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Treichel: Hey everyone.

This is Mark Treichel with another
episode of with flying colors.

I'm back with two frequent guests
to two of my team members, Steve

Farr and Todd Millard guys.

How are you doing today?

Steve: Doing good.

Very well.

Treichel: Very well.

All right.

And we're going to, we're going to chat
today about what we're seeing, what we're

hearing in the landscape of our credit
union conversations with our clients with

just general conversations we're having
with credit unions at transitioning over

the last couple of years, what NCUA is
doing as it relates to exams right now.

But before we jump into that, let's
The folks that listen to every podcast

know who Steve and Todd are, but for,
we might have some new listeners today.

Steve, why don't you give a little
bit of your background in credit, in

the credit union world and at NCUF.

Steve: All right.

Sounds good.

My career over 30 years in, so it
can really be broken into two parts.

The first half of it.

It was spent in the field in the, as
in the examiner ranks, most of it is a

problem case officer working on the, those
troubled credit unions, mainly on the West

Coast, but I ended up being involved in
conservatorships throughout the nation.

Then I ended up in the central office
about the time Mark went into the

central office and I worked remotely
in the division of risk management.

And that was a great job because
I got to be involved in lots

of issues throughout my career.

Some of the more interesting ones is
I ended up writing the enforcement

manual was involved in the corporate
resolution, and then the last part

of the career, I worked mainly on
the risk based capital regulation.

Treichel: Very good.

Very good.

And Todd a little summary of
your 34 plus years at NCUA.

Todd: I spent 34 years.

I would break my career into
three parts instead of two parts.

I spent about a decade or a
little bit more as an examiner

and a problem case officer.

Then I spent a decade or so as
a capital market specialist, a

regional capital market specialist.

Then I spent the last 11 years of my
career as a director of special actions

in the Western region, supervising
problem case officers and capital market

specialists and That tenure started
right during that last recession.

So it was a pretty busy time as
a director of special actions

during that last recession.

Treichel: Boy, isn't that the truth.

So two funny stories that just popped
into my head before we start off.

I, Steve, you mentioned that you came into
the central office about the time I did.

And there, there's a correlation there
because when I was the, and if for

those NCOA folks listening here's a
little bit of NCOA history, you may

not be aware of the Agency did not have
remote staff other than their examiners.

If you worked in the office,
you had to be in the office.

If you worked in the office of
examination of insurance, you

needed to be in the office.

And up until that point in time,
leadership had not wanted to do that.

And then And I director Dave Marquis
was having trouble getting his positions

filled and getting good applicants.

And I said why don't you
offer a remote position?

You might get someone
like Steve Farr to apply.

Cause Steve and I had worked together
in the West coast and he, and Dave

looked at me, he goes, can I do that?

And I said, sure, why not?

So we announced it, the announcement
came out and Jane Walters comes

running up from the fourth floor says.

What's this?

You're letting he and I take remote staff.

This doesn't make sense.

And I said well, Jane, I think,
they need to have a broader pool.

And I think they can do these
jobs from the field and don't

necessarily have to be there.

And we need our best and brightest
to be willing to take raises.

And if you got really smart
people sitting in Montana, they're

never going to be in Montana.

The agency can be better
if we offer these.

I might not have given that example,
but that was what was in my head.

Cause but I did suggest to
Dave that Steve might apply.

Lo and behold, Steve did apply.

He ended up getting the position
and then later actually ended

up moving to the East coast.

And so that's the history of.

The remote analyst, the remote
anything at NCA goes back to that

conversation between Dave Markey and I.

And of course, they might have gone
there at some other point in time, but

we had then opened it up to the regions
and they ended up starting doing that,

which created better career paths.

And then Steve and I.

You talked about conservatorships
and different things you worked on

the corporate crisis and then I got
thrust into the corporate crisis and

needed to bring in people that I, A,
that I trusted and B, that were smart.

And Todd, sometimes you'll refer
to your last year at Westcorp.

When I swore you to secrecy and
brought you in to help us figure

out next steps at West core.

