July 29, 2011
National Real Estate Bisnow
Whod’ve thunk it—good things do come out of a financial crisis. This means growth for secondary loan market guru First Financial Network, thanks to the high volume of loans to be valued and sold (it’s done $18B since ’08, and serves as financial advisor to the FDIC for the marketing and sale of loans from failed banks). That’s enough to make any company happy—and we spoke to its appropriately named CEO, Bliss Morris, who launched the firm in ’89. Recently, she helped daughter Katie (a USAF captain who served in Afghanistan) collect over 450 boxes of clothing, toys, school supplies, and shoes to assist the Afghani citizens’ critical needs.
Bisnow: How has the economy changed the way FFN is doing business?
Bliss: The key challenge [was] the ability to meet the rapidly increasing needs of its clients without sacrificing quality. In order to continually enhance its services and tap financial markets, the company’s made a long-term commitment to intellectual capital and cutting-edge technologies. Currently, FFN has no debt and had the resources to invest in technology, hire specialized individuals, move and expand its corporate HQ, and expand its Northeast presence.
Bisnow: What’s driving your business?
Bliss: Loan sales continue to be the company’s core business. However, three additional service areas are emerging: the normalization of data and loan documentation for lenders and for M&A activity; and portfolio valuation and closing management. Over the past year, the company has transitioned from a pure loan sale advisory firm to being regularly tapped to provide due diligence and valuation services for clients seeking to acquire banks or determine critical balance sheet issues necessary for raising capital.
Bisnow: How does business compare to previous down cycles?
Bliss: FFN initially made a name for itself through the successful execution of several national loan auctions on behalf of the RTC resulting from the US banking and S&L crisis. This down cycle is similar in the failure of banks [but] different in its national deflation of real estate prices. However, lenders are bringing a new mindset to ‘11. Most banks and financial institutions now know which of their loans flatlined and they recognize that the underlying assets are potentially deteriorating. They’re addressing these loans, looking at the best strategies for working them out, and taking action.
Bisnow: What is your forecast for the secondary loan market and M&A activity?
Bliss: Large commercial, regional, and community banks have shaken off the torpor and shock and have started to take a cold, hard look at their portfolios and make action plans. And banks are continuing to analyze their balance sheets carefully, evaluating the delicate relationship between moving loans to the held-for-sale accounting category and its potential impact on their stock price. I believe you’ll see an increase in loan trades with the potential of $50B being offered over the next year.