It seems everybody's got a theory about bank mergers these days.

High-profile acquisitions by First Union Corp. and First Chicago, and abortive talks involving Bank of Boston have pushed bank mergers onto the front pages of the nation's newspapers, attracting the hordes of arbitragers, institutional investors, and mom-and-pop investors - all placing bets as to which bank is next to be taken over.

Trading volume in banks, which had been on the rise, surged to 146% of average monthly volume in July, according to SNL Securities.

"All the amateurs have come to the party," said Joseph Stieven, a bank analyst with Stifel, Nicolaus & Co. "I sat down and had my shoes shined, and the shoeshine boy started telling me which bank would be the next."

But as is often the case when amateurs join the fray, the late-comers could be in for a disappointment. The high level of interest has already pushed bank shares so high that there is little room left for takeover premiums.

Indeed, First Bank System Inc. on Monday agreed to buy Firstier Financial Inc. for $38 per share, $1 less than the market price the day before announcement. And Mercantile Bancorp. last Friday agreed to pay only a 13% market premium for Hawkeye Bancorp. That was less than half the 28% average market premium paid for a bank this year.

Bank of Boston Corp., which remains independent, received a paltry takeover offer of $45 per share last month from Banc One Corp., compared with expectations in some quarters that the bank would fetch $55 per share in a buyout.

Among other takeover candidates, BayBanks Inc. is now trading at 185% of book value, a 42% gain since Dec. 30, 1994. The company's stock price is up a whopping 56% in that time.

Or take Compass Bancshares, the Alabama regional that was subject to a bitter proxy fight earlier this year, which management won narrowly against a dissident slate seeking to sell the bank. Its shares are up 44% year to date, and the company's price-to-book value has surged 33%.

"If these prices for companies that will be bought stay high, it will be harder to seek a significant market premium," said Scott Edgar, an analyst with Sife Trust Fund.

Bank deals could really slow down if sellers' prices do not come down, added Anthony Davis of Dean Witter Reynolds. The price-to-earnings ratio of regional banks are 14% higher than the P/Es of superregionals, he said, the largest differential in recent memory.

As a result, he added, now would be a good time for investors to instead focus on banks that look to be left standing once the consolidation fray has subsided.

However, as fast money continues to pour into banking, investors looking for the quick buck may not be so understanding. Firstier, unlike many other banks such as BayBanks, has a very low percentage of institutional ownership - 23.2%.

Many of its directors were also large shareholders, so the deal represents for them a tax-free way to invest in First Bank System, said First Bank System chief financial officer Rock Zona.

And one of Firstier's largest shareholders is well-known value investor and Omaha resident Warren Buffett. Other banks may not have shareholders as willing to accept a negative market premium.

But Mr. Zona says the Firstier deal could pave the way. "Hopefully it will put a dose of reality back into the marketplace," said Mr. Zona, adding that his bank's acquisition strategy had been stymied by unrealistic price expectations among sellers.

Maybe "the marketplace will see there are a number of banks that are trading at their takeout value," he said, "or in some cases above their intrinsic takeout value."

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