Failed Bank Acquisitions through FDIC Bank Auctions

Sheshunoff & Co. Investment Banking can assist you and your organization in pursuing FDIC bank auctions.

Failed Bank Auctions

Sheshunoff & Co. Investment Banking can assist you and your organization in pursuing FDIC bank auctions. A failed bank auction has its clear advantages: it’s a low-cost and low-risk way to gain a deposit franchise, there may be some FDIC profit built in, and you’ll have the benefit of regulatory help instead of delays in getting the transaction approved and completed. Of course there are limitations, which can greatly affect pricing or even the desirability of FDIC-assisted deals, but Sheshunoff & Co. Investment Banking can help address those issues and assist in preparation for failed bank acquisitions.

The FDIC on more than one occasion announced substantial changes to the process, which impact bidding on banks and pricing. We have acted as the advisor to multiple failed bank bidders and have an understanding of reality versus theory — we are constantly mindful of the impact to long-term value.

Failed Bank Auction Pricing

The pricing of failed bank assets presented below is through August 27, 2010. It includes all transactions for which pricing was disclosed. Of significance:

  • Bids include a modest deposit premium and premium/discount on assets
  • Loss-sharing has been a feature of 65% of failed bank sales since 2009
  • Often result in booking a one-time gain which increases equity
Assets at Failed Bank # of Transactions Median Asset Discount Median Deposit Premium
> $10 Billion 7 10.3% 0.00%
$1-$10 Billion 37 13.5% 0.00%
$500MM-$1 Billion 29 10.2% 0.25%
$250-$500MM 52 11.5% 0.32%
$100-$250MM 57 10.6% 0.00%
< $100MM 48 11.5% 0.00%
All Transactions 230 11.1% 0.1

Buying Failed Banks: Our Services

If you are contemplating bidding on FDIC assisted deals, it is best to learn everything about how the process works before the event arises. We can help you:

  • Identify likely candidates for failed bank acquisitions and assist with making contact prior to a failure in order to begin due diligence (giving you a distinct advantage over those who wait until the FDIC steps in).
  • Analyze a failed bank or distressed bank and advise on what would be an appropriate bid and structure for the transaction, according to FDIC instructions.
  • Assist in preparing pro forma analyses and financial statements of the combined entity, with an eye towards understanding the impact on key regulatory ratios.
  • Identify potential benefits and/or negative aspects of buying failed banks.
  • Identify merger synergies, financial and otherwise.
  • Assist with issues that arise when closing the transaction.
  • Analyze the impact on future value.

There are many banks with high levels of distressed assets and we believe bank failures will continue for months to come. If your bank has an interest in this type of transaction, let us help you prepare your board and management team before the short timeline of an auction is upon you.

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