The Challenge

Banks working through non-performing loan issues face an historically challenging market and regulatory environment:

  • Bank examiners are increasingly uncompromising with banks on NPA reserve and charge-off mandates. Coupled with a nationwide trend of real estate appraisers delivering overly pessimistic estimates of value, banks are facing unfair and unnecessary degradation of bank equity capital
  • Banks do not have the in-house human resource and administrative capabilities to control collateral for C&I loans as mandated by Federal bank regulatory authorities; nor are these loans structured to optimize recoveries in the context of liquidation
  • Collection through the court system is slow, expensive and uncertain. The passage of time often leads to the dissipation of C&I loan collateral
  • Capital available to community banks remains scarce and NPA portfolio valuations by prospective investors are increasingly punitive, especially as prices for certain real estate asset classes in many geographic regions continue to decline
  • Bank regulatory authorities have become hostile to officers and directors of stressed banks, with the FDIC filing a proliferation of lawsuits against these individuals