FIC is a leader in the Shared-Loss Arena

In 2009, more than 60% of failed bank resolutions involved an FDIC Shared-Loss Agreement. In 2010, we expect that percentage will increase to as high as 75% or greater.

The Shared-Loss transaction provides strong banks with a lower risk strategic growth opportunity thanks in large part to the “guarantee” the FDIC offers buyers. Typically, the agency reimburses the acquiring bank 80% of losses incurred in a covered portfolio up to a predetermined threshold at which time the reimbursement increases to 95%. In addition, the FDIC reimburses the acquiring bank for its direct expenses related to the covered portfolio. In turn, bank management must aggressively pursue recoveries, which they share with the FDIC.

Though these deals are attractive strategically and economically, they are also very complex. Our work with banks and private-equity players points to five key elements that must be addressed in order to structure and manage a transaction appropriately:

Several key principles for managing a Shared-Loss Agreement emerge from our experience:

• Separate and Centralize Shared-Loss Assets. FDIC reporting requirements require loans to be “flagged” as share-loss assets, and access to loans should not be “bank wide”.


• Create a Dedicated Team. The specific requirements related to managing Shared-Loss loans in compliance with the Agreement underscore the need for a specialized group of experts. Failure to dedicate “Shared-Loss experts” may cause errors that preclude loans from future submission


• Engage Key Internal Constituencies. The Shared-Loss process requires the involvement of Workout, Finance, Accounting, IT, Audit, and other areas. Creating a knowledgeable and engaged Shared-Loss working team is critical


• View Shared-Loss as a Line of Business, Not a One-Off Transaction. The upfront investment to manage a Shared-Loss transaction can only be justified if the bank maximizes cash flow and, ideally, builds a portfolio of transactions


• Operate With a Sense of Urgency.  Optimizing cash flow from the transaction and ensuring that acquired customers are handled efficiently and effectively underscores  the need to prioritize activities related to Shared-Loss

FIC’s Shared-Loss Capabilities Provide a Turnkey Client Solution

FIC’s experience and capabilities span the key elements of the Shared-Loss transaction providing our clients with a “cradle to grave” solution over the life of the Agreement.

Areas of expertise include:

• Acquisition and Due Diligence Support
• Accounting and Valuation Services
• Portfolio Support (Commercial and Residential)
• FDIC Submissions (Commercial and Residential)
• Data Management/Software Tracking System (Commercial and Residential)

Click here to view or download a document detailing our activities within each of these areas.

The FIC Shared-Loss Portal Manages and Automates the Ongoing Activities Related to the FDIC Agreement

FIC developed a proprietary application that addresses the unique tracking and reporting requirements of a Shared-Loss Agreement over its ten-year lifespan.

Key characteristics of this proprietary software application include:

• Serves as the singular system containing all data required to generate the FDIC’s monthly or quarterly Certificates
• Reconciles data and produces all downloads and spreadsheets required by the FDIC
• Supports both Residential and Commercial reporting requirements
• Manages multiple portfolios simultaneously with each portfolio tracked and reported separately
• Ensures a defined process to manage the charge-off process for a commercial loan, automatically including them in the certificate
• Assigns users defined “roles”, allowing the segregation of responsibilities and discretion in access to data
• Applies industry standard tools such as Oracle and Microsoft ASP, run internally or as an ASP

Benefits of the Portal include:

• Eliminates the need for multiple databases and spreadsheets to track required covered loan information; the Portal offers a consolidated repository of data from disparate internal systems
• Reduces time required to research/redress data inconsistencies required for reconciliation
• Provides reports and backup for FDIC audit
• Includes an expense tracking capability, allowing users to enter/upload expenses and attach unlimited supporting documents
• Limits the impact of employee turnover

Select this link to view the full features and specifications of the FIC Shared-Loss Portal.