An important event today:
SECU Annual Meeting
Tuesday, October 14, 2025
1:00 p.m.
You might try to watch virtually, but I am unable to find a link. Go to SECU NC website at 1:00?
Here is one member’s suggestion for Q & A. (link)
A Unique Beginning, But Is Now the End?
In March 1985 CUNA filed a friend of the court brief to support the newly chartered Local Government Employees FCU. The charter date May 23, 1983. The North Carolina Bankers Association filed suit in 1984 saying the FOM violated the FCU Act.
As reported in March 1985 issue of Credit Union Magazine (page 25) the suit was filed after the state Supreme Court ruled that State Employees CU (SECU) could not expand its FOM to county and municipal governments.
CUNA argued that “NCUA has statutory authority under the FCU Act to interpret the common bond provisions of the Act, that its interpretation is consistent with the legislative history and legal precedent and that the State Supreme Court ruling against SECU is inapplicable in this case.”
Local Government FCU won. It became an operational partner with SECU providing back office and branch support. The two grew side by side for over four decades. Local Government had its own board and began to diversify from total integration with SECU, ultimately founding a digital only charter, Civic FCU , to expand its virtual presence and business options.
After Maurice Smith retired as CEO of Local Governement, the new leadership began exploring other options. SECU’s board may or may not have made a merger overture to the new LGEFCU CEO. It depends on whom you ask. The upshot was the Local Government merged with its much smaller digital dopplinger June 1, 2025 , kept the Civic name and then proceeded to end its operational dependence on SECU. No longer were Civic members being served through SECU branches after forty years of having access.
The Beginning of an End?
As the newly named Civic FCU began its independent existence, the transition has not been easy as noted in its July 24 website post. (link)
As it tries to build out its own delivery system the credit union has reported negative net income for the 2023 and 2024 yearends. But the losses have begun to hemorrhage at June 30, 2025 post SECU separation.
In every critical financial and operational indicator, Civic is going backwards. It reported a loss of $24.8 million versus a $9.2 million positive gain while working with SECU in 2024. Compared to June 2024 balances, shares have declined by almost $600 million to $2.9 billion; members have gone from 407,926 to 380,898 with loan originations (-47.3%)and total loans both declining.
Civic has borrowed $320 million at June 2025 versus just $80 million one year earlier. It is bolstering its net worth ratio with $52 million of subordinated debt. Its total assets have declined from just over $4.0 billion to $3.66 in the first six months of this year.
The only increase has been in employee headcount going from 319 to 431 since 2024 yearend as the credit union opened at least ten new branches.
How will this story unfold– a new era or is it the beginning of the end? Civic In its original incarnation was an example of operational, legal and cooperative ingenuity. It succeeded in expanding credit union services by showing the power of dual chartering-a state charter in essence sponsoring a de novo federal one.
Today that spirit has been lost. Civic is struggling to just become another traditional credit union in a state with intense financial competition. This strategy is using up the financial, reputational goodwill, and cooperative legacy that created a unique solution for serving their members. Will the CEO and board find their way back to creating special value for their member-owners who seem increasingly skeptical of this independence turn?
Federal Government Shuts Down-The Importance of Options
In this latest test of political masculinity in Washington DC, the federal government has shut down.
NCUA says it is still open for business. As evidence the agency reissued this guidance from over 14 years ago:
11-CU-05 / April 2011
Planning and Preparedness for a Potential Government Shutdown
This test of political will and messaging on both sides has an open-ended feeling about it. No one knows for how long or at what cost this standoff will continue.
This event and its aftermaths will only add to the many economic, financial and consumer uncertainties now infecting future outcomes.
This is not the first era of credit union’s navigating broad events outside their control. Recalling previous periods of change can remind that one of the most useful responses is to have options–not merely hunker down to weather the storms.
When Options Matter
The headline reads: Federal Credit Unions Eyeing State Charters as Rate Ceiling Hurts. It is from the Business & Finance section of the January 18, 1980 edition of the Washington Star newspaper.
The opening paragraphs:
Some federally chartered credit unions are trying to switch to state charters because the government’s 12 percent interest rate ceiling is shutting down their loan business. . .
In the last year, the 12 percent ceiling on loans has either shut down lending at some credit unions or generally restricted granting of loans in others.
