The FDIC said that approximately $4 million in deposits were in accounts that might have exceeded deposit insurance limits.
Although Colorado Bank Commissioner Fred Joseph's press release on New Frontier provided no reason for the closing, the FDIC had issued a cease and desist order to the institution on Dec. 2, requiring it to stop violations of regulations and law, as well as "unsafe and unsound" practices. The order required the institution to submit plans for raising capital and improving oversight of operations and required the removal of New Frontier's president and chief lending officer.
According to published reports, the bank was making real estate loans that were far too large for an institution of its size.
TheStreet.com Ratings had assigned New Frontier a D-minus rating based on Dec. 31, 2008 financial information, downgrading the rating from D-plus the previous quarter.
Cape Fear Bank
Cape Fear Bank had total assets of about $492 million and total deposits of $403 million. The FDIC entered into a loss-sharing agreement with First Federal S&LA of Charleston, whereby First Federal acquired all of Cape Fear Bank's deposits and $395 million in assets, with the FDIC sharing losses on certain asset pools. The agency didn't spell out what percentage of losses it would absorb.
Cape Fear's eight offices were set to reopen Monday as branches of First Federal.
While state regulators didn't issue a press release Friday on the bank failure, on Feb. 26 Cape Fear's holding company announced it had received a cease and desist order resulting from an October 2008 FDIC examination of the bank. The order required the bank to increase its capital levels and the holding company's board to "increase its participation in the affairs of the bank." Both of these stipulations are pretty standard for regulatory orders issued to troubled community banks.