Credit Union Exam Solutions Presents With Flying Colors

Treichel: Hey everyone, this
is Mark Trekel with another

episode of With Flying Colors.

Today I am here with Ryan Donovan,
who is the President and Chief

Executive Officer of the Council
of Federal Home Blown Banks.

Ryan, how you doing today?

Ryan: Doing great, mark.

How are you?

Treichel: I'm doing great.

So you and I met back when you were at
CUNA and I was at N-C-U-A-I I've had you

on the podcast at least one other time.

Ryan: That's right.

And

Treichel: we talked about some of
the challenges at the time you had

just moved over to your new role
and I think there was the 100 year

review which we chatted about there.

And we've, we, we've had some
things that have happened or

not happened relative to that.

But I thought it would be great,
to just get back touch base, see

what's happening with the federal
home loan banks at this juncture.

So I'm excited to catch up.

Ryan: Yeah, no, that when we spoke
before, we were really in the thick

of it with that a hundred year review
and that's, that started just days

after I began my time with the council.

So it was definitely like being thrown
into the deep deep end and having

to learn how to swim, at least with
respect to the Homeland Bank system.

Yeah,

Treichel: What a better, what better way.

They have to learn everything immediately.

That's right.

Some of our listeners might be learning
about the Federal Home Loan banker,

hearing about it for the first time,
if they aren't familiar with it or if

they're not, specifically linked to one
of the federal home loan banks out there.

If you could kinda walk through
a little bit of what it is, the

history of the organization.

Sure.

I think that would set the table well.

Ryan: The Home Loan Bank system was
created in 1932 and it was created with

the express purpose of facilitating
liquidity, lendable funds to financial

institutions across the country.

If you think back to it's the wonderful
life and the whole problem that George

Bailey ran into with not having the
liquidity that he needed to meet his

members withdrawal demands at that time.

That's one of the.

One of the problems that the home loan
bank system solves for lenders, but

it's really so much more than that.

We're set up to connect Wall Street
to Main Street and every day.

Billions, tens of billions of dollars
flow through the home loan banks from

market to Main Street, and it helps
local lenders, like credit unions have

the funding that they need to make loans
to their members, to their customers.

We're 11 regionally based home
loan banks, and importantly,

especially to this audience.

We're member owned financial
cooperatives, just like credit unions.

So I like to say home loan banks and
credit unions are cooperative cousins.

And and that brings I think a
real close connection between

the two the two systems.

Treichel: No, that makes perfect sense.

When I think about my times at NCUA.

One of the guys who works for me
was a capital market specialist,

and he would always compare the,
a liquidity event to a car crash.

When you're spin, you're in the snow
and you're spinning outta control

and it's different than other issues.

And the comparison I like to make is
it's like oxygen liquidity almost.

You don't even think about
it until you need it.

When you need it.

It's, it seems like it's all you
need at that moment, just like

regaining control of that car, the
liquidity when it's gone, yeah, no,

Ryan: absolutely.

One, one of the I love to, to talk through
metaphors and and make comparisons and

everything but when you think about.

Why we use the word liquidity,
it's it's really akin to water.

So whether it's oxygen or water it's life.

It's life sustaining.

And and I think that really speaks to
the critical role of the home loan banks.

We want to make sure that our members
have what they need to continue to serve

the communities that they're serving.

Treichel: When you think of the Fed is
often called the lender of last resort,

and they've had programs inter, when
Silicon Valley Bank popped up, they did

some things to create some liquidity.

But they are the lender of last resort
and the federal home loan banks.

Can you speak to a little bit to how,
it's a better source of liquidity

than a lender of last resort.

And then, and or if there were
like things that happened that you

wanna touch on from the, that era.

Sure.

That would be good to
discuss too, I think.

Ryan: Certainly not duplicative
of each other in the marketplace.

We serve different roles.

We're complimentary to each other.

In fact, I would I would compare.

The home loan bank really
to, to the way that a credit

union would serve its members.

You're there for them every
day, and you're certainly there

for them in times of crisis.

