Colorado regulators seize credit union in hopes of saving it

Northwestern Financial Review, Jan 15-Jan 31, 2008 by Sandin, Erik

Regulators in Colorado took control of a Denver credit union with the goal of saving it for its low- and moderateincome members.

"We're doing the right thing for the consumer. We're doing our job serving the membership," said Colorado's Financial Services Commissioner Chris Myklebust about Zion United Community Credit Union.

Myklebust's agency assumed control of Zion United and removed its board of directors on Dec. 14, according to the National Credit Union Administration. Myklebust appointed a new, six-person board that includes two attorneys, two local credit union executives, a minister and an official at the National Federation of Community Development Credit Unions.

"We've brought in people who have a good sense of business, a good sense about credit unions," Myklebust said. "We still are working in cooperation with the NCUA. We're a team."

"The decision to conserve a credit union enables the institution to continue normal operations with expert management in place," an NCUA statement added.

Myklebust hopes his team can turn around Zion United. The credit union has about 1,300 members, assets of $4.2 million and serves a Denver community a few blocks from the state capitol.

Zion United's financial reports with regulators show the credit union's loans delinquent by two months or more soared at year-end 2006 to $178,370, more than twice the credit union's capital of $80,000. Myklebust, however, declined to say what Zion United's problem was, citing Colorado laws protecting credit unions' privacy.

Myklebust said another reason he wants to save Zion United is the institution's status as a community development credit union.

"They are the only community development credit union in the state of Colorado," he said. "There's a real value to a low-income credit union."

Zion United's community development credit union designation gives the group access to grants and funding not available to other credit unions or financial institutions, Myklebust said.

"They have a different set of rules for reaching out to people of modest means," he said.

Myklebust and the NCUA said service to Zion United members continues uninterrupted, with members able to make deposits and loan payments and access funds.

"Although we replaced the board, we kept the management in place," Myklebust said.

The state regulator would like to bring Zion United out of receivership sometime in the first quarter, Myklebust said.

By Erik Sandin