Energizing the Options-NOW
Leadership is the art of changing before you have to. The Trump administration’s one consistent theme is disruption, if not the destruction, of traditional government functions.
Recently in an NCUA board meeting the single member Kyle Hauptman suggested that it was possible the agency might have no board members in the future.
Whether that was just a hypothetical musing or confirming his interest in another government position is unknown.
But assume that scenario. No board at NCUA. What would the administration do? What it has done with other vacancies, appoint an “acting Chairman” likely from Treasury. And then begin a process of assimilation like the OCC under that Department for the agency’s future.
Just one of many possibilities created when the status quo is not longer as political checks and balances are completely gone.
To protect the independence, integrity and unique role of credit unions, it may be necessary to go back to where the movement started and gained its credibility–the state chartered system.
State regulators (NASCUS), state insurance options, trade associations and every credit union, whether state or federal, should now be assessing the ability of the states to be their primary regulatory choice.
It is critical to reinvigorate the state chartering system as a real option as the federal government and NCUA seem to be careening away from any stable leadership and certain future.
Credit unions created the dual chartering system that has evolved into serving tens of milions owners. It may end up being their best hope for the future. That is just one history lesson from the 1980’s.
NCUA Turns to Exit Stage Right in Examinations
At the NCUA’s September single board member meeting the acting CFO announced the agency had conducted four liquidations through the first two quarters. The YTD loss allowance was increased by $17.6 million versus $2.0 million in 2024. $12 million was expensed as an insurance loss for June without any details (Unilever FCU?).
NCUSIF trends are not going in the right direction.
The most important efforts limiting NCUSIF losses are NCUA’s annual examination program.
The problem is that it is no longer annual except for selected cases. After the Agency’s April layoffs of 20% of staff, the exam cycle was extended further for apparently stable credit unions.
But it is not just the frequency of contact, but the quality of the work and the interaction with management and board on important issues.
Against this recent NCUSIF update, yesterday’s NCUA press release was especially unsettling. On the surface, the single board member Kyle Hauptman announced NCUA’s goal to conform agency policy with the political ideology of the current administration.
The Headline read: NCUA Eliminates Use of Reputational Risk, (link). But the change was much more extensive as described by Ancin Cooley in a post in which he focuses on this paragraph:
In addition to eliminating reputation risk, NCUA has discontinued the practice of assigning ratings to the Risk Categories (also referred to as Risk Areas) for the examination and supervision program. Historically, examiners assessed the amount and direction of risk exposure in seven Risk Categories: Credit, Interest Rate, Liquidity, Transaction, Compliance, Reputation, and Strategic.
This brief excerpt does not specify what this change means. Will the 1-5 CAMELS ratings be affected? Will the “high, moderate, or low” summary comment on risk areas be ended?
With credit union failures and NCUSIF losses trending higher, reduced examination efforts, and continuing economic uncertainty, is now the time to muzzle examiner judgements? Here is Cooley’s reaction:
What Cooperative Owners Should Know When Their CEO Buys a Bank
Credit unions purchases of for-profit banks have become a more frequent and accepted coop strategy. The most recent total count is 77 purchases since 2010 with 22 announced in 2024.
Buying banks requires the credit union to pay cash versus the option of issuing new shares or partial cash and share offers when banks purchase each another.
This cash outlay means the members’ collective equity is being used to pay bank owners for their shares, often at premiums of 1.5 to 2.0 times the bank’s net worth. The gain or increase is booked as “good will” a non-earning asset that must be evaluated for future write downs.
In all these situations the members have no say. They are informed after the deal is signed subject only to “regulatory approval.” Information as to how and why this outlay of the credit union’s capital will benefit the members is rarely presented.
Moreover, most of these transactions are serendipitous bought to the credit union by brokers hoping to facilitate a sale for a fee. There is often no connection or knowledge of the bank. Sometimes it is far removed from the coop’s existing market. In one case in Arizona, the credit union converted to a state charter to acquire a bank outside its FCU’s field of membership.
What Should Member-Owners Know?
What should the credit union owners be told about this use of their cash? The most important question is how this transaction will benefit the members.
When purchases are completed within the banking industry the standard disclosures are straight forward-what will be the impact on earnings, dividends and recovery of the capital outlay.
A Case Study in Financial Disclosure
Yesterday the $1.9 billion QNBC Bancorp (QNBC) (Quakertwon, PA)announced the purchase of the $477 million Victory Bancorp in Limerick PA. As both are publicly traded companies, there is much market and call report information about both firms.
