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Hey everyone.

This is mark Treichel with another
episode of, with flying colors.

This is part of a recording I did
with Steve Farr and Todd Miller of my

team, Steve Todd and I worked on the
biggest and baddest conservatorships.

And CYA history and have a lot
of knowledge on this topic.

Uh, if you don't know what the
term conservatorship means in the

context of credit unions, that's
when NCUA removes the board.

And steps in and represents
both the insurance fund.

And the members for a
particular credit union.

So without further ado, Uh,
here is myself, Steve and

Todd on conservatorships.

Treichel: All right.

Conservatorships.

They're an adrenaline adrenaline ride
as a former special actions person,

as you two were you learn a lot.

You, they're, they can be a challenge.

They can be fun.

They can be scary.

And they can be very effective
when they're appropriate.

So let's talk a little bit about NCUA's
conservatorship approach and powers.

Miller: So conservatorships are quite.

Interesting, and I think one reason
NCOA doesn't go down the path of cease

and desist very often is usually by
the time you get to that place where

you have legal grounds to issue a cease
and desist, you almost have the legal

grounds to conserve a credit to and
by then problems are pretty severe.

They're usually related to the
people in place of being unable

or unwilling to correct problems.

Going through a cease and desist isn't
going to change that if they don't

have the competency to fix the problem.

Giving them a cease and desist isn't
going to magically resolve that problem.

There are almost always
people problems at this point.

You're almost always getting close
to involving potential losses to

the insurance fund at this point.

So from a legal perspective, quite
often, it's just as easy for a regional

director to pursue a conservatorship
than it is a cease and desist.

And then once NCUA is in control,
they can make a better assessment of

what are our potential losses here.

Can this credit union be saved?

Sometimes we've conserved credit unions
just because, We've tried to get them

a merger partner and people wanted 40
million in assistance and you can serve

them and you clean up the books and you
clean up some of the bad loans and that

cost of the insurance fund drops to 20
million the next time you bid it out

after NCOAs had a period of time hiring
some competent people to clean things up.

In other times, it was, You can clean
things up and end up with a stable credit

and you can return it to the members.

You just give it to a different
set of board of directors that we

recruit and the CEO that we recruit.

I always thought as a, PCO and as a DSA
that NCOA should do more conservative

shifts because you said you learn a lot.

And here's what happens.

We go through a recession
and we do a lot of them.

I think in like 2011, 2012 in our region,
we may have done six or eight of them.

I know at one point I had four
at one time, but you learn a lot.

And then the economy gets better
and all those people move on

and get promoted and retired.

And then eight years later, when
you're doing it again, you've lost

that skill set and you have to relearn
all the same lessons over again.

So I thought you should do more just
to keep people in practice because

there's, there are a lot of work
and like you said, they're fun.

The year when I was managing four of them.

Okay.

I didn't take a day off those weeks.

I worked on Saturdays and Sundays too.

When you brought me into Westcore,
so I spent a whole year there under

your supervision mark at westcore.

Similar things.

There's a lot of days that are fun.

You learn a lot, and there's other
days that are not very pleasant when

you're running a conservatorship.

But ultimately, NCUA, when they
do conserve a credit union.

I try and make a decision early on.

Is this salvageable or are we just
trying to put lipstick on this

ugly beast and try and reduce our
losses to the best of our ability?

Said Steve.

Farrar: Yeah, I had a unique opportunity.

It was pretty great.

I got to as working for
NCOA, I was involved in.

Direct supervision of a number
of conservatorships and assisted

people, with other ongoing ones.

And then post retirement, they
had the opportunity where I went

in and was part of the management
team that NCLA brought in.

To run a conservatorship, and so
it was nice to see both sides.

It was it was very interesting when I
was on the side of the conservatorship

management team that we had issues
of course dealing with our regulator.

It was in conservatorship, and so I even
I would get frustrated with the regulator

and then, I wanted, to stay focused on
the issues that needed to be resolved.

And so it, it, the, it still is, NC
way, the conservatorship team is still,

working with the regulator on that.

And it can create problems.

The other thing that we had is usually, as
Ty pointed out, we're, you can serve them

because you just can't deal with mainly
the people or the board of directors that

are there anymore, just aren't taking
care of it and putting the fund at risk.

The 1st thing you clean all of that
out, and then, when you come in and

conservatorship, the 1st thing we
would, we did an action was actually

on there was we reviewed the abilities
of all of the senior managers.

To make sure that they were the people
we needed to resolve everything.

