Credit Union Exam Solutions Presents With Flying Colors

Treichel: 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 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 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 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 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 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 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 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?

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 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 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.

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 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 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, 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 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.

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 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 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 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.