Regulators seize two more banks

Regulators closed two more banks, including one that had hoped for salvation through the Troubled Asset Relief Program.

North Carolina banking regulators shut down Cape Fear Bank, of Wilmington, N.C., and appointed the Federal Deposit Insurance Corp. as receiver.  It arranged for First Federal Savings and Loan of Charleston to take over the deposits and most of the assets.

Regulators also seized New Frontier Bank, in Greeley, Colo. State and federal agencies have shut down 23 banks so far this year, compared with 25 for all of 2008.

Cape Fear Bank's shareholders approved changes to its articles of incorporation earlier this year that would have authorized the sale of preferred stock to the Treasury Department. The publicly traded company said it hoped to get as much as $12.4 million in taxpayer capital through Treasury's $700 billion TARP initiative.

Its financial condition worsened, however.  In February, it entered into an agreement North Carolina regulators and the FDIC to halt "unsafe and unsound'' practices, boost capital levels, reduce concentrations of credit and take other steps to improve liquidity.

As of March 31, Cape Fear had $403 million in deposits and $492 million in total assets. South Carolina-based First Federal took over all of its deposits, and its eight branches, which it will reopen under its own name. It also bought $468 million of Cape Fear's assets.

First Federal entered into a loss sharing agreement with the FDIC on $385 million of those assets. The FDIC will absorb a big chunk of any losses on the assets, as part of its strategy to maximize returns and minimize disruptions by keeping the assets in the private sector.

The Colorado Division of Banking took over New Frontier Bank, and appointed the FDIC as its receiver. The FDIC created a new entity, Deposit Insurance National Bank, to manage the orderly disposition of New Frontier's accounts.

It had deposits of roughly $1.5 billion and total assets of $2 billion.

Bank of the West, of San Francisco, agreed to manage DINB's operations for 30 days, during which time customers can transfer their accounts to other institutions. Any amounts still on deposit at the end of that period will be paid out by check.

The FDIC estimated that the two closings would cost its deposit insurance fund around $801 million.