Purchased Loans
The banking industry has experienced decades of consolidation, and this trend shows little signs of slowing. The cost of operating a successful branch has risen substantially amidst progressively slimmer margins and an increasingly competitive landscape teeming with regulation. The acquisition of loan portfolios, particularly for those of failed institutions or those succumbing to the aforementioned pressures can present healthier institutions with a unique opportunity to rapidly expand their current footprint, enhance their deposit base and provide value to shareholders, oftentimes at significant discounts.
With that, many banks have decided to acquire, and must abide by regulation in accounting for their purchased loans. Institutions often rely on a third-party software or an outside consulting presence to aid in the often demanding process of accounting for these acquired loans.