Credit Union Exam Solutions Presents With Flying Colors

Treichel: Hey everyone, this
is Mark t Trico with another

episode of With Flying Colors.

I'm excited today to be
here with Mark Ritter.

Mark, how you doing today?

Ritter: I am doing great, mark.

Thank you for having me on.

Looking forward to the conversation.

Treichel: You got it.

A lot.

You were on my podcast once before.

I was on yours a couple times.

And you are the CEO of Member
Business Financial Services and

you're also a host of your own
podcast, credit Union Conversations.

And if to my listeners, if you
haven't checked out Mark's podcast,

I think after you hear him today,
you're probably gonna wanna add it to

your, the top of your list and your
download list for future episodes.

And we'll talk a little bit about a couple
of your recent episodes, but Mark, give

a little bit more of your background
beyond just those titles I've given that

the titles I've announced related to you.

Ritter: Sure, absolutely.

I am a native of Pennsylvania more of a
coal region guy up northeast Pennsylvania.

And after 30 years I've
moved back to the area.

That's what I call home these days
for our virtual company, MBFS.

And I got into credit unions little
over 25 years ago Now when business

lending I call it the Lewis and Clark
era everybody was forging their own

path and there were no resources in
front of you to get this thing moving.

So I was at members first Federal
Credit Union in Pennsylvania.

Started up their program and was there
over 10 years and was really started up.

They said, we wanna do business loans.

You seem like an okay guy.

Here's a desk.

And that was pretty much
all the resources I had.

Treichel: Go get 'em, tiger.

Ritter: Go get 'em.

Figure it out.

Then I started up maybe about,
I was actually coming up

at about 13 years ago now.

Wow.

I'm, I started up at the QSO
MBFS and we are a wholly owned

credit union business lending qso.

Currently, we work with credit unions
nationwide and even in Puerto Rico

now which is our own adventure.

I don't get to visit there enough.

And and we provide what I'll call, I
hate to say the cookie cutter services,

but all the backend services like loan
documentation, underwriting, servicing.

We have a team of originators out there
and really help out with the consulting

startup phase of the program, setting up
policies and cultures and strategies and

help out with SBA loans and the like.

And when I started, we were
a company of three people.

Now we're about 60 people, so I
spend a lot of my time working with

the industry and examiners and CEOs
and and also spreading the good

word on epi podcasts like yourself.

Treichel: No that's exciting.

And and if I remember right when when you
were back as an employee of the credit

union you had one of those credit unions
and one of those programs where NCUA kind

of brought people through to train 'em
how member business loans should be done.

If I remember right,

Ritter: it was the funny
part of when I look back, I.

Is in, in all of Pennsylvania, when
I started there was $13 million

of business loans and almost
all of those were Amish loans.

So we started up and started
building volume and I used to

think, wow, we get a lot of exams.

I like, I can't believe we have,
why do we have this many examiners?

And through conversations I found out
we're two hours from Alexandria, Virginia,

and there was hardly anybody doing
member business lending at the time.

So we were a location where they could
bring people in and look at real files

and real data and talk to people.

I said, oh, okay, under that guys
let's make it more of a training

session and help people out rather
than the confrontational exam.

Treichel: No, that's great.

That's great.

And along those lines you mentioned
that, that growth of the company,

that's fantastic in, in the sixties
of with but you're also in the virtual

mode now, which is really nice too.

But you also get out
and travel quite a bit.

I was listening to one of your podcast
recently might have been the one that came

out this week with Frank Deman talking
about his journey through different

publications that he's been involved with,
and you guys chatted a little bit about.

You having just come off of the tour if
you will, of different different places

that you've been as far as conventions and
different, any different things like that.

What was the general theme that you saw
at these events in, earlier here in 2025?

Ritter: Yeah.

It's really an evolution because,
the end of 23 and throughout 24.

Everybody put on a happy face,
but to be honest, when you talk

one-on-one, the things really stunk.

Loan volumes were tight, liquidity was
tight, and people were managing to those.

And this year we've really come out
with our head out of the sand a little

bit and finally a back to normal year.

Because from 2019, I always say
2019 is the last normal year we had

because we had such a whiplash of
liquidity and then the exact opposite

rebound of to liquidity tightening
like people haven't seen in decades.

Now, thankfully we're back to normal.

And it's really interesting to
me in the credit union conference

space because a, as credit unions
have a lot of con conferences.

