Liquidating Colorado's failed BestBank could cost five times more than the original Federal Deposit Insurance Corp. estimate.

The Bank Insurance Fund expects to lose about $150 million on the defunct Boulder bank. The FDIC had predicted a loss of $28 million when BestBank was shut down by state regulators July 22.

It is rare for a small bank's failure to cost so much. Typically, the loss on a small bank failure is 10% to 15% of its assets. In BestBank's case, the damage was closer to 50%. Still, the $150 million cost is dwarfed by the insurance fund's total reserves of $29.1 billion.

Most of BestBank's losses stemmed from its subprime credit card portfolio, which comprised nearly 500,000 accounts and grew by 40,000 in June 1998 alone.

BestBank conducted the credit card program with a Florida firm called Century Financial Group. Applicants got a card with a $600 limit. However, after paying a $45 annual fee and a $498 membership fee for an affiliated travel club, each cardholder began with a $543 debt and $57 in available credit. About three out of every four cards ended up delinquent.

The FDIC did not know about the extraordinary delinquency rate when Colorado regulators closed BestBank. The agency's October lawsuit against BestBank, Century Financial, and their owners alleged that the two companies deceived examiners with phony delinquency data.

John F. Bovenzi, director of the FDIC's division of resolutions and receiverships, said his asset specialists might have made a more accurate loss projection with better data and more time.

But the agency was given little notice in this case. Colorado regulators closed BestBank with unusual swiftness because of concerns that its assets- and losses-were growing rapidly. From April 1, 1997, to March 31, 1998, the bank's assets tripled, to $314 million.

Unable to do a thorough, hands-on review, the asset specialists instead plugged what they knew about BestBank's assets into a computer model, which conservatively predicted a loss of $28 million.

In the end, Mr. Bovenzi said, the FDIC's underestimate was harmless. "I don't think the estimate had an impact on the cost in any way," he said. In fact, the agency had already decided to postpone selling the credit card portfolio because of uncertainty about its value, he said.

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