DENVER — Mindful they could end up as bidders for the good assets, large Colorado credit unions last week began assessing the fallout from the collapse of the $330 million Norlarco Credit Union of Fort Collins seen by most as a prime example of over-reach into risky construction and real estate loans.

A sampling of CEO views among the state's largest CUs shows a keen interest in eventually bidding on Norlarco in a purchase/assumption deal once NCUA decides how to handle the “daylight” conservatorship imposed quietly in May.

“It's a pretty complex case given the participation loans and the lawsuits and so it might be until next year” when NCUA unravels conditions and “returns the credit union to its members,” forecast William Sterner, the chairman of the Colorado Credit Union Association.

The bustling Fort Collins market, north of Denver and home to Colorado State University, is a highly desirable growth area for CUs even though it is also well-banked, said Sterner.

At the moment, however, the state and NCUA must deal with what he called a “sticky wicket” considering there are “some 25 credit unions and a couple of banks that had participation loans” with Norlarco.

Under the NCUA conservatorship, the Norlarco board was removed, but new management including Robert Hamer, its president/CEO and formerly an executive with Mission Federal Credit Union in San Diego, was allowed to stay on.

That differs from the conservatorship imposed by the state and NCUA on the $152 million New Horizons Community Credit Union of Denver, which failed a year ago for similar reasons and last June was sold in a sealed auction to Security Service Federal Credit Union of San Antonio,

Like New Horizons which got into trouble over subprime Centrix indirect auto loans, Norlarco's problems related to ill-fated Florida real estate operations, some of which are now being adjudicated in the court suits, said Sterner.

The lesson now for CUs in Colorado and elsewhere is to stay close to local business and avoid chasing yield, maintained Sterner, who also is president/CEO of the $720 million Elevations Credit Union of Boulder.

Credit unions have to be realistic in evaluating risk “and understand completely the business you're in,” said Sterner who also revealed that a year ago Elevations had seriously considered a Norlarco merger, but plans fell through when some of its portfolio problems came to light.

Alan Peppers, president/CEO of the $906 million Westerra Credit Union of Denver, the state's third largest, said his CU “if invited would certainly look at Norlarco” as a merger candidate.

“We look at all situations like this on an individual base but it is too soon” to determine what might occur, observed Peppers, whose CU over the last two years has been active in merging CUs in metro Denver.

A likely bidder for Norlarco would also be the $1.5 billion Bellco Credit Union of Denver, the state's second largest, which was unsuccessful in its reported New Horizons offer to the state and NCUA among a group of 12 CU groups.

On that score, Bellco got into an unusual Internet ad spat last week with its Texas rival, the $4 billion Security Service, the successful acquirer of New Horizons.

In what Security Service called a “very disappointing” gesture and harmful to the industry, Bellco opened a new Web site and placed bus bench and truck trailer ads urging New Horizons members to switch financial institutions for the sake of keeping funds locally invested.

But Security countered that it has had a Colorado footprint for 27 years with Denver area branch operations, plus it has long been regarded as a valued corporate citizen unworthy of the Bellco media blitz.

In the ads titled, “Don't Let Your Money Leave You Behind,” appearing on a Web site, banklocalatbellco.org, Bellco suggests the funds of New Horizons members are leaving Denver and “headed to Texas.”

For the New Horizons member, “it will almost be as if you're with a big out-of-state bank instead of a friendly local credit union.”

As part of the promotion and in letters sent to New Horizon members, Bellco offers to deposit $100 to New Horizons members for a Bellco checking account and $25 for savings.

While expressing dismay at the Bellco move, Security said since June it has received favorable response from New Horizons members opening 193 accounts.

In defending its ads, a Bellco spokeswoman maintained the CU has a “long-standing commitment to the metro Denver community spanning 70 years and believes that locally based credit unions offer the best value and services to members.”

“Our awareness campaign lets New Horizons members know they have the option to keep their money in Colorado where decisions are made locally,” said the spokeswoman. The campaign is slated to run through early October.

Echoing his spokeswoman, Douglas Ferraro, president/CEO said “local ownership is very important” and that its “money-leaving-for-Texas” ads would be directed at any out-of-state institution.

“We'd do the same whether it's WaMu or Wells Fargo,” said Ferraro referring to Washington Mutual Savings Bank of Seattle or Wells of San Francisco.

Sterner, the league chairman and Elevations CEO, said Bellco's attempt to corral accounts “makes sense since they were a low bidder” for New Horizons.

Security simply has to understand “we live in a competitive world,” declared Sterner joking about the phrase, “I support the free enterprise system but keep out the competition.”

As for Norlarco and Huron River Federal Credit Union of Ann Arbor, Mich. and their venture into Florida real estate, Sterner compared their troubles to “just what happened to those Rhode Island credit unions” of years ago when they went far afield in construction loans.

“They were out to make a killing but did not comprehend the downside risk,” said Sterner.

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