So there, those are two additions
to the journey that you two were

on and which bring back fond and
fond memories, but scar tissue.

All right, guys.

So it's been an interesting
year so far in credit unions.

It's been an interesting
couple of years in the economy.

And we're seeing.

As I like to say there's a rhythm
to what we're seeing based, on, on

history and also based on where the
trends and examinations are going.

But let's speak a little bit to
the conversations we're having

the things that we're seeing
repeating out in credit union.

land as it relates to examinations.

Anybody want to proffer
up one thought first here?

Todd: Sure, I can go first.

It's interesting each year NCUA issues
a supervisory priorities letter and what

we see are somewhat consistent with that.

If you look at the last couple
years back in 2022 2023 When that

yield curve inverted and you started
seeing rates climb those years there

was a heavy focus in our clients.

Almost all of them were getting
doors and findings on interest

rate risk and liquidity risks.

A lot of our clients were asked
to reduce their interest rate

risk back in 2022 and 2023.

Loan concentration issues seem to
have been an ever present thing

during the last two or three years.

As we got into last year and this year,
we have an emerging type of trend, and

it's probably a positive one where the
examiners seem to have a very increased

focus on board governance, and there's
lots of pieces to that board governance

one, but that's a big one that we're
seeing here in the last year and a half

or so is this focus on board governance
and our board members putting, having

appropriate oversight over their staff.

And then the commercial lending has
been a big thing last year and this

year, especially, and the other thing
we're seeing, and this has been a

constant during this whole time, is
they're really focusing on weaknesses

in commercial lending programs.

We've even had a couple of clients
that have been told to cease commercial

lending until they fix some of their
internal controls and program monitoring.

So that's a new one.

That's a good one,

Steve: Todd, because that, just imagine,
though, if you're listening to this and

then Sui came in and your program that
is probably your cash cow and has a

number of staff in there and they tell
you to cease that, just think of how the

impact of that has on you and now you
have the challenge of, If they're good

people retaining them while you're not
producing new volume it's so that is it's

a huge obstacle, but needed to be done
in most of those cases, because the risk

could become just so great but boy, that,
that's, that is almost a poison pill,

Treichel: That, that.

That word cease.

I remember when I was executive director
credit union on the East Coast that

in the region I used to supervise a
really smart examiner actually put

into a use the word cease, right?

Which is not a good word to use in
the exam, just because of the concept

of cease and desist order, which
is like this legal document that is

rarely used, but it's used in banking.

It's used at NCUA on very rare
occasions, but discontinue, you'll

see people use, but I think.

That one particular case that I
am mentioning might have been what

triggered I know, Todd, in some
of our conversations, you have

mentioned that if you're going to
tell someone they have to stop doing

something that the policy now at N.

C.

U.

A.

Is That needs to be run up the
flagpole to a higher level.

Is there anything you can share relative
to your memories on how that policy works?

If someone's going to say stop commercial
what does that trigger at NCUA?

Todd: Ceasing anything at NCUA
requires your supervisor's approval.

An examiner doesn't get to make that
choice themselves and while it's not

required, I suspect anytime a supervisor
has got a recommendation from an examiner

about ceasing a program, I'm pretty
certain that supervisor is going to have

a conversation with the ARD as well.

It's going to be a couple levels above
an examiner's head that it's going

to sign off on a door or an action
that says cease an activity because

there's just reputation risk involved
in that there has to be a certain high

degree of risk to the insurance fund
when you tell a credit union to see

something because you are creating
reputation risk for that credit union.

Like Steve says, you risk
people leaving at that.

Is going to be a short term thing.

Generally, when NCOA asks you to cease
a program, they have conditions in

place before you get to restart that
line of business again, and usually

the problems are severe enough that
you don't get to fix those, or you're

not able to fix those in two or three
months, it's usually an extended period

of time to meet all the conditions you
need to meet to restart that again.

So they're pretty significant
actions on the part of the agency.

