Exam 19: Acquisitions and Mergers in Financial-Services Management

The First National Bank of Edmond had decided to purchase The First National Bank of Plano in Texas.The bank is interested in this purchase because The First National Bank of Plano is in financial distress and the First National Bank of Edmond thinks this is a cheap way to get a start in the large Texas market.The FDIC supports this acquisition because it won't have to make any insurance payouts.What motive for a merger does this most likely reflect?

First National Bank's stock is currently selling at $40 per share and the bank recently reported earnings per share of $4.50 on its 200,000 shares outstanding.Second National Bank has 150,000 shares outstanding,with a current market price of $30 per share.It just reported its earnings per share of $5.If First National acquires Second National in a stock purchase,with the two banks agreeing to exchange stock at the current market prices,and post-merger earnings are expected to be $1,800,000,what is the expected EPS post merger?

The State Bank of Stillwater has had record profits this year.It is interested in purchasing the National Bank of Durant because it has had losses this year.The State Bank of Stillwater feels that it can turn around the National Bank of Durant and in the meantime they can enjoy a reduced tax burden after this acquisition.What motive for a merger does this most likely reflect?

Many mergers arise from expected ___________________________ benefits.This takes place particularly when an acquired firm has earnings losses that can be used to offset taxable profits of the acquirer.

One of the reasons for a merger is _________________.This is where the merger is encouraged by the FDIC as a way to conserve scarce federal deposit insurance resources.

As a result of many bank mergers in the last few decades,research indicates that goodwill as an asset on many bank's balance sheets has grown exponentially.

According to the text,which of the following is a trigger that created a wave of mergers in Europe?

According to the textbook,the lackadaisical profit performance surrounding a merger may be explained by the:

Andover Bank is planning to purchase Berkley Bank.The current market value of Andover's stock is $55 per share while that of Berkley's stock is $15 per share.Andover plans to pay Berkley's stockholders a $5 bonus per share.Currently,Andover has 100,000 shares outstanding and earnings per share of $12,while Berkley has 50,000 shares outstanding and earnings per share of $5.Suppose that the earnings of the new bank are $1,600,000 and the combined bank will have 118,182 shares outstanding.What will be the earnings per share for the new bank?

One reason banks pursue mergers is for _____________________.This allows the bank to reduce fluctuations in revenues and net income.

There are three banks in East Panhandle.First State Bank which currently has 25 percent of the deposits in the area,Second State Bank which currently has 40 percent of the deposits,and Third State Bank which has the rest.What is the Herfindahl-Hirschman Index for East Panhandle (compute the share of Third State Bank first)?

Andover Bank is planning to purchase Berkley Bank.The current market value of Andover's stock is $55 per share while that of Berkley's stock is $15 per share.Andover plans to pay Berkley's stockholders a $5 bonus per share.Currently,Andover has 100,000 shares outstanding and earnings per share of $12,while Berkley has 50,000 shares outstanding and earnings per share of $5.What will be the total number of shares outstanding for the new bank?

In recent years,financial services industry has consistently ranked in the top five of all U.S.industries in the number or value of merger transactions every year.

Andover Bank is planning to purchase Berkley Bank.The current market value of Andover's stock is $55 per share while that of Berkley's stock is $15 per share.Andover plans to pay Berkley's stockholders a $5 bonus per share.Currently,Andover has 100,000 shares outstanding and earnings per share of $12,while Berkley has 50,000 shares outstanding and earnings per share of $5.What is the merger premium that Andover will end up paying on Berkley's shares if the merger goes through?

____________________ refers to a declining population of businesses in any one industry.

A merger where the institutions involved don't overlap much or at all in terms of geographic area served is known as:

Suppose Bank A's stock price is $75 and Bank B's stock price is $25.Bank A is planning to purchase Bank B by paying Bank B's shareholders a bonus of $10 per share.If Bank B has 100,000 shares outstanding,how many shares of Bank A will the shareholders of Bank B receive?

The acquisition of First City Bancorporation of Texas by Chemical Bank of New York was motivated by both banks seeking market-positioning benefits.

According to the textbook,the principal beneficiaries of most bank mergers appear to be:

When a bank enters into a new market area as the result of a merger with another financial institution,they have practiced __________________ diversification.