKI DGW APWR FUQI HEAT

8.43 13.56 7.46 7.45 6.39

142 333 338 206 210

77 119 277 81 179

603% n/m n/m n/m n/m

-47% n/m 73% 19% 6%

-63% -62% -59% -58% -56%

1.1x 1.2x 1.3x .7x 2.1x

3x 9x 6x 5x 7x

37% 49% 28% 43% 43%

-/-/-/-/-/-

6 7 8 9 10

Alphatec Tiens Biotech Genoptix Cumberland Pharma * Universal Travel

ATEC TBV GXDX CPIX UTA

2.38 1.41 17.33 6.67 5.22

208 101 305 135 104

227 95 165 77 53

n/m -88% n/m n/m n/m

1% -28% -49% n/m 98%

-55% -53% -51% -51% -49%

3.6x .6x 1.5x 2.1x 1.3x

20x 12x 17x 12x 3x

2% 95% 1% 36% 20%

8/1 -/7/8 5/2 -/-

11 12 13 14 15

SurModics drugstore.com Charming Shoppes Jinpan International Energy Recovery

SRDX DSCM CHRS JST ERII

12.09 1.72 3.61 13.38 3.89

211 182 417 220 204

189 165 346 208 153

-49% -69% -34% 305% n/m

-52% 39% 48% 84% -49%

-47% -44% -44% -44% -43%

1.5x 4.1x 1.7x 1.8x 2.0x

19x 57x 361x 9x 49x

11% 14% 1% 30% 34%

3/4 7 / 13 13 / 5 -/2/1

16 17 18 19 20

Value Line Nat. Am. University AgFeed Industries China Nepstar China Green Agri.

VALU NAUH FEED NPD CGA

14.38 6.86 2.92 4.26 8.64

144 289 146 449 232

100 249 128 278 170

-71% n/m n/m n/m n/m

-58% -6% 81% -16% 179%

-43% -42% -42% -42% -41%

6.8x 5.5x 1.4x 2.0x 2.0x

13x 10x 5x 30x 5x

87% 68% 36% 76% 31%

-/10 / 3 -/-/-/-

21 22 23 24 25

Sykes Enterprises * Apollo Group KongZhong Orion Marine * Strayer Education

SYKE APOL KONG ORN STRA

15.01 36.00 7.40 12.69 130.30

711 5,321 261 341 1,810

539 4,621 129 326 1,669

75% -47% n/m n/m 20%

-21% -53% 121% 31% -39%

-41% -41% -40% -40% -39%

1.8x 6.0x 2.9x 1.7x 8.0x

13x 8x 23x 11x 11x

12% 15% 0% 1% 1%

11 / 16 / 12 -/-/8/3

26 27 28 29 30

China Fire CAMAC Energy NutriSystem * Monolithic Power * NVIDIA

CFSG CAK NTRI MPWR NVDA

8.39 2.90 19.52 15.10 11.80

232 415 525 552 6,773

204 393 436 363 5,024

n/m 5700% 1035% n/m 53%

23% 346% 34% 20% 46%

-38% -38% -37% -37% -37%

2.0x 1.0x 4.4x 2.2x 3.0x

6x 97x 15x 11x 17x

76% 68% 5% 9% 5%

-/1 9/5 7/6 6/8 8/7

31 32 33 34 35

* ITT Educational Neutral Tandem * Tri-Tech Holding Aviat Networks Telestone Tech

ESI TNDM TRIT AVNW TSTC

61.13 14.57 13.13 4.45 12.78

1,951 482 102 264 135

1,839 295 70 136 133

30% n/m n/m 3% n/m

-36% -10% n/m -14% 806%

-36% -36% -36% -36% -36%

13.7x 1.9x 1.9x 1.1x 2.1x

5x 12x 10x 14x 5x

0% 3% 35% 2% 31%

11 / 5 5/6 -/-/-/-

36 37 38 39 40

* Sterling Construct. Shanda Games * Consolidated Water RINO International AsiaInfo Holdings

STRL GAME CWCO RINO ASIA

12.33 6.59 9.38 18.24 20.15

200 1,898 137 522 1,495

124 1,448 112 449 1,226

n/m n/m -6% -74% 202%

-33% n/m -25% 421% 70%

-36% -35% -34% -34% -34%

1.6x 6.0x 1.1x 2.0x 5.7x

12x 10x 15x 9x 12x

5% 71% 2% 68% 33%

10 / 2 -/-/1/12 / 5

41 42 43 44 45

* Blue Nile Heidrick & Struggles * RTI Biologics * Insteel Industries Vanda Pharma

NILE HSII RTIX IIIN VNDA

42.12 21.05 2.60 8.89 7.81

603 369 143 156 219

557 276 137 112 12

n/m -3% -76% n/m n/m

72% -2% -6% -21% 1462%

-33% -33% -32% -32% -31%

19.9x 2.2x 1.0x 1.0x 11.0x

37x 15x 15x 9x 41x

3% 2% 1% 7% 2%

9/6 6/1/1 5/5 -/-



Company website

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Proxy

* New additions are highlighted.

