ALEXANDRIA, Va. – The 2010 failure of Beehive CU, the one-time $190 million Salt Lake City credit union that failed in its effort to convert to a bank, was largely caused by weak management and board oversight and lax regulatory oversight by NCUA and state regulators, a new report issued this afternoon by NCUA’s office of the Inspector General concludes.
The IG’s Material Loss Review found that both state and NCUA examiners ignored the credit union and neglected to make supervisory contact for almost three years–32 months–from March 2006 when the credit union applied to convert to a mutual savings bank, until November 2008, when it teetered on insolvency. The bank charter was subsequently denied by the FDIC amid the credit union’s growing losses.
The failure of Beehive, one of a handful of large Utah credit unions to fail in 2009 and 2010, will cost the National CU Share Insurance Fund almost $28 million in losses, the report stated.
The report concluded that the ultimate cause of the failure was an over-concentration of construction and lot loans during the over-heated Utah building boom. “In 2007 when the economic dislocation began, management did not respond timely to the declining property values, which eventually led to rising delinquencies and foreclosures, followed by declining net worth,” the report concluded.
After Beehive wracked up almost $18 million of losses between 2007 and June 2010, NCUA took it over and sold the remnants of the failure to Texas credit union giant Security Service FCU.
