Credit Union Exam Solutions Presents With Flying Colors

www.marktreichel.com

https://www.linkedin.com/in/mark-treichel/

Treichel: [00:00:00] Hey everyone, this is Mark Treichel with another episode of With Flying Colors. Today I am flying solo and I am calling this podcast something like what I expect from NCUA in 2025. In preparing for today's show, I took some notes going back and looking at NCUA's Agenda from their board action taken in 2025 and am gleaning based on the Trump administration and the Helpman leadership.

What may or what may not happen in 2025 compared to 2024. When you go back and look at 2025. They had canceled two board meetings. So that was one takeaway. They canceled the March, 2024 board meeting, which was the first time in a long time that that had happened. And they canceled the June, 2024 meeting.

So this was under then [00:01:00] chairman Todd Harper, who is now a board member at large, although he came close to being named vice chair, and you can check out some of my past podcasts for discussions on why that may have blown up anyway. It things continue to blow up at the board level, but I'll get to that here shortly.

All right. They canceled 2 board meetings and they held for N. C. U. S. I. F. share insurance fund briefings. I report on those quite a bit here and on linked in because that's 1 of the few windows to generic camel code ratings. You can see when camel code ratings go up and they did 4 of those. in 2024.

I'm expecting they'll do four of those in 2025. They did one cyber security update briefing and they did a new charter update and briefing and tip to what I might say in the future. I think there will be more briefings because I don't think the board will be acting on much because I don't think the board [00:02:00] is currently getting along because of the kerfuffle on NSF and overdraft fees.

All right. So other things they did they did a proposed succession planning rule and a final succession planning rule. They did an incentive based compensation proposal, which I think will go nowhere in 2025. That was put out there because Biden's administration required it from all. Banking agencies and under the Trump administration there will be less or zero regulation.

And I don't see them wanting to put proposals in on incentives. If you'd know what I mean. In July, there was a loan rate ceiling approval to. re approve utilization of the 18 percent rate. That's what they do every time. The trade associations come out saying you should allow that to go up or you should make it based on variability.

If NCOA was ever going to raise it, it would have been last year and or the year before. They [00:03:00] didn't seize that opportunity because they thought it would have been egregiously harmful to credit unions and credit union members. I disagree with that, but they will vote on that again because they have to vote on it and they will likely just do what they've done umpteen years in a row, which is reaffirmed the 18%.

I expect that to happen in July again. All right. What else is going to be happening? Potentially, they did have a board appeal in August. By the way, they typically don't have open board meetings in August. That was a closed a closed item where a credit union appealed something without revealing what I know relative to that.

That was a field of membership appeal. There was a fair hiring and banking proposal, which doesn't need to repeat in 2025. They simplified the insurance rules. And then when you get close to the end of the year, what happens at the end of the year and CUA approves their budget. But before they approve their budget, they do a budget briefing.

A little [00:04:00] bit of history on the budget briefings. The budget briefing started when I was the deputy executive director and they were started by Dennis Dollar. And I remember saying to that executive director, Len Skiles, if you do this, Make sure you want to do it and it was for transparency. But once you start something, it's very difficult to stop it.

And I'll get to that and why I'm making that point. I'll get to it now, but I'll refer to it again. So NCOA did stop it. I believe it was under the Matt's administration and the trade associations got upset because that was their opportunity. One of their opportunities to show value saying your budget's too high.

Here's why we think it's too high. And through assistance from Senator Mark Warner in Virginia, they were able to get the Federal Credit Union Act proposed, requiring NCUA to do a budget briefing. They are required to do a budget briefing. I believe they will do a budget briefing. I'm not so sure they will do a budget.

They're not [00:05:00] required to do a budget, and they are required to do a budget briefing. They're not required to do a budget, and that's because there is a two year budget. So I'll get to that and why I think that they may not do a budget when we walk through what I think will happen in totality in 2025. The NCOA approved their annual performance plan, which is linked to their strategic plan, already in January.

That was one of the last things they did prior to Hauptmann taking over. So they don't need to do that annual plan, but they do need to do another strategic plan, and that would be due by the end of 2025 for the years 2026 through 2030. Will they do that? We will see. All right. So when you look at what is going to happen and what I predict will happen in 2024, that's a little bit about what happened.

What I'm predicting in 2024 is that the theme of canceling board meetings will continue. They, as I mentioned, they canceled March and June. I'm [00:06:00] expecting that they may cancel April or May. Or June or July, I don't believe they're going to have enough briefings to keep an agenda full. I don't believe they're going to agree on enough things because of the arguments they're having about about NSF fees and overdraft fees being reported by over a billion dollar credit unions.

There's two approaches here. Kyle Hauptman canceled and changed the. Way that billion dollar plus credit unions were going were reporting for three quarters on NSFs and overdrafts saying that it's overkill and it's onerous on the credit unions, et cetera, et cetera, and that they would be looking at that during part of the examinations and then after he announced that at GAC and then.