But I'm I find that the
audience sometimes is the same.

I'm talking to the same people a little
bit and I've really come to enjoy.

Audio and video formats because
you know who go, who goes to

the conferences, the CEO, the
executives maybe a step or two down.

Really a format like this,
it's open to everybody.

It's open to, there's not nobody in
the credit union that can't learn

and that's what, I try to do on
my podcast and you do a great job.

So I really think this free format that
we can provide people is just so valuable.

Treichel: Yeah.

I'm glad to hear you say that.

And I enjoy it and every time I know
when I get off the end of this chat, I'm

gonna go, wow, that was a lot of fun.

It's already fun and it's gonna
be thought provoking for me.

And if being able to give back for
free is a very very good feeling,

and like on LinkedIn, I aggressively.

Find people that are
new into credit unions.

Doesn't matter what position
they're in from the CEO down

to someone who's an intern.

And I'll see if they wanna connect and
if a few of them listen to the podcast

and become CEOs down the road and
see the catalogs of what you've, the

conversations you've had, the things
they can learn from me relative to exams.

It's really.

I grew up on talk radio, right?

I was a big Larry King listener before,
before he went on to CNN that day.

Tells you how old I am.

But it's it's a pleasure to be
able to have these conversations

now when you're out there.

And things are getting back
to normal alone, loan wise,

liquidity wise specifically in the
arena of member business loans.

What is it you're hearing?

What is it you're seeing as it relates
to just the chatter or the folks in

general that you're helping in that arena?

Ritter: What we're we really budgeted
and planned a kind of a flat year

because everybody knew rates were
gonna get lowered and we expected

them to be drug out like they are.

And we'll have a little
bit lower rates, but.

Demand has always been there.

We've had solid demand.

What we haven't had is the liquidity
and openness to fund loans because

a lot of people reach rank.

So we're having a great year.

Other than what I always say, the
glory days of 2022 it's our best year

other than 2022, which I don't think
is gonna be matched for a long time.

And look, unemployment is low and I
always like to tell people as people have

a job and unemployment's low, you can
have a stable business lending program.

When that, when I see the unemployment
really start to creep up on a consistent

basis, and I don't mean going from 4.2

to 4.3,

if I see above that five and
it starts to continue up.

That's where people don't have jobs,
and that's where your business loan is.

Small business loan is
paid from, is the jobs.

So now, other than the disaster
of office space, we, our per loan

performances are very strong.

Really what we're seeing is the bigger
city you're in, the bigger deals you

may have, the bigger problems you have.

When you look at the program without
kind of that micro lens it's really good.

And in today's world, at a three and a
quarter percent interest rate, just about

every real estate project look good.

It's tough to not make a cash flow,
but when you're having it cash flow

at 7% and you have those projections.

Interest rates are gonna be flat.

If anything, we're gonna go down
maybe the next six to seven years.

You have a pretty solid loan and you
have a pretty solid relationship.

So we're, delinquency's increasing
and it's, I think it's gonna

increase for the next one to two
years just because of the size of

some of these loans as they mature.

But overall, there's a lot of positives.

Treichel: It, using one of the
kids' terms, the math is matting

on those good loans right now.

That's a great point.

That if you can cash flow and
show a loan as good now at these

rates, that's a great loan.

It's a great relationship to begin at
your credit union because that, that

corporation that so solopreneur, whatever
it is positioned to grow because their

cash flow is so good with rates high.

Ritter: And you used, the key word of
relationship that we preach for credit

unions to focus on is the relationships.

Credit unions, basically for the last 20
years and even during the COVID liquidity

boom, basically gave up the relationship
and much of that was system oriented.

Credit unions didn't have good systems
to, to support small businesses.

Now there, there's no excuse on systems.

If you don't have the systems to support
small businesses, that's your issue.

Not, you know that, not
the other way around.

So credit unions have access to
systems to support small businesses.

The pricing and economics now make
sense and people need to remember the

liquidity crunch that we came through
and focus on both sides of the fence.

Treichel: No, that makes good sense.

And as you're talking about, rates going
down, demand being good I meant how do you

envi So they're, they're talking maybe the
rates are gonna come down 75 basis points

between now and the end of the year.

I think it's maybe even today or
tomorrow that, that one of the votes

might happen of the Federal Reserve.

Refi.