I know the extent to which credit unions
go to make sure that they're providing

Treichel: Marie, can
you turn off your, yeah.

Are you there?

I am back now and I'm not sure I'm in a
different more I'm in a bit of a remote

place, but it says my speed is okay,
but I'm gonna guess it's on my end,

Ryan: okay.

Sorry.

Treichel: That would be an
example of being illiquid.

That's right.

Losing your internet is
akin to not being liquid.

Ryan: W you were asking me about the the
different roles between the ho the Home

Loan Bank System and the Federal Reserve.

And, the point that I
make is that they are.

Complimentary to each other.

And if you're thinking about it in going
back to our discussion of of the different

metaphors, I think the home loan banks are
a lot like credit unions to their members.

Credit unions are there for their
members every day in all economic

conditions, and so are home loan banks.

And certainly when there's times
of crisis, whether that's, March

of 2023, the COVID-19 pandemic.

Even through the great financial crisis
the home loan banks have the ability to

scale up to make sure that that their
members have the liquidity they provide.

Just as credit unions are able to
make sure that they're there for

their members in times of crisis.

Yeah.

Treichel: That's that's fantastic.

And again, I can tell you when I was
there situations where we were working

with the conserved credit union, or
we were working with the credit union

that was challenged just seeing the
ability of it must be that, probably

that cooperative nature too, right?

That their you mentioned they're
cousins and they operate similarly.

They, you try to help
to the extent you can.

Ryan: Yeah, I what I, when I talk to
the home loan bank leadership, what

they often remind me is that they've
got relationships with their members.

I think that's a big distinction between
the home loan bank system and the federal

reserve system is that relationship.

The home loan banks have to demonstrate
a value proposition to their members.

They want their members
using the institution, and

comfortable with with putting.

Collateral on deposit or on,
pledging collateral to the home

loan bank and being ready to borrow.

So that relationship is
something that happens every day.

It's not something that's simply
created at a time of crisis.

I.

Great point.

Great point.

Treichel: And then it's an inter it's an
interesting, before we got on, we talked

about, living in interesting times and
we've had a change in the White House.

There have been changes at most banking
regulators one way or the other.

And there's a new regulator of
the federal home loan banks.

Bill Pulte was recently confirmed
as director of the FHFA.

And he's been making some announcements
and or making some changes relative to

that can you speak to that environment and
perhaps in general how the current times

are impacting federal home loan banks?

Ryan: Yeah, no.

Great.

Great question.

A couple of observations just to lay
the foundation for the response mark.

I think, at the beginning of our
conversation, we talked about the a

hundred year review and that in some
ways was a positive experience for

the home loan banks because it gave us
the opportunity to listen to what our

members and stakeholders had to say
about us, how they were feeling about us

and what I think came through in that.

In that process was that everybody
wanted more from the system.

Our members certainly wanted us to
continue to stay in a position to provide

them with the critical liquidity that
they need, and they wanted us to be in

an even stronger position to do that.

We were under a lot of scrutiny in
the previous administration and,

I think we weathered that well.

We responded to a lot of what we heard
in that, in, in, in that process with

the election, we saw an opportunity
to reset our relationship with the,

with FHFA, the, even before Mr.

Pulte was nominated and confirmed.

We went to work on, what is it that
we need in order to continue to be.

In a very strong position to serve our
members and maybe even a stronger position

if we could remove some regulatory
burdens that had been imposed, make some

other changes to how the agency and the
home loan banks operate, and then when.

Mr.

Pulte was nominated.

We had already been engaged with the
administration and we made sure that we

were really clear in the priorities that
that we saw, the opportunities that, that

we saw, trying to align those with the
with the priorities of the administration.

I had the opportunity
to meet briefly with Mr.

Pulte in a virtual meeting.

Early on, and he recently took
time to meet with with each of

the home loan bank presidents.

This is a guy that's hit the
ground running at FHFA and he is

really an appropriately focused
on Fannie Mae and Freddie Mack.

But he took a part of his very valuable
time to meet with the home loan bank

presidents to share a little bit
about himself and his priorities,

what he'd like to see the banks do
and the message was, continue to serve

your members, continue to operate.

