DENVER -
The initial focus of the $630-million Public Service CU will be to prop up the confidence in Norlarco members, who have withdrawn more than $30 million since the NCUA conservatorship was made public in August.
“We’ll be working through what we have over the next few days; we want to make sure we do this in a way that doesn’t cause any undue concern for the membership,” Cyndi Koan, chief financial officer for the winning Norlarco bidder, soon after NCUA announced its decision.
Public Service CU, which outbid credit union giants Bellco CU and Ent FCU for the remnants of Norlarco, was one of a half-dozen credit unions to explore a merger with the troubled credit union last year, and even signed a letter of intent to acquire Norlarco before it was taken over by regulators last May. But the deal was scrapped after the extent of Norlarco’s troubles were disclosed, prompting a takeover by regulators last May.
Under a purchase-and-assumption agreement with NCUA, which has been running Norlarco under conservatorship, Public Service CU will get Norlarco’s headquarters/branch in Fort Collins, Colo., six branches and almost 40,000 member accounts, according to Koan.
Norlarco members will get access to 19 additional branches in Colorado, as well as 2,900 shared branches across the country and a financially sound credit union. Public Service CU had net income of $8.7 million in 2007, an ROA of 1.36%, and net capital of almost 14% at year-end.
NCUA will assume about $140 million in bad loans, most of them in speculative residential real estate in southwest Florida.
Officials with NCUA and Public Service CU would not disclose the price the credit union paid for the Norlarco assets.
The final toll on Norlarco of their Florida expedition was not pretty. The one-time $360- million credit union lost 20% of its assets between the end of 2006 and the end of 2007, to end at $290 million. Member shares declined by 28% during that period, from $318.5 million, to $230.6 million.
As it moved to reserve for loan losses, the credit union accrued a $4.8 million loss in the fourth quarter of 2007, and a $13.1 million loss for the full year.
Norlarco is one of three credit union failures tied to the Florida projects in Lehigh Acres and Cape Coral. NCUA has sold off all three failures, leaving the agency with more than $300 million in real estate loans, many of them defaulted on, in those two developments. The federal regulator must now resolve those loans by either selling them off in the depressed real estate market or servicing the loans.
NCUA sold off the remnants of Huron River Area CU, in Lansing, Mich., to Detroit Edison CU, and the remains of New Horizons Community FCU, in Denver, to Security Service FCU.
