WHAT ARE THE CONDITIONS FOR BUYING A FAILED BANK?

1. WHAT ARE THE CONDITIONS FOR BUYING A FAILED FOR BUYING A FAILED BANK? WWW.MERGERSCORP.COM

2. At MergersCorp M&A International we help our clients confidentially buy and sell privately held businesses, aligning the interests of all parties for mutual success and satisfaction. It is our goal to make the process of either buying a new business or selling your current business as smooth and efficient as possible. We know how important confidentiality is to our sellers and we treat it with the utmost importance. WWW.MERGERSCORP.COM

3. WHAT ARE THE CONDITIONS FOR BUYING A FAILED FOR BUYING A FAILED BANK? WWW.MERGERSCORP.COM

4. What Are The Conditions For Buying A Failed Bank? There is a very wrong misconception out there that only filthy rich investors can do vulture investing because they always have ready cash. Buying a stressed banking institution is one form of vulture investing. Even small investors can do it as long as they comply with particular guidelines as provided by Federal Deposit Insurance Corporation. Important to note is that a bank can never go bankrupt. So, when it reaches an insolvent state, never go bankrupt. So, when it reaches an insolvent state, the state chartering authority forces the bank into receivership. FDIC becomes the receiver, seizing the control of the bank assets e.g. the outstanding loans and liabilities e.g. leases, deposits, and undisbursed loans. Not so many people understand how to buy a bank that has failed. This post explains what it takes.

5. Acquiring Assets From A Distressed Bank When a bank is troubled, the FDIC takes the responsibility of selling its assets at the most reasonable price. This is done to pay off the existing liabilities. The remaining liabilities will be covered by the FDIC. This is why every bank must be insured by this agency. Many times, the highest bidder never takes the loans in default. Therefore, it is the duty of the FDIC to get buyers who can buy the hard to sell liabilities. The agency uses creative ways like online auctions to get the highest possible bids. This involves a series of announcements regarding the sale of assets. Then the loans are listed on the FDIC website as well as the office furniture, and real estate. How to Buy a Bank Before it Seizes Private investors have a better chance of buying a financial institution before it is seized by the FDIC. Do you feel like the assets of a particular bank for sale have been undervalued or the distress has been exaggerated? Then it would be profitable to invest equity into the bank to navigate through the plunge. If you are an expert in banking, this can be your deep value investment.

6. What are The Requirements? You will need to fulfill these conditions under the Covered Investors policy of the FDIC before bidding on a distressed bank : • You have to retain 10% or more of the capital reserve from the troubled assets. This is unlike the normal bank acquisition that requires investors to maintain 5% of the capital reserve. Then the bank must maintain well capitalized levels after the acquisition • A minimum holding period of 3 years • A minimum holding period of 3 years • Insider Lending is prohibited • Disclosure of the ownership chain • Limitations on the structure of investment

7. These rules and regulations are meant to clarify the ownership of the bank. This is especially important in hedge funds and equity firms whose legal structures are a bit complex. As a private investor, the FDIC will advise you to limit your involvement in distressed banks to passive investment. This will actually keep you from turning into a bank holding company that is subjected to stringent requirements. So, limit your equity to 25% of voting shares or less and 33% of the total equity. Now that you understand how to purchase an American bank that is troubled, don't go looking for a watch list of stressed institutions on the FDIC. Ask the experts if you stressed institutions on the FDIC. Ask the experts if you need more insights to buy a bank whose securities are already distressed. Visit mergerscorp.com now. At MergersCorp™ M&A International, we are ready to take you through the whole process of buying a bank. You can also talk to us if you are looking to sell failed assets privately. We make sure that the mutual interests of the involved parties are met.

8. Our M&A Process NEGOTIATION & CLOSE POST MERGER INTEGRATION (PMI) INTEGRATION (PMI) POST MERGER TARGET APPRAISAL APPROACH DUE DILIGENCE Key Areas  Target & market analysis;  Initial assessment of synergies & value drivers;  Indicative valuation;  Go or No-Go decision;  Preparation of transaction documents (NDA – Non- disclosure Agreement/LOI- Letter of Intent); Letter of Intent);  Select Transaction team;  Appoint advisors;  Consider funding ability.  Initial approach letter;  Signing of NDA;  Prepare & share initial information requests;  Formulation of LOI (Letter of Intent) & possible negotiations;  Initial meeting and Q&A;  Circulate information on the  Circulate information on the Target to the Transaction team.  Set scope of due diligence;  Set up VDR (virtual data room);  Coordinating of due diligence, further meetings and Q&A sessions;  Consider points relevant to the Post-Merger (PMI) phase; phase;  Revisit indicative valuation & prepare detailed valuation based on due diligence findings;  SPA negotiations with the seller;  Development of final structure (share/asset deal) and final valuation; and final valuation;  Approvals;  Signing of SPA & Close.  Consider the extent of integration;  Development of 100 Day PMI Plan;  Consider short & long term objectives;  Estimate requirements to capture synergies;  Determine resource needs  Determine resource needs & optimal allocation. Parties Involved  CFO;  Head of M&A;  Accountants;  Corporate finance advisors;  Consultants.  Senior management;  CEO, CFO, CTO;  Strategy director;  Head of M&A;  Head of Business Development;  Consultants.  Company general counsel;  Lawyers;  Senior management.  Company general counsel;  Lawyers;  Senior management/HR. 8 © Midaxo 2018 www.midaxo.com

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10. MergersCorp.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Member firms of the MergersCorp network of independent firms are affiliated with MergersCorp International. MergersCorp International provides no client services. No member firm has any authority to obligate or bind MergersCorp International or any other member firm vis-à-vis third parties, nor does MergersCorp International have any such authority to obligate or bind any member firm. Copyright © 2020 MergersCorp International. All rights reserved. 10 © Midaxo 2018 www.midaxo.com