Federal banking regulators shut down Southern Colorado National Bank in Pueblo on Friday evening and arranged for its sale to another bank.
Southern Colorado’s two locations will reopen today as branches of Legacy Bank, based in Wiley.
Depositors will suffer no losses, said David Barr, a spokesman with the Federal Deposit Insurance Corp.
Legacy and the FDIC also entered into a loss-sharing agreement on $25.5 million of loans made by Southern Colorado. The FDIC estimates the closure will cost the nation’s deposit insurance fund about $6.6 million.
“Basically, it was loans to developers that went bad,” Barr said. “Enough of them went bad that the bank had to be closed.”
The bank failure is the third in Colorado this year. The last one came April 10 when the FDIC took over New Frontier in Greeley after failing to find a buyer.
Before that, Colorado National Bank in Colorado Springs was closed by regulators and sold to Herring Bank of Amarillo, Texas.
Two other banks also failed Friday, bringing the national total to 98 this year.
As of Sept. 4, Southern Colorado had total assets of $39.5 million and total deposits of about $31.9 million. Legacy Bank will pay the FDIC a premium of 1 percent to assume those deposits.
FDIC staff will be in the failed bank over the weekend to facilitate the transition to Legacy.
“What happened here is that a sick and troubled institution was taken out of a community and it was replaced with a new institution. That is a positive,” Barr said.
Southern Colorado customers can use their ATM cards and write checks with no disruptions, the FDIC said.
Aldo Svaldi: 303-954-1410 or asvaldi@denverpost.com