Treichel: We did have one situation
where we were able to assist a credit

union that had the worst word ceased
come forward in a draft document, but

the things that Steve mentioned and
Todd that you just mentioned that if

you shut a program off in totality,
it's harder to turn it back on.

And oh, by the way, what
happens to your staffing?

And will you be positioned
to keep them or not?

And in that particular instance, without
going into details, we were able to it.

The credit union and with discussions
with us, we're able to get the N.

C.

U.

A.

to give a little bit more
flexibility relative to that.

Now you can see them telling or
we've seen them say that they need

to cease because of non compliance.

And we've seen them.

Tell credit unions to cease because of
concentration risks, or perhaps that

they don't believe the concentration risk
the risk appetite, if you will, has been

adequately defined by the credit union.

So it couldn't be that particular topic.

I've seen it coming from
different directions.

Any thoughts on?

I don't think risk appetites is
anything we've discussed here yet.

But board governance,
concentration risk appetite.

Any thoughts on what we've seen or what
you're hearing on the risk appetite front?

Because that's a subcategory of a
theme of a lot of our discussions

that that I'm recalling from the
last two, three, four months.

Todd: It's somewhat interesting,
and the agency says cardians outside

of ones that don't need enterprise
risk management type programs.

But more and more, if you actually
read the doors that people are getting

the board governance issues, they're
getting specific to concentration risk.

And we've been seeing
this for the last 3 years.

They want cardians to justify.

Their risk appetite and those
concentration risk limits.

They want actual modeling support
that those limits are appropriate.

And those are all directions of they're
really moving every institution out there

towards having a reasonable capital plan.

A reasonable risk appetite state.

So they're getting everyone 80 percent
to an enterprise risk management program.

That seems the direction
that they're pushing.

I think some of this board
governance is a subset of that too.

They want the boards to know
exactly what the risk appetites

is in their credit unions.

They want to know what the credit unions
risk position is and there's a greater

expectation, or at least their Putting
down on paper, a greater expectation for

boards to supervise and hold management
accountable for these risk positions.

And that's not a bad thing.

It's probably a good thing.

Treichel: In the whole management
accountable in, in corporate governance,

I've said this, I don't know if I've said
this on the podcast, but I've said this

in some conversations with clients, it
almost seems as if when the examiners see

something that happened, they didn't like.

Whether there was zero board governance
or 80 percent of what NCUA wanted

to see in board governance, they
raise it as a board governance issue.

It's, here's a program that went awry,
or here's a program we're questioning,

or here's a program that doesn't
have enough safeguards around it.

NCUA staff have been have had advanced
training on board governance when maybe

when they got down together in New
Orleans last year, but it's definitely

a theme that's running through that.

If there's a door that's
tied to a, B or C.

It may also be linked to
board governance, but.

Todd: We see that word
appropriate oversight quite often.

We see them holding board governance
accountable for a higher level of

accountability for strategic planning.

Profitability issues are under that
umbrella board governance that we've

seen a very big one that we're seeing is.

They expect board members to have a
hand in due diligence on new programs.

New programs have come up multiple
times in the last year where there's

an expectation the board is fully
aware of the risks and rewards of new

programs and they're throwing that
under the board governance issue.

Treichel: Even going so far
as possible new programs.

I've seen credit unions get dinged where
they're just contemplating, think we might

be thinking about having a discussion.

Why wasn't the fact that you might
be thinking about possibly having a

discussion in your board minutes which
in that particular instance was a little

bit farther than I think reality would
have been appropriate in, but it's

definitely a focus that they're having.

And one of the thing that popped into
my head and I, this is some research I

need to do There is no broad requirement
for enterprise risk management.

The ones credit unions is
where that all started.

And there is an expectation
at ones that they are going to

have enterprise risk management.

Corporate credit unions by
regulation are required to have

enterprise risk management.

Somewhere along the line.

And I'm not really certain when there
is a portion of NCOA's examiner's

guide that says, there enterprise
risk management guidelines for

large credit unions, but it does not
define what large credit unions are.

And as I'm thinking through
that we've talked a little

bit about the Chevron case.

