Three Faces of Greeley

What do you know about New Frontier Bank? We can pretty confidently say, that depends on where you live. If you live in Greeley, Colorado, where New Frontier was based before regulators closed it earlier this year, you know a lot. If you live in Colorado, you may know something. If you live in New York City, a lot less.

Narrowly speaking, the closing of New Frontier was local news, and so as it filtered up from Greeley, through the regional and national press, less and less of the story survived. This is how news works, and is not necessarily a problem. But if you look at the three versions of the New Frontier story—the local narrative, the regional narrative and the national narrative—you can see both what is lost and what is gained as the story transforms along its passage from local to national story.

Which version is best? All had their strengths and weaknesses and were aimed at different audiences. All offered important elements: the local press excelled on the human toll of the bank failure and at giving us a steady stream of facts, the national press—to the extent that it covered the story—excelled at fitting the failure into the troubles in the larger economy, with the regional press striking a medium between the two.

If we had to choose just one of these levels of distance, we would choose regional—the Denver Post’s Miles Moffeit did an excellent job—but that is a false choice, because all are available online. And so this post is an exhortation to be active readers, moving beyond the same national papers and down to local and regional ones as well. Taking our own advice, this is our first piece in a series on local and regional business coverage. Yes, what’s good and what’s not. But also how these local and regional stories reflect and are reflected by the national press.

So back to the three narratives of Greeley.

The Greeley Tribune, as might be expected, provides us with the factual blow-by-blow.

As the paper reported, New Frontier Bank had been operating under the concerned eye of federal bank regulators since 2008, but was rocked this spring when one of its major debtors—a large and problem-plagued Colorado dairy that had filed for bankruptcy in January of this year, alleged the bank had committed fraud in a complex scheme to inflate the value of loans to the dairy. In the wake of these allegations, an investment group called Colorado Financial Holdings, which had been looking to add much-needed capital to New Frontier, pulled out of the possible deal (it is unclear how much that had to do with the dairy’s allegations, and bankruptcy, and how much with a more general review of the bank’s books). In mid-March, by the way, the dairy’s owner was charged with cheating on his state income taxes.

Okay. So while all of this was going on, bank customers were understandably worried and withdrawing their money from the bank, adding to its financial woes. Then, in mid-April, authorities deemed the bank untenable and shut down New Frontier, ending its “reign as the largest locally owned bank in northern Colorado,” according to an April 11 Tribune article.

But the ripple effects were just getting started.

Those with loans from the bank, which specialized in lending to farmers, could be in trouble because a good percentage were in delinquency. The loans that no bank wants to take on will be packaged and sold, maybe at a fraction of their original value, to bidders across the country. Investors will subsequently decide either to keep the loans at the same terms or to renegotiate or to foreclose and sell the property. A large portfolio of farm loans went up for auction in mid-August, so a lot of farmers in Greeley are worried about their livelihoods right now.

The effect of this bank failure on Greeley is hard to overestimate, as the Tribune expressed in an April 14 editorial:

Like most of Greeley, we are still reeling from the news that the Federal Deposit Insurance Corp. is closing New Frontier Bank.

The editorial made the bank seem like an errant family member.

We are sad to see New Frontier go. Despite obvious problems in their business practices, they have been a good neighbor, and one that will be missed.

But, as the story progressed, the bank looked worse and worse. As a May 2 article announced:

The past three months of New Frontier Bank’s life have exposed a massive load of problems that go far beyond bad publicity.

In the first quarter of 2008, federal reports show a geyser of money pouring out of Greeley banking’s largest success story.

From January to March, the bank lost $98 million, bad loans more than doubled to $550 million and the bank lost 10.7 percent of its deposits since its last report in December 2008.

The Tribune’s closeness to the story adds urgency to the pieces. But we also sometimes felt as if the paper was working so hard to cover all the details—and was so deeply embedded in the story—
that it didn’t have the luxury (and to some extent ability) to step back and decide which parts were the most important. For that, we need to step up to the Denver Post.

Unlike the Greeley paper, the Denver Post didn’t do much reporting in the days leading up to the failure, or even the day the failure itself happened. These early stories—perfectly fine but not remarkable—tell readers the bank has failed and place that failure in the context of other failed or troubled banks in Colorado and nationwide.

But the coverage soon gets interesting.

Several days after the failure, reporter Miles Moffeit re-examines the run on New Frontier Bank that took place in the months before its closing:

While banks under heavy regulatory scrutiny sometimes see a falloff in business, government officials characterized the magnitude of New Frontier’s run—events often associated with the Great Depression—as unusual.

‘It baffles me,’ said Colorado’s acting bank commissioner, Fred Joseph. ‘We haven’t had a bank failure in this state in over 10 years. But you wonder, why do people still do that’ when deposits are insured by the federal government.

Modern-day bank runs are so rare that Federal Deposit Insurance Corp. officials don’t track them. Only a handful have surfaced in recent decades.

And then:

Because the run played out more diffusely and subtly than the spectacled bank runs of old, its scope went unnoticed by the larger Greeley public.

