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Mr. Egan’s Report
Mr. Egan’s report used an approach similar to Mr. Hitt’s:
Finding comparable companies, calculating various ratios, and
then applying the ratios to FNBW to determine its market value.
Mr. Egan relied on four ratios, two of which were also used by
Mr. Hitt:16 P/E, P/Eqt, price/5-year earnings (P/E5),17 and
price/dividends (P/D). However, because Mr. Egan used sales of
minority interests rather than acquisitions of entire banks (as
Mr. Hitt did), he did not apply a minority interest discount.
Comparable Companies
To create a list of comparable companies, Mr. Egan started
with a list of commercial banks based in Ohio and chose banks
that satisfied four criteria: (1) Publicly available financial
statements, (2) publicly held and actively traded common stock,
(3) common stock price exceeding $2 per share, and (4) assets
under $1 billion. Seven banks met these criteria.
Ratios
To calculate the P/E, P/E5, and P/Eqt ratios, Mr. Egan used
the per-share traded price of each company on the date of
decedent’s death and obtained figures for earnings during 1992,
16 Although Mr. Hitt also employed P/E and P/Eqt ratios, his
numerical values were different because he used different
comparables.
17 For this ratio, Mr. Egan calculated a weighted average of
FNBW’S earnings from 1988 to 1992 using the same method used in
calculating a weighted average of JFI’s earnings.
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