MV ($mn)

Price Change Since December 31, 2003 2008 2009

Price ($)

Stock Price Charts

Screening criteria: ► Positive net cash ► Positive next FY EPS estimate ► Market value > $100 million

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October 29, 2010 – Page 132 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Value with Catalyst: Cheap Repurchasers of Stock Companies that may be creating value by reducing their shares outstanding at relatively cheap prices ▼ MV ($mn)

EV ($mn)

Q-Q Change in Shares

Next FY P/E

Price to Tangible Book

Net Cash as % of MV

Insiders % Buys/ Own. Sells

Company

Ticker

Price ($)

1 2 3 4 5

United Overseas Bank Brasil Telecom SA Dillard's Platinum Underwriter IAC/InterActiveCorp

UOVEY BTM DDS PTP IACI

28.54 21.25 26.41 43.03 26.10

21,491 4,156 1,745 1,690 2,730

n/m 5,553 2,490 n/m 1,359

-19.9% -12.5% -6.4% -6.3% -6.1%

10x 5x 14x 8x 22x

1.8x .7x .8x .8x 1.9x

n/m -34% -43% n/m 50%

35% 48% 34% 1% 17%

-/-/20 / 1 13 / 4 10 / 2

6 7 8 9 10

Harris Corp. Gilead Sciences Hanover Insurance PartnerRe Axis Capital

HRS GILD THG PRE AXS

43.80 39.11 45.87 81.53 34.46

5,652 31,893 2,060 6,163 4,135

6,404 31,579 n/m n/m n/m

-5.8% -5.5% -5.5% -5.3% -5.0%

9x 10x 11x 8x 8x

17.9x 6.3x .9x 1.0x .8x

-13% 1% n/m n/m n/m

0% 1% 1% 1% 5%

10 / 10 15 / 2 11 / 3 -/-/-

11 12 13 14 15

RenaissanceRe O2Micro Validus * Xilinx Seacor Holdings

RNR OIIM VR XLNX CKH

60.60 6.01 28.79 25.20 90.56

3,325 203 3,211 6,523 1,923

n/m 109 n/m 6,000 1,859

-4.9% -4.6% -4.4% -4.4% -4.3%

8x 14x 6x 11x 19x

1.1x 1.2x .9x 3.2x 1.0x

n/m 46% n/m 8% 3%

1% 6% 1% 0% 6%

-/-/9/2 4/3 13 / 6

16 17 18 19 20

Assurant Primerica ITT Educational Biogen Idec Tech Data

AIZ PRI ESI BIIB TECD

41.37 21.26 61.13 58.75 42.88

4,408 1,546 1,951 14,213 1,999

n/m n/m 1,839 14,323 1,478

-4.2% -4.2% -3.8% -3.7% -3.7%

8x 9x 5x 12x 10x

1.1x 1.2x 13.7x 6.3x 1.0x

n/m n/m 6% -1% 26%

0% 1% 0% 0% 4%

14 / 10 3/11 / 5 12 / 7 10 / 12

21 22 23 24 25

* Oil-Dri of America Navigators Group SAIC * Am. Physicians Cap. Hudson Pacific

ODC NAVG SAI ACAP HPP

21.92 45.89 15.76 41.50 16.12

154 726 5,858 387 358

147 n/m 6,359 n/m 368

-3.3% -3.2% -3.2% -3.2% -3.1%

14x 13x 11x 14x 17x

1.8x .9x 9.7x 1.6x .9x

4% n/m -9% n/m -3%

28% 23% 1% 4% 1%

2/2 2/1 13 / 8 -/12 / 1

26 27 28 29 30

Qlogic FPIC Insurance Transatlantic America's Car-Mart NASDAQ OMX

QLGC FPIC TRH CRMT NDAQ

16.73 36.97 51.62 26.44 20.66