But inside the 35th Avenue bank, staffers were growing apprehensive. They kept confronting customers’ questions about the bank’s poor health, then watched as they went on to close their accounts. In February and at the end of March, the pace of the transactions only quickened.

Interesting stuff. Moffeit follows this up a few days later with an excellent piece on fallout from the bank closure. He opens strong:

When the man from Farm Bureau Bank asked the crowd of 60 area dairy owners, farmhands, crop-dusters, grain truckers and other business owners whether they had any questions, he encountered silence.
A man cleared his throat. A woman sniffled. Mostly they just stared back, many with bloodshot or moist eyes.
‘I thought there would be questions,’ said bureau salesman Jason Smith, his words trailing off at the front of the room.
Smith was looking at the downcast rural face behind the fallout from the government’s closure April 10 of New Frontier Bank. Hundreds of dedicated depositors and borrowers who relied on the now-closed institution for credit to ride the hard and good times are suddenly bankless — and scared.

Like those opening paragraphs, the piece manages to say a lot in not very many (about 700) words. And then, again a few days later, Moffeit gives us a wonderful, lengthy piece on the history of New Frontier (which “started in a double-wide trailer on Greeley’s west side”), its irresponsible business practices (“Greeley’s largest bank was so larded with troubled assets that, for the first time in three decades, federal officials couldn’t find another bank willing to do the liquidation.”) and its failure (“After the quick shutdown, some customers were so angry they were yanking deposits without transferring their money. One customer, $19,000 in hand, was escorted by a security guard to her car.”) If you read only one article on New Frontier, make it this one.

Still on the story in early June, Moffeit gives us a related piece, which the AP picked up, on the increase in phone calls by agricultural workers to crisis hotlines. It opens:

The phone calls usually come in the evening after the machinery goes silent on farms across the country. The callers speak of dwindling cash flows, crumbling marriages. Some admit they’re holding a loaded gun.

Then, after a handful of news stories, Moffeit wrote an investigative piece focusing on questionable loans New Frontier had made to an ex-director of the bank who “later was convicted of felony theft for a mortgage scheme.” Who said business news was boring? The AP picked up on this report as well.

Moffeit returns to the human side of the bank failure on August 18, with a story on that day’s auction by the federal government of 418 farm loans still left on New Frontier’s books:

The auction is believed to be the largest sale of farm notes since the aftermath of the 1980s savings-and-loan crisis, and it has many Colorado farmers fearful they will lose their property as a result.

Farmers suspect investors or banks will snap up their notes at fire-sale prices, then liquidate their collateral to score a quick profit.

There is obviously a lot to this story. What interested the national press? Well, wire services dipped in here and there—with the most attention coming the day of the bank’s closure—but these were mostly news blips. NPR brought some life to the story with a segment looking at the bank failure’s effect on farmers. But the most notable attention came from a substantial page-one piece in The Wall Street Journal on June16,

The piece does a nice job at putting the Greeley situation in larger financial context without adding much that is new. In fact, the WSJ’s cast of local characters overlaps almost exactly with a Greeley Tribune piece that had appeared May 31.

The opening paragraphs of the WSJ story give you a sense of it:

Larry Seastrom, the founder of New Frontier Bank, made it a mantra to invest in his community. That paid off big time, both for the bank and for this fast-growing college town on the broad plains of northeast Colorado.
Founded a decade ago in a double-wide trailer, New Frontier hit $1 billion in assets in July of 2006 and, in a burst of growth, doubled to $2 billion in just 18 months.
Then, just as quickly, it collapsed.

While some details get lost, the WSJ does give us some new ones on the bank and offers several pieces of nice context. Like:

Nationwide, nearly three dozen small and midsize banks have failed this year. Another 80 are under pressure to raise more capital. Treasury Secretary Timothy Geithner recently announced that he intends to extend bailout funds to more community banks. He will have significant sums at his disposal, given last week’s announcement that financial giants such as J.P. Morgan Chase & Co. and Morgan Stanley plan to return billions in bailout money to the Treasury.
But some industry advocates say small banks need more than cash handouts. Many community bankers say regulators are pressing them to write down the value of certain assets, such as construction loans. That pressure applies to all banks — part of an effort to ensure financial balance sheets are realistic — but small banks feel the impact more keenly because their loan portfolios tend to be less diversified. The American Bankers Association says it will raise the issue at an upcoming meeting with Treasury officials.

The Journal also offered a slideshow on the bank and local community. And if you doubt whether the issues raised by New Frontier’s failure are important well beyond the borders of Colorado, just look at the WSJ’s forum on the piece.

We don’t agree with a lot of the comments—and many of the commenters would have benefited from a look at the Post and Tribune coverage—but they hit important topics, like the roles of community banks, regulators, and borrowers in the US banking system.

These days, readers can reach in and pull up coverage from remote (for us) places like Greeley. That you can do it for free may be bizarre, but that’s a story for another day. For our purposes, the New Frontier story shows that if you want fine-grain and urgent business reporting, as well as the 30,000-foot-view, as long as you can drill down, you should.

Elinore Longobardi is a Fellow and staff writer of The Audit, the business-press section of Columbia Journalism Review.