Colorado banking regulators shut down the $2 billion New Frontier Bank of Greeley Friday night and federal officials stepped in to cover insured deposits after no buyer could be found, the Federal Deposit Insurance Corporation (FDIC) announced. It’s the largest bank failure in the nation so far this year and the second Colorado bank to go under following the failure last month of Colorado National Bank in Colorado Springs.
Depositors stand to lose more than $150 million in the Greeley bank failure, federal regulators said, because roughly 10 percent of the New Frontier Bank deposits were uninsured or over the FDIC’s $250,000 limit. Shutting down the bank will cost the FDIC’s Deposit Insurance Fund an estimated $670 million, regulators said.
The failed Greeley bank will open Monday under a new name — Deposit Insurance National Bank of Greeley –and insured depositors will have roughly 30 days to move their money to other institutions, the FDIC said. The FDIC contracted with San Francisco-based Bank of the West to operate the Greeley bank for 30 days.
Regulators sought to reassure former New Frontier Bank customers who had insured deposits at the Greeley bank:
Banking activities, such as direct deposit and writing checks, ATM and debit cards, can continue normally for former customers of New Frontier Bank during the 30-day transition period. It is also important to note that New Frontier official checks will continue to clear and will be issued to customers closing accounts.
In addition, customers with loans from New Frontier Bank “should continue to make their payments as usual,” regulators said. Loans issued by the failed bank are now owned by the feds, who plan to sell them off to solvent institutions over time.
New Frontier is the 23rd U.S. bank to fail since January. Last year, 25 banks failed, up from three in 2007. No banks failed in 2005 and 2006, according to FDIC records.
After a pending deal with Boulder-based investors fell through Friday, state authorities closed New Frontier Bank and turned its assets over to the feds as receiver.
Business writer David Milstead traces the steps to New Frontier Bank’s failure on InDenverTimes:
New Frontier ran into trouble in its September regulatory exam, and it signed “consent orders” with regulators in December and January promising to raise new capital, replace top executives and revamp its procedures.
The bank reached a deal to sell controlling interest to a Boulder-based investment group led by Mark Wong and Gary Jacobs; bank turnaround specialist Jim Slavik would be CEO.
The deal fell apart, however, as New Frontier battled lawsuits, including one from customer Johnson Dairy that alleged improper lending procedures.
“No advance notice is given to the public when a financial institution is closed,” a notice on the New Frontier Bank Web site read Saturday morning. The site alerted bank customers that online banking has been suspended for the weekend but “is expected to resume the morning of Monday, April 13, 2009.” That’s because “New Frontier Bank had a number of avenues for customers to access funds, and each of those avenues had to be closed off so that a final accounting could be completed,” the site announced.
Former New Frontier Bank customers can find answers to some questions at this link. Check this FDIC tool to find out if an account is fully insured — but, the FDIC notes, information on New Frontier Bank accounts won’t be available until Monday. Until then, and for customers who’d rather set up an appointment to talk with a federal regulator, the FDIC Call Center is available over the weekend at 1-800-830-4705. Call 9 a.m. to 6 p.m. Saturday, April 11; noon to 6 p.m. Sunday, April 12; and 8 a.m. to 8 p.m. on Monday, April 13 and on future dates.
In general, deposit accounts and IRAs are insured up to $250,000 per institution. Customers with deposits over that amount might not be out of luck entirely, the FDIC says:
If it is determined that you have uninsured funds, the FDIC will generate and mail to you a Receiver Certificate. This certificate entitles you to share proportionately in any funds recovered through the disposal of the assets of New Frontier Bank. This means that you will eventually recover some of your uninsured funds.
A North Carolina bank also failed Friday, the FDIC announced, though regulators were able to find a buyer for the Cape Fear Bank and depositors aren’t expected to lose any money:
Cape Fear Bank, Wilmington, North Carolina, was closed today by the North Carolina Office of Commissioner of Banks, which then appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with First Federal Savings and Loan Association of Charleston (First Federal), Charleston, South Carolina, to assume all of the deposits of Cape Fear Bank.