Great Southern Bank has tapped into a unique but recently prevalent source of growth – failed banks – and the takeover transactions follow a tightly orchestrated process.
“We have to move quickly. It’s usually just a few days from when we find out we’re the successful bidder to the closing of the bank,” Great Southern President and CEO Joe Turner said.
Great Southern’s latest purchase was Ellington-based Sun Security Bank in October 2011. It purchased Kansas-based Team Bank in March 2009 and Iowa-based Vantus Bank in September 2009. In the last three years, Great Southern has grown to 104 branches from 39 and spread its operations into five states.
Federal Deposit Insurance Corp. spokesman Greg Hernandez said federal or state regulators determine when a bank will lose its charter, and when that happens, the FDIC is enlisted to act as a receiver, launching a 90- to 100-day timeframe when bids will be solicited.
The bid process is confidential, he said, and winning bids are chosen based on having the least cost to the deposit insurance fund.
Turner said the three acquisitions represent only a small percentage of Great Southern Bank’s bids on failed institutions in the last few years, though he declined to disclose a total number.
From bid to buyOnce the bank is notified of its winning bid – at most, a few days before the closure date – groups of employees are assembled and plans are made to dispatch them to each branch, Turner said. Some branches might be sent a single employee, he noted, or there might be several. He estimated that more than 40 people were sent to Sun Security’s 27 branches to be on hand immediately after the purchase, and about 15 of those were at the bank’s headquarters branch.
The shutdowns typically happen at the close of business – often 6 p.m. – on a Friday.
“At 6:01, we own the bank. The operations of the bank become our responsibility at that point,” Turner said, noting that Great Southern staff is charged with communicating with the associates of the failed bank and facilitating the transfer of assets and liabilities from FDIC to Great Southern.
“The chartering authority representative will get up and make a short talk,” Turner said. “Then they’ll turn it over, usually, to us, and we’ll say a few words … then everybody gets to work. We usually say, first of all, that their bank failed, but they shouldn’t feel like failures. Their bank failed because of the economic dislocation of our country and not because of what they’ve done.”
Turner said he also usually tells the associates at the failed bank that they still have jobs, at least for the time being, so that customer service will remain unchanged. If duplication of efforts is determined, there will, however, be some job cuts.
“We promise them that everybody’s got a job [with us] starting the next day, and as soon as we know whether their job will be affected, we’ll let them know,” he said. “And if their job is affected, we’ll give them some sort of fair severance.”
That notice is generally given within 45 days, said Matt Snyder, vice president and director of human resources for Great Southern. He noted that all associates of the failed bank are given a frequently asked questions document when the sale is announced.
Turner said with the three acquisitions, Great Southern has been able to keep the bulk of the banks’ work forces. With Sun Security, for example, 112 employees stayed on and 35 jobs were eliminated, he said. Snyder said Great Southern now has 1,300 employees.
An immediate order of business the night of the shutdown is an audit.
“(The IRS has) people who go through the loan records (and) the records of other real estate owned. They have people who go through the banking center assets. They want to make sure they’re not charging us for an asset that we don’t actually get,” Turner said.
Customer concerns and operationsWhen a bank fails, customers may have plenty of questions straight out of the gate, including whether their money is safe or they’ll be able to access it, Turner said, so Great Southern employees also do plenty of communicating with customers.
“They have complete access to their money starting at 6:01 p.m., to the extent they could have if the bank had been remained open,” he said. “In each of the three transactions that we did, we agreed to assume all deposits, not just the insured deposits, so nobody suffered a loss.”
Kelly Polonus, Great Southern’s director of communications and marketing, said her team worked through the weekend after the Sun Security acquisition issuing press releases and calling media outlets to spread the word and allay customer concerns. “A lot of our new associates, on Monday, were picking up the phone and calling customers to say, ‘It’s a new day, and here’s what’s going on,’” she said.
Great Southern’s rapid expansion hasn’t come without a few growing pains, particularly in Springfield, because all broad functions such as human resources are handled in the city.
Vice President of Operations Doug Marrs said the bank’s senior management recognizes that growth could occur at any time, so the bank needs to be ready.
“We continue to look at how many people are in each department, and if we have … an acquisition, how many spots will they need, and we try to make sure we’re always one step ahead of (having) the space to absorb that additional volume,” Marrs said. “You can’t go into an acquisition and not have already preplanned needing the space.”
When there’s an acquisition, Marrs also has to make arrangements for temporary signage to be in place by the time the failed bank branches reopen on their next business day, usually Saturday.
Bank officials also to have make sure Great Southern’s technical infrastructure can handle a heavier load.
Lin Thomason, vice president of information services, said Great Southern has two local mainframes – one underground and one at the Great Southern operations center, 218 S. Glenstone Ave. – that run its core applications.
Thomason leads the conversion of the failed banks’ computer systems, which entails determining what the failed bank is currently using and what it will take to transition to Great Southern’s system. The process isn’t always easy, particularly in the beginning, when personnel must merge two sets of data – one on the failed bank’s system and the other on Great Southern’s.
Turner said until the computer systems is converted, existing Great Southern customers can’t use the failed bank’s systems, and customers of the failed bank wouldn’t be able to walk into other Great Southern locations and access their information.
The TeamBank and Vantus conversions weren’t as technologically difficult as the Sun Security transaction, Thomason said, because existing Great Southern locations were geographically separated from the new sites. With Sun Security, the new and existing locations were closer together, which ramped up the pressure to complete the conversion and merge the data so that customers could go into any branch and access their information.
Other longer-term steps to acquisition of a failed bank include buying the real estate, which doesn’t happen on the day the sale is made, Turner said.
After the transfer of ownership, the real estate is appraised, and the buyer has the opportunity to purchase the property at the appraised value. Great Southern has bought the real estate for each of the banks it has acquired, he added.
Failed-bank acquisitions have a six-month settlement process so that the FDIC and the buyer can work through any unanticipated issues that crop up.
Eye on expansionThe FDIC’s Hernandez said that as of March 23, 15 U.S. financial institutions had failed in 2012, which is fewer than the same period in 2011. Last year, there were 92 failed banks, according to FDIC data, and Sun Security was the only Missouri bank to fail that year.
Marrs said Great Southern leaders continue to be on the lookout for acquisitions that make financial sense. When looking at failed banks, Turner noted that geography, the failing banks’ markets – and their quality prior to being shut down, factor in to bidding decisions.
“The negative of an FDIC deal is that you’re buying a lot of assets, and the idea is that you’re going to have to resolve those,” he said. “After resolving those problem assets, we’d like to think you’d have a core franchise that we really like. There are a lot of failing banks where that’s not true. The core franchise isn’t very attractive.”[[In-content Ad]]
