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Since You Asked: Stronger banks bid on those about to be closed

I read about the FDIC seizing Home Valley Bank and turning it over to South Valley Bank & Trust. How does the FDIC determine who gets the assets of a failed bank?

— Charlene D., Ashland

Plenty of financial institutions have gone under in recent years, including Home Valley Bank in Cave Junction and, most recently, Liberty Bank, which was closed Friday.

We found someone to answer your question who has been on the receiving end four times in the past 18 months when banks have been closed.

Ray Davis is chairman and chief executive officer of Umpqua Holdings, the parent company of Umpqua Bank, which acquired the assets of Nevada Security Bank/Silverado Bank in June.

Once a bank gets in a situation where it's not going to make it, Davis said, state banking regulators step in and ask the Federal Deposit Insurance Corporation to be the receiver.

"They figure out how to market the bank and put it into the hands of a bank that is stronger," Davis said. "The idea is to minimize the cost to taxpayers and FDIC funds."

Banks with good regulatory and financial standing are invited by the FDIC to bid.

The FDIC's actual criteria "is really unknown," David said. "They won't let a bank in trouble bid on another bank — they know your numbers backwards and forward."

Once invited, banks schedule on-site due diligence and then submit bids by a certain date to the FDIC.

"It's a blind bid," Davis said. "The lowest bid wins. You never know who you are bidding against, or who was in first place or last place. You just get a call that you've been selected to take over this institution."

The process, from beginning to end, normally takes a couple of months, Davis said.

The FDIC doesn't announce the move until it shuts down the bank and announces the institution taking over the assets.

Send questions to "Since You Asked," Mail Tribune Newsroom, P.O. Box 1108, Medford, OR 97501; by fax to 541-776-4376; or by e-mail to youasked@mailtribune.com. We're sorry, but the volume of questions received prevents us from answering all of them.