Here’s how it is done. Imagine a hypothetical mutual savings and loan, which we’ll call Magic Wand S&L, or MW, with $10 million in liquidation or book value, and net income of $1 million per year. If MW were a stock bank with one million shares outstanding, each share would have a book value of $10 and earn $1 per share, which is 10 percent of book value. Suppose that if there were such a thing as MW stock, it would, as is typical, trade at one times book value, or $10 per share.
