By Frank J. Diekmann
NCUA has not announced the various agendas for its board meetings for the rest of 2023, including its meeting set for later this month, but there is one thing that will be interesting to watch to see if it makes an appearance.
During its April meeting the NCUA board approved a plan to publish a Request for Information that includes 38 questions related to the effects of a changing climate on credit union operations and related risks (you can read more here).
The plan was favored by Chairman Todd Harper, while NCUA Vice Chairman Kyle Hauptman cast the dissenting vote in the 2-1 margin. That left board member Rodney Hood as the swing state on the board. The only way the climate RFI made the board agenda at the April meeting was because Harper knew he had the second vote. Hood, a Republican appointee like Hauptman, said he voted in favor because he had earlier given his word he would do so, but also made clear he expected one of his priorities to be taken up by the board later this year.
The priority has to do with part 701 of NCUA rules around financial innovation, loan participations, eligible obligations and more. Hood indicated his office was working with Harper’s and credit unions could see something related as early as the July meeting of the board.
That could be just in time, as there is another complicating factor: Hood’s term expires in August (when the board doesn’t hold a meeting) and the Biden Administration is going to want to move quickly to get a second Democrat appointee on the board in a term that would run for at least six years.
Scale? It’s Relative
Behind every CU merger is the issue of “scale,” even if it isn’t front and center in the merger disclosure forms on which CUToday.info regularly reports.
But credit unions always cite some version of scale when talking about the inability to compete, buy technology, pay people and more. In brief, each disclosure form says in its own way, “We need to get bigger.”
But David Brehmer, the president and CEO of Vizo Financial Corporate Credit Union, who has announced plans to retire on Jan. 5, 2024 after 44 years in credit unions, offered his own take on that debate and more during a recent Q&A with CUToday.info (which you can read here).
“I have attended both small and large credit union roundtables and at times it seems I could be in the same meeting as both groups talk about needing more scale,” observed Brehmer. “I think we need to understand that even two large credit unions merging does not put them on par with the likes of Bank of America or JPMorgan. They spend billions per year on technology.
“Being a niche player doesn’t mean you can’t aggressively grow your credit union. It does mean, though, that you understand your relevancy within your membership base. I think credit unions that understand where they excel within their market can be extremely successful.”
But Perhaps A Little Scale Wouldn’t Hurt
Sometimes—OK, often—folks at the largest credit unions simply have no idea just how some of the smallest credit unions operate and how little there is in their cupboards. Consider this from one merger disclosure form filed with NCUA:
“The board of directors has concluded the proposed merger is desirable and in the best interests of members because WAYCOSE has limited assets of only $3.3 million and has a limited menu of products and services,” the CU told its members. “We are unable to adequately staff the credit union and fill voluntary board positions. We are open only two hours Monday-Friday (closed Wednesdays).”
And Asset Size is No Guarantee…
I heard someone high up in an NCUA regional office recently observe that he knows of two billion-dollar-plus credit unions that are having issues balancing their books due to bookkeeping sloppiness and accounting issues.
In one case, it’s the result of an IT conversion that went south. To date, this person said, the credit union has written off $2 million in overdraft fees due to related issues, as well as losses from fraud after some members figured out the credit union wasn’t returning their drafts and instead was clearing them, even though they lacked the funds.
Meanwhile, on a different issue, he later observed it wasn’t very long ago that credit unions were complaining about having to shock their balance sheets up 300 basis points, arguing that scenario would never happen. And then it happened. Now, he added, NCUA is also asking CUs to shock their balance sheets 300 basis points in the other direction.
Not that that could ever happen.
A Reminder That Members Don’t Know They’re Members
As CUToday.info reported here, Teachers Credit Union in South Bend, Ind. recently announced it is changing its name to Everwise Credit Union. Many years ago I was told by one researcher that the number-one response from credit union members to a name change is they believe the credit union has been sold.
So, kudos to Teachers CU for being ever wise in including in the announcement of the name change that the new brand “does not reflect a change in ownership and TCU will remain 100% member owned and headquartered in South Bend.”
What Was the Steamin’ Giveaway?
As CUToday.info reported here, the New York Department of State took an action that was pretty close to home when it shut down two websites that “impersonated” the department and which was making money by significantly overcharging users for services otherwise provided by NYSDOS, according to the New York Attorney General’s office.
The “misleading” websites, created by Thomas Romano and his company, Steamin’ Weenie LLC, closely mimicked NYSDOS’ Division of Corporations site by using the agency’s official seal and logo, and allowed users to file various business-related documents with federal, state, and local entities for much higher prices than NYSDOS offered, the AG’s office explained.
“One of the websites charged $135 for a certified copy of a certificate of incorporation, which cost only $10 from NYSDOS at the time,” the AG’s office said.
I’m not sure how long it took for the department to act, but perhaps it might have started when it came across a company called Steamin’ Weenie in the first place.
Frank J. Diekmann is Cooperator in Chief of CUToday.info and can be reached at Frank@CUToday.info. Mr. Diekmann is also author of several new book, including the brand new “The Last Lyric,” a humorous satire about a murder investigation at the Rock & Roll Hall of Fame in which every line of dialogue is either a classic pop/rock song title or lyric. Available on Amazon, Apple iBook, Barnes & Noble and Smashwords. Mr. Diekmann is also author of a non-fiction compilation of the very best & worst he has seen and heard in covering more than 500 CU meetings and conferences, “501 Name Tags: How Everything You Need to Know About Business Can Be Learned at a Conference & Forgotten in the Trade Show.” It is available on Amazon, Barnes & Noble, Apple, Lulu, and Smashwords