As businesses and let me know how
I can help you do more of that.

And that was a really well received
message from the bank presidents and

and we really appreciated the time and
attention he has given us, especially

given the other really critical work
that that he's been doing at FHFA.

Treichel: I think I saw somewhere
that he had expressed some interest

about affordable housing and.

I also remember in some of our past
conversations in the last administration

you the organizations and the federal home
loan banks were, there's something they're

supposed to do relative to that, but
they were doing it on hyper drive, maybe

putting extra dollars into that program.

If I, yeah.

What, could you fill in some
blanks there as it relates to that?

Absolutely.

That, and then perhaps on what Mr.

Pulte has said about fair lending.

Ryan: Yeah affordable lending.

I'm sorry.

Yeah, no, absolutely.

Mark you're absolutely right.

So under, under the federal Home Loan
Bank Act the home loan banks are required

each year to put 10% of their net earnings
into an affordable housing program.

And really as a result of what we
heard from stakeholders during the

during the review process, each of
the 11 banks voluntarily committed to.

Contributing 50% more than that.

So taking that from 10%
to, to 15% in net earnings.

Last year was the first year that all of
the banks achieved at least 15% in net

earnings, and we ended up committing $1.2

billion to affordable housing
community development initiatives.

That's a record for us, and it's saying
something because we were already.

The largest single source of private
capital support for affordable

housing in the United States.

And here's an example of we, we listen
to our stakeholders and what they

need, what they what they were saying.

And we responded to that.

Director Pulte comes
into to this role with a.

Great familiarity on
housing affordability.

It's been something that he's
talked a lot about in the first two

months that he's been in this role.

And we're continuing that important work.

And certainly that plays out on
the in terms of the affordable

housing programs and the voluntary
programs the banks operate.

But our liquidity franchise.

Also drives our ability to
support housing affordability.

We had, a re report done by the Filing
Research Institute earlier this year that

really focused on how credit unions derive
value from the home loan bank system.

It helps 'em grow, it
helps 'em do more loans.

And, of course credit unions are in
that market in a very competitive

way, helping to provide lower
cost lending to their members.

But a few years ago, the University of
Wisconsin did a study that showed that.

Home loan bank activity reduces mortgage
rates by 18 basis points and increases

mortgage lending by more than 16%.

So here you have, you certainly have
our contributions on one side, but

then on the liquidity side, we're
really in a position to really drive

making mortgage lending more affordable
for consumers across the country.

And we're doing that every day.

And we think that activity aligns
very well with the priorities

that Director Pulte president
Trump and the administration have.

And the message that we feel like we've
received so far is keep doing that.

Treichel: That's great.

That's in the world right now to here.

Keep doing that.

That's about as, as good
a message as you can hear.

And when I hear the numbers 16%, that's
one out six, one out of every $6.

Yeah, that's that's absolutely amazing.

It, I used to live in Texas back at
the beginning of my days with NCUA.

I was a supervisory examiner.

91 to 95 down in Texas, and I remember
Pulte homes, so I haven't got, I'm

gonna go to Wikipedia, but I'm gonna
guess that Bill Pulte is the son of,

or something related to that, that
company down there and the homes,

which might be why he knows so much and
cares so much about affordable housing.

Ryan: Yes.

He's got housing in his
blood, that's for sure.

Treichel: Yep.

Yep.

Yeah.

Very good.

So from the credit union perspective,
anything you can think of that, that.

Credit unions should be thinking about
as it relates to their relationship,

if they have a relationship with
the Federal Home Loan Bank, and if

they don't have a relationship with
the Federal Home Loan Bank, what

would you tell credit unions today?

Yeah.

So

Ryan: If there's a credit union
that isn't a member of the home loan

bank system, I'd encourage 'em to.

Look for that filing research study.

It came out in January and what
filing did was they looked at call

reports going from 1994 to 2024,
and what they found was that I.

Credit unions that are members of the
home loan bank tend to grow loans faster.

