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Treichel: Hey everyone, this
is Mark Treichel with another

episode of With Flying Colors.

I'm back with Steve Farr and Todd Miller
of my team here at Credit Union Exam

Solutions and also formerly of NCUA.

Guys, how you doing today?

Farrar: Very good.

Very good.

Treichel: Very good.

All right.

And we have folks who listen to
every episode and we have folks

that listen to episodes based on
what we, what the topic is, and we

might have some new listeners today.

So if you guys could give a little bit of
your background at NCUA before you change

teams with me and started helping credit
unions what was your your journey at NCUA?

And let's start with Steve today.

Farrar: I welcome everybody.

I always refer to my career.

It was 2 parts.

1st, part in the field.

With the credit unions, 2nd, part in
the central office in the division

of risk management, but while in
the field, I got to do is just

a big variety of examinations.

Most of that career was as a problem case
officer and got to be involved in problem

credit unions and their resolution.

Then I second sent another
15 of my 30 some years in the

central office and division risk
management working on many project.

And 1 that will come into place here was
I worked on the training that was provided

to examiners on problem resolution.

And in that was we'd hired a person
that taught conflict resolution

specifically, and that training
session was one day for each examiner.

And that was one of the things that
they said it was one of the best things.

So examiners are trained and to be able
to listen well and to deal with conflict.

And I think that was important,
but so I'll just end it right

there for going into this podcast.

Treichel: Very good.

And Todd.

Miller: So I spent 34 years within
CUA, I can break my career into three

parts, probably the first third from
87 to 2000 or so, I was an examiner

problem case officer in the western
region, that middle third from 2000 to

2010 I was a capital market specialist.

Dealt with your larger complex
credit gains in the Western region.

And then the last decade of my
career, I was the director of special

actions in the Western region,
supervising problem case officers.

So throughout my career, most of it
was actually spent in larger complex

credit gains or what you would, NCA
would call troubled credit unions.

Treichel: Troubled credit unions.

And that kind of dovetails
into, we talked about problem

resolution, we talked about conflict
resolution, troubled credit unions.

We have experienced with our
discussions with credit unions recently.

An uptick maybe is the right word of N.

C.

U.

A.

Gathering the board of directors
or some subset of the board of

directors and asking to speak with
the credit union's board of directors

without credit union staff present.

And, we've seen that an uptick
in that in our conversations.

And I thought it would be a good topic
to walk through the nuances of why

NCUA might ask for that to happen.

So with that open-ended statement there,
guys, what let's talk about situations

where a board member, if a board member's
listening, or a CEO or staff member

is listening, where they might go here
for the first time from NCA that they

would like to meet with the board.

separately from staff being present.

Miller: I think we need to
break this into a couple pieces.

NCOA examiners asking to meet with
just the board chair as part of

an exam or part of their ongoing
supervision is not that uncommon.

And Steve and I, our first boss that we
ever had when we started, he often asked

us, He said, go to lunch with the board
chairman, figure out their points of view.

It's a very different equation when
NCUA asked to meet with the full

board without management present.

That's a whole different

Treichel: scenario.

Okay.

And so why don't we, and Steve,
you can add something here, but

so if we're going to break it into
Board chair versus full board.

We can maybe talk about board chair
first, but Steve, anything before

we jump into that, you want to add?

Farrar: No, I think that's a
good process for this discussion.

Treichel: Okay, great.

So scenario a NCOA asked to
talk with the board chair.

Miller: Steve talked about problem
resolution and conflict resolution.

A lot of times with meeting with board
chairs and like I said, our first boss had

us do it routinely when I was a director
of special actions, I told my PCOs to

meet with their board chairs at least
once a quarter, a lot of that is just.

Opening the doors to further
communication and building trust.

It's not nefarious.

It's here's the board's view.

It's gathering information, but part
of it is just the examiner wants to

meet with the board and open doors
of communication and build trust.

There's usually nothing nefarious in it.

It happens quite often.

It probably should happen
more often than it does.

So in those situations.

I think just as a board chair, take it as
an opportunity to learn a little bit more

about your examiner what concerns them
and take it as an opportunity to educate

your examiner what you as a board want
from your credit union, what your focus

is, how you focus on serving the members.

Use it as an opportunity
to open doors and exchange.

