The FDIC works cooperatively with the applicable chartering authorities and federal regulators to expeditiously resolve failing banks in a least costly manner. Once notified by regulators that an institution's condition warrants it, the FDIC begins the resolution process by gathering information covering most aspects of the institution's operations and financial condition and structure. The FDIC's Division of Resolutions and Receiverships (DRR) determines the marketing strategy and prepares the necessary marketing materials. The assets are then independently analyzed and valued. A notification is sent to qualified and interested potential bidders who are granted access to a secure website dedicated to the marketing of a specific institution.
After executing a confidentiality agreement, limited general marketing information is provided initially. Potential bidders respond if they are interested in obtaining more information on the marketed institution by notifying the marketing specialist. Interested bidders are then granted full access to the available information regarding the specific institution and the terms offered on the secure website. In most cases, potential bidders can schedule a brief period to perform due diligence. Throughout the process, DRR stays in close contact with the regulators to ensure that the marketing timeline is consistent with the projected closing date.
The FDIC does not negotiate transactions terms with each potential bidder. Rather, the FDIC conducts a sealed bid process based on standard transaction terms. Bids are submitted to the FDIC electronically via a separate secured website to ensure confidentiality, and all bids must be submitted on the FDIC's standard forms. Within a couple of weeks, bidders are notified of the results of their bids. Failing institutions are usually closed within a few weeks after bid submission. The marketing process usually occurs over a 60 to 90 day period.
All aspects of the bid process and all information concerning the bank must be held in strict confidence. Each potential acquirer and its agent(s), if any, that receive information or documents must first execute the FDIC's confidentiality agreement to obtain access to the secure website and to perform on-site due diligence. Prospective acquirers are reminded that the marketed institution is an open and operating entity and may find a solution to improve its troubled condition and prevent failure on its own at any time during the marketing process.
The FDIC usually sells a failed institution using a purchase and assumption (P&A) agreement whereby the acquirer purchases certain loans and other assets on the institution's books as of the sale date. Assets are purchased without representations or warranties. The acquirer assumes all deposits, or the insured deposits and secured public deposits, and certain other liabilities of the institution. Bank premises may be offered on an optional basis, either in the bid or within a certain time period after the sale date. The FDIC may offer optional loan pools or may specifically exclude certain assets from the transaction. The FDIC provides limited indemnification designed to protect the acquirer against liabilities created by the institution prior to the sale date that are not assumed by the acquirer. The P&A agreement also requires the acquirer to provide space for the receiver, retain certain records of the failed institution and continue limited data processing and accounting services until the receiver's assets and liabilities can be transferred to the receiver's systems.
Approved potential bidders will first receive an email notification of an acquisition opportunity from an FDIC project email box. The email provides a link to a virtual data room (VDR) site for a specific institution. The FDIC provides pertinent information and transaction information in the VDR to potential acquirers to facilitate analysis of the acquisition. After potential bidders execute an electronic confidentiality agreement, the FDIC will grant access to the VDR. Bidders can send an email to the project email box to request access for additional individuals. Bidders cannot self-register to the site in advance. The VDR provider can assist users with technical support regarding system access and changing a user profile and/or password.
Information compiled by the FDIC for the marketed institution is organized in folders on the to the VDR site. Bidders will receive email alerts for new items posted to the VDR site. Bidders may customize the nature, frequency and timing of the VDR alerts. The VDR site will host detailed information covering the target institution’s loans, deposits, general ledger and operations. The VDR will also provide information regarding the transaction terms, sample legal documents and a bid form. The information provided on the VDR is intended to be used strictly for the purpose of considering and evaluating a bid for an institution. If a bidder decides not to bid or to discontinue pursuit of a transaction involving the target institution, its access to the VDR will be removed, and it is contractually obligated to destroy all copies of reports or other information obtained on the VDR site.
The purpose of due diligence is for potential acquirers to obtain more current detailed information on the deposit franchise, facilities, operations, and any assets offered for sale. In most cases, approved potential Bidders can review loan files and other documentation and meet with institution personnel during the due diligence process. The FDIC monitors the due diligence process to ensure fairness and consistency to all bidders.
To establish a "level playing field," each Bidder is provided with equal access to the same information and data. Requests for on-site due diligence are sent to the FDIC marketing specialist who will set a time and location for the due diligence and introduce the Bidder to the on-site FDIC representative. Bidders are instructed not to contact the bank directly or enter the banking facilities without permission from the FDIC. It is important to note that the marketing process is short; bidders should respond quickly when notified about an acquisition opportunity. The due diligence period begins soon after potential bidders receive the initial notification.
In the event of the failure of a larger bank—one with a diverse geographic footprint or distinct lines of business—the FDIC may offer "alliance bidding" opportunities, which allow two or more parties (the "alliance members") to join together to submit a bid. This can be an appealing option for a bidder who is interested in only part of a failed franchise (e.g., its operations in a particular state or geographic area).
Alliance bidding increases competition and helps smaller community banks and Minority Depository Institutions (MDIs) increase market share by acquiring a segment of an acquisition target that would have been too large to acquire.
The information below describes alliance bidding in greater detail. For more information, read this series of Questions & Answers for Potential Alliance Bidders and the FDIC Resolution Timeline.
If you are interested in future alliance bidding opportunities, please send an email to firstname.lastname@example.org.
When and how is alliance bidding offered?
The FDIC offers alliance bidding to facilitate the resolution of larger banks with diverse geographic footprints or distinct lines of business. An opportunity for alliance bidding exists when multiple banks are interested in segments of a franchise when very few, if any, banks want the whole franchise or when the banks are not qualified to bid on the whole franchise.
