FORT COLLINS, Colo. -- "It could have been worse," said Bob Hamer, former CEO of Norlarco Credit Union, which has now been completely absorbed by Public Service Credit Union of Denver.
Hard to imagine as it sounds, Hamer said that although he wished he'd had more time to try and save Norlarco, he doubted that the NCUA's conservatorship could have been avoided. "The sheer number of loans and their geographic concentration made that impossible."
Hamer's other regret is not being able to deal with the press, including Credit Union Times, in an open and forthright manner. "It was discouraging that I couldn't respond with the truth. I think it would have made good sense to tell the press what we were doing to resolve things and that the parties to contracts were cooperating and trying to work things out. It could have gone much better, I think."
Norlarco posted $56 million in delinquencies at the end of June out of about $180 million in real estate loans outstanding, mostly in southwest Florida home construction loans, which led the state regulator to summon the NCUA. The agency placed the CU into conservatorship in May. Lawsuits brought by borrowers have now all been moved to federal district court in Florida, and the bad loans now reside with the NCUA's Asset Management & Assistance Center in Austin, Texas.
So coming out of a conservatorship combined with a large, healthy credit union (PSCU has $850 million-in-assets and Norlarco had $230 million) via a purchase and assumption was a good thing for Norlarco, Hamer said. "I'm glad they found a buyer, and PSCU is a good company and will take good care of the staff at Norlarco."
But Hamer lamented remarks attributed to PSCU President/CEO Dave Maus in The Coloradoan newspaper last week that seemed to cast doubt on Hamer's business ethics and management principles. Maus told the paper that PSCU offered jobs to "employees in good standing who will embrace and adapt to our business ethics and strong management principles." Hamer was "one of the people we didn't feel could do that. The business model that he has endorsed at Norlarco doesn't fit in with our business model and strong desire to serve the local community and become the premier lender in Northern Colorado."
Hamer called those remarks "disappointing," especially because he wanted to continue working within credit unions and is now seeking employment as a CEO of a mid-sized CU. He said he knows the CU world is a small one and negative remarks like those travel far and wide, often damaging a career. Hamer doesn't think he started the fire at Norlarco but only did his best to put it out. The damage was well underway before he came to Norlarco in 2006, he said. Hamer replaced Chuck Mabry, who has not responded to calls seeking comment from Credit Union Times.
"This program was utilized for years, four to five at least, and there were hundreds, if not thousands of homes funded and things went along fine. But some time before I got there the speculation reached a peak in 2006. Norlarco was extending loans to First Home Builders of Florida and First American Mortgage in Lee County, instead of doing so with several builders. That was all done before I arrived. Once I was able to settle in a bit I stopped that program in its tracks," he said. Hamer also said that Norlarco had attempted to reach a merger deal with PSCU before the
Coulda, Woulda, Shoulda
"I saw it, the state regulator [Chris Mycklebust] saw it, and finally the NCUA saw it. The concentration was too high," said Hamer. Asked why it took so long for the regulators to raise the red flag, Hamer explained that "inordinate comfort" was taken in the guarantees given by First American Mortgage on interest payments on loans and guarantees on closing costs from First Home Builders, which was bought by Hovnanian, which continued the guarantees.
Hamer said that for the first six months he was at Norlarco those payments continued from First Home Builders. "We were closing loans and for a while it all worked. Then, in January 2007, Hovnanian stuck its head up and said, 'Hey, we're paying interest every month; this can't go on.' I happened to be away from the office at the time, but I called Hovnanian and arranged for the January payment, and we reached an interim resolution for February and March."
In May, the collapse began when Mycklebust decided the situation was unresolvable, and he asked NCUA to conserve the institution, Hamer said. Homebuyers had begun balking at the contracts, and the real estate slump was off and running. "We began to look for any massive fraud of some kind and didn't find it. Looking back, I'd say that the concentration in one area was a bad call and I could say there's a lot to suggest it could have been different, but that was the hand I was dealt."
Hamer said he can't imagine that he would have seen the outcome from the circumstances he faced when he started at Norlarco. "I don't know what I could have learned up front to see the problems that arose later. I don't have a crystal ball. I saw the documents of resolution, you look at financials, everything, but..." The loans themselves weren't speculative per se, he said. "There was nothing to suggest that, and those outfits in Florida, that Millionaires University? I never heard of them until I saw the name in a legal filing from a borrower. And that guy [Frank] D'Allessandro? Again, never heard of him. We dealt only with First Homebuilders, which brought 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 in lawsuits over loans to consumers.)
Officials of PSCU have a decidedly different take on what happened and how Hamer dealt with it, however. Jane Willard, spokeswoman for PSCU, said that only three employees who were in good standing and sought employment with PSCU, were not offered a position. "Those individuals were provided with a severance package that included three months of salary and outplacement services. Bob didn't seek employment with us."
Willard did not say, as was reported in an online story by Credit Union Times, that Hamer was "dismissed," but neither would she deny it, and she affirmed Maus' remarks about Hamer in The Coloradoan as accurate. "Bob didn't seek employment with us," she repeated. But Willard acknowledged that "everybody knew he inherited issues and can't be blamed for what he inherited."
Hamer recalled the circumstances of his leaving this way: He said he had a conversation with Maus about his plans. "Dave asked me what I wanted to do, and I told him that as much as I'd like to work with him. I really liked running a moderately-sized credit union. And I asked Dave what his plans were and he told me he was staying. It was amicable and understood that I wouldn't be staying on."
But Dave Maus said Hamer knew exactly what he was getting into at Norlarco when he took the job in late 2006. "My remarks were extremely generous, in fact. When you speak about a former employee you don't want to be too disrespectful or say something you'll regret. But Bob knew what the problems were; there were no surprises. It was all a part of his accepting the job," said Maus. "He knew there was tremendous risk in the portfolio." Maus added that Hamer received a cease and desist order from the state regulator to stop the construction loan program almost as soon as he arrived at Norlarco. So making it seem as though he evaluated the program, saw the difficulties and stopped it himself is a stretch, he said.
Maus likened what happened at Norlarco to a family living above its means. Things went awry because one spouse, the breadwinner, became a gambler to earn enough income to maintain a standard of living. They did well for a while but it only encouraged the other spouse to keep spending freely. When the law of averages kicked in they went bankrupt and lost the house. The bank foreclosed and tried to do a work out but the gambling spouse had left and was replaced with another who wouldn't cut back on spending so the bank had to sell the house.
When both spouses expected the new owner to pay alimony and child support and the new owner was unwilling, they threatened to go to the press and reveal all the dirty laundry in public.
"I'd view that as blackmail," said Maus, who added that Hamer had been trying to negotiate a sweet deal for himself for much of the time he was at Norlarco. "He spent a lot of time looking for a new job. This whole thing is very sad, really. We did what we called 'Fireside Chats' with the staffers at Norlarco, and there are many wonderful employees. Many of them told us that they had completely lost confidence in the leadership."
Hamer said he was working with several search firms that specialize in CU job searches and added that "the companies I'm working with know the truth. I really didn't want to walk out on Norlarco 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't help but allow me to grow professionally. I'm sure not bitter in any way. I just think I'm more capable."
Jim Rubinstein contributed to this story.