The management of Beehive CU didn't do enough to manage risk and operations, especially on its real estate loan portfolio, according to the NCUA's Office of Inspector General's material loss review.
The report found that managers of the Salt Lake City-based credit union, which was liquidated last December at a loss of approximately $27.6 million to the NCUSIF, didn't respond adequately to problems in investment concentrations, allowance for loan and lease losses methodology, and asset quality.
The credit union had inadequate risk management practices that resulted in a "high concentration of construction and lot loans, which led to material charge-offs when the economy turned and the real estate market deteriorated,'' according to the report.
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Also, the report concluded that the credit union's managers used a flawed methodology to calculate and fund its allowance for loan losses and didn't remedy the methodology when examiners pointed out the problems.
In addition, federal and state regulators didn't examine the credit union between March 2006 and November 2008. They cited the credit union's financial health (it had a CAMEL 2 rating in March 2006) and the fact that it was pursuing a charter conversion to a mutual savings bank.
The office didn't make any formal recommendations as a result of its findings.
However, the agency wrote in a response that as of November 2008 it began examining all federally insured credit unions with assets of more than $250 million at least once a year. The response also noted that the agency advised examiners last June of the actions available to encourage credit union managers to correct unsafe and unsound practices.
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