<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>3
<FILENAME>ex99-2.txt
<DESCRIPTION>EXHIBIT 99.2 (C)(2) - VALUATION ANALYSIS
<TEXT>
================================================================================
CONFIDENTIAL
WELLS FINANCIAL CORP.
WELLS, MINNESOTA
MODIFIED DUTCH AUCTION TENDER OFFER
VALUATION ANALYSIS
PREPARED IN SUPPORT OF
FAIRNESS OPINION
DATED:
SEPTEMBER 21, 2004
PREPARED BY:
CAPITAL RESOURCES GROUP, INC.
11250 ROGER BACON DRIVE
SUITE 19
RESTON, VIRGINIA 20190
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
Key Financial and Pricing Data 1
Valuation Approaches: Financial and Pricing Factors Considered 2
Stock Repurchase Analysis 3
Table 1 - Stock Repurchase Analysis 4
Comparative Pricing Analysis 5
Table 2 - Selected Financial and Marketing Pricing Characteristics 6
(Comparative Pricing Analysis)
Graph 1 - YTD Stock Price Performance 7
Graph 2 - 12 Month Stock Price Performance and 50 Day Moving Average 8
Review of Premiums Paid in Other Stock Repurchase Transactions 9
Pricing Analysis Related to Tender Offer Price Range 10
Discounted Cash Flow and Terminal Value Analysis 11
Table 3 - Discounted Cash Flow and Terminal Value Analysis 12
(at $30.50 Per Share)
Conclusion 13
<PAGE>
[CAPITAL RESOURCES LOGO]
WELLS FINANCIAL CORP.
KEY FINANCIAL AND PRICING DATA
FINANCIAL DATA AT JUNE 30, 2004: (Dollars in Thousands Except Per Share Data)
Assets $223,353
Equity 28,328
Equity/Assets 12.7%
Net Income (Trailing Twelve Months) 2,690 ROA 1.20% ROE 9.79%
Net Income (Annualized) 2,100 ROA 0.94% ROE 7.41%
Book Value Per Share 24.39
Earnings Per Share (Twelve Months) 2.29
Earnings Per Share (Annualized) 1.80
RECENT PRICING DATA:
Recent Trading Price (Average of Bid/Ask) $26.75 P/E 14.9x P/TB 110%
50 Day Moving Average 26.50
200 Day Moving Average 28.75
TENDER OFFER PRICE RANGE:
P/E P/TB Premium*
Midpoint Price $30.50 16.9x 125% 14%
Low Price 29.50 16.4x 121% 10%
High Price 31.50 17.5x 129% 18%
* Premium is based on the Tender Offer Price compared to the Company's Recent
Trading Price of $26.75
Note: It is anticipated that 150,000 shares will be purchased in the tender
offer plus up to 26,000 shares will be cashed out in any reverse stock
split.
1
<PAGE>
[CAPITAL RESOURCES LOGO]
VALUATION APPROACHES:
FINANCIAL AND PRICING FACTORS CONSIDERED
IN FAIRNESS OPINION
We have applied the following approaches in our valuation analysis:
1. The impact of stock repurchases on the Company's pro forma earnings
per share, equity levels and book value;
2. The Company's recent trading activity and the pricing characteristics
of stock of comparable thrift institutions demonstrating similar asset
size and capital ratios as well as similar earnings ratios, and
similar market area;
3. Pricing premiums paid in recent tender offers and other types of stock
repurchase transactions that are similar to the Company's transaction;
4. Pricing characteristics (particularly price/earnings ("P/E") and
price/tangible book value ratios ("P/TB")) related to the price range
of the Company's tender offer; and
5. A discounted cash flow and terminal value analysis of the Company.
2
<PAGE>
[CAPITAL RESOURCES LOGO]
STOCK REPURCHASE ANALYSIS
Capital Resources has analyzed the pro forma financial impact resulting from the
Company's repurchase of up to 150,000 shares in the tender offer at prices
ranging between $29.50 and $31.50 per share. This analysis focused on pro forma
financial data such as book value per share, tangible equity to assets ratio,
earnings per share and return on equity. The repurchase analysis showed that
even if the 150,000 shares were purchased by the Company at $31.50 per share,
the high end of the range, the pro forma financial impact, on balance, would be
modestly favorable to the Company:
<TABLE>
<CAPTION>
Actual Pro % Increase
June 30, 2004 Forma (Decrease)
------------- ----- ----------
<S> <C> <C> <C>
Tangible Book Value Per Share $24.39 $23.34 (4.3%)
Tangible Equity to Assets 12.7% 10.4% (18.1%)
Earnings Per Share (Annualized) $ 1.80* $ 1.98 10.0%
Return on Equity (Annualized) 7.41% 7.75% 4.6%
* In analyzing the Company's consolidated net income prospects for fiscal
2004, Capital Resources has considered the Company's assumption that the
annualization of reported net income for the six months ended June 30, 2004
would approximate total net income of $2.1 million or $1.80 per share
expected for all of 2004.
