Follow the Yellow Brick Road:

A successful path to an FDIC assisted Bank acquisition

Joan Tupin-Crites

The Yellow Brick Road

• Pre-Acquisition – The Bid

• The Agreement with FDIC

• Post- Acquisition - Compliance – Credit– Data / Information Technology– Reports & notices– Audit

Start with the right TEAM

• Like Dorothy, in the wizard of OZ, get the right friends on your path;

• Strategic negotiators

• Credit personnel

• Finance

• IT/ Data support

• Accounting

• Of course… Legal Counsel

Pre-Acquisition and

Bid Overview• Very small window for due diligence vs. a non-

assisted typical acquisition• Team needs to be prepared for quick review

and overview• Use public data to learn about the “target” bank• Bidding may or may not be competitive

BID Process

• Bid is blind

• Can submit more than one bid

• Involve Board of Directors and strategic partners for the bid process, think broadly and creatively

• Legal and financial experts can assist to craft quality financially – successful bid

Starting on the Yellow Brick Road

• Closing day/ evening:– Coordinate Human Resources to assist with

the employee questions and issues– Coordinate with Marketing/ sales personnel– Have a plan for all locations – to win the

“hearts and minds” of employees AND the new clients and customers of your institution

The Agreement with the FDIC

• The Purchase and Assumption Agreement can include Shared- Loss provisions or leave out Shared- Loss provisions

• Do not expect any substantial negotiations

• Review FDIC.gov for the current version FDIC uses

• Loss-share vs. Non Loss-share

Loss Share

• Loss share is a feature in selected Purchase and Assumption (P&A) Agreements

• You can bid with or without Loss Share

• FDIC and Assuming Institution share the losses on a specified pool of assets

Purpose of Loss Share

• FDIC has a statutory duty to safeguard the assets of the FDIC fund.

• Loss Share is to minimize cost to the FDIC fund: • keeps assets in the banking sector • restructure problem credits • minimizes the FDIC’s operational risk and

liquidity needs• FDIC minimizes losses through “least-cost

resolution” approach

Compliance with the “P & A” Agreement – DATA, DATA, DATA

• Understand the requirements and stipulations of the P&A Agreement

• Submit certificates timely to recover the FDIC payments

• Submit data reports, in appropriate formats, to track performance of Covered Assets

• Comply with audit and site visit requirements

Credit Decisions are Key

• A quality credit team is essential to making the Loss Share profitable for the Institution

• Sufficient credit personnel to manage the loan pool is required by the P & A

• Both Commercial and Retail collection specialists need to be considered

• Quality training & monitoring must occur of the special asset officers

• Consider external assistance to assist to create the processes and forms needed to comply

Credit Decisions

•Loan amendments/modification must be in accordance with internal underwriting criteria and the P & A agreement•Quality documentation is key for all credit decisions to gain reimbursement from FDIC•Insure management participation in the credit decisions

Getting to OZ

• With the current economic climate and concern for large number of banks, an FDIC assisted bank acquisition can be a wise strategic move.

• As counsel, be supportive, but understand and counsel management on the risks and rewards of such a transaction.

• Thank You – • Contact me at joan.tupin-crites@oldnational.com

with questions or discussion points