Archive for February, 2010
American Banker Offers Tips for Community Banks to Acquire Failed Banks
Today’s American Banker online has an article (available here, subscription required) by Kate Davidson in which she recites tips from community bank officers on how to submit a successful bid package for failed banks. Among the more noteworthy tips for community banks are the following:
- Realize from the outset that small banks are at a competitive disadvantage in the bidding process.
- Track potential targets by monitoring regulatory actions every month.
- Raise capital well before making a bid. It demonstrates stability.
- Target fewer and smaller banks.
- Demonstrate that experienced management will be in charge of the failed bank after the acquisition.
President Proposes New Small Business Lending Fund
President Obama has called on Congress to create a new Small Business Lending Fund. Under the President’s proposal, $30 billion in TARP funds would be transferred, through legislation, to a new program outside of TARP to support small business lending.
Under the proposed program, banks with less than $1 billion in assets would be eligible to receive capital investments up to 5% of their risk-weighted assets (banks with assets between $1 billion and $10 billion in assets would be eligible to receive up to 3% of risk-weighted assets). As with prior bank investment programs, a bank would have to be approved by its primary federal regulator to participate. The proposal also would allow for current participants in TARP programs to convert capital received in those programs into the new program. It is also proposed that the dividend rate for the capital investment would begin at 5%, but could be reduced to as low as 1% based upon demonstrated increases in small business lending. The dividend rate would be decreased 1% for every 2.5% increase in incremental business lending achieved over a two-year period.
It will be interesting to see how the proposed program is received in Congress, whether it can be active within a reasonable period of time, whether banks will choose to participate in the new program and whether federal regulators will allow banks that need the capital to participate.