</TABLE>
As shown in the above table, even after the tender offer the Company is
expected to maintain a strong capital ratio. Also, the Company's earnings per
share and return on equity improves on a pro forma basis. Table 1, "Stock
Repurchase Analysis" presents detailed pro forma financial data based on the
full tender offer price range of $29.50 to $31.50 per share.
3
<PAGE>
Capital Resources
11250 Roger Bacon Dr #19 Reston, Virginia 20190
<TABLE>
<CAPTION>
Table 1
Stock Repurchase Analysis
Wells Financial Corp.
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
% OF SHARES REPURCHASED = 12.92%
Current Stock Price $26.75
Stock Repurchase Price 20-Sep-04 $29.50 $29.75 $30.00 $30.25 $30.50
Current Shareholders Equity 28,328
Estimated Shareholders Equity at 09/30/04 28,328 28,328 28,328 28,328 28,328 28,328
Less: Stock Repurchased 0 (4,425) (4,463) (4,500) (4,538) (4,575)
Ending Shareholder Equity 28,328 23,903 23,866 23,828 23,791 23,753
Book Value/Share $24.39 $23.64 $23.60 $23.56 $23.53 $23.49
Tangible BV/Share $24.39 $23.64 $23.60 $23.56 $23.53 $23.49
PERCENT INCREASE IN BV/SHARE -3.10% -3.26% -3.41% -3.56% -3.71%
Price/Tangible BV 109.65% 124.80% 126.06% 127.32% 128.58% 129.85%
Total Assets 223,353
Tangible Equity/Assets 12.68% 10.55% 10.53% 10.52% 10.50% 10.48%
Core Earnings Estimate 2,100 2,100 2,100 2,100 2,100 2,100
Less: Est. Lost Earnings From Repurchase 0 (82) (83) (84) (84) (85)
Ending Earnings 2,100 2,018 2,017 2,016 2,016 2,015
EARNINGS PER SHARE $1.80 $1.985 $1.984 $1.983 $1.983 $1.982
PERCENT INCREASE IN EPS 10.3% 10.2% 10.2% 10.1% 10.1%
Return on Equity 7.41% 7.73% 7.73% 7.73% 7.73% 7.74%
Price/Earnings Ratio 14.86 14.86 15.00 15.13 15.26 15.39
Assumptions
-----------
Incremental Investment/Borrowing Rate 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%
Beginning Shares Outstanding (000) 1,161 1,161 1,161 1,161 1,161 1,161
Ending Shares Outstanding (000) 1,161 1,011 1,011 1,011 1,011 1,011
Percent of Shares Repurchased 12.92% 12.92% 12.92% 12.92% 12.92%
Shares Repurchased 0 150.000 150.000 150.000 150.000 150.000
Tax Rate 38.00% 38.00% 38.00% 38.00% 38.00% 38.00%
<CAPTION>
<S> <C> <C> <C> <C> <C>
% OF SHARES REPURCHASED = 12.92%
Current Stock Price $26.75
Stock Repurchase Price 20-Sep-04 $30.75 $31.00 $31.25 $31.50
Current Shareholders Equity 28,328
Estimated Shareholders Equity at 09/30/04 28,328 28,328 28,328 28,328 28,328
Less: Stock Repurchased 0 (4,613) (4,650) (4,688) (4,725)
Ending Shareholder Equity 28,328 23,716 23,678 23,641 23,603
Book Value/Share $24.39 $23.45 $23.42 $23.38 $23.34
Tangible BV/Share $24.39 $23.45 $23.42 $23.38 $23.34
PERCENT INCREASE IN BV/SHARE -3.86% -4.02% -4.17% -4.32%
Price/Tangible BV 109.65% 131.12% 132.39% 133.67% 134.96%
Total Assets 223,353
Tangible Equity/Assets 12.68% 10.46% 10.44% 10.42% 10.41%
Core Earnings Estimate 2,100 2,100 2,100 2,100 2,100
Less: Est. Lost Earnings From Repurchase 0 (86) (86) (87) (88)
Ending Earnings 2,100 2,014 2,014 2,013 2,012
EARNINGS PER SHARE $1.80 $1.981 $1.981 $1.980 $1.979
PERCENT INCREASE IN EPS 10.1% 10.0% 10.0% 10.0%
Return on Equity 7.41% 7.74% 7.74% 7.75% 7.75%
Price/Earnings Ratio 14.86 15.52 15.65 15.78 15.92
Assumptions
-----------
Incremental Investment/Borrowing Rate 3.00% 3.00% 3.00% 3.00% 3.00%
Beginning Shares Outstanding (000) 1,161 1,161 1,161 1,161 1,161
Ending Shares Outstanding (000) 1,161 1,011 1,011 1,011 1,011
Percent of Shares Repurchased 12.92% 12.92% 12.92% 12.92%
