Minority Depository Institutions Program
Preservation and Promotion of Minority Depository Institutions
The Federal Deposit Insurance Corporation
Report to Congress for 2016
Failing Institutions
In accordance with Section 308 and FDIC Policy, the FDIC seeks to preserve the minority character of failing institutions before and during the resolution process. The FDIC provides ongoing supervisory oversight of institutions prior to failure, through regular onsite examinations, visitations, and off-site monitoring, as well as through numerous offers of technical assistance.
In the event of a potential MDI failure, the FDIC contacts all MDIs nationwide that qualify to bid on failing institutions. The FDIC solicits qualified MDIs’ interest in the failing institution and discusses the bidding process. The FDIC also will provide technical assistance regarding completion of the bid forms. During the resolution process, institutions on the final bidders list must be cleared by the appropriate Federal and State regulators.
As noted earlier, one FDIC-insured minority depository institution failed in 2016 and the least cost bidder for the failed bank franchise was not an MDI. This experience was an anomaly, as the FDIC historically has been able to solicit sufficient MDI bidder interest to preserve the minority character in failures (see page 7 of this report).
In 2016, the FDIC offered technical assistance on the bidding process for failing institutions to three MDIs that were considering a joint bid. The assistance covered the FDIC’s experience with structured transactions for possible use with failed bank assets and provided guidance on the technical aspects of alliance bidding.
The FDIC recently updated through 2016 the information published in its 2014 research study, Minority Depository Institutions: Structure, Performance, and Social Impact, capturing the impact of structural changes on the assets controlled by MDIs.
The charts below show that from 2002 through 2016, most of the assets of merged and failed MDIs have been acquired by other MDIs, consistent with the Section 308 goal to preserve the minority character in cases involving merger or acquisition of a minority depository institution.
Among MDIs that failed from 2002 through 2016, 86 percent of the total assets were acquired by another MDI, keeping MDI banking relationships within the communities.
Source: FDIC.
MDI Failures 2002-2016
Number of Failures Total Assets (Bil.) of Failures Percent of Failures Percent of Total Assets of Failures Acquired by MDI 15 $22.7 38% 86% Acquired by non-MDI 22 $3.7 56% 14% Payout 2 $0.03 5% 0.1% Total 39 $26.5 100% 100%
Note: The MDI designations underlying this chart have been updated to reflect revisions in the historical MDI data through year-end 2016
The same is true among MDIs that voluntarily merged or consolidated during the same period: 54 percent of the total number – and 76 percent of the total assets – were acquired by another MDI.
Source: FDIC.
MDI Voluntary Mergers and Consolidations, 2002 - 2016
Number of Failures Total Assets (Bil.) of Failures Percent of Failures Percent of Total Assets of Failures Acquired by MDI 39 $22.4 54% 76% Acquired by non-MDI 33 $7.0 46% 24% Total 72 $29.3 100% 100%
Note: The MDI designations underlying this chart have been updated to reflect revisions in the historical MDI data through year-end 2016