When the FDIC offers alliance bidding, a Marketing Specialist will notify potential alliance bidders of the opportunity to align with other potential alliance bidders. Potential bidders are required to execute confidentiality agreements, and authorize the FDIC to convey acquisition preferences (e.g., geographic area, assets, liabilities) to other alliance bidder prospects that have agreed to the same disclosure terms.
Expressions of interest are published on the FDIC’s virtual data room in a folder restricted to alliance bidder prospects.
Alliance bidders may submit multiple bids, both individually and as members of one or more alliances.
How is an alliance bid structured?
One of the parties to the alliance bid is designated the Lead Acquirer and is responsible for immediately executing the terms of the bid with the other parties to the bid.
An alliance bid is comprised of multiple transactions:
- One Purchase and Assumption agreement between the FDIC and the Lead Acquirer and
- Separate alliance agreements between the Lead Acquirer and the alliance members. (The FDIC is not a party to the alliance agreements, however, the Primary Federal Regulators and the chartering authority will need to approve their appropriate acquisition transaction.)
An alliance bid can be structured in one or more of these ways:
- Asset Purchase: The Lead Acquirer forms alliances with other banks or asset buyers to bid on loans by type or region, often non-performing loans and Owned Real Estate. The assets, offered as Optional Loan Pools, are marketed to banks or asset buyers when the Lead Acquirer has no acquisition interest or is not qualified to bid on certain pools of assets.
- Distinct Lines of Business and Specialized Lending Operations: The Lead Acquirer forms alliances to bid on distinct lines of business and specialized lending operations for which it has no acquisition interest or regulatory approval, including Trust Departments and Wholesale Residential Mortgage operations.
- Deposits, Branch Locations and Retail Operations: The Lead Acquirer forms alliances to bid on deposits, branch locations and retail operations for which it has no acquisition interest or regulatory approval.
How does my institution get on a bid list?
Insured depository institutions can complete the FDIC Qualified Bidder Contact Form and send it to the FDIC at email@example.com to express interest in acquiring financial institutions and indicate the size range of institutions and geographic area(s) that interests them. Potential bidders must maintain adequate supervisory ratings in all areas and have sufficient assets relative to a failing bank to be included on the bid list. Potential bidders must also contact the appropriate federal and state regulatory agencies to ensure all necessary approvals have been granted prior to submitting a bid.
Can we purchase just a branch rather than the whole institution?
The FDIC does not typically offer branches on an individual basis. A sale of the entire institution to one acquirer is the preferred transaction.
How does the FDIC evaluate bids?
The FDIC conducts a structured bid process to ensure a fair and equitable process for all bidders. As mandated by law (FDIC Improvement Act of 1991), the FDIC selects the resolution alternative that is least costly to the Deposit Insurance Fund.
What if I don't have a bank or thrift charter or deposit insurance? How can my institution get on the bid list?
You must contact the FDIC, the chartering authority for the proposed insured institution, and the Federal Reserve Board to seek necessary approvals or clearances. See the Regulatory Guidance section of this website.
Does the FDIC publish a list of banks it projects to fail?
No, that information is confidential and not made public.
How many people from my bank can have access to the virtual data room?
Only those individuals specifically assigned to analyze the transaction and prepare a bid are granted access to the virtual data room. The FDIC provides access to all the individuals from a particular potential bidder that need access. Emails requesting access should be sent to the project mailbox with each individual's name, email address, phone numbers, and job title.
Does the FDIC prefer bids for all deposits over bids for insured deposits only? Why does the FDIC offer deposits both ways?
The FDIC is required by law to select the least costly bid, whether it is for all deposits or insured deposits only. The amount of estimated uninsured deposits and losses in the institution, as well as the cost to perform the insurance determination, are all considered in the least cost analysis. The FDIC must demonstrate that the winning transaction is the least costly transaction among all resolution alternatives, including the cost to pay off the insured deposits and liquidate the assets from the receivership.
What if the potential bidder wants to acquire a specific target bank that it believes the FDIC may offer some time in the future? Will the FDIC take that information and ensure that the bidder is contacted when the institution is marketed?
The FDIC is able to record interest in specific institutions from approved potential bidders.
Can a bank acquire a failing institution and close some of the less desirable locations after closing?
Yes, however there are some restrictions. If the acquirer wishes to close a branch before the one year anniversary of the acquisition, it must request approval from the FDIC. To ensure a smooth transition for the customers, particularly for branches located in underserved markets, the acquirer must maintain banking services in the area. In addition, the acquirer must follow all other bank regulations and guidance regarding branch closures, including providing notice to customers.
What bid information is publicly released by FDIC following the closing of the institution?
Within a few days of an institution's closing, the Purchase and Assumption Agreement (P&A) is published under the institution's name on the FDIC's Failed Bank List website at www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/. Subsequent to publication of the Agreement, a Bid Summary is added to the web site that contains publicly releasable bid information in accordance with the FDIC's Bid Disclosure Policy. The Bid Disclosure Policy is summarized at www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/biddocs.html.
What considerations are given to potential MDI acquirers when an MDI is failing?
When circumstances allow, a two week advance window will be provided exclusively to qualifying MDIs. During this window, the FDIC contacts all qualified MDIs on the bid list to ensure they received an invitation to the failing bank project and provides full access to the data room, if the MDI is interested. The FDIC also describes the failing bank transaction and offers technical assistance on the bidding process. Following the two week period, the FDIC invites all other qualified bidders to the failing bank project.