Bank Management

by Koch, Timothy W.; MacDonald, S. Scott

• ISBN13: 9780030342974
• ISBN10: 003034297X
• Format: Hardcover
• Copyright: 2002-08-07
• Publisher: South-Western College Pub

Summary

The management and regulatory environment of commercial banks has seen rapid change in recent years. This modern introduction to commercial bank management is the most current in the market and reflects changes during the last year that competing books do not. Excellent and complete coverage focuses on bank management problems now and in the 21st Century in a way that helps students apply financial concepts to a variety of credit, investment, and funding decisions.

Table of Contents

Preface	vii
Part I - Overview of the Banking Industry and Regulation	1	(90)
Fundamental Forces of Change in Banking	3	(32)
The Fundamental Forces of Change	7	(20)
Increased Competition	8	(1)
Competition for Deposits	9	(1)
Competition for Loans	10	(4)
Competition for Payment Services	14	(2)
Competition for Other Bank Services	16	(3)
Deregulation and Reregulation	19	(1)
Financial Innovation	20	(5)
Globalization	25	(2)
Capital Requirements	27	(1)
Increased Consolidation	28	(1)
GE Capital Services: A Financial Conglomerate	28	(4)
Business Groups	29	(1)
Management Strategies	30	(2)
Competitive Responses	32	(1)
Summary	32	(3)
Bank Organization and Regulation	35	(56)
Structure of the Banking Industry	37	(10)
National versus a State Bank Charter	37	(1)
Unitary Thrift Charter	38	(2)
Commercial Banks, Savings Institutions, and Credit Unions	40	(1)
The Role of Commerical Banks in the Economy	41	(2)
Consolidations, New Charters, and Bank Failures	43	(2)
The Central Bank	45	(1)
Deposit Insurance	46	(1)
Organizational Form of the Banking Industry	47	(12)
Unit versus Branch Banking	47	(2)
Bank Holding Companies	49	(7)
Banking Business Models	56	(2)
Specialty Banks (Community Banks)	58	(1)
Bank Regulation	59	(11)
Reasons for Regulation	60	(1)
Safety and Soundness	61	(3)
Efficient and Competitive Financial System	64	(6)
Trends in Federal Legislation and Regulation	70	(15)
Key Federal Legislation: 1956-2001	70	(2)
The Depository Institutions Deregulation and Monetary Control Act of 1980	72	(2)
The Garn-St Germain Depository Institutions Act of 1982	74	(2)
The Tax Reform Act of 1986	76	(1)
Competitive Equality Banking Act of 1987	76	(1)
The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA)	77	(1)
The Federal Deposit Insurance Corporation Improvement Act of 1991	78	(4)
USA Patriot Act	82	(1)
Current Unresolved Regulatory Issues	83	(1)
Capital Adequacy	83	(1)
Too Big to Fail	83	(1)
Deposit Insurance Reform	84	(1)
Hedge Funds	84	(1)
New Powers	85	(1)
Summary	85	(2)
Appendix: Important Banking Legislation	87	(4)
Part II - Evaluating Bank Performance	91	(124)
Analyzing Bank Performance: Using the UBPR	93	(76)
Commercial Bank Financial Statements	95	(14)
The Balance Sheet	96	(8)
The Income Statement	104	(5)
The Relationship between the Balance Sheet and Income Statement	109	(1)
The Return on Equity Model	110	(8)
The Uniform Bank Performance Report	111	(1)
Profitability Analysis	112	(1)
Expense Ratio and Asset Utilization	113	(5)
Banking Risks and Returns: The Profitability, Liquidity, and Solvency Trade-Off	118	(9)