The way the examiner guide works now,
it's like a living, breathing document.

They go in there, they make
a change to something, it's

not announced to the world.

It might be redacted.

So the world really
doesn't know what it says.

But there's this new section, whether
it's 6 months, 12 months, 18 months.

I'm guessing it's more around a 6 month
timeline on enterprise risk management.

It's going to be interesting.

To see how that trickles down.

I think the challenge ultimately
that they have is if they come out

with a letter to credit unions on
enterprise risk management that

could lead to people pushing back.

That could lead to what's
this board member one in it.

What does that board member want in it?

And so there's A subtler way for NCUA
to effect change, and that's by dropping

it into the examiner finding or dropping
it into the national Supervision Policy

manual, which is also heavily redacted.

So it makes it challenging for credit
unions to understand the expectations.

It makes it challenging for it just makes
it challenging because of the whole, the

challenge of safety and sound is bringing,
being a broad brush that NCA paints with.

Frequently.

Steve, you and I had talked a little bit
about the challenges of the new world

that might become because of Chevron.

Any guys, anything I've said there
trigger anything in your head.

Steve: Let's just cover the
topic of what we see a lot of it.

It's just frustration and that the
frustration is usually directly

associated with their communications.

With their examiner, which is I'm telling
you that's been going on since, since

the Babylonians cross Euphrates, right?

But we know that the whole time,
but what's happening now is you

do have, examiners getting back
into the credit unions and looking

at things a little bit more.

And, they don't really have
frustration with what problems

they're finding that the credit union
has, that's usually not the issue.

There usually can be an agreement with,
yeah, here's what our problems are.

Sometimes the frustration is in
exactly how it's going to be fixed

and the cost of which that's going
to be and the timeframes for that.

But if it really comes down
to the main thing is that.

How you're communicating with
that examiner can have a lot to do

with how you see your regulatory
process working for or against you.

We understand, there's these different
between, the different generations and

how they want to go about communicating,
but it is and I, and we hear about a lot.

So we we tell, the credit unions, do
what you need to do on your end of

the communications, and when you have
a communication with your examiner,

whoever, follow up with that email that
says, here's what we discussed, here's

my understanding of it, but to try and
reduce that frustration level, and I know

you guys will have more thoughts on that.

Treichel: That's a great conversation
that I think we should have.

I got a couple of thoughts, but Todd,
I'm going to let you chime in first.

Todd: The communication part has
always been an issue, and I think

some of it today, they missed a
lot of things during COVID years.

And we're seeing that with some of
our clients that they're bringing

the issues to light that actually
existed for a couple years and

were not brought up before.

Like Steve says, that creates
a little bit of frustration.

NCUA's policy and practices have
always been when you have issues that

the credit union needs to address,
they're supposed to sit down with

management and have a conversation.

How do we best address these?

There should be some give and take.

There should be some give and take
on timelines to correct things.

And more and more of what we're seeing
is exam reports are taking a long time

from the time they finish field work
till they get to the credit union and

then the credit union gets surprised.

You know that they get a door and they're
given 60 days or 90 days to fix it and

it's a total surprise that they haven't
had this discussion about this issue

with their examiners during the exam.

And I think some of that is maybe
resource constraints on the part of NCUA.

They're a little bit behind.

Maybe some of it's just you know,
they got into bad communication

habits during COVID and aren't used to
sitting down and talking to management.

Some of this is on credit unions.

We have some one client where
none of their management teams are

on site, even though the credit
union examiners came on site.

So there's both sides to the
communication breakdowns.

Credit unions, you're
responsible for your members.

So if your examiners not doing their
part, I guess you have to step up your

game and do your part a little bit more.

But communications is a big piece of
this and surprises don't go over well

and some of our credit unions just seem
to be surprised more and more that they

get a report and there hasn't been a
full discussion of these doors in them.

Treichel: It's I wrote after Steve.

Brought this topic up.

I wrote down resources and no
surprises or surprises and there

really shouldn't be surprises.

