|In an unusual move, the federal government will liquidate the latest failed bank instead of selling off deposits and assets. One-third of the Colorado institution's $2 billion in assets are expected to be written off by the federal bank insurance fund.
The Banking Board of the Colorado Division of Banking said Friday it issued an order closing down New Frontier Bank. As always, the Federal Deposit Insurance Corporation was named receiver.
But the FDIC will pay out insured deposits of the Greeley-based institution instead of finding another bank to assume them. To facilitate this process, the Deposit Insurance National Bank of Greeley has been created, and a main office and two branches will remain open for 30 days for depositors to withdraw their funds.
"Under the FDI Act, the FDIC may create a deposit insurance national bank to ensure that depositors have continued access to their insured funds where no other bank has agreed to assume the insured deposits," the FDIC explained in its own announcement.
San Francisco's Bank of the West was contracted to provide operational management for the temporary institution.
New Frontier had $1.5 billion in deposits and $2 billion in assets as of March 24, including $88 million in residential loans, $111 million in commercial mortgages and $448 million in construction and land development loans. The high concentration of development loans has been common among many failed banks.
The FDIC expects its losses from the failure to come in around $670 million.
Around 237 employees are impacted by the failure.
In February, New Frontier entered a written agreement with the Federal Reserve Bank to strengthen oversight of its management, conserve capital and improve its capital position. It was additionally required to prepare an acceptable capital plan.
The FDIC, which insures 8,305 banks, issued a civil money penalty in November 2008 against New Frontier for $48,895.
New Frontier, established in 1998, is the 23rd FDIC-insured bank failure this year and the 53rd mortgage-related closing tracked by MortgageDaily.com.