And there's usually a large number
of terminations that would take place

because we need to gain efficiency.

Also, I think,

Treichel: yeah, I think even back in
the day, they'd say those were part of

the those who were part of the problem
will not be part of the solution.

So it comes in the board is removed.

The regional director represents the.

Members serves as the board and
then also as the regulators.

If if there was someone who was in a
loan program that went haywire and should

have known better, those folks will go
find their happiness elsewhere under

the conservatorship and then oftentimes
NCWA will bring in a team like you

mentioned and I believe that I know
the one you worked on, it was one of

those success stories where the region
was able to turn it back to the members

and It's out there thriving right now.

And another one of yours,
Steve, I think they, they named

a boardroom after you, right?

The Steve Farr boardroom.

Farrar: Yeah, because we're
going to build a cheap building.

You need a new building.

It's going to be we're going to do it.

Yeah, those are nice when you can go
back and Todd and I have that thing is,

you go back and you go back and look at
those conservatorships and check their

numbers every now and then and say.

Okay.

It would be really neat to go
visit them again someday, but

We probably don't, but yeah.

The conservatorship I is is, we always
refer to this kinda the most extreme

option NCA takes 'cause it, has to
be approved by the NCA board and then

you gotta go back to the NA board
when you have the success and you're

returning it to the credit union.

And NCA board would also be involved
if they turn into a liquidation and

stuff because the regional director.

Is appointed by the board nso, a board
is in charge of it, and then they appoint

regional director that is basically, but
the conservator, I'm trying to remember

exactly what that document agent for.

The conservator, the
agent for the conservator.

And then letters are written to,
everybody who's working in that case.

That's, you're subagent
of the conservator.

So it's it, lots of legal
paperwork is completed.

Treichel: Lots of legal paperwork.

And as you're talking through
that I'm getting a smile on my

face cause I'm thinking about,
that, so there is no board, right.

And then you could have an advisory
board, which might be some, which will be

some NCA staff and that there was this.

There was this pendulum that swung towards
we need to have more robust documents

of what the conservator is doing and
there'd be formal board meetings and

then there were lawsuits and then the
pendulum swung as we don't need as robust

board documents for conservatorships.

And then I contrast that this is a total
non sequitur kind of sorta, but then I

contrast that with where NCOA is going
on corporate governance right now, as

far as you must document everything.

Or that's how some examiners
are interpreting it.

And and as we've told our
clients, there's some things you

want to put in board minutes.

There's some things you don't.

NCWA wants to understand that, that you're
involved and that the board is doing what

it needs to do, but there's a balance.

And you, as a conservator, You would
be running the credit union and you

would start to understand some of those
balance issues more than you would have

just being a government NCOA worker,
which goes back to Utah and saying

it'd be great if they did more so
people could learn from the process.

Miller: I always thought that balance
was one of the hardest things to

strike because most of the time when
you're Involved in a conservatorship,

the credit is not going to survive.

There, there are ones that do survive
and we've all mentioned that those

are high points in our career when we
get to return a credit to the members.

Most of the time they don't, but the agent
for the conservators got a tough road.

A hulk is.

They're there as the members
representatives, and sometimes doing

things that are best for the members is
not what's best for the insurance fund.

And they're also a regional director
in most cases, and they're there to do

what's best for the insurance fund, too,
and sometimes there's a conflict between

those two things that is difficult to
navigate, which is why sometimes you

want less documentation about things.

But for the most part, fixing troubled
credit unions, whether they're

in conservatorship or not, or the
conservatorships that we have resolved,

they almost always going back to doing
what's in the best interest of the member.

That's generally the way you fix the
credit union is get it refocused on

what is in the best interest of the
members here and you go through that

process and generally that's what you
go through to actually fix a credit

union and return it to its members.

And I think even for credit unions
that just get an unpublished LUA or

even a door, if they keep that in mind
that what's in the best interest of

our members, it's going to lead them
down to the right path, not just.

When you're in a conservatorship, it
just seems to be the heart of a lot

of present problem resolution and
pretty gains is what is really in

the best interest of the membership.

Treichel: And you know what?

That's my alarm that says it's
time for a client call, guys.

Thanks so much for sharing
your wisdom on this topic.

I know it gets my blood flowing
talking about conservatorships

because it brings back good memories,
bad memories, and scar tissue.

Thanks for your time guys.

Have a good day.

You too.

And those who are listening, I
want to thank you for listening.

I hope you'll listen again soon.

This is Mark Treichel signing
off with flying colors.

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