Back in the day you had to give them
the draft report when the examiners

were allowed to give camel in the
full report a week before any meeting.

And, today we just last week there,
there were credit unions finding out

at the joint conference, what the code
was not having seen any documents other

than draft doors that were delivered.

Two months earlier and the timelines
had already passed and it's a little

bit almost like trying to get.

Sadly, I think there's a little
bit at the agency of trying to

get toothpaste back in the tube.

They're having difficulty
getting their work done timely.

They brought it up at their board
meetings that the only 80 percent of code.

3 is we're done within policy.

Excuse me.

Only 67 percent of code.

3 is we're done within policies.

Only 80 percent of code.

4 is we're done.

It within policy meanwhile, camel
codes are getting worse, meaning

they're having to do more follow
up exams at the credit unions.

They have while half their staff has
come on since the or more of their staff

has come on since the Great Recession.

And it hasn't seen the churning
of the challenges of what camel

codes can do to their resources.

And, oh, by the way, what it can do
to credit union resources when comes

back every 6 months instead of every.

12 months or 18 months if
you're on an extended cycle.

So yeah, the communication, it
goes back to the beginning of time.

And it's wreaking havoc
in some situations.

And so the best advice for credit unions
is what Steve said there that To document

what your agreements are encourages
taping of exit conferences, which when

they first came out with that approach,
I really didn't think was necessary.

But the more time goes on,
I think that's a pretty wise

step in the electronic world.

We're living in here today.

What todd, you brought up Previously,
the heavy focus on interest

rate risk and liquidity risk.

That's seems to be trending down in 2024.

We've talked about board governance.

Steve, I know you have mentioned
on the topic of board governance.

We're seeing it a lot, but
there's a document that you

like to refer clients to a lot.

Could you do you remind me what that is?

Steve: Yeah, it's something I carry
with me almost everywhere I go anymore.

So it's it's was put out by the FDIC,
and it's the title of it is Guidelines

Establishing Standards for Corporate
Governance and Risk Management for

Covered Institutions with Total
Consolidated Assets of 10 Billion

or More, and this was put in the
Federal Register in October of 23, 23.

We do find, there's this trickling
down it's really good guidance and I've

shared it with some people I know that
are on boards of large credit unions and

they're like, wow, we're not subject to
that because they're usually below 10

billion, but the guidance, they find it
to be really helpful and as a good tool

towards training, training their board
members, And just it's a requirement to

have them read through it because it has
a wonderful definition of risk appetite.

And, the training of the board and the
responsibilities, the 1st, 2nd, 3rd line.

It is something that we do, we have been
sharing with anybody that is starting to

get that corporate governance question.

Treichel: Yeah, that's
a really good document.

Like you said, they're not, you might not
be a 10 billion dollar credit union, but

whatever size credit you are, you can.

Learn good basic principles
by reading that document.

And you might glean, if you're a small
credit union, you might glean two or

three things that you might want to add.

If you're less than 10 billion you
could probably bullet proof your

board governance if you took a
lot of those principles into play.

And of course there's costs associated
with it, but some of it's just

common sense on things you need to
think about, like having an ethics,

a link to it, et cetera, et cetera.

Todd: I think you can even
circle back a little bit more and

understand why NCUA is doing this.

If you look at all their letters and you
look at the regulation, they use this word

with risk management systems commensurate
with your size and complexity.

And the fact of the matter is, As credit
unions even cross that billion dollar

threshold and you start having complexity
where you got commercial lending programs,

you got third party lending programs,
you've got direct real estate lending

programs, you're selling things on the
market, you have a high level of interest

rate risk, even though your asset size
might be a long ways away from 10 billion,

your complexity is approaching that level
and realistically to stay competitive

and operate your institution in a safe
and sound manner, your risk management.

processes have to evolve to almost
where they're at that point.

I tend to call it like a
ruler of sophistication.

And even when I was a director of
special actions and I'd get a billion

dollar code for, we would actually put
in our door that, they needed to get an

enterprise risk management system in place
before they got out of special actions.

