Credit Union Exam Solutions Presents With Flying Colors

Why Does NCUA Ask to Meet with CU Board without CU Staff Present?

Join Mark Treichel and his team as they delve into the rare but important topic of why the National Credit Union Administration (NCUA) might ask to meet with a credit union's board of directors without staff present. In this episode, Mark, Steve Farrar, and Todd Miller share personal experiences and insights from their extensive careers in credit union examination and supervision. Learn about the reasons behind such requests, how to handle these meetings, and the implications they might have for your credit union.

  Guest Introductions
 Steve Farrar's Background
 Todd Miller's Background
 Increasing NCUA Board Meetings without Staff
 Board Chair vs. Full Board Meetings
 Meeting with Specific Board Members
 Supervisory Committee Conversations
 Handling Full Board Meetings without Staff
 Considerations for Board Responses
 Recording Meetings and Legal Counsel
 Emotional Responses and Agreement Caution
 Conclusion
 

Guest: Vin Vieten, former NCUA Senior Credit Specialist

Key Topics:
- Financial analysis for commercial lending
- Credit proposal best practices 
- Global cash flow analysis

Key Takeaways:

1. Financial Analysis:
   - Should be well-organized, consistent, and comprehensive
   - Analyze 3+ years of financial performance to establish trends
   - Examine income statement, balance sheet, and cash flow
   - Provide value to borrowers through expert financial review

2. Credit Proposals:
   - Use a standard, logical format 
   - Include key information like ownership structure, industry analysis, repayment ability
   - List all direct and related debt to show total relationship exposure
   - Assign and justify an appropriate risk rating
   - Highlight exceptions to policy on the cover page

3. Global Cash Flow:
   - Analyzes borrower, guarantor, and related entities to understand overall risk
   - Depth of analysis depends on transaction complexity and risk level
   - Should drive understanding of risk, not just regulatory compliance
   - Default expectation is to obtain guarantees; exceptions must be well-documented

Resources Mentioned:
- NCUA Examiner's Guide on financial analysis and credit approval documents
- Preamble to the proposed MBL rule from July 2015

Contact: 

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

# With Flying Colors Podcast: CAMEL Code 4 - What You Need to Know
 Episode Summary
Mark Treichel discusses CAMEL Code 4 ratings for credit unions with guests Steve Farrar and Todd Miller, both former NCUA employees. They explore what a Code 4 rating means, its implications, and what credit unions should expect.

## Key Points

1. CAMEL Code 4 Definition:
   - Indicates unsafe and unsound practices or conditions
   - Risk management practices considered unacceptable for credit union size/complexity
   - NCUA may have concerns about management's ability to correct problems

2. Implications of a Code 4 Rating:
   - Administrative action (usually unpublished Letter of Understanding and Agreement)
   - Examinations every 120 days (6-12 weeks of examiner presence annually)
   - Potential loss of Federal Reserve daylight overdrafts
   - Possible assignment to NCUA's Division of Special Actions
   - Federal Home Loan Bank may eventually be notified, potentially affecting borrowing terms

3. Board and Management Responsibilities:
   - Increased expectation for board to hold management accountable
   - More frequent progress reporting to the board
   - Need to authorize resources for problem resolution

4. Financial Implications:
   - May affect NCUSIF equity ratio, especially for larger credit unions
   - Potential collateral requirements from lenders
   - Possible issues with mortgage sales on secondary market

5. Regulatory Oversight:
   - NCUA approval required for changes in senior management and board members
   - More detailed Document of Resolution (DOR) requirements

6. Comparison to CAMEL Code 5:
   - Code 5 indicates imminent failure risk
   - Limited options, often leading to regulator-driven mergers or conservatorship

## Guest Backgrounds

- Steve Farrar: 30-year NCUA career, split between field work and central office roles
- Todd Miller: 34-year NCUA career, including roles as examiner, capital market specialist, and director of special actions

## Additional Notes
- Discussion of historical tools like PUED (Prior Undivided Earnings Deficit) no longer available to NCUA
- Emphasis on the challenging but potentially rewarding nature of working with troubled credit unions

