We find ourselves in the middle of one of the greatest wealth transfer periods of all time. Those with wealth must decide whether they want to make transfers, and if they do, they must decide how much, to whom, when and in what structure?
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The assets up for auction range in value from $34,500 to more than $7.4 million and are scattered from Hayden, a town of approximately 1,600 situated along Highway 40 between Craig and Steamboat Springs, to Colorado Springs.
The largest of the properties is 38 acres of commercial retail land located in Berthoud. The parcel originally totaled 45 acres, but Safeway purchased seven acres from the borrower. No construction has begun on that parcel.
The wide range in size and location of loans made by New Frontier is a testament to how large the now-defunct bank once was, holding 17.8 percent of the deposit market share in Northern Colorado and $1.47 billion in assets as of June 30, 2008, less than a year before it was shuttered by the Federal Deposit Insurance Corp.
By the end of 2008, New Frontier shot past $2 billion in assets, making its mark as the largest agricultural lender in Northern Colorado, just 10 years after it was founded. But the heyday ended when, in the first part of 2009, the FDIC came to town, shut the doors of the Greeley-based bank and began the task of selling some 4,200 active loans worth $1.54 billion.
Nineteen of those loans will be on the auction block this spring, as Mission Capital Advisors attempts to sell a portfolio of residential and commercial properties in a sealed bid auction.
March 21 will mark the first day that bids are accepted, and the bids will be narrowed down until the final bid date on April 11, according to Peter Tobin, managing director of sales and trading at Mission Capital Advisors. All sales must be closed by April 20, Tobin said.
The assets up for sale are mostly raw land, and are a mix of residential and commercial. The sale will provide an opportunity for locals to invest in these assets in a time when the economy is slowly rebounding and real estate prices are firming up, Tobin said.
He could not comment on what kinds of bids he expected to receive for the properties.
The assets being auctioned off are a portion of a $75 million portfolio that Mission Capital Advisors is managing on behalf of Leawood, Kan.-based Mariner Real Estate, which was the winning bidder in the FDIC sale of $762 million in assets from 20 failed banks in 2010.
Many local banks had the opportunity to take over New Frontier loans, but in the vast majority of cases, passed on the opportunity due to the poor quality of the loans.
Agricultural lender New West Bank, headquartered in Eaton, looked at many of the loans at the time, New West Chairman Leroy Leavitt said, but in most cases, the borrowers had been allowed to borrow far more than they could repay.
“We took maybe one out of every 10 requests,” he said.
New Frontier’s lending practices did serious harm to the Weld County economy, Leavitt said, not only by making bad loans but also by driving up real estate values by allowing borrowers easy access to too much capital that they used to overpay for property.
At the height of its prosperity, New Frontier also made many charitable contributions to various entities in Weld County, Leavitt said, delivering a blow to the institutions the bank had once supported when New Frontier’s money was no longer available.
Leavitt’s bank, like many others in the region, also took over a lot of deposits when New Frontier folded. Nearly every bank’s deposit market share increased in the year following the closure, and First National Bank, which had been the only bank ahead of New Frontier in the market-share rankings, was cemented as the frontrunner.
Most of New Frontier’s loans were sold to non-bank investors, such as Mariner Real Estate. Some of the loans that were purchased were called immediately by their purchasers, resulting in some businesses having to close their doors.
New Frontier’s failure was attributed to bad loans and unsound banking practices that eventually led to all six of the top officials at the bank being banned from banking by the FDIC. In 2009, nearly 60 shareholders leveled a civil suit against nine defendants, including New Frontier founder Larry Seastrom, in an attempt to get back $13 million they had invested.
The suit alleged that the defendants encouraged policies and practices that led to the bank’s failure by making too many loans and permitting transactions meant to circumvent lending limits.
The suit was dismissed without prejudice in March 2010.
To date, no other charges, civil or criminal, have been brought up against the New Frontier officials. New Frontier’s failure resulted in a loss of $871.4 million to the FDIC’s deposit insurance fund, which is funded by premiums paid by banks.