Shares Repurchased 0 150.000 150.000 150.000 150.000
Tax Rate 38.00% 38.00% 38.00% 38.00% 38.00%
</TABLE>
4
<PAGE>
[CAPITAL RESOURCES LOGO]
COMPARATIVE PRICING ANALYSIS
Capital Resources has compared the Company's pricing characteristics with
those of a peer group of 15 other thrift institutions to determine if the
Company is trading at a reasonable price relative to such peers. The comparative
peer group is composed of thrifts exhibiting similar financial characteristics
as the Company, including a relatively small asset size, and operating in
similar market areas in the Midwest.
We note that while the Company's common stock is traded on the NASDAQ
National Market, the stock is not actively traded, generally exhibiting low
trading volume. Reflecting its limited liquidity, the stock typically trades
with a large spread between the "bid" and "ask" price and during 2004 actual
trades in the stock reflected a high degree of price variability. During 2004,
the stock traded to above $34 per share in February and March and traded down to
$22 per share in May. Since May, the stock has traded in the $23 to $28 range.
We believe that the decline in the Company's trading price since the first
quarter of 2004 reflects two primary factors: (i) the overall decline in the
market for thrift stocks; and (ii) investors' recognition that the Company's
recurring earnings stream has declined in 2004 from the higher levels
experienced during 2003.
The recent average trading price of the stock, as of September 20, 2004, is
$26.75. Capital Resources has utilized this stock price in its comparative
pricing analysis. Based on a recent average trading price of $26.75, the Company
has a total market capitalization of $31.1 million versus an average market
capitalization of $39.7 million for the 15 thrift comparative peer group. The
Company's price/earnings and price/tangible book value ratios of 14.9x and 110%,
respectively, compared to average price/earnings and price/tangible book value
ratios of 15.1x and 129%, respectively, for the comparative thrift group. (See
Table 2).
We have concluded that, while the Company trades at a moderate discount to
the comparative group on a price/tangible book value basis, at $26.75 per share
the Company's stock is trading at a reasonable level.
5
<PAGE>
[CAPITAL RESOURCES LOGO]
<TABLE>
<CAPTION>
TABLE 2
SELECTED FINANCIAL AND MARKET PRICING CHARACTERISTICS - PEER THRIFTS
AS OF 9/17/2004
TgBk
Mkt Prem Div Average Ttl NPAs
Market Averages Price Cap P/B P/TB P/E /Dep P/A Yld Assets + 90s
---------------- ----- ---- --- ---- --- ---- --- --- ------ -----
(#) ($) ($MI) (%) (%) (x) (%) (%) (%) ($M) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Wells Financial Corp. 26.75 31.1 109.7 109.7 14.9 1.7 13.9 3.14 223 0.10
--------------------
Comparative Group
-----------------
o Mean (Average) 15 18.82 39.7 119.0 129.2 15.1 3.6 11.8 2.33 345 0.91
Comparative Group Detail
------------------------
AMFC AMBFinancial-IN 15.01 14.6 114.1 15.0 1.6 9.5 1.47 154 1.29
FFWC FFWCorp-IN 21.84 28.4 117.2 11.6 2.6 11.9 2.93 239 0.84
FBTC FirstBancTrust-IL 11.90 29.8 115.5 18.6 2.5 13.4 2.77 221 0.48
FFBI FirstFedBcshs-IL 20.54 26.9 114.3 135.0 16.4 2.6 8.7 2.14 308 0.55
FFSX FirstFederal-IA 23.05 87.3 120.6 162.2 15.6 7.6 13.8 1.48 633 1.37
HFFC HFFinancial-SD 16.85 59.3 116.8 129.4 15.5 2.1 7.2 2.55 823 0.48
HMNF HMNFinancial-MN 27.26 121.5 149.8 157.9 11.8 7.1 13.3 2.93 914 0.36