You see the second the last quarter
and next year being a big commercial

lending refi opportunity for credit
unions to either steal loans from

someone else or their good members
coming in saying, Hey, I'd like to refi.

Maybe take out a little bit more money.

Ritter: Absolutely we will
see that once we probably get

another 50 to 75 basis points.

Because for the past two,
three years, people have been

funding off of elevated rates.

So you're gonna see some of those.

And also 20 26, 20 27.

Let's go back five years.

You are in the low rates of 20 21, 20 22.

These are coming off of
their five year reprice,

Treichel: right?

Ritter: So this, there is going
to be a boom of opportunity.

Now you mentioned the
refinance and renegotiating.

If there was one piece of the
Federal Credit Union Act, I would

change, it would be about repricing
because I understand the intention

was we wanna be friendly to people.

There's a legitimate safety and
soundness issue because credit unions

essentially have one way variable rates.

If you fund it and the rates go
skyrocket, you're underwater.

If you fund your loan now and the rates
go down every, all those rates can,

all those loans can walk out the door.

Whereas some states, and with SBA
loans, you can have some prepayment

penalties, but for 95% of the industry,
you really have to watch it because

those rates and that's why I tell
people not to be too greedy on the rate.

Because you can fund at that rate,
it's gonna walk out the door quicker.

Sure.

So you really have to
manage these relationships.

Treichel: No that back
to relationships again.

Very good.

In Federal Credit Union Act, that
reminds me of when I walk, I listen

to podcasts and I think it was.

A week ago, two weeks ago I listened
to your recent episode with Todd

Harper, former chairman, maybe gonna
be chairman, maybe gonna be board

members soon again if, depending
on what happens in the courts.

And you also had Mike Radway
on and they were talking about

the Federal Credit Union Act.

You were talking about the Federal Credit
Union Act with them in CMA back when.

When field membership was
challenged and they had to fix that.

And then along with that fix some things
were dropped in law and sausage, right?

When you don't wanna see law made,
you don't wanna see sausage made,

but there was the cap of the 12.25%

that was put in place of
member business loans.

A percentage of assets.

And there was an interesting discussion
relative to that they explained how and

why it happened, but if I, if you remember
you had a thought relative to that was

w which I thought I found refreshing.

If you k could walk through
that, I think that'd be cool.

Ritter: The whip, the and to set it up.

The 12 and a quarter percent of assets.

Was put in place in HR
11 51, 26 years ago, 27.

You do the math and before
that, there was no restriction.

And what happened there was also very few
business loans, and when they put that

restriction in place, it did two things.

It put people in pe, in credit union's
mind, I can do loans up to this amount.

It also put into place what I'll call
the generation of business lending QSOs.

Because you couldn't, because you
had a restriction, it put together

people like me to put together QSOs
where we could share underwriting

expenses overhead, where the economics
made sense, and because there was a

much more QSOs and third party help.

People got into business lending.

So it was really, as far as
the banking lobby, thank you.

It really became unintended con
consequences that they unleashed the beast

by putting these restrictions in place.

Now, when I started out that 12 and
a quarter percent was a hard limit.

That was participations rental properties.

It was a very hard limit.

Since then, it's loosened up a little bit.

So really, if we have 40% of the industry
is low income or A-C-D-F-I, there's

participations able to manage it.

There's rent, rental properties.

So the number of people
who have cap issues.

Is very microscopic in the credit
union industry because of that law.

So yes.

I always appreciate 1151.

I don't think I would be here and in
the credit union space without it.

So it, and it was really nice on that
episode because so many people came

in, have come into our industry in
the last 20 years, but they don't

understand the heritage and why things
are and that law was really a pivotal

movement into why the credit union
industry looks like it does today.

Treichel: No it, I love that.

Take on it.

I love the fact that the unintended
consequences, the bankers they put a

spotlight on member business loans forced
people like you to get creative and say,

okay, let's, how do we make this work?

And then there was this boom and there,
it makes me think back to the pictures

of Clinton signing that into play.

And Norm Damour was in the background
who Mike Radway talked about how his

father worked with Norm Damour when
he was in New Hampshire as a senator.

And it was fun hearing those guys' voices.

I chat with I chat with Mike on
occasion and I know Todd occasionally

listens to both of our podcasts,
so maybe he'll hear this one.

And.

On the relative to the cap I just
interviewed Jason Sterk of DCUC.

And they have a proposal
in a plug and play.

