FORT COLLINS, Colo. — “It could have been worse,” said BobHamer, former CEO of Norlarco Credit Union, which has now beencompletely absorbed by Public Service Credit Union of Denver.

Hard to imagine as it sounds, Hamer said that although he wishedhe'd had more time to try and save Norlarco, he doubted that theNCUA's conservatorship could have been avoided. “The sheer numberof loans and their geographic concentration made thatimpossible.”

Hamer's other regret is not being able to deal with the press,including Credit Union Times, in an open and forthright manner. “Itwas discouraging that I couldn't respond with the truth. I think itwould have made good sense to tell the press what we were doing toresolve things and that the parties to contracts were cooperatingand trying to work things out. It could have gone much better, Ithink.”

Norlarco posted $56 million in delinquencies at the end of Juneout of about $180 million in real estate loans outstanding, mostlyin southwest Florida home construction loans, which led the stateregulator to summon the NCUA. The agency placed the CU intoconservatorship in May. Lawsuits brought by borrowers have now allbeen moved to federal district court in Florida, and the bad loansnow reside with the NCUA's Asset Management & Assistance Centerin Austin, Texas.

So coming out of a conservatorship combined with a large,healthy credit union (PSCU has $850 million-in-assets and Norlarcohad $230 million) via a purchase and assumption was a good thingfor Norlarco, Hamer said. “I'm glad they found a buyer, and PSCU isa good company and will take good care of the staff atNorlarco.”

But Hamer lamented remarks attributed to PSCU President/CEO DaveMaus in The Coloradoan newspaper last week that seemed to castdoubt on Hamer's business ethics and management principles. Maustold the paper that PSCU offered jobs to “employees in goodstanding who will embrace and adapt to our business ethics andstrong management principles.” Hamer was “one of the people wedidn't feel could do that. The business model that he has endorsedat Norlarco doesn't fit in with our business model and strongdesire to serve the local community and become the premier lenderin Northern Colorado.”

Hamer called those remarks “disappointing,” especially becausehe wanted to continue working within credit unions and is nowseeking employment as a CEO of a mid-sized CU. He said he knows theCU world is a small one and negative remarks like those travel farand wide, often damaging a career. Hamer doesn't think he startedthe fire at Norlarco but only did his best to put it out. Thedamage was well underway before he came to Norlarco in 2006, hesaid. Hamer replaced Chuck Mabry, who has not responded to callsseeking comment from Credit Union Times.

“This program was utilized for years, four to five at least, andthere were hundreds, if not thousands of homes funded and thingswent along fine. But some time before I got there the speculationreached a peak in 2006. Norlarco was extending loans to First HomeBuilders of Florida and First American Mortgage in Lee County,instead of doing so with several builders. That was all done beforeI arrived. Once I was able to settle in a bit I stopped thatprogram in its tracks,” he said. Hamer also said that Norlarco hadattempted to reach a merger deal with PSCU before the

conservatorship.

Coulda, Woulda, Shoulda

“I saw it, the state regulator [Chris Mycklebust] saw it, andfinally the NCUA saw it. The concentration was too high,” saidHamer. Asked why it took so long for the regulators to raise thered flag, Hamer explained that “inordinate comfort” was taken inthe guarantees given by First American Mortgage on interestpayments on loans and guarantees on closing costs from First HomeBuilders, which was bought by Hovnanian, which continued theguarantees.

Hamer said that for the first six months he was at Norlarcothose payments continued from First Home Builders. “We were closingloans and for a while it all worked. Then, in January 2007,Hovnanian stuck its head up and said, 'Hey, we're paying interestevery month; this can't go on.' I happened to be away from theoffice at the time, but I called Hovnanian and arranged for theJanuary payment, and we reached an interim resolution for Februaryand March.”

In May, the collapse began when Mycklebust decided the situationwas unresolvable, and he asked NCUA to conserve the institution,Hamer said. Homebuyers had begun balking at the contracts, and thereal estate slump was off and running. “We began to look for anymassive fraud of some kind and didn't find it. Looking back, I'dsay that the concentration in one area was a bad call and I couldsay there's a lot to suggest it could have been different, but thatwas the hand I was dealt.”

