NAPLES, Fla. — Southwest Florida contributed unseasonably cool weather in keeping with the Winter Meeting of the American Association of Credit Union Leagues here last week, but that was no impediment to AACUL attendees. The group discussed progress in several areas of interest, including the response to unrelated business income tax and planned political involvement in private sessions, while participants in open sessions heard from all three NCUA Board members.
Key issue discussions and reports dominated the private portions of the meeting, including an update on CUNA Strategic Services, Inc. from Senior Vice President Wes Millar and Terry Costin, SVP marketing & sales for CUNA; and a CUNA Mutual Group, Inc., progress report from Executive Vice President of Sales Robert Trunzo, Don Davidson, vice president CU systems relations, and Gerry Singleton, director of league and association relations. A discussion on NCUA's Outreach Task Force among CU league presidents and the committee meeting on state issues advocacy were also closed to the press.
NCUA Chairwoman JoAnn Johnson offered what she said was likely her last talk before AACUL members, covering changes to Part 712 regulation concerning CUSOs, Part 721 on business lending, and 740 on advertising.
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She noted specifically the importance of league involvement in planned changes to the CUSO rule, which was brought to the agency by the Iowa CU League. "This rule has the opportunity for CUSOs to make credit card loan originations and hold them," Johnson said. "Iowa league officials sat down with staffers and interested parties; this shows that's where great ideas can come from." Johnson said the CU industry faced a challenging year ahead on the mortgage lending front, but that capacity to repay, character, and collateral were still the three legs of the stool that made mortgage loans strong and what separated credit union lending from the unwise standards at other institutions. "Some credit unions out there made trouble, but the CU industry as a whole is in a good position," she said. She also noted the series of letters and guidance that NCUA has issued concerning concentrations and risk analysis.
"Credit unions have a long history of making prudent loan workouts for members in trouble, and many of those members got these bad loans elsewhere. While we don't want credit unions to lower standards, we encourage you to modify loans in keeping with the guidance offered. We understand that CUs don't want examiners making these decisions for them," Johnson said.
Speaking of CU mergers, Johnson emphasized that the NCUA has a clear preference to keep merger candidates local because the troubled CU can be swamped by too many suitors and finds it difficult to cope with so many due diligence requests and site visits. She also stressed the need for merging CUs to step up efforts to communicate progress with members.
Jan. 21 marked Johnson's six-year anniversary at the NCUA and she said that it had been a wonderful experience, both professionally and personally. "When my replacement comes in I'll go back to Iowa and I'll be politically active again, but as I leave I feel very optimistic for what lies ahead for credit unions."
Gigi Hyland covered aspects of what NCUA examiners would be looking for going forward in 2008 and beyond, including stepped up due diligence over third-party relationships. "The guidance we issued is really all about common sense," she said. "We know you have to contract with outside vendors for necessary services, but we had some issues with that, so we provided our examiner guidance as an umbrella to help you tackle vendor due diligence."
On strategic planning, Hyland said that CUs must look at the day-to-day operations but cannot neglect to take the time to contemplate what the future will bring. "Will it be a merger? What about the competition, both from banks and other credit unions? Is our membership changing?"
Future planning is so important that Hyland will be conducting an NCUA Webinar on Jan. 29 with a PowerPoint presentation and ample time for Q&A. Learning to deal more effectively with 'what ifs' presented by the overall economy can save time and money, she said. "No one knows how long or how bad this subprime mortgage problem is going to be," Hyland said. "It's been easy to get depressed, but I'm a glass half-full kind of person. I know the (Treasury) yield curve hasn't been much help of late, either."
"But this is an opportunity for credit unions to show the true difference between them and other financials. I urge you to take this chance to shine by helping your members get through this," she said. Hyland also noted the like-minded message coming from "sister agencies" like the FDIC, where Chairman Sheila Bair is "dragging them into finding ways to help troubled consumers." A survey conducted by the FDIC on serving the unbanked and under-banked is different from the NCUA's MSAP survey, she said. "We sought information on how CUs are serving all members within their fields of membership, but the FDIC survey is a signal, I think, of the growing interest in how all financials are serving American consumers."
Regarding CUs facing scrutiny in Congress, Hyland noted that Former House Ways & Means Committee Chairman Bill Thomas (R-Calif.) "is gone now and what CUs are doing to justify their tax exemption is gone with him, but Congress has a very different focus now, and that is on consumer interests."
That credit unions can benefit from that changing focus marks the effort behind the agency's series of outreach programs and town halls, Hyland said. "We've held six of them so far, asking for your input to help define outreach. We are compiling the data from those meetings and hope to issue a report at the end of February."
Hyland took one pointed question from Michael Beall, president/CEO of the Maryland & District of Columbia CU Association. Beall said that NCUA examiners were telling CUs that were in negative earnings yet had strong capital that they must reduce expenses, suggesting that they go to their league and ask that dues be lowered. Hyland said she would look into it but noted, "1% ROA isn't the be-all and end-all for credit unions."
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