HCFC HomeCityFinl-OH 15.47 12.8 103.0 18.9 0.3 8.3 2.84 153 0.18
LSBI LSBFinlCorp-IN 24.50 33.4 113.7 115.6 11.3 1.9 9.8 2.29 343 1.63
LOGN LogansprtFinl-IN 19.00 16.6 100.1 12.5 0.0 10.8 2.95 154 0.88
NEIB NEIndianaBncp-IN 21.28 31.2 117.8 18.8 3.6 13.9 2.58 225 1.08
SMBC SthmMissouBncp-MO 15.39 35.6 133.5 150.7 12.8 5.8 11.8 2.14 301 0.09
STBI SturgisBancorp-MI 14.00 38.1 135.0 164.7 18.9 7.3 12.1 2.57 314 2.01
UCBC UnionCmmntyBnc-IN 18.00 37.8 105.5 119.9 17.7 3.3 14.4 3.33 262 1.95
UTBI UnitedTennessee-TN 18.25 21.9 128.5 134.4 11.1 5.4 17.8 0.00 123 0.50
===================================================================================
<CAPTION>
Stockholders' Per Share
Equity --------------
--------------- Net Other ROAA ROAE Book 4 Qtr
Market Aveerages GAAP Tang IntInc Oplnc G&A (bf Ex) (bf Ex) Value EPS
---------------- ---- ------ ------ ----- --- ------- ------- ----- ----
(%) (%) (%) (%) (%) (%) (%) ($) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Wells Financial Corp. 12.68 12.68 3.38 2.51 3.96 1.20 9.79 24.39 1.80*
--------------------
Comparative Group
-----------------
o Mean (Average) 9.82 9.29 3.04 0.85 2.52 0.85 8.31
Comparative Group Deta
----------------------
AMFC AMBFinancial-IN 8.31 8.31 2.89 0.96 2.73 0.67 8.21 13.16 1.00
FFWC FFWCorp-IN 10.14 10.14 2.63 1.00 2.10 1.03 10.49 18.64 1.88
FBTC FirstBancTrust-IL 11.64 11.64 3.22 1.63 3.58 0.68 5.80 10.30 0.64
FFBI FirstFedBcshs-IL 7.00 6.51 2.70 0.44 2.29 0.69 5.39 17.97 1.25
FFSX FirstFederal-IA 11.42 8.75 2.86 1.49 2.83 0.88 7.88 19.11 1.48
HFFC HFFinancial-SD 6.17 5.60 3.19 1.39 3.40 0.51 7.94 14.43 1.09
HMNF HMNFinancial-MN 8.88 8.46 3.26 0.96 2.25 1.10 11.64 18.20 2.31
HCFC HomeCityFinl-OH 8.08 8.08 2.93 0.13 2.20 0.43 5.45 15.02 0.82
LSBI LSBFinlCorp-IN 8.43 8.43 3.33 0.87 2.46 0.93 10.98 21.54 2.17
LOGN LogansprtFinl-IN 10.81 10.81 2.57 0.42 1.56 0.90 8.65 18.98 1.52
NEIB NEIndianaBncp-IN 11.78 11.78 2.70 0.58 2.30 0.74 6.12 18.07 1.13
SMBC SthmMissouBncp-MO 8.81 7.91 3.14 0.64 2.23 0.98 11.11 11.53 1.20
STBI SturgisBancorp-MI 8.99 7.49 2.75 1.54 3.25 0.71 7.21 10.37 0.74
UCBC UnionCmmntyBnc-IN 12.96 12.16 3.01 0.25 2.08 0.75 5.60 17.06 1.02
UTBI UnitedTennessee-T 13.84 13.31 4.49 0.50 2.57 1.74 12.24 14.20 1.65
==============================================================================
Footnotes:
a. Prices are either closing price or last trade. All summary
calculations indicate market averages for each stratification.
b Reported earnings used in all ratio calculations are for the latest
twelve months of approved financials.
c. Market average P/ E ratios exclude firms that have either negative P/
E ratios or P/ E ratios in excess of 30 times earnings. High P/ E
ratios excluded from averages are indicated with an "x".
d. A P/ E ratio is calculated (indicated with a "c") for companies not
reporting earnings per share.
e. An adjusted P/ E ratios is calculated to exclude non- recurring items
(tax- affected at 35 %) and extraordinary items from total net income.
f. Equity/ Assets ratios (indicated with an "e") are used where TgEq/
TgAs is not yet available for the current period.
g. "Early Bird" EPS data from recent press releases (indicated with an
"eb") is provided prior to the release of full financial data.
h. Companies that are announced acquisition targets and stocks having
pricing dates less than 09/ 10/ 04 (or 7 days before run date) are
excluded.