Information about your
credit union and your board.

Farrar: Yeah, I think that's
the real key is that regular

dialogue can be extremely helpful.

And, unfortunately, that
regular dialogue really occurs.

Once the credit union is dealing with
the emergence of problems, cause they'll

tend to spend more time with, when you
get to code three and stuff that regular

dialogue will really start to kick up.

Treichel: And there also could be
a fear like it's a gotcha moment.

It's examiners are not police officers,
but they are regulators, right?

Examiner is not the IRS, but.

Getting a, getting an envelope from
the IRS, peach makes your eyebrows

stand up and getting a call from into
a saying, Hey, I'd like to talk to you.

They the volunteer could go, Oh
gosh, did I do something wrong.

Is there something I should I get
talking points from the CEO before I,

I call them but if it hasn't happened
to the board, it's a new board chair.

Or it's a board chair where
they haven't done that.

It could make them, get a little
bit anxious or get a little bit

worried about the fact that NCUA is
considering, having that conversation.

And then I also, I'm remembered of
a quote that I say on here quite a

bit, former NCWA board member who
said, familiarity breeds consent.

It's, it goes back to that communication.

If I know you, and how you tick, and you
know me, and how I tick if we should run

into problems, like it's someone who has
some issues that we have to deal with, If

it ever gets to that point, we're going
to under, we're going to have a little

bit more trust as one of you mentioned.

So that we can maybe figure
things out that work both for

NCUA and for the credit union.

Any thoughts on anything I added there?

Miller: I think you summed
it up fairly well, Mark.

Farrar: Yeah.

And occasionally, I know me, I met
with other board members apart from

that, and they usually dealt with it.

There was some specific issue there
that I didn't think needed to be

brought up to the entire board.

I know one case that dealt with
it had a board member that was

pretty seriously delinquent on an
agriculture loan and wanted to just

get the sense of what was going on
there, but and what the other board

members would be thinking about that.

The other ones dealt with when
I would find or be informed of

potential conflicts of interest.

I would see, when they start using board
members, firms for architecture and other

professional services that might lead to
the need for a conversation to make sure

that was completely on the up and up.

But those are examples of when I
would meet with not just the board

chairman, but specific board members.

Treichel: And in those instances,
making sure on the up and up that

the votes that, you know, that the
individual recused himself from the

vote, that they did a competitive bid.

And I'm also, as you were explaining that
I'm going to date myself here again, but

I was, I pictured you in a like Peter Falk
in Colombo, asking and asking open ended

questions to try and get to the truth.

Farrar: Yeah, they do that.

Oh, 1 more thing.

Just 1 more thing.

Yeah.

Yeah.

But the other thing is, we're also
interested in as examiners is.

The powers within the board, some
boards are overwhelmed by 1 member

of the board, and it really helps
if the examiner is aware of who that

is and why that situation exists.

And is it creating a problem or not?

Treichel: That's a good,
that's a good point.

We had, when I was at NCA we
had training by an author of a

book called the loudest duck.

And the concept was whoever the loudest
duck is in a group of ducks what a gaggle?

What's no giggles geese.

I don't know what a group of ducks is.

Whatever the loudest duck is,
that's who you hear, right?

And so you can have these dynamics
of group dynamics of a board or.

Or at NCOA executives where
there's someone who dominates

those conversations which can have
positive and negative effects.

Farrar: And on those 1 on 1 meetings
it's important when it's less of a group

is is if the examiner asks a question
and it's just you and the examiner, and

you don't know the answer, just admit
that, I don't know the answer to that

1, but I can get back to you on that
and don't ever try to, make anything

up, but don't be afraid to admit.

I don't know.

Treichel: That's great.

Yeah, saying you don't know expresses
the confidence that you don't

feel that you maybe you should.

And I would even say
sometimes, I should know that.

I think I know that, but let
me double check to make sure

I give you the right answer.

And we hadn't mentioned a supervisory
committee, but it's not uncommon

or actually probably is as common
or maybe even more common that

they'll reach out to the supervisory
committee and touch base with them.

Anything you want to add on NC way
talking to the supervisory committee.

Miller: That probably
happens on most exams.

Yes.

Supposed to happen on most exams.

So supervisory committee chairs
are probably used to talking

to their examiners and a lot
of that's just logistical.

