If there's one lesson community bankers should learn from the recent swings in the stock market-and especially from the sharp declines in prices of bank shares-it's that due diligence before selling your bank should go far deeper than ever before.

In mergers and acquisitions of the past few years, the major consideration has usually been the price offered.

Sure, there are exceptions. Some sellers made the protection of their employees' jobs the first consideration. And rewards for the acquired bank's top officers sometimes took precedence over shareholder value, employee concerns, or community service.

But basically, the price offered has been the major determining factor. Three to four times book value is usually an "offer you can't refuse."

The past several weeks, however, should make community bankers reevaluate their attitudes and their due diligence on whether to sell.

What new considerations should take precedence today?

First and foremost: Cash is gold.

Sure, most shareholders do not want cash; it makes them liable for capital gains taxes, as a share-for-share exchange does not. But selling for cash means you need not worry about what happens to the buyer's shares.

Many bankers have sold out for shares that quickly declined in value. The reasons?

Dilution of the acquirer's shares.

Fear that generous terms will lead to more dilution later as the acquirer keeps buying.

The buyer pumped up its share price until the deal was done (like a person who loses weight until finding a mate and then goes back to the former size.)

The multiple over book was so high because the buyer's stock also sold at an extremely high multiple.

Shareholders of the acquired bank tried to cash out their new shares. (Only the first ones out get the nominal price available at the time of the merger; after all, only one person at a time can go through a fire door.)

One question banks should be asking when contemplating selling is this: How sure are we that the acquirer will maintain its earnings in years ahead?

(Keep in mind that an efficiency ratio by itself does not predict earnings. Overstaffing can create a poor efficiency ratio, but so can wise investment in techniques or technology that will improve efficiency later on.)

Sellers should also be on the lookout for surprises. Are loan-loss reserves adequate? Are the pensions vested? Is the bank lending outside its territory? Are yields on loans higher than comparable banks are earning? (That is a sure sign of sacrificing quality for yield.)

And with the world economy the way its is, it's also a good idea to check if the potential acquirer's stock can be badly hurt by further developments in Asia, Russia, or Latin America.

Finally, sellers should consider how well the two banks get along together. Will their cultures merge to form a solid institution with high profit potential?

These issues have always been fundamental. They have just been forgotten as stock prices soared.

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