Credit Risk	119	(3)
Liquidity Risk	122	(2)
Market Risk	124	(1)
Operating Risk	125	(1)
Legal Reputation Risk	126	(1)
Capital or Solvency Risk	126	(1)
Maximizing the Market Value of Bank Equity	127	(1)
Evaluating Bank Performance: An Application	128	(12)
PNC's Profitability and Risk versus Peers in 2001	128	(11)
PNC's Profitability versus Risk: 1993-2001	139	(1)
Camels Ratings	140	(1)
Performance Characteristics of Different-sized Banks	141	(3)
Financial Statement Manipulation	144	(3)
Preferred Stock	145	(1)
Nonperforming Loans	145	(1)
Securities Gains and Losses	146	(1)
Nonrecurring Sales of Assets	147	(1)
Summary	147	(6)
Appendix	153	(16)
Alternative Models of Bank Performance	169	(26)
A Critique of Traditional GAAP-Based Performance Measures	170	(5)
The Appropriate Peer Group	170	(1)
Measures Based on Total Operating Revenue	171	(1)
Stock Market-Based Performance Measures	172	(1)
Customer-Focused Performance Measures	173	(2)
Line of Business Profitability Analysis	175	(8)
RAROC/RORAC Analysis	176	(2)
Funds Transfer Pricing	178	(2)
Risk-Adjusted Income and Economic Income	180	(1)
Allocated Risk Capital	181	(2)
Management of Market Risk	183	(2)
Value-at-Risk Estimate for Foreign Exchange	183	(2)
Economic Value Added	185	(3)
The Balanced Scorecard	188	(3)
Summary	191	(4)
Managing Noninterest Income and Noninterest Expense	195	(20)
Common Financial Ratios of Expense Control and Noninterest Income Growth	195	(10)
Noninterest Income	197	(3)
Noninterest Expense	200	(1)
Key Ratios	201	(1)
Operating Risk Ratio	202	(3)
Customer Profitability and Business Mix	205	(4)
Which Customers Are Profitable?	205	(1)
What Is the Appropriate Business Mix?	206	(3)
Strategies to Manage Noninterest Expense	209	(3)
Cost Management Strategies	210	(2)
Summary	212	(3)
Part III - Managing Interest Rate Risk	215	(204)
Pricing Fixed-Income Securities	217	(26)
The Mathematics of Interest Rates	218	(5)
Future Value and Present Value: Single Payment	218	(2)
Future Value and Present Value: Multiple Payments	220	(1)
Simple versus Compound Interest	221	(1)
Compounding Frequency	221	(2)
The Relationship between Interest Rates and Option-Free Bond Prices	223	(4)
Bond Prices and Interest Rates Vary Inversely	223	(2)
Bond Prices Change Asymmetrically to Rising and Falling Rates	225	(1)
Maturity Influences Bond Price Sensitivity	226	(1)
The Size of Coupon Influences Bond Price Sensitivity	227	(1)
Duration and Price Volatility	227	(5)
Duration as an Elasticity Measure	228	(1)
Measuring Duration	229	(2)
Comparative Price Sensitivity	231	(1)
Recent Innovations in the Valuation of Fixed-Income Securities and Total Return Analysis	232	(3)
Total Return Analysis	233	(1)
Valuing Bonds as a Package of Cash Flows	234	(1)
Money Market Yields	235	(4)
Interest-Bearing Loans with Maturities of One Year or Less	236	(1)
360-day versus 365-day Yields	236	(1)
Discount Yields	237	(1)
Yields on Single-Payment, Interest-Bearing Securities	238	(1)
Summary	239	(4)
The Determinants of Interest Rates	243	(46)
Determinants of Interest Rate Levels	245	(1)
Loanable Funds Theory	245	(3)
Supply of, and Demand for, Loanable Funds	245	(2)
Changes in the Supply and Demand for Loanable Funds	247	(1)
