News & Events Sep 8, 2010

Horizon Gets Creative in Deal for Ailing Neighbor

Though healthy companies scouting for acquisitions lately have preferred takeovers of failed banks, a deal in Indiana this week showed that a market for struggling banks exists for those willing to get creative.

With little competition, Horizon Bancorp in Michigan City, Ind., was able to create its own playbook for a deal announced late Tuesday in which the company agreed to buy pieces of the $122 million-asset American Trust and Savings Bank in Whiting, Ind.

Horizon, which has $1.3 billion of assets, agreed to pay $2.6 million for most of the assets, all of the deposits and four branches of American Trust and Savings, or a 3% premium on core deposits, plus $500,000. Horizon left the less desirable pieces out of the deal — American's portfolio of $12 million in loan participations, an insurance company and an investment company.

And it also left behind the bank's charter. American, which is operating under a regulatory order, has agreed with regulators to fold its charter as loans are repaid.

Industry watchers said this should not be interpreted as a sign that buyers are shifting from government-assisted deals. Acquirers have preferred failed banks because they often can pick up deposits and assets at a great price — and sometimes are paid to do so — while sharing credit risk with the Federal Deposit Insurance Corp.

Still, sellers in some areas — like India Read More

FDIC to Reveal More (But Not All) Failed-Bank Bids

After six months of withholding all the losing bids made for failed banks, the Federal Deposit Insurance Corp. has decided to resume releasing much of the information. Industry observers said they are pleased that there will be less secrecy, but many also complained the agency did not go far enough. Norman C. Skalicky, the chairman and chief executive of Stearns Financial Services Inc. in St. Cloud, Minn., said he finds the bids useful and does not think any harm could come from releasing the information to the public. "Transparency is a good thing in most cases," said Skalicky, whose $1.5 billion-asset company has bought failed banks in six deals with the FDIC in the past year. "It is interesting to see what other banks go for, and it is good to find out how many people are bidding and how much," he said. "That is valuable information," though "it isn't the be-all, end-all. It's just another factor to consider." In May the FDIC stopped its decades-long practice of revealing the names of losing bidders and the details of their bids, without offering any explanation. This week the agency said it plans to start releasing information about the losing bids again, but not to the same extent as in the past. The second-best bid, also known as the cover bid, will be withheld for one year. The names of all the losing bidders, including the one that made the second-best bid, Read More