May 19, 2009 05:34 PM UTC

How a local credit union committed suicide

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• by: twas brillig

Norlarco used to be the local credit union in Fort Collins. On the outside, it looked like your standard mom-and-pop level credit union, and it was a nice way to keep your money local, and not have to park your checking account with some fee-hungry multinational conglomerate.

However, Norlarco turned out to be a canary in the coal mine for the national collapse of the finance industry–thanks to a management and an oblivious board that supported getting mixed up in financing the dodgy Florida housing market. To stay afloat, it had to double down on loans it never should have financed in the first place. By the end, this “local” credit union’s mortgage portfolio was 97% in Florida, 1% in Colorado. It collapsed, with the FDIC stepping in to protect account holders, and what was left of Norlarco was sold off.

Norlarco Credit Union’s 2007 collapse was caused by management that routinely ignored sound lending practices, a board that failed to properly oversee management, and ineffective state and federal regulatory systems, a new federal report said.

The post mortem is in today’s Coloradoan:

http://www.coloradoan.com/arti…