Saturday, July 4, 2009

Profiting From a Bank Failure

Glenn Gray, CEO of Sunwest Bank in Tustin, CA, on his bank's experience in acquiring a failed bank from the FDIC. Interesting comments on how his bank positioned itself to be an acquirer rather than a victim:

Q. What did you avoid?

A. We didn’t touch subprime. We exited speculative construction lending at the end of 2005. And we were very selective about everything but in particular commercial real estate lending.

Q. I understand commercial lending had its own form of stated income lending?

A. We didn’t do any of that, but yes you are right. That’s doing so much on ‘pro forma,’ or projected future revenue (i.e. estimated rent from a property). We underwrote on historical, factual income, not hope. Hope is not a strategy. (Emphasis added)