Inflation and the Level of Interest Rates	248	(8)
The Fisher Relation	250	(3)
Actual Inflation and Market Interest Rates	253	(3)
Interest Rates and the Business Cycle	256	(4)
Why Do Interest Rates Differ between Securities?	260	(1)
Term to Final Maturity	260	(11)
Yield Curves	260	(2)
Unbiased Expectations Theory	262	(2)
Forward Rates	264	(1)
Unbiased Expectations, Market Efficiency, and Arbitrage	265	(1)
Liquidity Premium 'Theory	266	(2)
Market Segmentation 'Theory	268	(1)
The Yield Curve and the Business Cycle	269	(2)
Term to Repricing Variable Rate and Floating Rate Securities	271	(1)
Default Risk	272	(2)
Default Risk Premiums	272	(1)
Bond Ratings	273	(1)
Marketability and Liquidity	274	(2)
Liquidity Effects	275	(1)
Liquidity Premiums	275	(1)
Special Features on Securities	276	(2)
Call and Put Provisions	276	(2)
Convertibility	278	(1)
Income Tax Effects	278	(2)
Municipal Securities	279	(1)
State and Local Taxes	280	(1)
Municipal Default Risk	280	(1)
Summary	280	(5)
Appendix	285	(4)
Managing Interest Rate Risk: Gap and Earnings Sensitivity	289	(34)
Measuring Interest Rate Risk with GAP	291	(1)
Traditional Static GAP Analysis	292	(14)
What Determines Rate Sensitivity?	294	(1)
Factors Affecting Net Interest Income	295	(1)
Changes in the Level of Interest Rates	296	(3)
Changes in the Relationship between Short-Term Asset Yields and Liability Costs	299	(1)
Changes in Volume	300	(1)
Changes in Portfolio Composition	300	(1)
Rate, Volume, and Mix Analysis	300	(2)
Rate-Sensitivity Reports	302	(2)
Strengths and Weaknesses: Static GAP Analysis	304	(1)
Link between GAP and Net Interest Margin	305	(1)
Earnings Sensitivity Analysis	306	(7)
Exercise of Embedded Options in Assets and Liabilities	307	(1)
Different Interest Rates Change by Different Amounts at Different Times	308	(1)
Earnings Sensitivity Analysis: An Example	308	(5)
Income Statement GAP	313	(2)
Managing the GAP and Earnings Sensitivity Risk	315	(1)
Summary	316	(7)
Managing Interest Rate Risk: Duration Gap and Market Value Of Equity	323	(20)
Measuring Interest Rate Risk with Duration GAP	324	(8)
Duration, Modified Duration, and Effective Duration	324	(2)
Duration GAP Model	326	(2)
A Duration Application for Banks	328	(2)
An Immunized Portfolio	330	(2)
Market Value of Equity Sensitivity Analysis	332	(3)
MVE Sensitivity Analysis: An Example	332	(3)
Earnings Sensitivity Analysis versus MVE Sensitivity Analysis: Which Model Is Better?	335	(1)
Strengths and Weaknesses: GAP and Earnings Sensitivity Analysis	335	(1)
A Critique of Strategies to Manage Earnings and Market Value of Equity Sensitivity	336	(4)
GAP and DGAP Management Strategies: What Are Your Bets?	337	(1)
An Example	337	(1)
Yield Curve Strategies	338	(2)
Summary	340	(3)
Financial Futures, Forward Rate Agreements, and Interest Rate Swaps	343	(38)
Characteristics of Financial Futures	344	(7)
Types of Futures Traders	345	(1)
The Mechanics of Futures Trading	346	(1)
An Example: 90-Day Eurodollar Time Deposit Futures	347	(4)
Speculation versus Hedging	351	(7)
A Long Hedge	353	(2)
A Short Hedge	355	(1)
Change in the Basis	356	(1)
Basis Risk and Cross Hedging	357	(1)
Microhedging Applications	358	(4)
Creating a Synthetic Liability with a Short Hedge	359	(1)