Cause the reality is once you get a
code for, and you get it fixed, you

want it fixed to the point where it's
never going to come back to that again.

You don't want to see problems
repeated and having good risk

management systems in place.

It prevents those problems from
being repeated down the road again.

Treichel: That reminds
me of a conversation.

Again the conversations bleed together.

The longer we do this, whether it was
on a different podcast or with a client

where you made the point of when.

When you went into capital markets, how
the agency was behind the curve on banks

and credit unions were behind the curve.

And now that's more of a mature
understanding at NCUA and at

credit unions, albeit it's been
challenged over the last couple

of years with things going on.

And the, the correlation to that's
where corporate governance is at, right?

NCUA doesn't require
enterprise risk management.

They probably should, at least at
some level, but The way they're

bootstrapping that is by raising
the bar on corporate governance

which in general is a good thing.

We might see it on steroids sometimes
when it doesn't need to be on steroids,

but it's a good discipline for everybody
to be aware of and to wherever they're

at on it to improve is a good thing.

Steve: Along those lines, another
topic I want to bring up is that, we,

I think we've seen issues where there
was more requirements for different

types of stress testing and Todd,
I'm sure that you might have kind of

thoughts on that because there's a
cost and benefit associated with those.

And if you agree that's something that
we've been seeing a little bit more of.

Todd: We've seen this actually we've
been seeing it for the last three

years is on the concentration risk
and it reflects actually back to any

policy limit you set, whether it's
liquidity limits, whether it's interest

rate risk limits, whether it's loan
concentrations, borrowing levels, there's

an increasing, it's not an increasing,
it's been there for the last three years.

There's an expectation from
examiners now that credit unions can

analytically support those limits,
along the rulers of sophistication.

You use experience.

Hey, this is where we set the limit.

We think this is appropriate.

While that was appropriate in
the past it doesn't seem to be

sufficient for examiners today.

They want stress testing for these limits.

In some cases there's Simpler,
less expensive ways to do that

stress testing at other times.

Some of the stress testing
gets very costly and expensive.

It's very sophisticated.

We've seen credit unions where examiners
on just on their documents resolution.

They want commercial loan portfolios
stress tested at an individual loan level.

So the expectations for some of
that stress testing and supporting

of concentration limits is
getting very high and It's been

there for the last three years.

We see it almost all the time and it
used to be You looked at these limits

per net worth and it was examiner's
judgment, you know this examiner.

He's comfortable with 400 net worth
in first mortgage loans and then You

know, examiner B comes in, and this
young lady is not comfortable with 400.

And then someone like Steve or I
come in, we're comfortable with 500.

There's different informal
risk levels that examiners set

based on their own experience.

Anymore they're moving away from that.

And, they're not leaving it
up to examiner judgments.

We're just seeing doors and bindings
that Credit union, you need to

support your risk limits in some
analytical way, shape or fashion.

And like I said, sometimes
it's easier to do.

Sometimes it's extremely expensive
process for credit unions to go through.

And it almost leads back to, and
credit unions don't, or examiners

don't articulate it this way.

But it really leads back to just
about every credit union needs

to have a capital plan nowadays.

And, right now that's
only expected of ones.

But, you mentioned it earlier, Mark,
some of these expectations on ones credit

unions seem to be filtering down to credit
unions, that are even under a billion

dollars in some cases when it comes to
stress testing concentration limits.

Treichel: And that becomes a challenge.

I know, The, the board packages.

So if you have board governance,
what does board governance need?

You need to have a capital plan.

You need to stress test this.

You need to stress test that.

And there's this danger of, let's
just add another, let's just add

another layer of documents to, to what
the board has to see that the board

has to sign off on beyond what the
regulations say the board has to approve.

And it's because you become, Lucille
ball trying to get the chocolates

onto the, into the chocolate box.

Cause there's only so many hours a day.

There's only so many resources
and the smaller you get, the

less of those resources you have.

But an NCOA examiner see something
good in a 10 billion credit union.

And then they do it in an 8 billion
and then they do it in a 6 billion.