1,828 350 3,291 287 4,188

1,479 n/m n/m 332 n/m

-2.9% -2.7% -2.7% -2.7% -2.7%

12x 14x 8x 9x 9x

4.2x 1.4x .8x 1.6x n/m

19% n/m n/m -15% n/m

0% 5% 0% 13% 30%

11 / 6 9/6 3/2 3/3 14 / -

31 32 33 34 35

Argo Group Amgen * CSG Systems * Health Net Everest Re

AGII AMGN CSGS HNT RE

35.74 57.55 18.91 27.11 84.06

1,111 55,160 644 2,641 4,728

n/m 52,369 575 n/m n/m

-2.4% -2.3% -2.3% -2.1% -2.1%

11x 11x 8x 10x 7x

.8x 5.9x 10.3x 2.6x .8x

n/m 5% 11% n/m n/m

6% 0% 1% 1% 14%

1/23 / 13 9/3 2/2 -/-

36 37 38 39 40

RF Micro Devices Infinity Property H&R Block Novellus Systems CVS Caremark

RFMD IPCC HRB NVLS CVS

6.56 52.40 10.78 27.60 31.36

1,791 663 3,326 2,537 42,594

1,807 n/m 3,346 2,082 53,444

-2.0% -2.0% -2.0% -2.0% -1.9%

10x 12x 6x 9x 11x

4.8x 1.2x n/m 2.4x 169.7x

-1% n/m -1% 18% -25%

6% 1% 4% 1% 0%

13 / 8 9/2 7/2 10 / 5 7/-

41 42 43 44 45

Aetna * Hawaiian Holdings Integrated Device Technology, Oplink Comms White Mountains

AET HA IDTI OPLK WTM

0.00 0.00 0.00 0.00 0.00

13,023 366 950 358 2,709

n/m 264 617 208 n/m

-1.9% -1.9% -1.8% -1.8% -1.8%

10x 9x 9x 10x 22x

2.8x 14.1x 2.2x 1.6x .8x

n/m 28% 35% 42% n/m

0% 4% 0% 3% 11%

8/5 -/12 / 11 4/-/-



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October 29, 2010 – Page 133 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Profitable Dividend Payors with Decent Balance Sheets Dividend-paying companies with no net debt and EPS estimates in excess of 75% of the indicated annual dividend ▼ Move To 52-Week Low High

EV ($mn)

Est. P/E This Next FY FY

Price to Tangible Book

Insiders % Buys/ Own. Sells

Company

Ticker

1 2 3 4 5

Am. Capital Agency Fifth Street Finance Himax Tech Mesabi Trust TICC Capital

AGNC FSC HIMX MSB TICC

27.90 11.53 2.31 41.60 10.40

-15% -19% -7% -77% -54%

8% 18% 42% 5% 3%

939 629 411 546 280

865 n/m 253 n/m n/m

20% 10% 26% 4% 6%

20% 11% 11% 9% 8%

5x 12x 14x 15x 12x

6x 10x 12x 14x 11x

1.2x 1.1x 1.1x >9.9x 1.2x

0% 5% 12% 0% 3%

1/1 3/-/-/2/-

6 7 8 9 10

Cherokee BGC Partners Telecom Argentina * Cal. First Nat. Banc EarthLink

CHKE BGCP TEO CFNB ELNK

18.62 6.97 22.95 13.19 8.75

-16% -47% -36% -16% -10%

15% 2% 1% 14% 7%

166 633 4,518 135 946

158 n/m 4,429 87 621

9% 5% 9% 4% 7%

8% 8% 8% 8% 7%

13x 11x 10x 16x 10x

12x 10x 9x 16x 12x

>9.9x 3.0x 4.0x .7x 1.4x

12% 30% 59% 84% 1%

1/1 5/4 -/2/2 13 / 9

11 12 13 14 15

NGP Capital Gladstone Investment BBVA Banco Frances American Software K-Fed Bancorp

