Colorado Capital Bank, which described itself as a niche bank for privately-held businesses and nonprofit organizations, was closed today by the Colorado Division of Banking. The FDIC, as receiver, sold the failed bank to First-Citizens Bank & Trust Company, Raleigh, North Carolina.
The seven branches of Colorado Capital will reopen as usual on Monday as branches of First-Citizens. Depositors of Colorado Capital will have full access to their money over the weekend through the use of checks, ATMs or debit cards.
According to the Colorado Capital Bank website, an investor group acquired a majority position in the Bank in 2003. The new owners quickly abandoned retail banking and chose to focus on financing for privately held businesses.
From two small branches and assets of only $50 million in 2003, Colorado Capital expanded at an incredibly rapid pace, increasing assets to $900 and expanding its branches to seven locations.
The reckless expansion of lending came to a crashing halt and bad end as real estate markets collapsed and borrowers defaulted en masse. Losses to the FDIC for closing Colorado Capital amount to a stunning 40% of total assets indicating a very poor quality of loan underwriting standards.
At March 31, 2011, Colorado Capital had total assets of $717.5 million and total deposits of $672.8 million.
First-Citizens agreed to purchase all of failed Colorado’s assets, subject to a loss-share transaction with the FDIC covering $580 million of the asset pool acquired. The FDIC maintains that losses on a failed bank’s assets are minimized by keeping assets in the private sector.
The holding company for First-Citizens Bank & Trust is First Citizens BancShares, Inc., a well capitalized bank with almost $21 billion in assets. First Citizens was founded in 1893, is based in Raleigh, North Carolina, and operates in 17 states.
First Citizens stock, which dipped below $80 during the height of the financial crisis, closed at $187.36 on Friday’s close.
Prior to today, First Citizens had acquired five other failed banks located in California, Washington, Florida and Colorado.
The cost to the FDIC Deposit Insurance Fund for the failure of Colorado Capital is estimated at $283.8 million, a very substantial 40% of the failed Bank’s assets. Colorado Capital is the nation’s 50th banking failure. Regulators also closed Colorado based Signature Bank today, bringing the total number of banking failures in the state to four for the year.