The agency is trying to figure out,
how active the committee is and

are they aware of their duties?

And, what's the extent of their
supervision over the credit union in terms

of internal audit and external auditors?

And so that's an information gathering
one, too, on the part of the examiner.

It's just a routine check
in with the committee.

It's part of their scope.

It's something that
examiners are expected to do.

Treichel: Yeah.

And as you were, as I was framing
the question, my recollection is that

is a required call as opposed to the
others that are a, maybe regionally

or supervisory examiner based type
setups with the board and things.

But.

I think that reaching out to
the Supervisory Committee Chair

may actually be on the checklist
of things they have to do, but

Farrar: It's a good way, like Todd
talked about measuring their engagement

in in, in what they're doing.

The other thing is that one's always good.

'cause a lot of times supervisory
committee is a developmental

committee for potential board members.

So that's never hurts to get that dialogue
going with the potential board members.

Treichel: Yep.

No, that makes sense.

That makes sense.

All right, so that kind of I
think we've talked through the

talking to one board member and or
talking to the chair of the board.

Let's pivot to N.

C.

U.

A.

Has asked to speak to the entire
board or the executive committee,

but we'll focus on the entire board.

N.

C.

U.

A.

Asked.

to speak with the entire board
without credit union staff present.

Thoughts on that?

Miller: Now you're getting into the
realm of not such a common action.

In my 35 years, as I was going through
notes last night, I think I did this

maybe five times as all in my career.

So in 35 years, so it
doesn't happen very often.

In two of those five times, it
was state regulators that actually

said board, we want to talk to you
without your management present.

So it doesn't happen a lot.

And so when it does happen,
It's an unusual circumstance.

The regulators usually have
concerns of one kind or another.

I would just say in the times I've
done it, different reasons is you

have a dominant CEO, so you're
trying to figure out just where the

board stands because the CEO has
dominated all the conversations.

It doesn't really let the board
speak to the regulator at all.

Oftentimes, while in another case, it
came down to the board was just totally

misinformed about the credit union's risk
position in every way, shape, or form.

You can say the CEO or management
team was either intentionally or

unintentionally not keeping the board
informed about the whole risk position

of what was going on in the credit union.

Other instances, we've done it.

In those five things is you have a
board that's not holding management

accountable for doing their job.

And from a board governance
position, hiring the CEO and holding

them accountable is one of the
primary functions of the board.

And so we had a case where,
that wasn't happening.

And in one of the cases, it was a prelude
in a way to maybe prevent NCOA from having

to take other administrative actions.

And it's to inform the board.

This is what needs to happen.

It wasn't a pleasant conversation.

It's you're going to do A or
B or NCOA is going to take the

next administrative action.

So in my cases, those were the reasons
where I was personally involved in it.

But boards should be aware it's not A
usual practice and in fact, it's happens

very rarely, but as we're seeing with our
clients, it's happening more frequently.

And today with like code two credit
unions and it's wait, that's never

happened in my career in the past.

So there's some other
things potentially going on.

Farrar: And I think is that if you're
a chairman and you get that, phone

call that and see who he wants to
meet without a management president.

That I would probably ask is are you able
to provide me with a just brief agenda

that I can share with the other board
members so that we can be, if we need to

do any preparation for that meeting, they
may not they may say no, this is item

we're going to talk and that kind of would
tell you a lot if they say, I'm hesitant

to provide you a agenda ahead of time.

Keep in mind, you should have a
good idea of what the trajectory

of your credit union is.

Okay.

And I doubt that you'd be real surprised.

That that was a request that was made
to meet without senior management.

And I can't overemphasize Todd's
good point about, the bar, the

board is responsible for holding
professional management accountable

for obtaining the results of which
they have put into the strategic plan.

And that absolutely needs to happen.

Treichel: And

which is the kind of conversation
that you'd see in a credit union that

has complex document resolutions, and
maybe not not the code too, right?

That Todd said, we're starting
to see some situations where

well cameled credit unions are
asked to have such conversations.

And I don't know if
that's a change in policy.

At NCUA, or as you and I know that,
regions do things a little bit different,

there might be a rhythm to what's going
on, and of course there's a National

Supervision Policy Manual, but regional
directors can influence how things are

done ARDs, Associate Regional Directors of
Operations can influence it, Supervisory

Examiners, Directors of Special Actions
can influence how their group of 10,

15 examiners are handling things.