Sources: Audited and unaudited financial statements, sheshunoff Information Services,
SNL Financial, corporate reports and offering circulars for publicly-traded
companies.
</TABLE>
6
<PAGE>
WELLS FINANCIAL CORP. (NASDAQ: WEFC)
Graph 1
[GRAPH OMITTED]
7
<PAGE>
WELLS FINANCIAL CORP. (WEFC)
12 MONTH STOCK PRICE PERFORMANCE AND 50 DAY MOVING AVERAGE
[GRAPH OMITTED]
8
<PAGE>
[CAPITAL RESOURCES LOGO]
REVIEW OF PREMIUMS PAID IN OTHER STOCK REPURCHASE TRANSACTIONS
Capital Resources has reviewed the level of premiums paid in relation to
recent trading prices in other recent stock repurchase transactions involving
banks and thrifts. Given the Company's intention to initiate a reverse stock
split if the tender offer does not reduce the number of record holders below
300, we have considered the level of premiums paid in both "modified Dutch
auction" tender offers and reverse stock splits as well as other non-voluntary
going private transactions.
Based upon our review of available information on similar repurchase
transactions during the latest three years, we have determined that the level of
premiums paid were as follows:
Number Range Median
of Transactions of Premiums Premium
--------------- ----------- -------
Voluntary Tender Offers* 12 0% - 22% 8%
Non-Voluntary Going
Private Transactions** 10 1% - 21% 15%
* Includes modified Dutch auctions and other tender offers
** Includes reverse stock splits and other non-voluntary cash outs.
9
<PAGE>
[CAPITAL RESOURCES LOGO]
PRICING ANALYSIS RELATED TO TENDER OFFER PRICE RANGE
Capital Resources has derived the P/E and P/TB ratios as well as the
level of premiums related to the midpoint, low end and high end of the tender
offer price range of $29.50 to $31.50 per share:
<TABLE>
<CAPTION>
P/E P/TB Premium*
--- ---- --------
<S> <C> <C> <C> <C>
Midpoint Price $30.50 16.9x 125% 14%
Low Price $29.50 16.4x 121% 10%
High Price $31.50 17.5x 129% 18%
* Premium is based on the Tender Offer Price compared to the
Company's Recent Trading Price of $26.75
</TABLE>
We have concluded that the tender offer price range reflects appropriate
premiums in relation to the Company's recent trading price. Also, the P/E and
P/TB ratios related to such price range appear reasonable when compared to the
pricing ratios of the peer group of publicly traded thrifts.
10
<PAGE>
[CAPITAL RESOURCES LOGO]
DISCOUNTED CASH FLOW AND TERMINAL VALUE ANALYSIS
Capital Resources has also performed an analysis of potential returns to
stockholders of the Company, which is based on an estimate of the Company's
future cash dividend streams to stockholders and the future trading price of the
Company's stock (terminal value). Such analysis assumes that a stockholder
retains his or her ownership of the Company's stock for at least three to five
years and then sells the stock into the marketplace. In our analysis we have
considered the likelihood that, given the fact that the stock will no longer be
NASDAQ listed and publicly available financial reports will be very limited, the
stock will be even less liquid than it currently is.
The analysis has assumed an average annual net income growth rate of 8
percent and dividend growth rate of 10 percent. These growth assumptions are not
based upon any formal Company projections or budgets but are estimates that the
Company believes are reasonable. Because the assumptions and resulting
projections are subject to significant uncertainties, including changes in the
interest rate environment and the mortgage refinancing market, as well as the
competitive and economic environment, no assurance can be given that actual net
income and dividends will meet these projections.
To approximate the terminal values of Company common stock at the end of
a three year and five year period, Capital Resources has applied the following
pricing ratios: a price to earnings multiple of 15x and a price/tangible book
value ratio of 110%. The resulting terminal values and dividend streams were
then discounted to present values using a discount rate of 10 percent chosen to
reflect an appropriate rate of return required by holders or prospective buyers
of the Company's stock.