And the trickle down is real.

It just happens.

I knew it happened when
I was at NCOA, but.

We see it all the time here, and it's
a delicate balance between it all being

wise and good to creating a burden
that is just gonna lead to unnecessary

mergers, et cetera, et cetera.

Any thoughts on.

Where we're at on that pendulum or any
disagreements on how I frame that there.

Todd: I think it goes back to Steve's
earlier words where there's, this is one

of the areas that creates frustrations for
the credit unions because the examiners

will still support this analytically do a
stress test, but then they'll, the credit

union will ask, okay, what does that mean?

And what is expected of us?

And then the.

Examiners can't really
articulate what they want.

We want to stress test.

Okay.

How do we go about that?

And then it's dead silence
from the examiners.

And that builds in some of that
frustration and that they set

expectations for this, but then they
can't articulate what they want.

What is sufficient for them?

Or how does the credit go about it?

So they leave the credit and hang
and we expect you to do this, but

we're not going to tell you how
or how much money it should cost

or what will be acceptable to us.

It's go through the process and then
we'll decide whether it's good or not.

On the back

Treichel: end.

Yeah, we'll tell you if it's beautiful.

That builds in

Todd: frustration because Steve said,
these things cost money and you don't want

to spend money and go through this with
good intentions and then your examiners

tell you that's not good enough after
you spent 50, 000 and took a month.

And I don't think, I think this is
one of the things That examiners, they

don't necessarily dig into expenses
that and they're told not to dig into

expenses, unless there's problems,
but I think for a lot of examiners.

They don't really understand the
costs involved with some of the

things they put in their doors.

Maybe your problem case officers
and your more experienced long term

examiners do, your younger examiners
and by and large, I'd say on average,

most of your examiners have no idea
what the cost is for those doors

that are writing to the credit union.

And sometimes, and you do see
this, especially with newer

examiners, they the doors create
more problems than they solve.

Treichel: Yes, we've seen a handful
of those instances as well, for sure.

So, what else we what
other trends are we seeing?

Any other thoughts on what's going on?

I think the only one we haven't

Todd: talked about

We're seeing a lot of that and one
thing that we've seen in multiple

clients, three or four of them,
there's really this whole focus.

And this is coming from the agency
at the top on consumer compliance.

You got to make sure you get
your reg Z and truth and lending

and all that stuff squared away.

If you're letting third party people
fill documents out for you, And this is

one of those issues where it seems to
bypass the COVID years where it didn't

get looked at and maybe some of it, it's
just NCUA's renewed emphasis on this,

but third party relationships, you need
to make sure all the documents of those

third party loans, especially have all
this truth in lending, consumer compliance

issues, BSA issues all squared away.

Because NCOA seems to be digging
into those types of issues with

third party lending relationships.

Treichel: Yes, indeed they are.

That's going to continue because,
let's see, we're, the NCOA board has

a they probably their agenda for July
will come out today I believe, because

their board meeting's next week.

And They'll either talk about where
their budgets at or have a vote on

the budget, but we used to do some
reconfiguring at budgets like that.

I'm guessing with this
board, they might not.

I'm not sure if Todd Harper's back.

Chairman Todd Harper is back
in the building and back at

work for this board meeting.

He may be.

But there's the mid year budget and then
coming up in November, there is the budget

where Chairman Harper is going to have his
first vote as a chairman with a Democrat

who is also very pro consumer compliance.

As they have expanded into this area
where they're watching Reg Z closer, where

they're watching all these regulations,
As it relates to 3rd party originations,

they're starting to see trends in certain
things in that arena, which will fuel the

fire for the into a board to perhaps say,
we need nor specialists in this arena.

And I know there's things
going on at the agency where

they're retooling some of that.

I think there will be a big reveal.

At some juncture probably at the budget
briefing where they say they'll come out

and they'll say we want to add 20 and
then they'll say that they listened and

they'll come in and they'll only add 10.

they'll take out 10 of them and say,
they listened to the industry, but

there's going to be more done in that.

