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DENVER – Faulty construction and indirect loans, a portion subprime, apparently were major factors in the April 25 regulatory takeover of the $296 million New Horizons Community Credit Union of Denver, the state’s 10th largest, CU insiders reported last week. The sudden decision by NCUA and state regulators to form a conservatorship, dismiss senior management and a nine-member board was greeted with some angst in a state hard hit by economic troubles, particularly in the housing and high-tech market. “You know we now have the highest foreclosure rate in the nation,” said one CEO declining to be quoted. “And the ripple effect has forced a lot of small businesses to close up shop with employees moving out of state.” NCUA and state regulators moved in on New Horizons by ousting its president/CEO Tom Gressman, and nine directors who according to a statement by the Colorado Department of Regulatory Agencies had “resigned,” but were cooperating. Colorado CU sources said such an action might be a precursor to a forthcoming merger, but an initial sampling of the state’s largest CUs early last week showed no early feelers out. New Horizons, with 26,000 members and chartered in 1934 serving employees of Gates Rubber Co., had ROA of 0.32 at year-end, below the industry average of 0.90 and at the same time had experienced a high ratio of delinquencies.

In a press release distributed to Denver media, Chris Myklebust, the state’s top CU regulator who only took over the commissioner’s job just three weeks ago, said the New Horizons takeover was taken “in order to protect and preserve the interests of the membership” assuring members branches will remain open and public funds are safe.

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