GERMANTOWN, Md.–A CEO who has led a turnaround at one credit union has sent a letter to NCUA Chairman Rodney Hood and the agency’s board saying the agency needs to make internal changes in order to improve its efforts in helping CUs return to the black.
In his letter to NCUA, William A. (Bill) Brooks, a former NCUA examiner who has also led several credit unions, relates how he was brought in to lead a turnaround at Mid-Atlantic FCU, which over the last three years has gone from being on “life support” to “matching and exceeding peer performance.”
Brooks said his goal in reaching out to the NCUA board is to provide an “honest assessment of the value of the NCUA guidance during the recovery process,” and to help “improve the regulatory and examination processes.”
Brooks’ letter documents problems at Mid-Atlantic FCU he said go back as far as 2005 when its original sponsor, the IMB Mid-Atlantic plant, closed and it converted to a community charter. Pointing to what he said was poor underwriting combined with the financial crisis, along with bad management decisions, Brooks said the credit union finally hit the point where its operating expense-to-gross income ratio was 100%.
‘Inconsistent With the Facts’
Since joining the CU three years ago just as it entered into PCA territory, Brooks told Hood he agreed with an NCUA Special Actions Examiner at the time the credit union could be saved.
“During the last three years there have been numerous discussions with the field examiners,” Brooks wrote. “All have been open and sometimes contentious. Most of the contention seems to be around the field examiners being hamstrung into supporting positions mandated from above and inconsistent with the facts at hand.
“The biggest issue with NCUA's participation in the recovery of MAFCU, and the handling of any credit union that doesn't fit their predetermined mold, is concern that they are becoming more of the problem than the solution,” wrote Brooks. “ It is impossible to have a responsible dialogue about credit union problems and solutions with a field examiner when the examiners are being controlled by people far removed from the debate. On numerous issues and problems we had with the NCUA reports, when presented to the field and supervisory examiner, we received the response, ‘That was written from above,’ or ‘It has to be this way to get the examination report approved and issued.’”
Other Issues Encountered
Other problems Brooks said he and Mid-Atlantic FCU encountered as they attempted to right the ship have included inconsistencies between what examiners do and the Examiner’s Guide and a focus by NCUA on “things that are not strategically important or imminent.”
Brooks told Hood he believes part of the current reporting problem could be the result of the change from the CAMEL Matrix based examination to the Risk Focused Examination (RFE).
“If NCUA continues in this manner, we will see fewer credit unions as the frustrations will cause surrender. It would also call into question the NCUA requirement for Strategic Planning. It would be simpler for a credit union to take their marching orders from the central planners in the Washington office,” Brooks wrote. “Members lose because credit unions are not aligned with what they were originally designed to be, the subprime lender. There is nothing functionally wrong with subprime lending, as long as the risk is being compensated for…Where are the underserved to go?”
Watch CUToday.info’s The ‘Tude section for a fuller version of the letter.