So it, but we've seen also some
things in different in all of the

regions and all of the organizations
that touch credit unions.

So it's, yeah, it's an, it's
a very interesting trend.

And you talk about, importance of
responsibility and accountability with

staff ultimately who NCUA, Who the credit
union employs, as long as they're bondable

is up to the credit union, it's really
important that the credit union operate in

a safe and sound manner but who's employed
is the responsibility of the credit union.

And so it can get into a delicate
situation there if you're, if

they're trying to point out, issues
that could go into that arena.

I don't know if we want to talk, go down
that path in this podcast here today, or

that might be a story for another day.

Farrar: I go through 1 I want to bring
up is, 1 of the questions that you

might have is a board member based on
that trajectory of your credit union.

And what you know what's going on
is, do you feel like you need to have

legal representation at that meeting?

I know it's always a joke that I had.

I used to get called into.

When I was just an examiner and a
PCO that the regional director just

usually wanted to catch up with me.

And I would always ask jokingly,
Oh, do I need to bring my lawyer?

And everybody's laughing.

And then one time there was a
meeting, it was like I don't know.

You might want to think about it today.

But I think that's important that that
you can question that you can ask even

the numbers you think would be appropriate
for us to have counsel at that one.

And then you can ask that,
but it is your decision.

If you need counsel, then.

It's really needs to be clear
that if you bring counsel to that

meeting who they're representing,
because that would be the question.

I would always ask if counsel is there.

It's do you represent the board?

Are you representing an
individual board member?

But they wouldn't, you wouldn't have
somebody that's representing the CEO.

So I think those are issues that
you have to clearly consider.

You guys's thoughts on that.

Miller: I've asked that question
of attorneys a few times

when they've been present.

I want to circle back to your whole
comment about the board asking the

regulators if they have an agenda and
are willing to share with it because

the simple fact of the matter is The
regulator and see you a state regulator.

They don't ask to meet with the
board unless they have an agenda.

Now they might not want to
share it in writing but be

assured they have an agenda.

So I think, along with the General Counsel
recommendation that Steve brought up.

I think there's a couple things
that boards need to keep in mind

when they're asked for this one I'd
recommend you don't refuse them.

Refusing to meet with the regulator
is just inviting additional

actions or administrative actions
on their part, and you probably

don't want to go down with that.

That path.

So if N.

C.

U.

A.

or state regulator asked to meet
with the board without management

present as a board, you should
probably agree to do that.

Refusing is probably not in
the credit unions interest.

But in terms of the meeting itself like
Steve had mentioned earlier, asking

for an agenda ahead of time is good.

Whether they'll give you one or not is
a different thing, or they might give

you a verbal one and not a written one.

It is good to perhaps have
your attorney present.

I think as a board, one thing
you have to be very careful about

during these meetings is that
you don't agree to anything.

Go there and listen, have
questions back and forth.

But as a board in a pressured meeting
where you might not have an Clear

agenda on the part of the regulators.

I think it's important as a board, you
go and listen and you keep an open mind.

But at that specific meeting,
don't agree to anything with

the regulators at that meeting.

You need a chance to talk that
over with your fellow board

members away from the regulators.

You need a chance to
involve your executives.

You need a chance to potentially
involve your credit union's counsel.

So be careful that you don't agree to
anything, to agree to take any actions.

You might agree that a problem
exists or something that they bring

up, but don't agree to take any
actions at a meeting of that nature.

You might even consider
asking to record the meeting.

If it's within CUA, they generally
have to allow you to do that.

There are certain state regulators
that will not allow you to

record meetings with them.

So that answer to that
question can go either way.

I've been in meetings like this sometimes
state regulators are present in a state

chartered credit union and sometimes
it's been just with federal credit

unions, but there are some states out
there that will not allow you to record

meetings, but you might think about
asking if you can record the meeting.

Take notes.

But the big thing is listen
attentively speak truthfully.

If you don't know the answer to
something, like we talked about

earlier with an individual if you
don't know the answer, tell them you

don't know the answer or just say it.