NGPC GAIN BFR AMSWA KFED

10.00 7.36 11.50 6.13 7.78

-35% -41% -54% -26% -7%

2% 1% 1% 10% 34%

216 163 2,056 158 103

n/m n/m n/m 121 n/m

7% 5% 6% 6% 6%

7% 7% 6% 6% 6%

17x 14x 12x 23x 11x

11x 13x 12x 18x 9x

.9x .8x 3.0x 3.2x 1.1x

4% 1% 76% 12% 69%

4/3/-/2/2 2/-

16 17 18 19 20

Value Line First Bancorp Life Partners Crexus Investment Nat'l Australia Bank

VALU FNLC LPHI CXS NABZY

14.38 14.13 18.21 12.42 23.98

-17% -13% -19% -5% -23%

136% 24% 35% 17% 20%

144 138 272 225 49,870

n/m n/m n/m n/m n/m

25% 6% 4% 2% 6%

6% 6% 5% 5% 5%

13x 13x 8x 21x 12x

13x 12x 7x 10x 10x

6.8x 1.4x 3.9x .9x 1.6x

87% 15% 51% 25% 1%

-/1/1 3/4/-/-

21 22 23 24 25

Lorillard Colony Financial Banco Santander Tower Bancorp Westpac Banking

LO CLNY STD TOBC WBK

84.05 18.79 13.38 22.19 110.40

-16% -12% -35% -20% -22%

0% 12% 34% 26% 21%

12,752 275 110,102 158 66,024

12,746 n/m n/m n/m n/m

5% 2% 5% 5% 6%

5% 5% 5% 5% 5%

13x 18x 9x 18x 11x

12x 12x 7x 9x 11x

n/m 1.0x 2.3x 1.1x 2.7x

0% 1% 21% 21% 0%

1/1/-/24 / -/-

26 27 28 29 30

Lenovo CNB Financial Bristol Myers Squibb TrustCo Bank Corp NY United Bankshares

LNVGY CCNE BMY TRST UBSI

13.47 13.77 26.96 5.49 26.90

-25% -24% -20% -5% -39%

19% 38% 4% 31% 19%

6,573 168 46,232 423 1,172

4,200 n/m 45,316 n/m n/m

1% 5% 5% 5% 4%

5% 5% 5% 5% 4%

27x 13x 13x 15x 17x

20x 12x 12x 13x 16x

n/m 1.7x 6.0x 1.7x 2.5x

63% 6% 0% 4% 6%

-/15 / 5/9 2/1 4/7

31 32 33 34 35

Nokia Paychex American Ecology Safety Insurance Microchip Technology

NOK PAYX ECOL SAFT MCHP

11.06 28.00 16.33 45.73 31.35

-28% -12% -21% -28% -25%

44% 17% 19% 2% 2%

41,419 10,127 299 687 5,829

34,694 9,677 267 n/m 4,855

5% 4% 4% 3% 4%

4% 4% 4% 4% 4%

16x 20x 28x 13x 14x

13x 19x 21x 13x 13x

5.2x >9.9x 3.3x 1.1x 4.0x

0% 11% 7% 9% 3%

-/10 / 7 8/1/1 11 / 8

36 37 38 39 40

Maxim Integrated Washington Trust * Credit Suisse Renasant * Christopher & Banks

MXIM WASH CS RNST CBK

19.36 19.44 42.00 16.41 5.84

-19% -28% -13% -22% -6%

10% 5% 40% 11% 99%

5,776 314 49,740 411 209

5,249 n/m n/m n/m 113

4% 4% 5% 4% 4%

4% 4% 4% 4% 4%

14x 14x 8x 14x 37x

12x 13x 7x 15x 24x

3.0x 1.6x 1.9x 1.9x 1.1x

1% 15% 3% 4% 1%

12 / 11 11 / 5 -/3/2 6/6

41 42 43 44 45

GFI Group Electro Rent CNinsure * Baldwin & Lyons Am. National Insur.

GFIG ELRC CISG BWINB ANAT

4.89 14.97 26.03 25.03 78.05

-16% -34% -37% -20% -5%

43% 4% 10% 6% 55%

598 359 1,188 371 2,093

n/m 319 n/m n/m n/m

4% 3% 1% 5% 4%

4% 4% 4% 4% 4%

14x 20x 21x 22x 17x

10x 17x 17x 17x 20x

2.4x 1.6x 7.7x 1.0x .6x

43% 31% 0% 45% 4%

4/4 7/4 -/11 / 4 6/1



Company website

SEC

Proxy

* New additions are highlighted.

MV ($mn)

Dividend Yield Last 12 Annual Months Indicated

Price ($)

Price Charts

Criteria: ► Positive net cash ► Positive EPS estimates for this FY and next FY ► MV > $100 million

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October 29, 2010 – Page 134 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Deep Value: Lots of Revenue, Low Enterprise Value Companies that trade at low multiples of net revenue ▼ Move To 52-Week Low High

MV ($mn)

EV ($mn)

EV/ Sales

Est. P/E This Next FY FY

Price to Tangible Book

Insiders % Buys/ Own. Sells

Company

Ticker

Price ($)

