Find the lawyers. Just about every major law firm in town will have banking and finance experts who work with institutions on recapitalizations, mergers and acquisitions, regulatory issues and the like. Lawyers have a direct line to the bankers in your community, and although it’s highly unlikely they’ll break client confidentiality to help you, they do know the important issues affecting the institutions. They also can be knowledgeable on new regulations, and most likely they harbor strong opinions about the prospects for troubled banks in your region.
Likewise, consultants and accountants can be helpful sources. When I started on the banking beat, I asked a banking accountant to walk me through an income statement and a balance sheet so that I could familiarize myself with line items I hadn’t encountered on previous beats. Chances are there is someone in your region who would be willing to do the same for you.
Talk to borrowers. Small businesses in your region know when it’s harder to get credit. Their experience may indicate that a particular bank in town is in trouble, or that the economy overall is weakening. Maybe you cover other large companies based in your area. As a matter of your non-bank beat reporting, ask the CFOs and treasurers of those companies who they bank with; go to a Bloomberg terminal to find the lenders and terms of big loans made to those companies. Know which banks are key in your market.
Know your regulators. The federal regulators – the Fed, FDIC and OCC – have local offices in many regions. Get to know the people in those offices. State-chartered banks (as opposed to national-chartered banks) also are overseen by state banking regulators, and they can be valuable sources.
Specific examples of terrific stories
From the Macon Telegraph, here is a very thorough story about a local bank failure/takeover situation. You might not get as many column inches as this writer did, so look through it and think about what would matter most to you if you were a customer of the bank that failed, or a nonprofit in town that relied on the failed bank for sponsorships and support, or any other segment of your readership that might have questions about how things will work under the new ownership. Typical questions include: Why did the failed bank run into trouble? What’s going to happen to the rate on my CD? What’s going to happen to the local management team? What are the prospects for other banks in our area?
I came across the following piece in the St. Petersburg Times when I was doing some research for a story about banks making acquisitions in the U.S. South. This article provides a behind-the-scenes look at BB&T’s takeover of the failed Colonial Bank, which went into FDIC receivership in 2009. This was a large deal, likely larger than most failures we’ll see from this point on in the cycle, but it’s instructive for anyone who wants to understand what goes into a failed-bank takeover, and how a bank that gets shut down on a Friday night can still open for business on Monday.
For reporters interested in investigative work, the bank industry offers plenty to chew on. My American Banker colleague Jeff Horwitz obtained documents leading to a terrific piece about a previously undisclosed investigation by the Inspector General of the Department of Housing and Urban Development (since referred to the Department of Justice). Large U.S. banks are alleged to have taken $6 billion in kickbacks from mortgage insurers in the past decade.