Title: Credit Risk - NCUA's Top Exam Priority for 2024

Key Points:
- Credit risk is NCUA's #1 exam priority for 2024
- Economic conditions are changing the credit risk environment 
- Trends show weakening credit quality and increasing delinquencies
- Consumers have fallen behind inflation for over 2 years
- NCUA is directing credit unions back to credit risk management fundamentals
- Examiners will review lending programs, risk management practices, loan modifications, collections, and allowance for credit losses

Guests:
- Steve Farrar - Former NCUA problem case officer and VP of Central Liquidity Facility
- Todd Miller - Former NCUA examiner, capital markets specialist, and director of special actions

Additional Notes:
- Episode discusses NCUA's 2024 Letter to Credit Unions on exam priorities
- Compares credit risk priority to previous years
- Analyzes economic factors impacting credit risk like inflation, income growth, unemployment
- Mentions potential issues in commercial real estate 
- Discusses implementation of CECL accounting standard
- Notes NCUA's focus on concentration risk justification

The show notes summarize the key points and guests from the episode while avoiding any direct quotes or reproduction of copyrighted material.

Here are some suggested show notes for this podcast episode:

Title: So You're a CAMEL Code 3 - Now What?

Summary:
Mark Treichel, Steve Farrar, and Todd Miller discuss what it means when a credit union receives a CAMEL 3 rating from NCUA and what to expect in terms of increased supervision and requirements. They cover recent trends in CAMEL 3 ratings, how NCUA's oversight changes, and advice for credit unions on responding effectively.

Key Points:
- Recent trend of more large credit unions moving to CAMEL 3 ratings
- NCUA increases supervision for CAMEL 3 credit unions, including:
  - Follow-up exams every 6 months 
  - Documents of Resolution with specific deadlines
  - Regional Director letters emphasizing concerns
  - Monthly reporting requirements in many cases
- Credit unions should expect it to take 14-20+ months before potentially being upgraded back to CAMEL 2
- Importance of addressing core issues identified in Documents of Resolution
- Boards should implement tracking/reporting on progress resolving issues
- Management should provide regular updates to board on addressing concerns

Guests:
- Steve Farrar - Former NCUA examiner and central office staff member
- Todd Miller - Former NCUA examiner and Director of Special Actions

Host: Mark Treichel, Credit Union Exam Solutions

Title: Understanding NCUA's National Supervision Policy Manual (NSPM) and Examiner's Guide

Key Points:

• The National Supervision Policy Manual (NSPM) was developed around 2013 to create consistency across NCUA regions in exam processes and policies

• The NSPM has largely replaced the Examiner's Guide as the primary document for NCUA exam procedures

• The NSPM is currently on version 22 and is updated frequently

• Parts of the NSPM are redacted from public view, including sections on concentration risk thresholds

• The Examiner's Guide is now outdated in many areas but the reference sections can still be useful

• Job aids and questionnaires used by examiners in the MERIT system are not publicly available, reducing transparency compared to the previous AIRES system

• Key NSPM chapters for credit unions to review:
  - District management 
  - Federal and FISCU program chapters
  - Regulatory waivers chapter

• The podcast hosts express concerns about the lack of transparency around NCUA's concentration risk thresholds and exam procedures compared to other regulators

Guests: Todd Miller and Steve Farrar, former NCUA examiners

Host: Mark Treichel

For more information on working with NCUA, visit marktreichel.com

: Project Management of Your NCUA Documents of Resolution (DOR)

Guest Speakers: 
- Steve Farrar (Former NCUA examiner and central office staff)
- Todd Miller (Former NCUA examiner and director of special actions)

Key Topics Discussed:
1. Current trends in NCUA Documents of Resolution (DORs)
   - Longer DORs with numerous action items
   - Possible reasons: Merit system, examiner inexperience, post-COVID catch-up

2. Communication challenges between credit unions and NCUA examiners
   - Importance of clear understanding and negotiation of DOR requirements
   - Impact of quality assurance reviews on agreed-upon terms

