Today’s WSJ reports on a small community bank in Colorado recently closed by regulators. (If you are a WSJ Online subscriber, you can see the story here.) A decade old $2 billion institution started in a double wide trailer, New Frontier grew quickly by lending to farmers, entrepreneurs and developers- primarily those local to the community in which it was located. Was the founder a canny leader with fierce dedication to his local market- or a freewheeling optimist who did not plan or govern with sufficient rigor?
Like many community banks, new Frontier invested locally in people known to the principals and became an asset to the community. But any asset overused becomes a liability, and a whopping 35% of the outstanding loans at New Frontier were delinquent. In response to regulators action to seize control, the WSJ reports Larry Seastrom, the bank’s founder as responding with both unhappiness and frustration.
“Mr. Seastrom says his bank was strong. He blames the high delinquency rate on a crash in milk prices, which crippled dairy farmers, and on the downturn in commercial real estate. If he had been given time to modify the loans to let borrowers ride out the recession, he says, he could have saved the bank. But on April 10, fearing further losses, state regulators shut down New Frontier.”
So- Who is right? Whose wisdom should prevail? What would solid leadership have to say about this issue?
On the one hand, we could assume that the same optimism that led Mr. Seastrom to start a bank and lend locally could be the naiveté that brought the institution down. And in such case, his statement shows that his view is still colored by rose tinted lenses.
On the other, Mr. Seastrom has been shrewd enough to target a specific market and concentrate his resources to fuel growth. He is aware of the forces that impact his business and no more able to predict their future than anyone. In that case, regulators may have jumped the gun.
Is it possible that both are right?
I have no personal data about this situation. Nothing to use to determine who Larry Seastrom is as a person. The article did not provide much insight into his leadership style or integrity. Is he a freewheeler with an answer for everything or a solid leader who simply got blindsided by larger forces?
Skilled leadership does not always mean you win- or that you are always right. There are rarely clear right and wrong choices (those are the easy decisions). Leaders (and those who invest time and money with them) simply have to understand that each choice has consequences and do their best to prepare for the ones that they choose.
So, use the comments link to provide your point of view.
- How do you decide about a leader’s judgment?
- What information tells you the most about their leadership?
- Was the government premature in taking action or late to the game?
- What would you want to know to feel more certain about your own decision?