Greeley bank failure victims move on

GREELEY, Colo. (AP) - Five years ago, Martin Lind had the Midas touch.

As a development mogul throughout northern Colorado - the man and money behind the Colorado Eagles, the Budweiser Events Center and Water Valley - he literally couldn’t lose.

But one event almost brought him to his knees.

New Frontier Bank failed on April 10, 2009, and it came crashing down on its borrowers with no mercy. In one day, borrowers big and small learned they were on the precipice of financial ruin - even Lind.

With almost $2 billion in assets, New Frontier was the largest bank in Greeley and northern Colorado, and it became the biggest bank failure in the nation in 2009.

It was one of the few banks across the country that was completely liquidated, costing the Federal Deposit Insurance Corporation $912 million as of December 2013.

Five years after the bank failed, Lind and other victims say they have clawed their way back and say they are stronger and better for it. But they’ll never forget.

“Just this last January, I realized I survived,” said Lind in a small office tucked in a corner of his Water Valley headquarters in Windsor. “That’s when I could really take a big breath and say we survived.”

Northern Colorado was booming from 2000-2006. Lind, looking back, said he felt like he couldn’t lose.

“If it would have been Vegas, everyone would have been crowded around me at the craps table. Everything we touched was easy and worked,” he said.

New Frontier Bank was the one place in town everyone knew to get money, especially after being turned down elsewhere. It was the place where several small-business owners, farmers and developers turned for quick cash and ready money.

“They’d lend you money and when it came due, they’d just lend you more money to pay it. And they’d do that for a couple of years,” said Byron Bateman , president of Cache Bank and Trust in Greeley. “At a lot of banks in town, if you had a loan that was starting to look a little iffy, you just sent them to New Frontier.”

Bateman added, “It wasn’t meant to be a big conspiracy. I had several loans we were starting to squeeze, and they’d come in here saying they got refinanced at New Frontier.”

Banks’ books are public and bankers often look at each other’s finances for competitive purposes. All bankers in northern Colorado were watching New Frontier as it continued to grow exponentially.

In its short 10 years, it grew from $6 million in humble beginnings to become a $2 billion bank. When banks lend money, they have to have the capital to back it up.

Usually, that comes from core deposits (CDs or checking accounts), and a little bit of brokered deposits which are bought on the market and are volatile. New Frontier depended heavily on brokered deposits or overnight loans to pay out the incredible interest rates they offered.

“The reality is there were probably less than $100 million of real core deposits in the bank,” Bateman said.

New Frontier funded its practices increasingly with non-core funding as loans started to go bad; there also was a run on the bank amid rumors of a shutdown.

By the time regulators closed it, the bank already had lost more than $98 million, and more than $107 million in agriculture loans had gone sour.

Original estimates were that the bank’s failure would cost the FDIC’s insurance fund almost $700 million. That’s ballooned up to just shy of $1 billion today.

Lind, though highly leveraged at that time, had one loan with New Frontier - he’ll only reveal that it was in excess of $10 million - and he was current on his payments.

“My company got big in that time,” Lind said. “We had lots of loans and projects. But we had a tsunami of bad. First there was the tornado. I had one Wall Street bank come in right after and froze our lines of credit, and they called all of our notes in. Then we had New Frontier.”

The stock market plummeted and then the Great Recession hit.

Few knew what they were up against when New Frontier closed. Most, who just had checking or savings accounts, had 30 days to move their money to new banks in town.

They’d walk past armed guards in a bank that once welcomed customers into the building as family.

Lind had only one loan with New Frontier, but it was bigger than most local banks could handle. He wasn’t sure where he’d shop it.

“That was a real brutal and hostile period,” Lind said. “At first the answer was, ’Well, pay it off.’”

Lind said his loan, though current and based on his years of good business dealings and reputation, became toxic overnight. The FDIC decided speculative loans - basically loans to develop property without guaranteed tenants or buyers - were no longer bankable, as the national real estate market crumbled.

Lind had such a loan - it was for a commercial development near the Budweiser Events Center in Loveland - and no one could touch it. The rules changed overnight. The next month would become a chorus of “no” from every financial institution he called.

If he was having such trouble, he wondered, he couldn’t imagine the pain other borrowers were going through.

Local bankers had to look former customers in the eye and send them away. Many of the borrowers who came back in desperation were the very ones they had turned down.

“It made me feel sad and helpless,” Bateman said. “People came to our office pleading. A lot of them folded.”

Lind tried to buy back his loan for 85 cents on the dollar. The FDIC refused, put it up for auction and got 30 cents on the dollar.

“The FDIC isn’t a bank; they didn’t want a lending portfolio. They just wanted out,” Lind said. “The more dire of a picture, the quicker it was out and auctioned off. Bankrupt, the borrowers be damned, get out.”

Lind finally threw up his hands on finding new money. He worked with the bank that bought his loan and put all of his cards on the table.

“I was all in,” Lind said. He leveraged everything - his home, his businesses, property that was free and clear that he worked 20 years to pay off. “Literally, there was no trust for the kids, there was no college account that was exempt. It was all in … .”

He hired experts to put together his exit strategy, using the cash flow he had with an aggressive debt reduction schedule. Cash flow came from his mineral rights and some other areas that were recession-proof.

“It was a big, complex giant strategy with everything considered, every lender, every car payment, everything was in,” Lind said.

Lind, a former farmer who had massive acreage in northern Colorado, also held on to his mineral rights. And he knew his land. While he waited for values to return to normal, he worked the subsurface.

Then came Tekton Energy, a small, independent exploration company, looking to find a niche in drilling below Windsor.

“You bet it was a saving grace,” Lind said of the partnership he struck with Tekton to drill on his land, already teeming with residential and commercial properties. “It’s a patient, coordinated, blended effort to let two industries co-exist. The oil and gas industry is literally bigger than any of us know. It will have a bigger effect on northern Colorado than any of us can imagine.”

___

Information from: The Tribune of Greeley, Co, https://greeleytribune.com