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 — more specifically the public via higher banking fees — $911.6 million as of December 2013.
Five years after the bank failed, Lind and other victims 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 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 had already 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.
“I was worried about northern Colorado, everything from the farmer to someone with a little book store,” Lind said. “It was easier for me, because when you start with nothing, you don’t have a whole lot to lose.
“I was concerned about the thousands of families that had nowhere to turn.”
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.”
Patty Gates at the time was working at Bank of Choice, which also later was sold because of “risky lending” practices. She now is market president of FMS Bank, 2425 35th Ave.
“We would have people sit at our desk in tears because their bank closed,” she said.
Spreading the pain
Don Hijar was in somewhat the same boat as Lind. After years of the no-debt mentality, he’d allowed himself a little too much debt after following his loan officer to New Frontier, where loan officers were paid big bonuses to beef up loan amounts. They met monthly to manage his accounts.
But midstream, his loan officer was promoted and Hijar went through two other officers there. Suddenly, the loan officers weren’t looking out for his business, Pawnee Buttes Seed Co., 605 25th St.
“We didn’t know the bank was doing what they were doing, and growing at the expense of people like me,” said Hijar, who managed to come out of the other end in a bankable position. “That’s where I felt like the fool. Why did I think I could borrow more money? Because I trusted the bankers. Of course, now, I see that no matter what happens, I have to always look at my debt” and manage it wisely.
He shopped his loan to 25 different banks after the failure.
“I might as well have been on my hands and knees begging, and no one could do anything,” Hijar said. As with Lind, Hijar’s loan was bundled and sold for pennies on the dollar to investors in an auction. But Hijar was one of the lucky ones. The new lender worked with him to rebuild.
“In 2011, I started working on getting a bank,” Hijar said. “I got all my documents in order and talked to four banks. And those four banks put together proposals and I picked the one I wanted, and it felt so good. They were competing for my business rather than me begging them to help me.”
The bankruptcy trap
With more than $4 million in loans to develop a property in Wellington, John Vazquéz , Windsor’s mayor, also was stuck after the bank’s closure.
Like Lind, with a now-toxic real estate development loan on his hands that no one would touch, Vazquéz was in a tough spot on a $7 million property that FDIC appraisers devalued down to $2 million. Suddenly, he was way underwater.
His loan was eventually sold at auction, he said. The new lender called the note.
“They wouldn’t negotiate and they’d call every single day and leave messages,” Vazquéz said. “It’s a terrible way to live. I made all my payments, I was current and lived by the rules. I went from an 800-plus credit score to bankrupt.”
Vazquéz had to close his engineering business because of the recession. He was out of work for 18 months before landing a gig in the oil field. He later went to work for an engineering firm and this year opted to go it alone again as a consultant.
Still, Vazquéz was forced into Chapter 7.
“It’s hard. I went out, got a big loan. I was dreaming big and riding that big wave like everyone else was in the early 2000s,” Vazquéz said. “I’m not going to say woe is me, but I did nothing wrong other than be an entrepreneur. I lived by the rules taking that risk.”
Vazquéz learned to operate on a cash-only basis. He at least had the time to regroup financially. Some victims, he said, were senior citizens, and they lost everything.
“Spiritually, I’m better,” he said. “I spent 10 years of my life always focused on the next achievement and milestone, and I didn’t spend enough time appreciating the moment and benefits and blessings.”
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...
“It was so complex and such a cheese maze with such a tiny exit hole. The odds of pulling it off were slim. … If I’d not been successful, I might have got to keep my clothes, unless my pants size was the same size of some FDIC director.”
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.
Oil and gas angel investment
Unlike the rest of the country, Colorado’s oil and gas scene started heating up just about the time the economy was at its lowest.
New discoveries in technology and drilling techniques made what was once a typical oil play into a blockbuster in Weld County. The industry started creating good-paying jobs. More people with more cash meant demand for food, services and housing. All of it helped a sputtering engine begin to purr.
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.”
Gates said all anyone has to do is drive around town to see the effects the industry has had.
