State regulators seized two banks Friday, bringing this year's tally of failures to 23.
Executives at both institutions — the $2 billion-asset New Frontier Bank in Greeley, Colo. and the $492 million-asset Cape Fear Bank in Wilmington, N.C. — had recently warned their futures were in doubt.
It appears the Federal Deposit Insurance Corp. was unable to find a buyer for New Frontier and has instead created the Deposit Insurance National Bank of Greeley, which is holding all the insured deposits, except for brokered deposits, certificates of deposits and individual retirement accounts.
The newly formed bank will remain open for approximately 30 days to allow depositors time to open accounts at other insured institutions, with Bank of the West, San Francisco, Calif. providing operational management of the bank's main office and two branches.
Last week, New Frontier's ousted chief executive Larry Seastrom made comments to the local newspaper, The Greeley Tribune, indicating that the FDIC had begun shopping the bank, in essence killing a planned $30 million private capital deal by Colorado Financial Holdings LLC that was slated to close Friday.
"When the FDIC has you out on the bid process, why would anyone buy you?" the Greeley Tribune quoted Seastrom as saying. As rumors about the bank's viability swirled, depositors began pulling their money, according to local reports.
As of March 24, 2009, New Frontier had deposits of about $1.5 billion, according to a press release issued by the FDIC Friday. At the time of closing, there were approximately $150 million in insured deposits and $4 million in deposits that potentially exceeded the insurance limits.
The closure of New Frontier cost $670 million to the Deposit Insurance Fund and is the second bank in Colorado to fail this year. On March 20, regulators seized the $123 million-asset Colorado National Bank in Colorado Springs.
The North Carolina Office of Commissioner of Banks also seized Cape Fear Bank. Cape Fear Bank Corp., the bank's holding company, warned earlier this month in a filing with the Securities and Exchange Commission that it had substantial doubt about its ability to continue as a going concern.
The FDIC entered into a purchase and assumption agreement with First Federal Savings and Loan Association of Charleston, South Carolina. First Federal will assume all of Cape Fear's $403 million in deposits, along with $468 million of its $492 million in assets.
The FDIC and First Federal entered into a loss-share transaction on approximately $395 million of Cape Fear Bank's assets. The FDIC will retain the remaining assets for future disposition. The FDIC estimates that the cost to the Deposit Insurance Fund will be $131 million. It is the first bank to fail in North Carolina since Crown National Bank, of Charlotte, failed on May 20, 1993.