I saw the article about State Employees' Credit Union and whether it is safe and sound. ["OIG Report Reveals NCUA Questions SECU's Safety and Soundness," CUTimes.com, May 16.]
If they were doing anything that was unsafe or unsound, the NCUA would have to issue a cease and desist order. A DOR is issued to document area of concern and agreements reached to correct the areas of concern. What is interesting is that it seems that the DOR was written before any discussion with the board of directors of SECU. The DOR is the first step in the regulatory process. If the board does not agree with the concerns expressed or the suggested corrections of the examiner, the DOR needs to clearly document this disagreement.
The simple fact that Herb Yolles (I really think he is a good guy) would sleep better is not a safety and soundness issue. The last time I checked, 7% is still classified as well-capitalized. I bet that SECU trims it sails shortly because they are approaching the 7% number not because of any reason but rapid growth.
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What Yolles does not understand is the accounting equation for credit unions. It is simply, total income minus expenses minus reasonable reserves for unexpected losses equals zero. Yolles needs to point out where the accounting equation for a credit union has been changed to total income minus expenses minus reasonable reserves for unexpected losses minus extra reserves for Yolles' sleep disorder equal zero?
There are a host of things that the NCUA could have clearly expressed as areas of concern about SECU. However, the NCUA blanket pooh-pooh of the SECU operation hiding under the umbrella of safety and soundness without being very specific is inappropriate regulatory activity.
The role of the examiner is to identify potential concerns, document the concerns, present the concerns and get agreements to correct the concerns. Many examiners and the NCUA have pet concerns that have no place in the debate of safety and soundness.
It is the responsibility of the board of directors of a credit union to operate in a safe and sound manner for the benefit of their members. As far as I can tell, SECU's numbers for the most part are better than their peers. SECU has many options that they could utilize to and still be extremely competitive. Where is the real safety and soundness issues?
Are NCUA's concerns fact based or a matter of conjecture? When has having traditional core credit union values and acting on them for the benefit of members become a violation of safety and soundness?
I like Yolles and always believed he was a good bureaucrat to deal with when he was in Region II. However, Yolles does not have an extensive resume as a field examiner. He may have misspoke when he suggested that there was a safety and soundness issue that was adversely affecting his sleep.
I support a strong and fair regulator. In this matter I do not think you have either. I honestly believe the industry would be better served if all parties got in a room and quietly resolved any concerns.
Bill Brooks
Certified Financial Planner
CU Prosper
Rehoboth Beach, Del.
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