1 2 3 4 5

Tech Data Ingram Micro World Fuel Services Cardinal Health AmerisourceBergen

TECD IM INT CAH ABC

42.88 17.79 26.84 31.99 32.06

-19% -17% -17% -12% -31%

14% 7% 14% 15% 4%

1,999 2,788 1,597 11,234 8,940

1,478 2,377 1,301 10,608 8,989

.06x .07x .09x .11x .12x

11x 10x 12x 13x 15x

10x 8x 11x 12x 14x

1.0x 1.0x 2.8x 3.7x >9.9x

4% 5% 4% 0% 1%

10 / 12 2/1 8/3 9/9 11 / 6

6 7 8 9 10

Eastman Kodak * Kelly Services McKesson * Kindred Healthcare Office Depot

EK KELYA MCK KND ODP

3.93 15.64 61.08 13.58 4.63

-17% -36% -9% -15% -27%

131% 21% 17% 47% 98%

1,056 574 15,969 536 1,278

1,038 627 14,982 600 1,779

.13x .14x .14x .14x .15x

17x 26x 13x 10x n/m

n/m 16x 11x 10x 42x

n/m 1.1x 6.1x .6x 1.9x

0% 21% 0% 2% 4%

4/3 6/9 12 / 12 - / 12 12 / 1

11 12 13 14 15

OfficeMax SYNNEX Nash-Finch Insight Enterprises Sunoco

OMX SNX NAFC NSIT SUN

15.15 29.64 42.80 15.79 39.20

-37% -24% -34% -39% -38%

31% 9% 3% 7% 4%

1,288 1,060 527 731 4,726

1,096 1,298 820 716 5,783

.15x .16x .16x .16x .17x

21x 9x 14x 11x 20x

15x 9x 13x 10x 16x

3.1x 1.3x 3.2x 1.8x 1.7x

0% 35% 0% 1% 0%

11 / 3 6/8 -/10 / 4 6/2

16 17 18 19 20

Tesoro * Brightpoint Valero Energy BJ's Wholesale Club Celestica

TSO CELL VLO BJ CLS

13.20 7.43 17.65 42.54 8.41

-21% -23% -12% -25% -12%

27% 14% 23% 12% 35%

1,884 520 9,995 2,322 2,083

3,538 623 16,028 2,247 1,399

.18x .19x .20x .21x .22x

n/m 10x 12x 17x -

10x 9x 8x 16x -

.6x 6.8x .7x 2.1x 1.4x

1% 1% 0% 1% 9%

8/5 1/6 10 / 8 13 / 7 -/-

21 22 23 24 25

Tutor Perini Flextronics Barnes & Noble Owens & Minor * Western Refining

TPC FLEX BKS OMI WNR

23.02 6.23 15.01 28.33 6.58

-32% -22% -21% -10% -39%

11% 35% 67% 16% 5%

1,083 4,893 900 1,794 586

894 5,557 1,353 1,845 1,818

.22x .22x .22x .23x .23x

11x n/m 15x n/m

10x n/m 13x 13x

1.8x 2.8x n/m 3.3x 1.0x

46% 0% 49% 2% 42%

10 / 4 -/3 / 10 11 / 12 9/-

26 27 28 29 30

Sears Holdings Avnet SUPERVALU Arrow Electronics Bunge

SHLD AVT SVU ARW BG

76.32 28.80 10.80 28.28 61.74

-22% -22% -10% -23% -27%

64% 18% 66% 15% 20%

8,445 4,373 2,291 3,332 8,661

10,438 4,561 9,212 4,095 10,838

.24x .24x .24x .24x .25x

38x 8x 7x 7x 21x

35x 8x 7x 7x 11x

2.1x 1.8x n/m 1.7x 1.0x

4% 90% 1% 3% 1%

5/4 8 / 12 15 / 1 -/1 -/-

31 32 33 34 35

EMCOR Group KBR Frontier Oil Kroger Manpower

EME KBR FTO KR MAN

26.62 25.20 13.11 21.80 55.98

-17% -31% -16% -12% -29%

12% 2% 26% 11% 12%

1,766 3,938 1,385 13,903 4,604

1,317 2,804 1,292 20,683 4,712

.25x .25x .25x .26x .26x

15x 14x 27x 12x 34x

13x 13x 12x 11x 20x

4.0x 2.4x 1.4x 3.5x 4.6x

2% 0% 2% 6% 1%

1/5 2/2/6 17 / 16 5/4

36 37 38 39 40

Shaw Group Jabil Circuit Tyson Foods Andersons Sanmina-SCI

SHAW JBL TSN ANDE SANM

31.98 14.18 15.63 39.69 12.79

-23% -28% -24% -40% -52%

27% 30% 32% 7% 59%

2,701 3,089 5,900 730 1,018

1,862 3,531 7,648 832 1,645

.26x .26x .27x .27x .27x

15x 7x 8x 13x 10x

13x 6x 8x 12x 7x

2.6x 2.1x 2.1x 1.7x 1.6x

1% 10% 21% 7% 2%

2/2 -/3 9/6 9 / 10 2/3

41 42 43 44 45

Rite Aid Retail Ventures Centene Sonic Automotive Administaff

RAD RVI CNC SAH ASF

0.96 13.00 24.29 10.65 26.76

-10% -54% -29% -24% -39%

84% 1% 7% 26% 10%

853 637 1,255 561 701

7,071 483 1,214 1,913 490

.28x .28x .28x .29x .30x

n/m 8x 13x 11x 32x

n/m 11x 12x 9x 24x

n/m 3.2x 2.5x n/m 3.2x

29% 53% 2% 33% 12%

19 / 6 -/8/8 8/3 7/8



Company website

SEC

Proxy

* New additions are highlighted.

