Now, they are lining up at other banks hoping for loans that Miller and other small, community lenders say they may not be able to provide.
Miller said First FarmBank has had 20-25 applications from former New Frontier borrowers, seeking loans of about $16 million.
“We’re not that big of a bank and can’t handle that,” Miller said at a meeting last week between an aide for U.S. Sen. Michael Bennet, D-Colo., and a dozen farmers, farm organization representatives and bankers at the Greeley Chamber of Commerce.
The Greeley bank financed almost one in three Colorado dairy cows, a dairyman told the Tribune. Without the bank around, dairy farms face increasing pressure on top of plunging worldwide milk prices, dairy owner Les Hardesty said.
Colorado banking regulators shut down the bank and federal regulators stepped in to cover insured deposits after no buyer could be found, the Federal Deposit Insurance Corporation (FDIC) said. It’s the largest bank failure in the nation this year and the second Colorado bank to go under following the failure last month of Colorado National Bank in Colorado Springs.
The Colorado Springs bank found a buyer and continued business as usual but the Greeley bank went under entirely, with depositors standing to lose more than $150 million 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.
New Frontier’s failure was fueled by an old-fashioned — and rarely seen — bank run, The Denver Post’s Miles Moffeit reports. Amid rumors the bank was strapped for assets, and on top of lawsuits and bankruptcies involving Johnson Dairy, one of the bank’s largest customers, depositors drained the bank and brought it to the precipice.
After regulators ordered a personnel change in January, Moffeit reports, “depositors withdrew an average of $13 million a week, 18 percent of the core deposits held at the bank when the year started,” according to an unnamed government source.
Because the run played out more diffusely and subtly than the spectacled bank runs of old, its scope went unnoticed by the larger Greeley public.
But inside the 35th Avenue bank, staffers were growing apprehensive. They kept confronting customers’ questions about the bank’s poor health, then watched as they went on to close their accounts. In February and at the end of March, the pace of the transactions only quickened.
“People became jittery, and they were obviously closing more accounts than in a normal mode,” said Bob Bernd, customer-service manager for New Frontier who served as the bank’s greeter. “Basically, people were asking, ‘What’s going to happen? What if the bank closes?’ And obviously, everybody tried to be honest and forthright, saying we didn’t know either but that the deposits are safe. We kept saying we would continue to be there, even if the worst happened.”
At least one local government official didn’t buy the bank’s reassurances. Weld County Commissioner Bill Garcia moved his account from New Frontier in the week before regulators seized the bank. Last year, the county treasurer pulled the county’s money from the bank as rumors mounted, Garcia said.
New Frontier was the 23rd U.S. bank to fail since January. Since April 10, two more banks have gone under, tying the record of 25 failed banks last year. Only three banks failed in 2007 and no banks failed in 2005 and 2006, according to FDIC records. Track bank failures across the country this year on this interactive map.
New Frontier reopened April 13 as 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.