Capital Resources has derived its present value calculations based on
three scenarios. One scenario assumed the Company repurchased all of the stock
at $29.50 per share, the low end of the tender offer price range (Scenario 1);
the second scenario assumed the Company repurchased all of the stock at $31.50
per share, the high end of the range (Scenario 2); and the third scenario
assumed the Company repurchased all of the stock at $30.50 per share, the
midpoint of the range (Scenario 3).
Under each of the three scenarios, Capital Resources has derived a
present value for the Company's common stock and future dividend payments
assuming a stockholder sells his or her stock after three years or five years.
As a result of its analysis, Capital Resources has determined that there are
immaterial differences in the present value results under each of the three
scenarios. Therefore, Capital Resources has provided the Company with only the
present value results based on Scenario 3, which indicated a present value for
the Company's common stock and future dividend payments ranging from $26.98 to
$27.19 assuming a stockholder sold his or her stock after five years or three
years, respectively. Table 3 presents the results of Scenario 3.
These present value figures fall very close to the Company's recent
trading price of $26.75 and further confirm Capital Resources' conclusion that
at $26.75 per share the Company stock was trading at a reasonable level. These
results also serve to confirm the fairness of the tender offer price range of
$29.50 to $31.50 to those stockholders who sell their stock back to the Company.
11
<PAGE>
[CAPITAL RESOURCES LOGO]
<TABLE>
<CAPTION>
Table 3
Wells Financial Corp.
Discounted Cash Flow and Terminal Value Analysis
Assuming a Tender Offer Price of $30.50 per share
(Dollars in Thousands, except Per Share Data)
--------------------------------------------------------------------------------
As of -- Projected --
FINANCIAL DATA: June 30, 2004 Year 1 Year 2 Year 3 Year 4 Year 5
-------------- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets 223,353 231,309 244,200 257,820 272,206 287,397
Deposits 165,362 168,669 172,043 175,483 178,993 182,573
Tangible Equity, as adjusted 28,328 25,116 26,442 27,852 29,347 30,928
as a percent of tangible assets 12.68% 10.86% 10.83% 10.80% 10.78% 10.76%
Total Projected Net Income 2,100 (Normalized) 2,132 2,305 2,487 2,680 2,884
===== ===== ===== ===== ===== =====
% Return on Average Assets (ROA) 0.94% 0.94% 0.97% 0.99% 1.01% 1.03%
% Return on Average Equity (ROE) 7.41% 7.98% 8.94% 9.16% 9.37% 9.57%
PER SHARE DATA:
--------------
Book Value $24.39 $24.84 $26.15 $27.54 $29.02 $30.58
Tangible Book Value $24.39 $24.84 $26.15 $27.54 $29.02 $30.58
Fully-diluted Earnings per Share $1.800 $1.919 $2.219 $2.379 $2.555 $2.741
Dividends per share $0.880 $0.880 $0.968 $1.065 $1.172 $1.289
Number of Shares Outstanding 1,161,226 * 1,011,226 1,011,226 1,011,226 1,011,226 1,011,226
-----------------------------------------------------------------------------------------------------------------------------
Pricing Data and Ratios:
-----------------------
Est. Stock Price $26.75 $ 28.00 $ 31.00 $ 33.00 $ 35.00 $ 37.00
Implied Pricing Ratios
Price / Book Value 109.7% 112.7% 118.5% 119.8% 120.6% 121.0%
Price / Tangible Book Value 109.7% 112.7% 118.5% 119.8% 120.6% 121.0%
Price / Earnings 14.9x 14.6x 14.0x 13.9x 13.7x 13.5x
Projected Stockholder Returns
(including Dividends) 8.0% 14.2% 9.9% 9.6% 9.4%
PRESENT VALUE ANALYSIS 10.0% Discount Rate
----------------------
PV of Terminal Value $ 25.45 $ 25.62 $ 24.79 $ 23.91 $ 22.97
PV of Projected Dividends 0.80 1.60 2.40 3.20 4.00
------- ------- ------- ------- -------
Total Present Value of Discounted
Cash Flow $ 26.25 $ 27.22 $ 27.19 $ 27.11 $ 26.98
======= ======= ======= ======= =======
</TABLE>
Confidential = For Discussion Purposes Only
12
<PAGE>
[CAPITAL RESOURCES LOGO]
CONCLUSION
Based on the results of the above described valuation analysis, it is
Capital Resources' opinion that the tender offer price range is fair, from a
financial point of view, to stockholders of the Company.
13
</TEXT>
</DOCUMENT>