Board member Harper and board member Otsuka came out with their own press releases, and I understand they did a full court press on [00:07:00] Capitol Hill on the topic and came out saying that what's wrong with transparency? There should be transparency here. Why are you stopping something that was started and that credit unions had been providing and that's bad for members?

So that's the nexus I wanted to say where I mentioned with Dennis Dollar that when he started the budget briefings, I thought they would never be stopped. And it's hard to stop something when you do. What happened? Debbie Matt stopped the budget briefings, and then lo and behold, the Federal Credit Union Act was changed and INSU 8 was required.

to do that. So at some point, whether it's when the next time there's a D in the White House or there's a D in running the Dems have control of Congress. And the White House, you're going to see more on the fee situation. You're going to see NCOA go back to collecting this data. Will it be in 4 years?

Will it be in 8 years? Will it be sometime sooner than that? [00:08:00] My guess is not before the four year period. I can't see how it went flip flopping on this, but it's hard to go back. Once you have that transparency and you take it away, that pendulum will swing. It's just a matter of when it will swing. By the way, on this topic of transparency, it's a little bit.

I don't want to say disingenuous. It's a little bit flawed to complain about this transparency and requiring credit unions to be transparent when NCUA has its own transparency issues. I've talked about it on here on occasion, and that is that their redaction of things on their website.

Or there are errors of things on websites that are just deadlinks. If you assume that the deadlinks in the NSPM, National Supervision Policy Manual two attachments, which, attachments which they have said publicly will be available. For example, the attachments on how NCUA evaluates bank purchases, which was [00:09:00] discussed in a proposed rule that they were going to be adding things to the National Supervision Policy Manual.

If you click to that there are dead links. Now it's either that NCUA has gotten lazy in following up on these or it's a concerted effort to hide more things from the industry. It's a concerted effort to to redact. More things, and I don't think it's a situation where they've actually gone through and decided legally.

We can redact this. I think it's most likely errors, but to take the moral high ground of credit unions need to be transparent. When NCUA's transparency has gotten worse and worse. Over years and years about what's on their website. It is a little bit like throwing stones at glass houses.

I'll leave that at that. I've talked about that occasionally here. I've talked about doing FOIAs to get information that I know they need to release. And I just I haven't done that yet. At some juncture, I may pursue that. I did have conversations with NCOA. And first was told, Hey, you [00:10:00] might be able to just get this by asking.

And then I was told, no, if you want to get it, you need to FOIA. And I basically left it at that. There is a bit of a black box on the NCUA exam program compared to the FDIC and OCC at some juncture, maybe that pendulum will swing back, I'll try and push the pendulum sometime down the road, it's just not something that I've, have the time and energy to pursue, because especially when NCUA is going through reorganizations, most likely, probably, or will, it's going to be more difficult getting time assigned to that because their footprint is going to be shrinking and things will get elongated, including exams, et cetera, et cetera.

So back to the board meeting. I think they will cancel a few board meetings or they will go to quarterly board meetings and maybe they'll only do one. They'll do one each quarter. I could see that being something that they come up with. I know staff after I left proposed that and the tiptoeing towards canceling meetings is something that may mean that's something that's going to happen.

[00:11:00] But under the Trump administration, if they're not going to be acting on things, what's the point of having a monthly board meeting? And it puts more power with the, yeah. With the chair when there aren't actions being voted on because he can influence the the staff as chair, although they tweak the delegations and the executive director now reports to the full board or supervised by the full board, as opposed to just being supervised by the chair.

But. I digress on that. I think they will have three more NCUSAF briefings. I think in May, they will brief on Q1. I think in September, they will brief on Q2. And I think in November, they will be brief on Q3. All right, to the budget. Why do I think they will have a budget briefing? I think they will have a budget briefing because they can call it the staff budget.

They can say staff is proposing this budget. Now the reality is it's not the staff budget. It is partially the staff budget. It's the staff and the chair's budget. So this will be an [00:12:00] opportunity for the chair to get out and say, here's what we want to do. We want to cut X, Y, and Z consistent with the Trump administration.

That's my. anticipation of what might be done in that budget. I don't think he's going to be able to get a second vote, or he may not be able to get a second vote unless somebody on the board resigns. Because again, remember, there are two Democrats. Harper and Otsuka are Democrats, and their terms are longer, ironically, than the chairman Houtman, whose term is up in August.

So I believe he will have a forum to propose the budget. They are required to do a budget briefing is if there is going to be a budget. But back when I was executive director, we turned back on something that had been done in the past and in the past had done 2 year budgets when they approved budgets.

There were two year budgets the current year and the out year that stopped, but when we were down to two board members, we realized, this could end up in a draw how you [00:13:00] get to January of a year. And you don't have a budget. You really can't even pay people because NC way is self funded. And so we went back to doing a 2 year budget.