The Mechanics of Applying a Microhedge	360	(2)
Macrohedging Applications	362	(3)
Hedging: GAP or Earnings Sensitivity	362	(1)
Hedging: Duration GAP and MVE Sensitivity	363	(1)
Accounting Requirements and Tax Implications	364	(1)
Using Forward Rate Agreements to Manage Rate Risk	365	(2)
Forward Rate Agreements: An Example	366	(1)
Potential Problems with FRAs	366	(1)
Basic Interest Rate Swaps as a Risk Management Tool	367	(7)
Characteristics	367	(2)
Swap Applications	369	(3)
Pricing Basic Swaps	372	(1)
Comparing Financial Futures, FRAs, and Basic Swaps	373	(1)
The Risk with Swaps	373	(1)
Summary	374	(7)
Options, Caps, Floors, and More Complex Swaps	381	(38)
The Nature of Options on Financial Futures	382	(1)
Examples Using Eurodollar Futures	383	(3)
Profit Diagrams	386	(3)
Eurodollar Futures	386	(2)
Call Options on Eurodollar Futures	388	(1)
Put Options on Eurodollar Futures	389	(1)
The Use of Options on Futures by Commercial Banks	389	(9)
Positions That Profit from Rising Interest Rates	390	(1)
Profiting from Falling Interest Rates	390	(1)
Hedging Borrowing Costs	391	(1)
Hedging with 3-Month Eurodollar Futures	392	(1)
Hedging with Options on Eurodollar Futures	393	(5)
Sensitivity of the Option Premium to the Change in Eurodollar Futures Price	398	(1)
Interest Rate Caps, Floors, and Collars	398	(13)
Buying an Interest Rate Cap	399	(2)
Buying an Interest Rate Floor	401	(1)
Interest Rate Collar and Reverse Collar	402	(2)
Protecting against Falling Interest Rates	404	(3)
Protecting against Rising Interest Rates	407	(4)
Interest Rate Swaps with Options	411	(3)
Using Swaps to Reduce Borrowing Costs of a New Debt Issue	411	(1)
Using Interest Rate Swaps with a Call Option	411	(2)
Using Interest Rate Swaps with a Put Option	413	(1)
Summary	414	(5)
Part IV - Managing the Cost of Funds, Bank Capital, and Liquidity	419	(134)
Managing Liabilities and The Cost of Funds	421	(42)
The Composition of Bank Liabilities	422	(4)
Recent Trends for Large and Small Banks	423	(3)
Characteristics of Small Denomination Liabilities	426	(1)
Transactions Accounts	427	(6)
Electronic Money	428	(2)
Functional Cost Analysis	430	(3)
Service Charges	433	(1)
Calculating the Net Cost of Transaction Accounts	433	(2)
Characteristics of Large Denomination Liabilities	435	(7)
Jumbo CDs (CDs over $100,000)	435	(2)
Immediately Available Funds	437	(1)
Federal Funds Purchased	437	(1)
Security Repurchase Agreements	438	(1)
Foreign Office Deposits	439	(2)
Individual Retirement Accounts	441	(1)
Federal Home Loan Bank Advances	441	(1)
Measuring the Cost of Funds	442	(1)
Evaluating the Cost of Bank Funds	443	(8)
The Average Historical Cost of Funds	443	(1)
The Marginal Cost of Funds	444	(6)
Weighted Marginal Cost of Total Funds	450	(1)
Marginal Cost Analysis: An Application	451	(1)
Funding Costs and Banking Risk	452	(3)
Funding Sources and Interest Rate Risk	453	(1)
Funding Sources and Liquidity Risk	454	(1)
Funding Sources and Credit Risk	455	(1)
Funding Sources and Bank Safety	455	(1)
Borrowing from the Federal Reserve	455	(1)
Federal Deposit Insurance	456	(3)
Depositor Protection arid Handling Problem Institutions	457	(2)
Summary	459	(4)
The Effective Use of Capital	463	(42)