“You see the trickle down effect of oil and gas in all the ancillary business. They’re buying vehicles, staying in hotels, eating out, buying clothes,” Gates said. “Economists can throw all the numbers at it, but that clearly has been a huge part of the recovery.”
Burying the ghost
For years, the New Frontier Bank buildings on 35th Avenue sat empty. Once a bustling financial center for customers, and a social club for area seniors, the buildings became a bitter memory of arguably the worst financial event in Greeley’s history.
“It was heartbreaking to drive by this building,” Gates said. “No. 1, it’s beautiful, it’s a well-traveled street. It was really hard to drive by and see it sit empty for all those years.”
The FMS bank only bought the north building, as it was the core bank with drive-up windows. A south office building, attached to the bank by a covered bridge, later was sold to Kaiser Permanente to convert into a health clinic.
FMS, based out of Fort Morgan, opened in October 2012. The bridge was taken down to permanently separate the two. Other branches of the bank were slowly bought up in Longmont and Windsor.
Gates, who now does her work from the same office as former New Frontier President Larry Seastrom, said the disaster of April 10, 2009, came full circle as the new signage was placed on the building.
Even to this day, Gates said the bank sees people in the community who are still impacted by the loss. But more than not, FMS bank is gaining its own identity.
“We don’t have to say, ‘It’s the old New Frontier Bank building.’ We made a conscious decision to try not to say that. We really wanted that to be put to rest,” Gates said. “We think we’ve buried the New Frontier ghost.”
The FDIC status report on New Frontier’s assets show the agency still believes there’s $91 million in liquidity value left in the remaining assets.
Gates said it’s becoming fewer and farther between but she still sees some lingering issues with New Frontier customers.
“In retrospect, I wish the FDIC had a different method of closing banks as far as orderly liquidation and giving people more time to move out,” Gates said. “Had they been able to bring in a new management team, the losses to the FDIC would be a third of what they are.
“But it had to stop. The New Frontier model of banking had to stop. The impact on the community was devastating.”
Cluttered with plans and paperwork atop 12-year-old carpet, Lind’s office overlooks the front nine on his Pelican Lakes Golf and Country Club that are seeing some renovation after years of neglect.
His plans to kick-start the restaurant and club have been deferred long enough.
“A recession like that with all the belt tightening makes you defer a lot of maintenance,” Lind said. “Chairs that are broken you duct tape, and a lot of that takes time to catch up. We’re just going to reinvest in our core.”
To get there, he had to cut corners everywhere he could. He probably laid off up to 30 percent of his staff.
“I found employees who were stealing from me. We found poor business practices I was doing because we were too cavalier about some things,” Lind said. “We were too reckless, too much of the it’ll-be-OK attitude. It was good for the company.”
Today, that’s changed. Lind says no a lot more now. To this day, he’s not yet gotten a new loan on anything.
“We did do some replacement loans with other lenders that consolidated portfolios and shored them up with more equity,” Lind said. “… All we did was consolidate and refinance. To this day, I still haven’t borrowed any new money.”
He doesn’t plan to, either.
The economy has picked up and land values — which FDIC appraisers devalued immensely just a few years ago — are back to what they were in 2005 and growing, Lind said.
Hijar and Vazquéz, too, say they think the pain of New Frontier is starting to subside.
“I’m rebuilding as best I can,” Vazquéz said. “My mantra is pretty different now. I have a debit card and I’m a cash-only lifestyle. If I can’t pay cash, I shouldn’t be buying it.”
Hijar retains conservative economic values he grew up with. Soon to be 66, he plans to continue to keep his business open and continue employing local residents so they can pay their bills.
“My business is now in way better shape,” Hijar said. “Eighty percent of the economy is small business. I’m doing something (good) by not going bankrupt, not giving up, by hanging in there.”
With the oil and gas industry, including diversification, higher real estate values, more jobs and home sales, and re-establishing incentives to open a small business, recovery is here.
“I think we’ve digested most of the negative impact,” Bateman of Cache Bank and Trust said. “New Frontier Bank didn’t make us better. A lot of people got off their game. But it makes ours a stronger environment.”
People’s memories are short, too, Bateman said.
“I hardly hear about it,” he said. “… To me it’s amazing how many people just move on. Time does that.”