Price Charts

Criteria: ► EV to trailing revenue less than 0.5x ► MV does not exceed revenue ► MV > $500 million

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October 29, 2010 – Page 135 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Deep Value: Neglected Gross Profiteers Companies that trade at low multiples of gross profit ▼ Move To 52-Week Low High

MV ($mn)

EV ($mn)

Enterprise Value / Gross Sales Profit EBIT

Est. P/E This Next FY FY

Price/ Tang. Book

Insiders % Buys/ Own. Sells

Company

Ticker

Price ($)

1 2 3 4 5

* Zoran * Stewart Information Winn-Dixie Stores WellCare Charming Shoppes

ZRAN STC WINN WCG CHRS

7.71 11.09 6.95 28.55 3.61

-12% -30% -10% -22% -21%

60% 35% 100% 37% 91%

383 204 385 1,213 417

4 141 262 233 346

.0x .1x .0x .0x .2x

.0x .1x .1x .3x .3x

n/m .1x 9.0x n/m n/m

n/m n/m n/m 12x n/m

>99x 13x >99x 11x >99x

.9x .9x .5x 1.9x 1.7x

1% 7% 1% 4% 1%

3/9/5 / 10 14 / 7 13 / 5

6 7 8 9 10

RealNetworks American Equity Humana Eastman Kodak Office Depot

RNWK AEL HUM EK ODP

3.04 11.25 56.97 3.93 4.63

-15% -44% -37% -17% -27%

78% 3% 0% 131% 98%

412 659 9,641 1,056 1,278

111 395 2,674 1,038 1,779

.2x .3x .1x .1x .1x

.4x .4x .4x .4x .5x

n/m .3x 1.4x 1.7x n/m

n/m 6x 9x 17x n/m

n/m 6x 10x n/m 42x

1.2x .7x 2.3x n/m 1.9x

38% 5% 1% 0% 4%

4/4 2/1 3/6 4/3 12 / 1

11 12 13 14 15

E.W. Scripps IDT Corp. Haverty Furniture OfficeMax Tuesday Morning

SSP IDT HVT OMX TUES

8.14 14.65 10.88 15.15 4.99

-27% -77% -12% -37% -58%

44% 34% 67% 31% 76%

468 331 238 1,288 215

329 158 183 1,096 191

.4x .1x .3x .2x .2x

.5x .6x .6x .6x .6x

22.5x 5.5x 17.4x 14.9x 9.5x

17x 27x 21x -

23x 15x 15x -

.9x 2.1x .9x 3.1x .9x

45% 24% 19% 0% 1%

10 / 11 2/3 13 / 11 11 / 3 2/2

16 17 18 19 20

Retail Ventures Imation * Christopher & Banks TeleNav Corinthian Colleges

RVI IMN CBK TNAV COCO

13.00 10.66 5.84 4.88 4.77

-54% -25% -6% -5% -11%

1% 18% 99% 135% 305%

637 412 209 206 421

483 161 113 93 526

.3x .1x .2x .5x .3x

.6x .6x .6x .7x .7x

3.2x n/m 19.2x 1.4x 2.2x

8x 63x 37x 8x 4x

11x 41x 24x 8x 5x

3.2x .7x 1.1x 1.4x 4.2x

53% 21% 1% 51% 0%

-/16 / 7 6/6 11 / 9 7/3

21 22 23 24 25

MedCath Investment Tech Blyth * Coldwater Creek Brown Shoe

MDTH ITG BTH CWTR BWS

10.23 14.95 46.11 3.48 12.79

-35% -12% -44% -10% -23%

26% 74% 30% 151% 56%

210 639 379 321 561

262 366 368 261 716

.5x .6x .4x .2x .3x

.7x .7x .7x .7x .7x

n/m 6.7x 7.4x n/m 9.3x

n/m 14x 16x n/m 15x

41x 11x 15x 87x 11x

.7x 1.8x 1.8x 1.3x 1.8x

4% 1% 36% 35% 2%

1/6/6 8/2 9/1 2/3

26 27 28 29 30

Saia THQ Hot Topic Molina Healthcare * Career Education

SAIA THQI HOTT MOH CECO

13.72 4.18 5.71 26.63 17.51

-18% -20% -20% -36% -7%

29% 98% 74% 19% 105%

