what due diligence is necessary in the purchase of a bank?

Answer 1

The loan portfolio is critical. What is the % of underperforming loans? % in default? What other banks are in direct competition in the locality? What % of deposits are in time deposits and demand deposits? What is employee turnover? Many banks have very high turnover among lower level employees. How does the return on assets compare to similar sized banks? Is the area in which the bank is operating growing or declining? Who are the bank's customers? Do a few big customers account for much of their business?

Answer 2

FOR MORE INFO GO TO: http://www.lglinc.net/duediligence.htm

While financial Due Diligence is an important process for a buyer to determine the value of a business, operational Due Diligence is integral to a buyer’s ability to properly evaluate a business for a potential acquisition. Operational Due Diligence involves the on-site analyses of the target business’ daily processes and of how the business operates. This analysis should include an evaluation of the key employees, managers, independent contractors, suppliers and other factors that are necessary for the business to conduct normal operations. Operational Due Diligence may also extend to conducting investigation outside of the actual business, when researching market and industry trends, the community in the area surrounding the business location the potential for new market competition. A comprehensive operational Due Diligence will enable a buyer who purchases a business to have a detailed understanding of how to manage the daily business operations, which will, in turn, lead to a trouble free transition after the consummation of the acquisition.

Answer 3

I never had the opportunity to purchase a bank, except for a porcelain pig we used to keep our loose change in!
If somebody has a bank for sale, and has offered it to you for a sum of money--you must tread very carefully from here on! If its an internet offer, RUN! AWAY!
There are many rules and regulations, plenty of lawyer work, papers to sign, all kinds of stuff to do to buy a bank!
How did they decide to sell it to you? And, check all of the papers, have your lawyers check everything for hidden things that could separate you from your cash! And, don't fall for anything on the Internet-you'll most certainly get taken for everything, and they will sit back and enjoy your money, and leave you holding an empty bag-money bag!
By: James H.

Answer 4

Due diligence (also known as due care) is the effort made by an ordinarily prudent or reasonable party to avoid harm to another party or himself. Failure to make this effort is considered negligence. Quite often a contract will specify that a party is required to provide due diligence.

In finance, due diligence may refer to the process of research and analysis that takes place in advance of an investment, takeover, or business partnership. The potential investor generally uses in-house resources or hires a consulting firm that specializes in due diligence and corporate investigations to investigate the background and principals of the target company.

A due diligence assignment generally includes reviewing press and SEC filings, checking for regulatory and licensing problems, identifying liens and judgments, and uncovering civil and criminal litigation matters. Sophisticated investigators will also search for conflicts of interest, insider trading and press and public records that identify problems that may have occurred under the principal's "watch."

The investigative results may be prepared in a "due diligence report" that the investor uses to understand risks involved in the investment. For example, if negative information is uncovered on a principal of the target company, the investor may put pressure on the target firm to replace that individual.

In addition to identifying risks and implications of an investment, due diligence may include data on a company's solvency and assets.

Due diligence can also refer to the ongoing activities of pension or investment fund managers in keeping track of the operations, solvency, and trustworthiness of the managers of a corporation in which their fund is invested, or those of the managers of an acquiring corporation toward a target corporation.

The key factor that separates due diligence from a more in-depth background check is that due diligence reports are always gathered from publicly available information. Contrary to popular belief, public records often include a target's more sensitive data, such as date of birth and social security number, which can be gathered from credit card records. Unlike a background check, more intrusive methods of surveillance are not used.