FORT COLLINS, Colo.—A new federal report on the 2007 collapse of a Fort Collins credit union cites management mistakes that left the business “overexposed to unfavorable economic conditions.”
The 72-page report by the National Credit Union Administration inspector general says Norlarco Credit Union’s problems started in 2001, when it gambled on a Florida residential construction loan program that quickly ballooned.
The gamble paid off initially, netting up to $1 million a year. But when the bottom fell out of the Florida housing market, Norlarco was left with an insurmountable pile of bad home loans that should never have been approved in the first place, the report said.
“Although some may view the downturn in the real estate market as the cause of Norlarco’s failure, management’s actions clearly left the credit union overexposed to unfavorable economic conditions,” the report said. “Management’s inability to effectively manage the risks their own actions created, led to Norlarco’s failure.”
The report said Norlarco’s board and management committed a “significant portion” of the credit union’s assets to the risky loan program without making sure the adequate controls were in place to oversee the program’s daily operations.
Peggy Reeves, a Norlarco board member and former member of the state Legislature’s Joint Budget Committee, declined to comment on whether the board was fully informed of the potential risk it was taking on.
“It’s water under the bridge, and I don’t want to say anything about the management that was there,” Reeves said. “I’m sorry it happened, but I don’t feel that me being critical of other people will do much to make any changes.”
Other board members and former credit union managers did not return calls from the Coloradoan newspaper seeking comment.
No depositors lost money when federal regulators took over the credit union in mid-2007 and sold it in February 2008 to Public Service Credit Union for $21.6 million. But the failure saddled the National Credit Union’s Share Insurance Fund with millions in bad loans it is still trying to absorb or sell.
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On the Net:
National Credit Union Administration report,
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Information from: Fort Collins Coloradoan,