And keep your mouth closed in this
situation, but be honest with them

and anything you do say But in the
big scheme of things This is not the

meeting to make agreements with them

Farrar: That's a really good point
because we actually recently did deal

with a credit union where the board and
the examiner had met together and agreed

on doing something and the Examiner
thought the board was going to tell

senior management about it You and the
other 1, 5 and 2, 8 was going to partner.

Nobody told senior management would
have been agreed to in that meeting.

And, it was, weeks later, and everybody
starts asking him, it was like.

Nice to know, so that's just following
up on those recapping those meetings is

something that usually should be done.

If the NCOA doesn't do it, you
should do it as your organization.

That's always important.

Here's what we understand in
our conclusions of our meeting.

That's a great

Treichel: point.

Yeah, as Todd was walking through that,
the situation of not making commitments,

if you don't have the people, there
may be unintended consequences and

NCOA should, A, NCOA should not expect
you to make decisions like that.

And B, there may be unintended
consequences that both the people

at NCUA and the board might not
be aware of if they were to take

some sort of action similar to
the situation you're referring to.

And then the taping concept, that's
something NCUA's vice chairman, Kyle

Houtman talks about at NCUA board
meetings, NCUA actually in their closed

section of their exam report, they
have to check a box that says whether

or not the meeting was tape recorded.

And so NCOA current regime is
pushing people to do that so

that they've got a good record.

And the reality is anything that NCOA says
in a meeting with the board they should be

comfortable that there be a record of it.

40 years ago, that might not have been
the case, but today in the world we're

living in that is indeed the case.

So very good.

What else?

What else we got on this topic guys?

Anything you can think of?

I

Farrar: think at times
you may get, emotional.

And that occurs in some of these meetings.

And it's okay to disagree with
the examiner, but you have

to do it in a respectful way.

And you may have to
just say, we need that.

We need a break right now.

If you can feel like you're
triggered and might not be.

In the best of shape to continue the
conversation right at that minute.

So it's just all of that, good listening
and conflict resolution type skills.

Treichel: As my mom said, you got two
ears and one mouth for a reason, go into

those meetings planning on listening
and not using your mouth so much.

Miller: He speaks about emotional stuff
in the big scheme of things in my career.

It never bothered me when boards got
emotional, especially if you were giving

them news that was unexpected to them
or they perhaps didn't want to hear.

I found quite often if they got emotional,
it was helpful in the long run because

They would go back later and they would
rethink their whole position and go

over everything that they were told.

And quite often it was a
catalyst to moving forward.

Treichel: Yeah.

The seven stages of grief, you
gave them maybe some bad news about

something that they weren't aware
of, and they're going to, they're

going to have some emotions there.

Yeah, this is an interesting topic guys.

Again, we're seeing it.

More frequently taught in the front end.

You had mentioned you saw
it less than five times.

And I'm recalling three in particular.

And two of those three were actually
state exams where they called

them into the office and said,
you're coming to the office and

you can leave your staff at home.

And states tend to.

Be a little bit more aggressive in
that maneuver, at least they did back

when you and I and Steve were at NCUA.

Miller: Like I said, out of my five, it
was state commissioners twice, once on

the Canadian border and once at a state
on the Mexican border, so extreme North

and South, and in those cases, Both
times the commissioners, the highest

level at the state, they went to the
credit union, but it was pretty clear

that state commissioner was in charge of
the meeting and they had very specific

reasons for meeting with those credit
unions without their management present.

Treichel: Same in my, in
the one I was involved with.

Very good.

It's happening more frequently.

If it happens consider having your
attorney present, consider tape recording

listen more than committing to actions.

If it should happen and any last thoughts
again, before we wrap up here, guys, I'm

Miller: reemphasize Steve's point,
ask them if they have an agenda.

Farrar: Yeah.

Miller: And exam.

Farrar: Examiners are people and
they're usually, after the, the

best interest of your institution.

So just keep that in mind.

Treichel: Great point.

Great point.

As always, this is fun.

It's fun chatting with you
guys about these topics.

I think we all probably sparked
a synapse in our brain of a story

that we hadn't thought of for
a while, which makes us smile.

And I appreciate your
time, Steve and Todd.

Miller: Have a great day, Mark.

Treichel: You too.

And listeners, I want to thank
you for listening as always.

I hope you'll listen again soon.

This is Mark Treichel signing
off with Flying Colors.

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