Let's drop this in whenever we might
be able to, where they talked about

exempting any business loans that are
made to veterans as a way to work another

angle on, carving away the restrictions.

Any thought, any thoughts
on that, that novel concept?

Ritter: There, there's definitely
what I would call credit union loans,

and I don't think anybody is going to
stand up that we shouldn't be making

loans to small town community, com.

Community banks have largely
abandoned much of America.

Treichel: Sure.

Ritter: And think anything
we can do to help veterans.

To help underserved communities to
help, really what the, those members

that the credit union was found.

Credit union principles were founded
upon, I think is great for us.

I'm going to a QSO meeting next month
and they might throw things at me, but

I don't believe that our mission, when
they wrote the Federal Credit Union

Act was to do $60 million real estate
deals in downtowns of major cities.

There are people that do that, but
it's not a mission driven loan.

Sure.

And I think we need to fo, business
lending needs to be focused on

the missions of your credit union.

It's okay to do a couple things
to make money, but really I think

we have to focus on who we are,
what we do, and the memberships

that we want to serve effectively.

Treichel: Great.

Said.

Very well said.

You talked a little bit
about the examinations.

Back when NC you were, your credit
union was close to NCA, it was a good

place for them to learn and that the
industry was learning how to do loans.

NCOA was learning how to do loans.

Now we're in this environment
where NCA has a lot of specialists.

Including regional lending
specialists, which incorporates

commercial or member business loans.

Let's speak a little bit about
the cultures, the culture of the

exam, as you've seen yesterday,
today, and maybe even tomorrow.

What's what is it you're
seeing and hearing as it

relates to exams in this arena?

Ritter: What we have really seen
the evolution from transactional

management to portfolio management.

And there used to be the NCUA
CA came in, you'd hand them your

stack of files and they looked at
how you were spreading numbers.

They looked at your analysis, they looked
at your decision making and I reread

every appraisal and environmental report
and it was you were getting questioned

about minutia on the transaction.

Today there's a little bit of, hunt and
peck and maybe look at a transactions, but

it's really about portfolio management.

It's about the controls you have.

It's about the people.

And I see people get
criticized for their structure.

It the days of the one
man band shops are over.

If you're gonna have any substance.

The other piece is I'm
gonna criticize myself.

The QSO industry has had to evolve because
in the old days it used to be who's

your member business lending expert?

They point to the QSO and
say, talk to Mark Ritter.

He knows what he's doing.

Those days are over.

It's you have to understand
the risk in your portfolio.

You don't have to be an expert on the
X's and O's of everything that we do.

That's why we're here.

But you have to understand the risk.

And when I say that there has to be good
quality portfolio reports and substantive,

not check the box that are going to senior
management, that are going to the board.

You have to have reviews of our work.

And you have to be on proactively
on top of your portfolio.

The number one piece that
credit unions say that make me

cringe is delinquency's good.

We don't have any delinquency.

We've never had delinquency.

That or the NCUA never
said anything about that.

That's not the standard.

The standard is not till
you're criticized on something,

Treichel: right?

Ritter: The standard is not till you have
a delinquency, because when you have a

business loan delinquency, it's over.

The standard is to be
proactive with these members.

The standard is to monitor your members,
and the standard is good sound, safety

and soundness before the NCUA comes in.

You can have an intelligent conversation
because the credit unions that can't

have that conversation about what's
in their portfolio and the strategy,

boy, they just, the NCUA takes that as.

As a, they're like a lion looking
at a wounded animal and can just

pounce on that and won't stop.

Treichel: Yeah.

As you were describing that, that
type of credit union or someone who

finds himself in that situation,
it's deer in the headlights type.

If you can't, if you can't walk
the walk, talk the talk that you

know, why you put these loans on the
books that you don't, that you know

what your risk appetite is for this
type of loan or that type of loan.

The reporting.

Real reporting, not just.

A stack of papers reports that add
value to your discussions at your

committees about how much of this type
of loan, how much of that type of loan

and then the reporting up to the board.

NCA is.

Really since 20, late 2023 has been
aggressive in corporate governance,

that whenever they see something
that goes wrong, whether that's

member business loans, whether it's a
acquisition of a bank what have you.

If the, if there's issues that NCA finds
with it, they then pivot to what type

of reporting is being done on this?

Who knew what, when did they know it?

And did the board know enough
or was it just done, at

A-A-C-E-O or an executive level?

