Resolving Problem Institutions

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Resolving Problem Institutions

• CSBS Legal Seminar
• August 10-13, 2008

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Overview

• Information Needs for a Resolution/Closing
• Resolution Timeline
• Marketing Process
• Closing Process

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Information Needs

• Contingency Planning Institutions
• Failing Institutions

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Information Needs Interagency MOU

• Deposit Downloads
• CAMELS 4 or 5
• CAMELS 3 and 2 Billion in Domestic Deposits and
  either (1) 250,000 Deposit Accounts or (2) over
  20 Billion in Assets
• Contingency Planning
• Significantly or Critically Undercapitalized
• PFR CAMELS 4 and has (1) 2 Billion in Domestic
  Deposits and either (a)250,000 Deposit Accounts
  or (b) 20 Billion in Assets

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Info Needs - Failing Institutions

• Deposit and Loan Download, Trials and Subsidiary
  Ledgers
• General Ledger, Statement of Condition
• Business Line Products or Service
• Information Systems
• Other Assets
• Operational Information

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Resolution Timeline
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Resolution Timeline Options
30-45 Days
70-90 Days
10-30 Days
Time Available
1-10 Days
Full Resolution
Task Completed
AVR Completed
Call Report Data
Full Information Package
None
Level of Due Diligence for Buyers
Minimal
Little on Assets
Full on Site for Buyers
Likely Result Deposits Assets Premium
All or Insured
All or Insured
Insured
Insured
Sold W/O Put
W/Put Option
No
No
Better
For Franchise
Some Deposit
Token
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Resolution Structures

• Purchase and Assumption (PA)
• Whole Bank
• Clean Bank
• Put/Call Options
• Optional Loan Pools
• Loss Share

• Insured Deposit Transfer
• Standard Deposit Payoff
• Bridge Bank
• Open Bank Assistance

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Resolution Process Primary Goals

• Provide Depositors timely Access to their Insured
  Funds
• Resolve Failing Institutions in the Least Costly
  Manner
• Manage Receiverships to Maximize Net Return

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Resolution Products Information Package (IP)

• Summary level Information about a Potentially
  Failing Institution as of a Specific Date
• Deposit Franchise
• Bank Facilities / Branches
• Securities
• Loans and Loan Portfolio Characteristics

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Resolution Products IP Continued

• Information Systems
• Contracts and Leases
• Specialized Activities
• Mortgage Origination
• Sub-Prime Lending
• Credit Card Processing
• International Operations
• Subsidiaries

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Resolution Products Asset Valuation Review (AVR)

• Estimate of Value for ALL assets
• Based on Discounted Cash Flow Analysis
• Statistically-Valid Sampling is used
• Used for the Least Cost Test for comparing
  Alternative Bids and selecting the Best
  Alternative

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Marketing Process

• Market the Institution via a Secure Website
• All Financial, Legal and Regulatory Information
  is uploaded and available 24/7
• Loan Pools and Deposit Trial Balances are also
  available but redacted

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Marketing Secured Website
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Marketing Acquisition Opportunity
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Marketing Offering Information
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Marketing Regulatory Information
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Marketing Process Bidders List

• Based on Supervisory Criteria, Size, Geographic
  Area and Preferences
• Interested Bidders are Cleared by Regulators

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Bidders List Regulatory Criteria

• Tier 1 Leverage Capital at least 4
• CAMELS Composite Rating 1 or 2
• Management Rating 1 or 2
• Community Reinvestment Act Rating Satisfactory
  or Outstanding
• Satisfactory Anti-Money Laundering Records

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Who Do Bankers Contact to Bid?

• FDICconnect, Acquiring a Failed Financial
  Institution
• Email institutionsales_at_fdic.gov
• Call Debra Harrell at 1-800-568-9161
• extension 2598 or DHarrell_at_fdic.gov

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Closing Process FDIC as Receiver

• Appointed by the Chartering Authority upon
  Failure / Revocation of Charter
• Liquidates Assets and Distributes Income to
  Creditors
• Looks out for the Best Interests of the Creditors
  and Stockholders of the Failed Institution

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Closing Process Actual Failure

• Assets at Closing 61,606,713
• Deposits at Closing 99,640,303
• Expected Loss to Fund 64,022,484

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Closing Process Closing Night
FDIC is appointed Receiver. Failed Institution
Employee Meeting is conducted. All Work is
processed to the Closing Date. Closing Night
Reports are Ordered.
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Closing Process First Two Days
Begin inventory of all Assets and
Liabilities. Begin balancing Financial
Institution. Request hold on Deposit
Accounts. Start Investigation Process.
Saturday and Sunday
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Closing Process First Business Day
Work with Assuming Institution to open the Doors
for Business as Usual. Ensure a smooth
transfer of the Assets and Business to Assuming
Institution.
Monday
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Closing Process Sample Chart
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Take Away

• Constant coordination between DRR, the Failing
  Institutions Regulators and the Bidders
  Regulators is critical to ensure a smooth
  Resolution of Problem Institutions.

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Regional Manager Contact Info
Atlanta Region CHERYL BATES 678 916
2372 cbates_at_fdic.gov
Chicago Region GREGORY WATSON 312 382
7594 gwatson_at_fdic.gov
Dallas Region MIKE HOUSTON 972 761
8204 mhouston_at_fdic.gov
West Virginia Virginia North Carolina South
Carolina Georgia Alabama Florida
Wisconsin Michigan Illinois Indiana Ohio Kentucky

Colorado Oklahoma New Mexico Texas Arkansas Louis
iana Mississippi Tennessee
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Regional Manager Contact Info
Kansas City Region JIM MEYER 816 234
8106 jameyer_at_fdic.gov
New York Region BOB GOFF 917 320
2890 bgoff_at_fdic.gov
San Francisco JEANNE MCBRIDE 415 808
8050 jemcbride_at_fdic.gov
Maine New Hampshire Vermont Massachusetts Rhode
Island Connecticut New York New
Jersey Pennsylvania Delaware Maryland Puerto Rick
Virgin Islands
Washington Oregon Montana Idaho Wyoming Utah Neva
da California Arizona Alaska Hawaii Guam
North Dakota South Dakota Minnesota Iowa Nebrask
a Kansas Missouri
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