Why Worry about Bank Capital?	464	(1)
Risk-Based Capital Standards	465	(6)
The Basel Agreement	466	(1)
Risk-Based Elements of the Plan	466	(5)
What Constitutes Bank Capital?	471	(3)
FDICIA and Bank Capital Standards	474	(7)
Tier 3 Capital Requirements for Market Risk	477	(2)
Capital Requirements for Market Risk Using Internal Models	479	(1)
The New Basel Capital Accord (Basel II) and Operational Risk	480	(1)
What Is the Function of Bank Capital?	481	(3)
How Much Capital Is Adequate?	484	(1)
Weaknesses of the Risk-Based Capital Standards	484	(1)
The Effect of Capital Requirements on Bank Operating Policies	485	(4)
Limiting Asset Growth	485	(3)
Changing the Capital Mix	488	(1)
Changing Asset Composition	489	(1)
Pricing Policies	489	(1)
Shrinking the Bank	489	(1)
Characteristics of External Capital Sources	489	(3)
Subordinated Debt	489	(1)
Common Stock	490	(1)
Preferred Stock	491	(1)
Trust Preferred Stock	491	(1)
Leasing Arrangements	491	(1)
Capital Planning	492	(2)
Applications	492	(2)
Federal Deposit Insurance	494	(8)
Risk-Based Deposit Insurance	496	(1)
Problems with Deposit Insurance	497	(2)
Weakness of the Current Risk-Based Deposit Insurance System	499	(1)
Proposals to Improve Deposit Insurance	499	(3)
Summary	502	(3)
Liquidity Planning and Managing Cash Assets	505	(48)
The Relationship between Cash and Liquidity Requirements	506	(2)
Cash versus Liquid Assets	507	(1)
Objectives of Cash Management	508	(1)
Reserve Balances at the Federal Reserve Bank	509	(3)
Required Reserves and Monetary Policy	509	(2)
The Impact of Sweep Accounts on Required Reserve Balances	511	(1)
Meeting Legal Reserve Requirements	512	(9)
Recent Problems with Reserve Requirements	513	(2)
Lagged Reserve Accounting	515	(2)
An Application: Reserve Calculation under LRA	517	(2)
Reserve Planning	519	(1)
Liquidity Planning over the Reserve Maintenance Period	520	(1)
Managing Float	521	(4)
The Payment System	521	(2)
Holds on Deposited Checks	523	(1)
Daylight Overdrafts	523	(1)
Pricing Federal Reserve Check-Clearing Services	524	(1)
Managing Correspondent Balances	525	(3)
Correspondent Banking Services	526	(1)
Payment for Services	527	(1)
Computing Balance Requirements	527	(1)
Liquidity Planning	528	(4)
The Development of Liquidity Strategies	529	(1)
Liquidity versus Profitability	529	(1)
Liquidity, Credit, and Interest Rate Risk	530	(2)
Traditional Measures of Liquidity	532	(11)
Asset Liquidity Measures	532	(2)
Liability Liquidity Measures	534	(1)
Liquidity Analysis of PNC Bank and Community National Bank	535	(3)
Liquidity Planning: Monthly Intervals	538	(4)
Considerations in Selecting Liquidity Sources	542	(1)
Summary	543	(4)
Appendix	547	(6)
Part V - Extending Credit to Businesses and Individuals	553	(142)
Overview of Credit Policy and Loan Characteristics	555	(34)
Recent Trends in Loan Growth and Quality	556	(8)
Trends in Competition for Loan Business	564	(1)
The Credit Process	564	(8)
Business Development and Credit Analysis	566	(3)
Credit Execution and Administration	569	(2)
Credit Review	571	(1)
Characteristics of Different Types of Loans	572	(14)
Real Estate Loans	572	(3)
Commercial Loans	575	(9)
Agriculture Loans	584	(1)
Consumer Loans	585	(1)
Summary	586	(3)
Evaluating Commercial Loan Requests	589	(48)