3. Project management strategies for addressing DORs
   - Establishing clear priorities and timelines
   - Assigning accountability and resources
   - Balancing reporting requirements with actual problem-solving

4. Cost implications of DOR requirements
   - Examiners may not fully understand financial impact on credit unions
   - Potential conflicts between profitability goals and compliance costs

5. Best practices for internal communication and reporting
   - Transparency across management team and board
   - Regular updates to board and supervisory committee
   - Demonstrating commitment to corrective actions

6. Importance of finding the right balance in reporting
   - Avoiding excessive time spent on reporting at the expense of problem-solving
   - Using summary reports effectively

Key Takeaways:
- Effective communication with NCUA examiners is crucial for managing DORs
- Proper project management techniques can help credit unions address DOR items efficiently
- Credit unions should be aware of and communicate the cost implications of DOR requirements
- Regular, transparent reporting to internal stakeholders demonstrates commitment to improvement
- Balance detailed reporting with actual progress on corrective actions

Guests: 
- Keith Stone, CEO of The Finest Federal Credit Union and New Jersey PBA Federal Credit Union
- Rick Mumm, former NCUA examiner and credit union consultant

Key Points:

- Keith Stone discusses his background in credit unions, including chartering The Finest FCU for law enforcement in New York in 2014-2015
- Rick Mumm shares his 35+ year career at NCUA, including work in chartering and field of membership  
- They discuss the process of chartering the new New Jersey PBA Federal Credit Union, set to open next month
- Key challenges in chartering a new credit union:
  - Proving the concept/need for the credit union
  - Securing initial capital funding 
  - Navigating NCUA's chartering process and requirements
- Benefits of having experienced help to "speak NCUA's language" and present information properly
- Importance of having a committed sponsor group and sufficient capital to start
- How The Finest FCU is leveraging shared services to support the new NJ PBA FCU
- Keith's work with new NYPD recruits, offering low-rate loans for equipment 
- Their mission to provide better financial services for law enforcement

Contact Info:
Keith Stone: 646-661-1331
Rick Mumm: [email protected]

# With Flying Colors Podcast: Upcoming Episodes and Industry Updates

## Episode Summary
Mark Treichel provides updates on upcoming podcast episodes and discusses recent trends in the credit union industry based on Callahan's quarterly state of the industry report.

## Key Points

### Upcoming Episodes
- Late August: Field of memberships and new charters, featuring Keith Stone of the Finest Federal Credit Union
- September: 
  - "You're a Code Three. Now What?"
  - "You're a Code Four. Now What?"
  - NCUA meeting with credit union boards without staff present

### Podcast Statistics
- 192 episodes of "With Flying Colors"
- 46 episodes of "Credit Union Regulatory Exams" (AI-driven audiobook style)
- New schedule: 
  - Mondays: New "With Flying Colors" episodes
  - Tuesdays: "Credit Union Regulatory Exams" episodes
  - Thursdays: "Evergreen" topics from past episodes

### Industry Updates (from Callahan's Report)
- Profitability marginally better
- Charge-offs flat
- Net interest margin improved slightly
- More credit unions engaging in hedging
- Total credit unions: ~4,600
- Total assets: $2.3 billion
- Loan growth slowed to less than 4% (down from 12% in previous 12 months)
- Share growth improved to 2.7% (up from 1.2% in previous 12 months)
- Median credit union (assets $59 million) saw 1.22% decline in shares
- Certificate growth at 31%
- Unrealized losses down from $41 billion to $30 billion
- Borrowings decreased from 6% to 5.3% year-over-year
- Cash reserves built up to about 2%
- Real estate loans down slightly
- Consumer loans down 15%
- Credit card loans up 7%
- HELOCs up 20%
- Commercial loans up 10%

## Call to Action
- Subscribe to the podcast
- Rate the podcast on Apple Podcasts/iTunes
- Check out services at marktreichel.com

10 Reasons Why NCUA Should NOT regulate Succession Planning.

https://www.marktreichel.com/

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