They have more total assets.

Their balance sheet is more flexible.

They've got higher loan to share ratios.

They increase, they've got an
increased borrowing capacity and

it really helps increase their
access to the capital markets.

And it does that without.

Having any sort of statistically
significant effect on

delinquencies or charge offs.

So this is a safe activity that
makes credit unions stronger, and

the impacts they found were more
pronounced on smaller credit unions.

So if you're a credit union out there
that isn't a member of the home loan

bank system, check out that report and
then reach out to your home loan bank

and and look into to becoming a member.

Credit unions are the
fastest growing segment of.

Home loan bank membership and and we love
working with our cooperative cousins.

We love working with all of our members.

You know what I would also ask is if
you are a member of the home loan bank.

When you come for Hike the Hill or for GAC
make sure that's part of the messaging.

America's credit unions put it in there.

Their messaging this year,
as did the American Bankers

Association and ICBA as well.

So we've got the National Banking
and Credit Union trades talking about

home loan banks, and that's really
critical because there was, I don't

wanna overstate it, but it, over the
last couple of years there's been a lot

of scrutiny in on the home loan bank
side, especially on the liquidity side.

And, earlier this year I met
with the heads of the four

major finance depository.

Regulators.

I met with Chairman Hotman, acting
Chairman Hill acting comptroller hood,

and fed Governor Bowman, who's about
ready to become vice chair of the Fed.

Really to reinforce the fact that the
home loan bank system is safe and sound.

Reliable.

We're there for our members.

We're gonna continue to be there.

And this was a message that was very
well received by, by those regulators.

And it's an important message for credit
unions to deliver to policymakers as well.

Treichel: Great point.

You could never, the hike, the power
of hike the hill, which just happened.

But credit unions touch a lot
of members, touch a lot of

people in good ways, so always.

If you are a member I couldn't agree more.

If you are a member, when you're
communicating tell people how

much your home loan bank helps.

It's an option.

And I'm thinking as you were thinking,
as you were talking about someone

who's not a member life's about having
options and maintaining, and you.

I think if you, from what I've seen from
my clients and my time at NCA, somebody

who is a member has just one more option
and then it turns into a relationship

that's more than just an option.

It turns into a key and
crucial relationship that

helps you help your members.

I couldn't agree more

Ryan: and I couldn't have
said it better myself.

You want to have options and I
think the home loan bank system is

a great option for credit unions.

Treichel: Very good.

Very good, Ryan.

Any other questions I should
have asked you here today?

Anything else you wanna chat
about while while I have you

on the video and, online here.

Ryan: Oh, mark.

There's so many things going on right
now, but I think we've covered the the

beachfront for for home loan banks today.

Treichel: Very good.

Very good.

Let's stay focused on that, and if
someone wants to reach out to you or

your organization, what's the best way
for them to get in touch with you, Ryan?

Ryan: Yeah, so we're we're
very active on LinkedIn.

And and of course you can reach
out to me there or reach out

to the council on LinkedIn.

That's probably the best
way to get ahold of us.

Treichel: You got it.

Very good.

I appreciate your time today and
and thanks for sharing a little bit

of it with my listeners here today.

All righty.

Thanks, mark.

Very good.

And listeners, I wanna
thank you for listening.

As always, this is Mark TriCal
signing off with flying Colors.

Fabulous.

Ryan: Awesome.

Very good.

Thank you so much.

Treichel: Yeah, you got it.

My pleasure.

Let's see.

This will probably go out.

I, my, my newish, my new episodes
go out Tuesdays on the podcast

apps and Wednesdays on, on YouTube,
and so it'll be two weeks from

now that this one will go out.

Okay, that's fantastic.

Just in

Ryan: time.

Treichel: Yeah.

Ryan: We have our conference
in two weeks from Tuesday okay.

Perfect timing.

Treichel: Alright.

Excellent.

Fantastic all guys.

All righty.

Ryan: Thanks, mark.

Take care.

Thanks, mark.

Appreciate it.

Treichel: Bye-bye.

Thank you.

I appreciate it as well.