Fundamental Credit Issues	590	(5)
Character of the Borrower and Quality of Data Provided	591	(1)
Use of Loan Proceeds	592	(1)
Loan Amount	592	(1)
The Primary Source and Timing of Repayment	593	(1)
Collateral	594	(1)
Evaluating Credit Request: A Four-Part Process	595	(18)
Overview of Management, Operations, and the Firm's Industry	595	(1)
Common Size and Financial Ratio Analysis	596	(6)
Cash Flow Analysis	602	(4)
Application to Prism Industries	606	(4)
Financial Projections	610	(3)
Risk-Classification Scheme	613	(1)
Credit Analysis: An Application	613	(12)
Common Size and Financial Ratios Analysis: Wade's Office Furniture	614	(5)
Cash-Based Income Statement: Wade's Office Furniture	619	(5)
Sensitivity Analysis	624	(1)
Summary	625	(6)
Appendix I	631	(2)
Appendix II	633	(2)
Appendix III	635	(2)
Evaluating Consumer Loans	637	(32)
Types of Consumer Loans	638	(7)
Installment Loans	639	(6)
Noninstallment Loans	645	(1)
Subprime Loans	645	(1)
Consumer Credit Regulations	646	(7)
Equal Credit Opportunity	646	(1)
Prohibited Information Requests	647	(1)
Credit Scoring Systems	647	(1)
Credit Reporting	647	(1)
Truth in Lending	647	(1)
Fair Credit Reporting	648	(4)
Community Reinvestment	652	(1)
Bankruptcy Reform	652	(1)
Credit Analysis	653	(11)
Policy Guidelines	654	(1)
Acceptable Loans	654	(2)
Evaluation Procedures: Judgmental and Credit Scoring	656	(1)
An Application: Credit Scoring a Consumer Loan	657	(3)
Your Beacon/FICO Credit Score	660	(1)
An Application: Indirect Lending	661	(3)
Recent Risk and Return Characteristics of Consumer Loans	664	(2)
Revenues from Consumer Loans	664	(1)
Consumer Loan Losses	665	(1)
Interest Rate and Liquidity Risk with Consumer Credit	666	(1)
Summary	666	(3)
Customer Profitability Analysis and Loan Pricing	669	(26)
Account Analysis Framework	671	(8)
Expense Components	671	(1)
Target Profit	672	(1)
Revenue Components	673	(6)
Customer Profitability Analysis: An Application to Commercial Accounts	679	(2)
Pricing New Commercial Loans	681	(7)
Risk-Adjusted Returns on Loans	682	(2)
Fixed Rates versus Floating Rates	684	(2)
Base Rate Alternatives	686	(2)
Customer Profitability Analysis: Consumer Installment Loans	688	(1)
Summary	689	(6)
Part VI - Managing the Investment Portfolio and Special Topics	695	(156)
The Investment Portfolio and Policy Guidelines	697	(48)
Dealer Operations and the Securities Trading Account	698	(1)
Objectives of the Investment Portfolio	699	(5)
Accounting for Investment Securities	700	(1)
Safety or Preservation of Capital	701	(1)
Liquidity	701	(1)
Yield	702	(1)
Diversify Credit Risk	702	(1)
Help Manage Interest Rate Risk Exposure	703	(1)
Pledging Requirements	703	(1)
Trade-Offs between Objectives	703	(1)
Composition of the Investment Portfolio	704	(1)
The Risk Return Characteristics of Investment Securities	705	(5)
General Return Characteristics	706	(1)
General Risk Characteristics	707	(3)
Regulatory Guidelines	710	(1)
Characteristics of Taxable Securities	710	(13)
Money Market Investments	710	(6)
Capital Market Investments	716	(7)
Prepayment Risk on Mortgage-Backed Securities	723	(11)
Unconventional Mortgage-Backed Securities	726	(5)
Corporate, Foreign, and Taxable Municipal Bonds	731	(1)