218 283 255 795 1,423

294 167 193 425 1,112

.3x .2x .3x .1x .5x

.7x .8x .8x .8x .8x

37.3x n/m 20.3x 7.8x 3.5x

86x n/m >99x 16x 6x

14x 14x 34x 14x 5x

1.1x 1.6x 1.1x 3.3x 4.5x

3% 1% 9% 43% 0%

4/4 11 / 4 8/8/9 6/4

31 32 33 34 35

Celadon Group Barnes & Noble Core-Mark Sears Holdings * PC Connection

CGI BKS CORE SHLD PCCC

13.43 15.01 33.86 76.32 8.15

-36% -21% -24% -22% -32%

25% 67% 2% 64% 2%

301 900 366 8,445 221

317 1,353 311 10,438 174

.6x .2x .0x .2x .1x

.8x .8x .8x .9x .9x

23.9x n/m 7.8x 14.0x 7.1x

18x n/m 17x 38x 14x

13x n/m 12x 35x 13x

2.3x n/m 1.1x 2.1x 1.1x

7% 49% 2% 4% 35%

3/3 3 / 10 8/8 5/4 1/4

36 37 38 39 40

Gleacher & Co. AMR Corp. Kelly Services Fred's Bob Evans Farms

GLCH AMR KELYA FRED BOBE

2.10 7.42 15.64 12.53 29.04

-29% -31% -36% -28% -20%

309% 42% 21% 15% 17%

270 2,473 574 491 883

275 9,205 627 449 1,052

.8x .4x .1x .2x .6x

.9x .9x .9x .9x .9x

7.2x n/m n/m 11.8x 10.2x

26x n/m 26x 17x 14x

9x 19x 16x 14x 12x

1.2x n/m 1.1x 1.3x 1.5x

18% 1% 21% 7% 2%

2/2 6/6 6/9 31 / 2 22 / 14

41 42 43 44 45

* Lincoln Educational * Fidelity National * Destination Maternity Genesco * Spartan Stores

LINC FNF DEST GCO SPTN

12.60 12.78 37.89 32.56 15.37

-23% -1% -56% -36% -21%

124% 26% 1% 7% 12%

329 2,916 241 783 348

338 3,051 257 739 497

.6x .5x .5x .5x .2x

.9x .9x .9x .9x .9x

3.0x 1.6x 9.6x 10.5x 8.6x

5x 11x 16x 15x 12x

5x 11x 10x 13x 11x

2.4x 2.2x 3.7x 2.0x 8.4x

3% 5% 17% 4% 3%

11 / 4 1/1 5/3 17 / 11 17 / 9



Company website

SEC

Proxy

* New additions are highlighted.

Price Charts

Criteria: ► EV not more than trailing gross profit ► MV not more than 2x gross profit ► MV > $200 million

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October 29, 2010 – Page 136 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

Activist Targets: Potential Sales, Liquidations or Recaps Companies that may unlock value through a corporate event ▼ Move To 52-Week Low High

MV ($mn)

EV ($mn)

Price to Tangible Book

Net Cash (% of MV)

Net Net ST Assets (% of MV)

EV/ Sales

Next FY P/E

Insiders % Buys/ Own. Sells

Company

Ticker

Price ($)

1 2 3 4 5

Qiao Xing Universal Qiao Xing Mobile Audiovox Fuqi International Crexus Investment

XING QXM VOXX FUQI CXS

1.71 3.71 6.38 7.45 12.42

-20% -45% -5% -39% -5%

68% 41% 53% 265% 17%

158 196 146 206 225

(263) (121) 87 81 (40)

.3x .5x .6x .7x .9x

267% 162% 40% 61% 118%

206% 200% 145% 136% 116%

n/m n/m .2x .2x n/m

5x 10x

43% 62% 19% 43% 25%

-/-/8/8 -/4/-

6 7 8 9 10

Opnext Volt Information PennyMac Mortgage Imation Colony Financial

OPXT VOL PMT IMN CLNY

1.54 8.60 17.30 10.66 18.79

-12% -28% -10% -25% -12%

105% 57% 11% 18% 12%

138 179 291 412 275

81 151 (50) 161 (1)

