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ALEXANDRIA, Va. – The NCUA Board members deal with pressing credit union issues everyday. Here are their thoughts on some of the major credit union issues du jour. Membership Growth NCUA has raised some concerns about a stagnant rate of membership growth. “I believe credit unions are responding, certainly with the adaptation of underserved areas,” NCUA Chairman JoAnn Johnson said. Through June of this year, 73 credit unions were approved to serve 96 underserved communities. These have the potential to reach 14.5 million people. In addition to adding underserved areas, providing the right services, such as small business loans, is “the real key,” she said. NCUA Board Member Debbie Matz pointed out that the 2% growth figure that she frequently cites includes members gained through indirect lending, who will probably never use the credit union again. However, she pointed out, “Some are growing very robustly. Those are the ones we should use as our models.” Matz stated that these credit unions see the importance of growth and understand it takes money and time. “They are willing to make those investments and when they do it really seems to pay off,” she concluded. For example, community development credit unions have twice the membership growth of credit unions in general. Should credit unions do some type of reporting to document how they are serving underserved members? “That’s a tricky question.” Matz responded. “My concern is, with the efforts to tax credit unions and renewed efforts to have some sort of CRA, they might want to have some reporting.” She quickly added that she does believe credit unions are fulfilling their mission and serving the underserved. PCA Reform Banking groups, and ultimately some on the Hill criticized the Prompt Corrective Action reform provision currently included in the Credit Union Regulatory Improvements Act last year, as lacking details. “The proposal underwent a lot of work over the last few months and is very solid,” Johnson said. She is “hopeful it will be included in the regulatory relief bill.” As far as a timeline for regulatory relief legislation, “You’d be better off asking Congress,” Johnson commented. In the meantime, she added, “We’ll continue our education and we’ll continue to do our work,” such as educating committee members and others to familiarize them with the issue and what the agency and credit unions are trying to accomplish. Matz had initially raised some issues with the provision, but now says, “My concerns have been met.” She supports the reform effort, saying it would be helpful to credit unions and makes safety and soundness sense. MBLs Johnson and Matz led the way to more flexible business lending regulations for credit unions from their earliest days on the board. “It’s exciting to see these results,” Johnson said. Matz followed up, “More and more credit unions are thinking about business lending and starting to do it.Business lending is risky and it’s not for every credit union.” The Small Business Administration was a bit disappointed with the initial results for credit unions joining their programs. Now, Johnson said, “I think SBA now is pleased with how the numbers are beginning to increase.” She noted that credit unions are approaching member business lending from all angles, whether it be the CUSO route, participations, SBA, etc. Adding business loans can help a credit union not only diversify its portfolio, Matz commented, but it can also help grow membership. A proposal currently out of NCUA would expand certain business loan requirements beyond NCUA’s to that of the agency backing the loan. Johnson said she will continue to use Access Across America to keep educating credit unions on the various opportunities out there. As of June 10, 2005, there were 228 credit unions participating in SBA programs. They have made 675 loans totaling $77.5 million with an average loan of $114,000. MSB Conversions Despite two large Texas-based credit unions attempting to convert to mutual savings banks, that is not a trend, both NCUA Board members said. However, Johnson said she does see a trend for those credit unions turned thrifts to convert to stock held institutions over time. If CURIA passes it could alleviate some credit unions’ feelings that they have to convert, Matz said, referring to the reasons named by Community Credit Union. Regarding the disclosures in that case, she added, “We haven’t officially invalidated it yet. It’s our opinion that they have not done their disclosures properly.” Johnson admitted it could end up in the courts. Indirect Lending Due diligence is the phrase of the day here. Matz said the agency wants to ensure that credit unions are not relying too heavily on their vendors and “don’t delegate their approval authority to anyone else.” Credit unions also need to ensure they are getting the yield promised and that the dealerships understand the credit union philosophy and do not jack up the prices with extras until the buyer cannot afford to keep the vehicle. Johnson pointed credit unions to a recent risk alert NCUA issued. “It’s a good book of business when done properly,” she said. The agency has no overwhelming concerns right now, but the increase in participation drove the issuance of the guidance, the chairman said. -

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