Asset-Backed Securities	731	(3)
Characteristics of Municipal Securities	734	(5)
Money Market Municipals	737	(1)
Capital Market Municipals	737	(1)
Credit Risk in the Municipal Portfolio	738	(1)
Liquidity Risk	739	(1)
Establishing Investment Policy Guidelines	739	(2)
Return Objectives	740	(1)
Portfolio Composition	740	(1)
Liquidity Considerations	740	(1)
Credit Risk Considerations	740	(1)
Interest Rate Risk Considerations	740	(1)
Total Return versus Current Income	741	(1)
General Portfolio Considerations	741	(1)
Optimum Size of the Loan Portfolio	741	(1)
Stability of Deposits	741	(1)
Optimal Federal Funds Position	742	(1)
Capital Requirements	742	(1)
Summary	742	(3)
Active Investment Strategies	745	(36)
The Maturity or Duration Choice for Long-Term Securities	747	(7)
Passive Maturity Strategies	747	(1)
Active Maturity Strategies	748	(3)
Interest Rates and the Business Cycle	751	(3)
The Impact of Interest Rates on the Value of Securities with Embedded Options	754	(13)
Issues for Securities with Embedded Options	754	(1)
The Roles of Duration and Convexity in Analyzing Bond Price Volatility	755	(4)
Impact of Prepayments on Duration and Yield for Bonds with Options	759	(3)
Total Return and Option-Adjusted Spread Analysis of Securities with Options	762	(5)
Comparative Yields on Taxable versus Tax-Exempt Securities	767	(4)
After-Tax and Tax-Equivalent Yields	767	(1)
The Yield Comparison for Commercial Banks	768	(2)
The Effective Tax on Incremental Municipal Interest Earned by Commercial Banks	770	(1)
The Impact of the Tax Reform Act of 1986	771	(2)
Qualified versus Nonqualified Municipals	771	(2)
Strategies Underlying Security Swaps	773	(3)
Analysis of a Classic Security Swap	773	(2)
Swap with Minimal Tax Effects	775	(1)
Leveraged Arbitrage Strategy	776	(1)
Summary	777	(4)
Global Banking Activities	781	(28)
Global Banking Participants	782	(8)
The European Community	788	(2)
Universal Banking Model	790	(2)
Organizational Structure of U.S. Banks	792	(2)
International Financial Markets	794	(2)
The Eurocurrency Market	794	(1)
The Eurobond Market	795	(1)
Eurocredits	796	(1)
International Lending	796	(6)
Short-Term Foreign Trade Financing	797	(2)
Direct International Loans	799	(3)
Foreign Exchange Activities	802	(4)
Foreign Exchange Risk	802	(1)
Currency Exchange	803	(1)
The Relationship between Foreign Exchange Rates and Interest Rates	804	(1)
Price Risk with Foreign Currencies	805	(1)
Summary	806	(3)
Financial Institution Mergers and Acquisitions	809	(42)
How Do Mergers Add Value?	818	(4)
Problem Mergers	821	(1)
Value Added from Buying Failed Thrifts	822	(1)
Valuation Procedures	822	(11)
Levels or Types of Value	823	(2)
Valuation Methods	825	(1)
Comparable Analysis	825	(1)
Price to Book Value	825	(3)
Price to Earnings per Share (EPS)	828	(1)
Price to Total Assets	829	(1)
Price to Total Deposits	830	(1)
Discounted Cash Flow (DCF)	831	(1)
Valuing Future Earnings	832	(1)
Estimating Terminal Value	832	(1)
An Application	833	(11)
Historical Performance Analysis	835	(1)
Valuation Based on Alternative Procedures	836	(8)
Implications	844	(1)
Nonfinancial Considerations That Affect Mergers and Acquisitions	844	(1)
Summary	845	(6)
References	851	(14)
Glossary	865	(12)
Index	877