They're talking about doing
separate compliance exams.

They've alluded to that.

There hasn't been a lot said about it,
but there will be some sort of reveal

relative to that would be my guess.

Thanks.

So yeah, that's a, that, that's
going to be a growing area

of review by NCUA for sure.

Todd: All right, guys,
information security.

It's what information security is
probably worth talking about, too.

It's always been an emphasis within
CUA party unions have always actually

been appreciative of what those
regional information specialists

provide on exams, in the past, their
work has mainly been, Put out his

supplementary facts or exam findings.

We rarely see doors on
information security.

Of course, we have a big information
security event going on right now.

I think cranes can maybe expect
increased scrutiny in that area.

They've been feeling it for years,
but it wouldn't surprise me of

things that were supplementary
facts and findings in the past.

Don't find their ways to doors given
what's happened in the last week.

Treichel: It's yeah, without naming
names, everybody is going to know

probably what we're speaking to.

But, there have been discussions
and chatter that I've seen that

this incident is mainly dance.

You a continuing to beat
the drum on 3rd party.

Vendor authority which I think this could
be the straw that breaks the camel's back,

if you will, no pun intended on camel.

But we could see we could see that
we've, I've seen two different stories

out where leaders in the industry are
saying, no, they shouldn't have it and

someone came out yesterday and said maybe
they should, in light of things that

are going on And, NCOA does post mortem
reviews on things when things go bad.

And there's clearly going to be
lessons learned from what's going on

in one particular credit union right
now which has dragged on far longer,

I think, than I'm sure that they had
wanted or their members had wanted.

And I'm really surprised how under, how
limited the press has been nationally on.

That particular event I am going
to have a podcast coming up talking

about how are we going to frame
it on having good communication

plans for when things go wrong?

Because going back to the theme of this
how important communication is with N.

C.

U.

A.

It's even more important when your
members win when things go wrong.

John McKechnie, former PACA director,
and I are going to get on and talk about

that sometime here in the near future.

Definitely challenges out there.

Steve any thoughts on
that particular topic?

Steve: No, I think we covered it.

It's not fun to talk about.

So let's not talk about it

Treichel: if that's a wrap.

Yeah.

I love it.

All right, guys.

This was fun.

I'm sure we missed a few and, when we
chat tomorrow with another client or a

pre talk with the client or something,
I'm sure we'll go, you know what?

We should have brought up X, but
this will be something maybe we'll

have every quarter where we just
say, what are the trends we're seeing

in our conversations with Craig.

Interesting

Todd: on the cyber attack.

As you look at Patelco,
I've seen another article.

The average is 22 to 28 days
to recover from one of these.

And like another one,
it's not getting lit.

National attention.

I don't know if there's any Lithia
car dealers where you guys are at.

Lithia is a big national chain.

They had a cyber attack.

It's over a month ago, and I
know a person here in Billings.

They're still doing everything by hand.

Are you kidding me?

Wow.

Their whole service department by hand.

You go buy a new car.

It's all the dock person.

They're filling it all out by hand.

Their systems are still down,
and that's over a month ago.

Treichel: I guess that's why the NCWA
board always frequently says I can't

sleep at night because of what I'm
hearing about cyber security and that

car dealership problem the ransomware
we're talking about Things are,

things seem to be ramping up, right?

I think we'll be seeing more and more
of this, which means ends may, we'll

be talking more and more about it.

And perhaps having you add some more
things to your budget that you can't

have, can't afford, but that you need to
do all right, guys, this has been fun.

Any last thoughts?

Todd: No.

I thought you were done already when
I started talking about the 22 days.

Treichel: I was done, but then, we
started talking about the 22 day

average, and we forgot to weave in that.

We forgot to weave in that reference
to the car the car implosion, that

car software that's it's crazy stuff.

All right, guys, this has been fun.

Listeners.

I want to Steve Todd.

Thank you listeners.

I want to thank you for listening.

As always.

I hope you'll listen again soon.

Mark Treichel signing
off with flying colors.

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