Commercial Loan Automation
Credit - Small Loans
BirdsEye Viewmore on fdic assisted deals
2010 is the year of the assisted deal. Many either want a piece of the action, are contemplating getting in on the bidding or are knee-deep into it. As the FDIC gains more experience in these sales, the financial and operational landscape is changing. Below are some nitty-gritty details that might escape the first-time buyer, then come back to haunt you. Also, terms are changing daily, so stay alert to the most current deal parameters. The FDIC is certainly becoming a more savvy seller.
·These deals take a lot of work. Quality of FDIC receivers varies widely, so the level of information available and FDIC staff responsiveness is inconsistent. Expect this to take time today, tomorrow and for some time.
·Stealth is essential. Until D Day, no one is to know the bank is being acquired. Shockingly, many employees dont realize the9ir banks dire situation, especially in very small banks. Figure out in advance how to house and feed your people in small, rural towns, and how to get through limited due diligence when every stranger sticks out like a sore thumb.
·Validate employees feelings. Take care of the grieving bank employees. Many are good people whose hearts and lives are closely intertwined with the bank, and they are deeply saddened or even in shock. Theres nothing like a top notch chocolate chip cookie to help sweeten their disposition (no pun intended).
·Sell the employees on your bank. I realize they have no choice but to be with you or leave, but youd be far better off if they cooperate. Woo them on why your bank is a good place to work and how their customers will be well served by you. They care!
·Dot every I and cross every T, especially on your loss share loans. These agreements are a bit fuzzy and open to interpretation. You want to make sure you can trace back every step you took to ensure you get paid.
·Custodian of records. Youre expected to keep records going back ten years and 6 years forward. Its a major commitment and you need to be ready for it.
·Vendors can help. You need assistance in payroll processing, data retention, signage, etc. Prepare a list of your choice vendors and let them know your intentions should you have a winning bid on a transaction. Set the price in advance.
·Be careful who you fire. Job descriptions dont tell the whole story, especially not in small banks. Find out what each person does before you let them go even if their title might indicate they are redundant. They might be the only ones who can open the vault J At the same time, youre now expected to make these decisions within a week of the deal.
·Keep track of the acquired deposits and loans after integration. Designate a field in your system to ensure you know the origin of these dollars.
·Pay special attention to dormant accounts. When the FDIC activates accounts, they activate ALL accounts including dormant ones. In 18 months if an account has no activity the dollars revert back to the FDIC. You want to either activate the account or close it.
·The FDIC can be your friend. Form a relationship with their staff, engage them, touch base frequently. Like you, they want the transaction to be smooth, and they can help you make it so (or not).
·Have a project plan. No matter how small the bank, the steps to integration and taking the company over are numerous. Forethought is forearmed.
·FDIC is still on premises, investigating. Find a comfortable spot for them so they can carry on their business while you do yours.
·This is an interesting way to raise stealth equity. In many ways the FDIC is paying banks to work out troubled loans and liquidate assets.
FDIC deals are only as good as their strategic fit into your company. They might be financial accretive immediately, but the human and organizational ramifications will stay with you for a long time. Bearing that in mind will serve all constituencies well.