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Oct. 7, 2013 – The NCUA Office of Inspector General released its material loss review of Chetco FCU, of Harbor, Ore., on Friday and said "inadequate management and board oversight" was to blame for the credit union's failure in 2012.

NCUA liquidated Chetco last December, after 15 months of conservatorship. In June, NCUA's OIG said the agency would conduct MLRs of three credit unions, including Chetco, to determine why they failed and if NCUA was remiss in its supervision.

In its report, the office said, "The Board of Directors and management exposed the credit union to excessive amounts of credit and liquidity risk due to its failure to set appropriate limits and maintain the appropriate risk management infrastructure to support the growth in the Member Business Loan (MBL) portfolio." The report said Chetco's MBLs represented more than 600 percent of its net worth in 2008.

Regulations limiting credit unions to 175 percent had been waived for Chetco because of its low-income designation. The MLR said problems could have been identified earlier by examiners but for limited resources, a lack of focus on MBL renewals and modification processes, and several other oversights.

NCUA's OIG is required by the Federal Credit Union Act to conduct an MLR on a failed credit union when associated share insurance losses exceed $25 million. It is also required to do an MLR if a credit union of lesser asset size fails amid unusual circumstances, per the Dodd-Frank Act.

A NAFCU summary of NCUA MLR findings is available here.