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Saturday, July 04, 2009

FDIC Bank Closure from the Acquirer's Perspective

by Calculated Risk on 7/04/2009 04:34:00 PM

Matt Padilla at the O.C. Registers interviews the CEO of a bank that recently acquired a failed bank: Profiting from an Irvine bank failure

Note: This regards the failure of MetroPacific Bank in Irvine, California on June 26th (just over a week ago).

Q. How did you learn a bank was going to fail and its assets be sold?

A. [Glenn Gray CEO of SunWest]: It first starts with us, or any bank, that wants to be a bidder letting the FDIC know that. ... We did that several months ago, when we anticipated that, unfortunately, bank failures were going to be an ongoing occurrence.

Then we turn the clock back to about four weeks ago. The FDIC notified us of a potential failed bank situation. They spoke in very general terms, describing a business bank with about $80 million in assets in Orange County with a single branch. They asked, ‘Are you interested?. Well, yes, that fits our profile: community banks in Orange County or North San Diego.

Next they say here’s your password, go to a secure Web site and find more information. Once we visit the site we understand which bank it is ... The data are macro level. But there is enough information for you to start to form an opinion, and you don’t have to put in bid yet.

Next they told us we would have two days of due diligence. We came on site, visiting the bank in an area segregated from the rest of the employees. Most employees didn’t know we were on site. There was an FDIC representative there. Now we start to get into more micro level detail. ... We met some people, but couldn’t get into their background or interview them.

Once the on-site review was done, we got a couple of days to form a bid. We finished up on a Thursday and had to provide a bid the following Tuesday. The next day (Wednesday June 24) they asked for some clarification and a little negotiation. Thursday (June 25) they notified us that our bid was accepted. Friday morning (June 26) we met with a larger group of FDIC employees and they did a walk through of what was going to happen. Then it happened that Friday at 4 p.m. They went in and took over the bank and we followed them.
There is much more in the interview including some comments on commercial real estate lending.