Hamer said he can't imagine that he would have seen the outcomefrom the circumstances he faced when he started at Norlarco. “Idon't know what I could have learned up front to see the problemsthat arose later. I don't have a crystal ball. I saw the documentsof resolution, you look at financials, everything, but…” The loansthemselves weren't speculative per se, he said. “There was nothingto suggest that, and those outfits in Florida, that MillionairesUniversity? I never heard of them until I saw the name in a legalfiling from a borrower. And that guy [Frank] D'Allessandro? Again,never heard of him. We dealt only with First Homebuilders, whichbrought us the borrowers.” (Russ Whitney's Millionaires University,a real estate advisory corporation and D'Allessandro, a developer–who died last summer in a kayaking accident– are both involved inlawsuits over loans to consumers.)

Officials of PSCU have a decidedly different take on whathappened and how Hamer dealt with it, however. Jane Willard,spokeswoman for PSCU, said that only three employees who were ingood standing and sought employment with PSCU, were not offered aposition. “Those individuals were provided with a severance packagethat included three months of salary and outplacement services. Bobdidn't seek employment with us.”

Willard did not say, as was reported in an online story byCredit Union Times, that Hamer was “dismissed,” but neither wouldshe deny it, and she affirmed Maus' remarks about Hamer in TheColoradoan as accurate. “Bob didn't seek employment with us,” sherepeated. But Willard acknowledged that “everybody knew heinherited issues and can't be blamed for what he inherited.”

Hamer recalled the circumstances of his leaving this way: Hesaid he had a conversation with Maus about his plans. “Dave askedme what I wanted to do, and I told him that as much as I'd like towork with him. I really liked running a moderately-sized creditunion. And I asked Dave what his plans were and he told me he wasstaying. It was amicable and understood that I wouldn't be stayingon.”

Not Exactly

But Dave Maus said Hamer knew exactly what he was getting intoat Norlarco when he took the job in late 2006. “My remarks wereextremely generous, in fact. When you speak about a former employeeyou don't want to be too disrespectful or say something you'llregret. But Bob knew what the problems were; there were nosurprises. It was all a part of his accepting the job,” said Maus.“He knew there was tremendous risk in the portfolio.” Maus addedthat Hamer received a cease and desist order from the stateregulator to stop the construction loan program almost as soon ashe arrived at Norlarco. So making it seem as though he evaluatedthe program, saw the difficulties and stopped it himself is astretch, he said.

Maus likened what happened at Norlarco to a family living aboveits means. Things went awry because one spouse, the breadwinner,became a gambler to earn enough income to maintain a standard ofliving. They did well for a while but it only encouraged the otherspouse to keep spending freely. When the law of averages kicked inthey went bankrupt and lost the house. The bank foreclosed andtried to do a work out but the gambling spouse had left and wasreplaced with another who wouldn't cut back on spending so the bankhad to sell the house.

When both spouses expected the new owner to pay alimony andchild support and the new owner was unwilling, they threatened togo to the press and reveal all the dirty laundry in public.

“I'd view that as blackmail,” said Maus, who added that Hamerhad been trying to negotiate a sweet deal for himself for much ofthe time he was at Norlarco. “He spent a lot of time looking for anew job. This whole thing is very sad, really. We did what wecalled 'Fireside Chats' with the staffers at Norlarco, and thereare many wonderful employees. Many of them told us that they hadcompletely lost confidence in the leadership.”

Hamer said he was working with several search firms thatspecialize in CU job searches and added that “the companies I'mworking with know the truth. I really didn't want to walk out onNorlarco and its members so I haven't been looking hard until now.I met a lot of good people there and the whole experience can'thelp but allow me to grow professionally. I'm sure not bitter inany way. I just think I'm more capable.”

–[email protected]

Jim Rubinstein contributed to this story.