.6x .6x .9x .7x 1.0x

42% 16% 117% 61% 100%

112% 111% 111% 100% 99%

.3x .1x n/m .1x n/m

n/m 7x 41x 12x

40% 43% 1% 21% 1%

-/1/1 1/1 16 / 7 1/-

11 12 13 14 15

Nam Tai Electronics Exceed Company Movado CE Franklin FormFactor

NTE EDS MOV CFK FORM

4.74 7.91 11.14 6.73 8.70

-15% -23% -22% -21% -21%

27% 53% 31% 11% 160%

212 156 275 117 437

9 80 231 117 39

.7x .8x .8x 1.0x .8x

96% 48% 16% 1% 91%

98% 98% 96% 95% 94%

.0x .2x .6x .3x .2x

11x 5x 74x n/m

26% 40% 31% 56% 3%

-/-/2/1 -/6/3

16 17 18 19 20

Zoran Sprott Physical Gold QLT Cutera Alvarion

ZRAN PHYS QLTI CUTR ALVR

7.71 11.79 5.53 7.40 2.17

-12% -18% -40% -6% -18%

60% 9% 21% 63% 105%

383 815 290 100 135

4 82 104 8 44

.9x 1.1x .7x 1.0x .9x

99% 90% 64% 92% 68%

93% 90% 89% 89% 89%

.0x n/m 2.3x .2x .2x

>99x n/m -

1% 12% 16% 7% 3%

3/-/4/8/3 -/-

21 22 23 24 25

Ingram Micro Furiex Pharma Tech Data Callaway Golf Cynosure

IM FURX TECD ELY CYNO

17.79 12.02 42.88 7.17 10.33

-17% -28% -19% -19% -15%

7% 66% 14% 42% 36%

2,788 119 1,999 462 131

2,377 20 1,478 408 37

1.0x 1.2x 1.0x .8x 1.1x

15% 83% 26% 12% 72%

88% 85% 83% 83% 82%

.1x 2.1x .1x .4x .5x

8x 10x 22x >99x

5% 1% 4% 1% 23%

2/1 -/1 10 / 12 7/1 -/-

26 27 28 29 30

PC Connection GigaMedia West Marine Tuesday Morning Benchmark Electron.

PCCC GIGM WMAR TUES BHE

8.15 1.96 9.55 4.99 17.01

-32% -4% -29% -58% -18%

2% 146% 43% 76% 34%

221 108 215 215 1,059

174 20 213 191 719

1.1x .6x .9x .9x 1.0x

21% 81% 1% 11% 32%

82% 81% 81% 79% 78%

.1x .2x .3x .2x .3x

13x 9x 11x

35% 1% 35% 1% 1%

1/4 -/6/4 2/2 1/1

31 32 33 34 35

Maxygen Hurco Cypress Bioscience Electro Scientific * PCTEL

MAXY HURC CYPB ESIO PCTI

6.35 18.31 4.02 12.02 6.07

-23% -24% -49% -22% -21%

13% 10% 82% 25% 17%

194 118 155 336 114

39 73 50 167 45

1.3x 1.1x 1.3x 1.0x 1.1x

80% 38% 68% 50% 60%

77% 76% 74% 74% 73%

.8x .8x 1.6x .9x .7x

n/m 24x n/m 13x 21x

10% 5% 1% 1% 6%

4/1 3/1/14 / 4 6/5

36 37 38 39 40

Ascent Media * Universal Travel Aviat Networks Cogo Group * Hooker Furniture

ASCMA UTA AVNW COGO HOFT

28.30 5.22 4.45 7.58 11.14

-22% -38% -24% -29% -17%

8% 170% 85% 5% 61%

405 104 264 268 120

120 53 136 190 90

.7x 1.3x 1.1x 1.4x 1.0x

70% 49% 49% 29% 25%

73% 73% 71% 71% 70%

.3x .4x .3x .5x .4x

n/m 3x 14x 9x 11x

7% 20% 2% 35% 4%

-/-/-/-/5/-

41 42 43 44 45

SuperGen TomoTherapy * Celera Axcelis Technologies * ModusLink

SUPG TOMO CRA ACLS MLNK

2.35 3.94 5.79 2.11 6.86

-27% -34% -3% -64% -16%

62% 13% 33% 22% 62%

142 213 475 221 302

39 68 152 173 140

1.3x 1.2x 1.3x 1.1x 1.1x

72% 68% 68% 22% 54%

69% 69% 68% 68% 67%

.8x .4x 1.1x 1.0x .2x

34x n/m n/m 11x -

16% 5% 2% 1% 2%

-/1 14 / 2 -/8 4/6 7/5



Company website

SEC

Proxy

* New additions are highlighted.

Price Charts

Criteria: ► Tang. book > 50% of MV ► ST assets - liabilities > 50% of MV ► Net cash ► MV > $100mn

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October 29, 2010 – Page 137 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

This Month’s Top 10 Web Links A Selection of Our Favorite Freely Accessible Internet Resources

Click on the link next to each title, or type the Web address into your Web browser:



Carol Loomis Interview with Warren Buffett

http://bit.ly/blMPjw



T2 Partners on the Stock Market and Housing Market

http://bit.ly/aQxmut



David Einhorn’s Presentation on St. Joe (JOE)

http://bit.ly/9NhBvz



Guy Spier Interview: How Value Investing Has Changed

http://bit.ly/a9iMQq



Buffett on His Biggest Investment Mistake

http://bit.ly/bNmCMn



Bill Gross on His “Worst Trade”

http://bit.ly/drhw7I



Frank K. Martin: Fighting the Last War

http://bit.ly/cZGoL2



Jean Marie Eveillard Interview on Gold

http://bit.ly/cFKntB



Carol Loomis on Buffett Recruit Todd Combs

http://bit.ly/c9jPzn



Looking to 2012: China’s Next Generation of Leaders

http://bit.ly/doPKlg

Related: Buffett on Gold – http://bit.ly/a2D4py

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October 29, 2010 – Page 138 of 141

Value-oriented Equity Investment Ideas for Sophisticated Investors

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