Federal regulators have stepped in at Greeley's high-flying New Frontier Bank, demanding the dismissal of executives and citing the bank for violations of law, and unsafe and unsound banking practices, including high levels of bad loans and low levels of capital.

CEO Larry Seastrom and the bank's chief lending officer are departing as a result of the bank's agreement with the Federal Deposit Insurance Corp., struck Dec. 2 but first released to the public Friday. The Federal Reserve Bank also released its Jan. 12 written agreement with New Frontier.

Seastrom and a bank spokesman failed to return calls Friday afternoon.

The agreements mean the regulators stopped short of actually closing the bank and declaring it failed. Three other banks nationally were closed Friday, including MagnetBank in Salt Lake City, where no other institution could be found to take on the bank's customers. Six banks have failed so far in 2009.

The Greeley Tribune reported Friday that a group of Boulder investors is negotiating to buy New Frontier for $30 million.

State incorporation records show that the investor group, Colorado Financial Holdings, was formed by venture capitalist Gary Jacobs. He failed to return a call Friday afternoon.

New Frontier is a member of the Independent Bankers of Colorado. Barbara Walker, executive director of the group, said, "I'm just relieved they've found a local investor to retain the local profile of that community bank, rather than have it sold to a large, regional out- of-state bank."

Regulators examined New Frontier on Sept. 22 and launched the actions soon after. By the Sept. 30 financial statements, New Frontier's balance sheet had $180.5 million in late loans and foreclosed real estate, compared with $70.1 million the year before.

That level of problem loans - those 30 days past due or more, plus the foreclosed real estate - exceeded the bank's capital of $168.8 million, making it essentially insolvent.

In the nine months ended Sept. 30, profits dropped to $2.67 million from $13.04 million in the first nine months of 2007.

New Frontier grew like a comet. Founded in 1998, it zipped to $2 billion in assets in its first 10 years in the highly competitive Weld County market.

Part of the strategy for growth was offering high- priced deposits, including "brokered" deposits sold in big chunks to wealthy depositors at high interest rates.

That practice must cease, regulators told New Frontier. The bank was required to submit a plan in December "for eliminating its reliance on brokered deposits."

Other requirements of the two regulatory orders include the bank correcting the unspecified violations of law found in the September exam; submitting plans to increase capital; submitting plans to decrease high concentrations of loans to specific industries; hiring of new management; and submitting monthly or quarterly progress reports.

Finance Editor David Milstead may be reached at milstead@RockyMountainNews.com or 303-954-2648.