Colorado National fails, to reopen as Herring Bank of Texas

Federal regulators Friday seized Colorado National Bank, the first local bank failure in nearly 20 years, and sold its deposits to Herring Bank of Amarillo, Texas, which will reopen Colorado National's former branches in Colorado Springs, Monument and Peyton today.

For most consumers, the transition will be seamless with the new bank processing pending transactions, including checks, direct deposits and loan payments. No deposits are at risk or will be lost. All deposits are insured up to $250,000 by the Federal Deposit Insurance Corp., a federal agency that will keep the failed bank's loans and eventually sell them to investors along with the bank's foreclosed real estate.

"For (customers), they should just look on this as a merger between the two banks," said David Barr, a spokesman for the FDIC. "None of the depositors are going to lose a penny on this transaction."

No other banks in the Colorado Springs area are in danger of failing and all are well-capitalized, said Ed Sauer, the volunteer chairman-elect of the Colorado Bankers Association and president of The Bank at Broadmoor in the Springs.

"The industry as a whole is doing fine," Sauer said.

Colorado National employed 24 people and had $82.7 million in deposits and $123.5 million in assets as of Dec. 31, according to the FDIC. Herring Bank bought $117.3 million of the assets at a slight discount. The FDIC will split any losses 80-20 on $62 million of Colorado National's assets. The FDIC estimates the transaction will cost its deposit insurance fund $9 million.

It ends up being a good deal for Herring Bank, because its gets access to a new market with limited exposure to potential losses, the FDIC's Barr said.

"For Herring, this is a great opportunity to buy a bank," he said. "They can just concentrate on serving the customers and the borrowers of this bank."

Friday night, a team of about 30 federal accountants and lawyers was in Colorado Springs going through Colorado National's records, said Rich Schmalzer, regional ombudsman for the FDIC.

"We are working at helping to create an orderly transition from the former bank to Herring Bank, so the bank will be open for business (Saturday) morning as normal," he said. "The lobby, the drive-ups, all of that will be open as scheduled."

Colorado National was one of three banks to fail Friday. Colorado National's parent company, Paola, Kan.-based Team Financial Inc., also owned one of the other banks seized on Friday, Team Bank in Kansas.

Twenty banks have failed so far this year and 25 failed last year, the most since 1993. Banks nationwide have been hit hard by the housing industry meltdown; the U.S. Treasury Department has poured $197 billion into 489 banks since October as part of unprecedented industry bailout.

First Bank (which is not related to FirstBank now operating in the Springs and across the state) was the last Colorado Springs bank to fail in October 1989; four other Springs-area savings and loan associations and three other area banks failed in 1987-89. Two small local credit unions failed last year. Boulder-based BestBank was the last Colorado bank to fail in 1998 and only one other Colorado bank has failed since 1991.

The FDIC ordered Team Financial late last year to raise more capital for Colorado National and Team Bank, but the company couldn't raise the money.. Local bankers said Team has been trying for months to sell Colorado National.

Team Financial's problems stem from troubled loans in construction and real estate development lending. The company told stockholders in August that most of its delinquent loans were for commercial real estate projects, including $8 million in the Colorado Springs area. Colorado National lost $8.02 million last year, most from writing off a $6 million premium Team paid when it bought the bank in 2001.

Team Financial chief executive officer Sandra Moll referred questions to the FDIC.

Longtime local banker J.C. Culley opened what later became Colorado National in 1963 as Northern National Bank. Normal Postles bought the bank in 1967 and ran it for 25 years before turning over the post to his son, Geoffrey Postles in 1992. The family sold the bank to Team for $13 million in 2001.

"This is a tragedy. Norman Postles was one of the great bankers this community has produced and for a long time he had what was considered the best bank in town," said Rob Alexander, a longtime local banker and co-owner of Stockmen's Bank.

Colorado Springs area bank and S&L failures since 1934

• Colorado National Bank, March 20
• First Bank, Oct. 6, 1989
• American Federal Savings, April 6, 1989
• Otero Savings, March 9, 1989
• First Federal Savings, March 9, 1989
• Rocky Mountain Savings, March 9, 1989
• Citizens National Bank, April 21, 1988
• Pioneer Bank of Fountain, Oct. 21, 1987
• First Continental Bank of Rockrimmon, July 9, 1987
• Bank of Woodmoor, Jan. 12, 1976
• First National Bank of Cripple Creek, Nov. 30, 1971

Q & A

QUESTION: What happens to my account with Colorado National Bank?

ANSWER: All deposit accounts, which include checking, savings, money market, CDs and retirements accounts, have been transferred to Herring Bank of Amarillo, Texas, regardless of the dollar amount. No one lost any money on deposit in Colorado National Bank.

If you had an account with Colorado National Bank, you now have an account with Herring Bank.

Q: What about my ATM/debit card?

A: Your ATM/debit card will continue to work.


Q: What will happen to my direct deposits?

A: Direct deposits will continue as normal, including Social Security checks.


Q: Will I continue to earn interest at the same rate? Will I be charged an early withdrawal penalty?

A: Herring Bank will review rates and will notify you. You may withdraw funds from any transferred account without an early withdrawal penalty until you enter into a new deposit agreement with Herring. Entering into a new deposit agreement can be done by either renewing your CD or making a deposit to, or a withdrawal from, your account.


Q: What about my loan or mortgage with Colorado National Bank?

A: All mortgages and loans have been assumed by Herring Bank. Your payment amount and due date are the same. If you are having your payment deducted from your account, it will continue as it has in the past. You should continue to make your checks payable to Colorado National Bank and send your payments to the same address.


Q: What happens if I had a loan in process that had not closed or a line of credit not fully funded?

A: You should contact your loan officer. All prior contacts remain the same.


Q: What about checks that I have written on my account with Colorado National Bank?

A: Your checks will clear up to the available balance in your account. You can continue to use your existing checks.


Q: How can I claim the contents of my safe deposit box?

A: It is business as usual. You can go to your local branch and access your safe deposit box; however, no action on your part is required because of this transaction.

For the answers to other questions, call the FDIC at 1-800-830-4698 or go to www.fdic.gov.

SOURCE: Federal Deposit Insurance Corp.