Your answer or your statements,
there are a hundred percent true

that you really, you have to.

It is great to have the third party
that you can help you and you can

leverage their skill sets, but you
need to understand it in your own shop.

And if you don't, things start to go bad.

They'll go bad quickly with nnc UA

Ritter: Yes and many people have said, I
need to hire a business lending expert.

That's like saying, I just
need to hire a mortgage expert.

Business lending is not just.

Talking.

There are so many facets of it.

And when you find somebody who's an
expert in everything, I'm gonna show you

somebody who's a really good interview
and not that deep into many topics.

Sure.

And you have to have a bench and a
well-rounded bench here at Member

Business Lending and for your team.

And you have to have that people who can
deal, who know what the exam is like.

The portfolio is like.

Interviewing with people, I, I see that
mistake of I'm going to hire a veteran

banker and the loans that we want are
exactly the loans that he's dealt with for

the past 25 years, and are his members.

That might not fit your strategy.

Yep.

Treichel: And that might not be who walks
in the door once you start advertising.

You've got commercial loans or member
business loans that might not be who walks

in the door and what your members need.

Ritter: Yes.

And many time the more
experienced somebody is, they

want to deal with their clients.

Not that deep part of the community
and out there with new people.

That is what your credit union needs.

Yeah.

It's nice to have a little bit of of
action and without, people who can bring

you some relationships, but just because
their experience is not your strategy.

Treichel: Wow.

Yeah.

Their experience is not your strategy.

I love that.

I love that.

Very good.

Mark, this has been a lot of fun.

What questions didn't I ask you
that we should talk through here?

Any, anything come to mind?

Ritter: Yeah.

It's really, my number one priority
is getting people in the portfolio and

there's really two types of credit unions.

Those credit unions that have
been criticized for their annual

reviews and those credit unions
that have will be criticized for

their annual reviews in the future.

Treichel: I love that.

I love that.

I've seen a lot of that with my clients.

Were that annual re review, A, you didn't
do it on time, or b you didn't look at

the right thing, and I'm sure there's
other nuances to that you've seen.

Ritter: It's the high priority.

It's a moving target.

And what I'll say is reasonableness
sometimes takes a backseat to

this is an emphasis for us.

So that is the point of emphasis.

And whatever you're doing now,
you're gonna be expected to

do a little bit more of it

Treichel: yeah.

Layer layering on.

Next time we'll come in
we'll wanna add this.

And the other thing that credit unions
are dealing with as it relates to this

and o and other things is nnc A is
going through a, 20 to 25% downsizing,

and the people that are leaving
are either people who could retire

or who could take an early buyout,
meaning they had at least 25 years.

Of experience.

So you're seeing, I know on the West
Coast in particular, they lost a

lot of regional lending specialists.

Ritter: Absolutely.

A

Treichel: lot of that corporate
knowledge is going away and

people will rise to the occasion.

And there's a lot of really talented
people left at NCA, but that makes them

a little a little less nimble, a little
bit less willing to have conversation, a

little bit more in a rush, a little bit.

Here's my findings, and then
they're moving on to their next job.

What I'm seeing is communication
is always the key to a good exam,

but it's even more incumbent today.

While NCA is going through this chaos
and finding its new normal for the

credit union to be ultra communicative
because odds are some balls might

hit the floor on the NCA side.

Ritter: Couldn't agree more.

Very good.

Treichel: Mark if if one of my listeners
wants to chat with you about how how

you might be able to assist them, start
a new program or add something as it

relates to their member business loans
or if they just want to chat with you,

maybe get on your podcast, how, what's
the best way for someone to reach you?

Ritter: Yeah, AB absolutely.

Check us out@mbfs.org.

You can link to our podcast Credit
Union Conversations just like yours.

It's on all major audio platforms.

Also very active on
LinkedIn like yourself.

M-A-R-K-R-I-T-T-E-R.

Check us out message and whether you're a
client or not, if you're ever just hearing

something or want to have a conversation.

Here's what I have, here's what we don't
mind just having those conversations.

We're not here for every
hour of consulting dollars.

We, if you need a little bit of
help, just give us a call and we'll

be happy to have a conversation.

Treichel: That's great.

I appreciate that.

Mark, I wanna thank you so
much for your time today.

Ritter: Thank you.

Treichel: And listeners, I want to
thank you for listening, watchers.

, Also thank you for watching.

This is Mark reel, signing
off with flying colors.