Bank takeover

Dear Mr. Berko:

For more than a decade, my son-in-law has worked for a small New York bank with multiple locations, and he earns a good living. He has a responsible position but is not a member of top management or an "insider," but he is often privy to some of the things discussed by the board and the thoughts of management. The bank is public, lightly traded on NASDAQ, and over the years, he has purchased stock on the open market. Management has also given him stock as a bonus. The bank is profitable, got through the financial crisis in good shape and has a good balance sheet.

My son-in-law has a feeling this bank will be bought by a larger bank and thinks he could lose his job to a computer or a counterpart at a bigger bank. No one in management has said a thing to him, but he believes that things are happening at the main branch and the branches and with the legal and accounting departments, which "smell of a buyout." And the stock has moved up almost 2 points in the past two months.

I'd like to buy 3,000 shares as a speculation, but I'd like to be more certain (if possible) before I do it. I have given you the name of the bank (please do not print it) and wonder whether you could come up with something that would or would not support a buyout.

SB, Erie, Pa.

Dear SB:

I spoke to several bank analysts at Merrill Lynch, Stifel Nicolaus and Fidelity. And if they know anything, they ain't talking. I even called a banker I know in Syracuse, N.Y., and though he's very familiar with this bank and management, he has heard nothing about a buyout. However, both he and the fellow from Merrill indicated that the bank could reasonably be a buyout target.

Anyhow, a retired lady banker (she's Jeff Foxworthy's aunt) I've known for three decades has made serious money investing in small banks, including the bank employing your son-in-law. Several years ago, she invested big bucks in 22 publicly traded, small- and medium-town banks (several were mentioned in this column), and her bank investments have increased nearly fivefold in value. She personally knows the ropes, the signs and the management of these banks and seems to have a sixth sense about bank stocks. She hasn't heard "serious" buyout talk, but she knows the bank and says, "It presents itself well as a takeover candidate."

She told me that there are seven simple signs that determine whether a bank is being groomed for a takeover, and they are: 1) If the average ages of the chairman, CEO, president and board members exceeds 66, it may be a buyout candidate. 2) If management has failed to prepare, train or assign others to assume more responsibilities, it may be a candidate. 3) If the bank has begun to increase visibility in the community, is participating in various civic functions, has become more active in city or municipal meetings, is participating in fundraising activities and has become a better neighbor, it may be a buyout candidate. 4) If the bank is aggressively trying to pretty up its income statement, sanitize its balance sheet, reduce fixed costs and redundancies, and streamline job descriptions, it could be a candidate. 5) If a large portion of common stock (at least 35 percent) is held by management, then it may be a buyout candidate. 6) If management has no sons, daughters or in-laws in executive positions, then it could be a candidate. And 7) If some of the bank's big shots recently purchased condominiums in Boca Raton, Naples, Fort Lauderdale or The Villages, then it may be a buyout candidate. And if this bank hits on all seven signs, it's definitely a candidate, and your son-in-law may be out of a job. Just buy 1,000 shares!


Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at Visit Creators Syndicate website at

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Published: Mon, Sep 17, 2012