So I am anticipating 1 of the very likely possible or probable. Outcomes of this is they will have a budget briefing, but they will not have a budget approval. Why? Because Harper and Otsuka won't want to cut things that Hauptman wants to, or the other alternative is that they do, and Hauptman has to acquiesce more to what Harper and Otsuka want.

Neither one of those things is a good strategy for Hauptman wanting to go out and find another job in the Trump administration, in my opinion, because again, his term is up in August, so he's in the hot seat here. Not having the votes, but having to carry the water of the Trump administration.

And I think because of that, there will be less board meetings. There will be less votes because he's not going to be able to get the votes. And hypothetically, possibly, [00:14:00] probably, maybe there won't even be a budget that is approved because they have the out year budget which is a good thing to have because again, then staff can can take what's in that budget.

And do what needs to be done to keep the trains running, to keep the exams going, and to keep the credit union industry safe and sound from an NCUA examination perspective. So as far as briefings, I talked about the NCUSIFs. I believe one of the things they'll do is more briefings. I'm anticipating that maybe Hauptman will want to have a fintech briefing.

He's big on fintech, he's big on blockchain, he's big on all of those Coin related things, and I'm expecting based on his speaking engagements, he might have a fintech briefing. He might have a fintech symposium. I know he's done some of those things and meetings at G. A. C. Recently he did that. I predict there will be at least one, maybe two cyber briefings again.

Why? It's something that they can talk about, and they do it at [00:15:00] least annually. They're not required to do those things. And by the way, Transcribed The briefing started again back when Dennis Dollar was chair. There was a time period where he was the only board member and the general counsel opined you cannot have a 1 0 vote or you could but it could be challenged and they wanted to have meetings.

So what did they do? They invented the NSU SIF quarterly briefing. It was a good invention because They reveal the state of the insurance fund, and they reveal the state of the CAMEL ratings, and they can put some soundbites out relative to that. So other things I am expecting will or won't happen.

I'm expecting that NCUA staff footprint will go down. If you listened to my emergency podcast last week, NCUA out of the blue dropped a closed board meeting last Thursday. And I recorded an instant podcast on that before I had chatted with anybody at NCWA anticipating that they were putting their RIF plan together and getting the board approval.

[00:16:00] I understand they had a very long meeting and that there may be a future vote on what was presented and that it it was a very long meeting. I'll just put it at that. And there will be some kind of reorg. What does that reorg mean? Means the footprint is not going to get bigger. It's going to get smaller.

It means. Exams will take longer for NCOA to get done when I was there each region had a division of supervision and analysts that worked for that director of supervision, and they had, we put a deputy in to help the workload since I left, they went to three DOS. DOS directors in each division because of the magnitude of the weight of reviewing exams.

And as you know better than I, exams are slow. Expect exams to get slower because the footprint in the offices, the footprint of the examiners who take the buyouts, either the Trump buyout or the one that NCUA may be proposing to its staff of voluntary early retirement, or just encouraging people [00:17:00] who are eligible to retire.

You'd expect that to elongate. The plus is if you're a billion billion dollar plus or more code one or code two, but less than one's 15 billion, you may see NCULS less frequently because they extended the exam cycle that allowed. Non they extended the exam cycle, not requiring a calendar touch each year for those billion dollar credit unions.

So if you're in good shape, haven't had a management change, you might see them less. That's what a smaller footprint can do. If you're really well run, they're going to do triage just like in mash, right? You do triage, which places don't we need to go? And if you're on that good list, you will see them less frequently.

You can expect things that you're asking for field of membership to take longer mergers to take longer bank acquisitions to take longer. If you're doing a bank acquisition and a merger that's really going to take longer. So again, expect less customer service, longer exams to get done and [00:18:00] longer.

Any other service you're looking for from N. C. U. A. Is going to get worse in the short term. Not better as far as turnaround time. Because what do they do when they triage? They've got to get their exams done. That's job one. The other things move to the back burner. I talked about the debate on the NSF.

You can argue either way. Again, the transparency argument is a good one, except NCUA, look in the mirror. That's all I ask. Look in the mirror, see what's on your exam website that isn't there, that should be there, that isn't there, that is on FDICs, that is on OCCs. And it's it's really lack of transparency in what's out there with the deadlinks and the excessive.

Redactions. All right. What else? I think that's it for today. I appreciate you listening. I know that later this week, I'll have a recording with Todd Miller and Steve Farr on the trends at the end of the year. That podcast will go out next week. I had a great time at GAC seeing good friends, colleagues.

Credit [00:19:00] union clients credit unions I used to supervise, potential clients, etc. etc. That's a wonderful event. I think America's Credit Unions did a really good job with that event, and I appreciate the opportunity to attend that. As always, listeners, I want to thank you for listening. I really appreciate that, and I hope you will listen again soon.

This is Mark Treichel, signing off with Flying Colors.