The press release led with the total purchase price of $41 million, based on the closing price of QNB shares in this all share transaction.
While there were other general details of the benefits of the sale such as similar culture, business models and greater combined resources, the crux of the announcement was the financial justification for the transaction for both banks’ shareholders.
In the case of the seller, Victory, the stock price (VTYB) has fluctuated between $10-$11 per share even though it reported a net book value of over $15 at the June 30, 2025 call report. Last night the stock closed at $18.20 per share.
The $41 million total price is 132% of the banks shareholder net equity of $31 million. The bank’s YTD performance though the second quarter was an ROE of 9.07% and ROA of .59%. Both OK numbers, but not great. But what stands out is that Victory reported zero delinquencies and charge offs in the first six months of 2025.
It is clear why Victory shareholders might be interested in this instant gain in the value of their shares. But what will the purchasing bank owners gain. This was discussed at length with specific goals in the announcement under the heading, Financial Benefits of the Merger. Following are from the proforma financial projections how this transaction will impact QNBC’s owners:
The transaction is projected to deliver approximately 16% EPS accretion to QNB’s 2026 estimated EPS and approximately 19% EPS accretion to QNB’s 2027 estimated EPS. . . The expected tangible book value earn-back period is approximately 3.3 years. . .
On a pro-forma basis for the year 2027, the combined business is expected to deliver top-tier operating and profitability metrics upon fully phased-in integration plans, including:
- Return on Average Assets of approximately 0.80%
- Return on Average Tangible Common Equity of approximately 13%.
The pro-forma combined company financial metrics are based on estimated combined company cost synergies, anticipated purchase accounting adjustments, and the expected merger closing time horizon.
Specific financial outcomes based on proforma estimates. This is what shareholders expect to see when their shares are diluted with this purchase using newly issued shares. This is what regulators will use to evaluate their supervision and approval.
The announcement also contains the traditional statements about future hopes:
Beyond just this transaction, this partnership represents an exciting opportunity to build one of the most dynamic and growth-oriented community bank franchises in all of Pennsylvania.”
But the bottom line on this event is the financial benefits to the owners of both financial fimrs.
The Need for Financial Disclosures
This is an example of the financial disclosures and goals credit union CEO’s should be providing their owners when announcing bank buyouts. It is standard industry practice and obliquitory for regulatory review.
When credit union’s buy banks the bank shareholders are given full financial details as to why this is a good deal for them. The NCUA and FDIC require full financial proformas to analyze for safety and soundness issues.
The only owners left in the dark at the credit union members whose funds are being used to pay a premium to the bank’s owners. It’s past time for credit union owners to have this full information. It is essential to understand whether the transaction makes financial sense and to hold their leaders accountable for the proforma outcomes. Right now everyone else has the details except the owners footing the bill.
The CEO and Board’s Fiduciary Responsibility
If credit unions want to compete to buy banks, then they should be held to the same financial disclosures to their member-owners as the banking industry requires of their institutions. Otherwise we risk creating a dark market where the facts are unknown and accountability for investing member funds is lacking.
The bottom line is that it is the CEO’s fiduciary responsibility to the credit union’s owners to be fully transparent when using their capital to buy a bank. It is the Board’s duty to ensure this disclosure takes place.
Serving Multiple Masters
Jim Blaine’s blog SECU-Just Asking! has continued almost daily for over four years.
His blogs have focused on SECU’s changes of policy, norms and practices which he and Mike Lord, his successor, developed over four decades.
These changes of direction included potential mergers, ending the partnership with Local Government FCU, considering business lending and expansion of the FOM. But his early and most strident criticism was the implementation of risk based pricing on consumer loans. The prior practice was to charge each member the same interest rate on loans of similar maturity independent of the members’ credit score.
Jim then exercised the owner’s option to recruit members who were open to his point of view to run for open board seats at the annual meeting. The first effort was successful in that all three member-nominated candidates won over the board’s chosen.
But since that first success the board has enacted bylaw and other procedures to make it increasingly difficult for independent candidates to run–and then eliminating any “live” member participation at the owners’ annual meeting.
Jim’s SECU blog is sometimes caustic and personal. But most often he tries to present his policy concerns with facts, logic, SECU’s experience, and occasionally referencing other credit unions.
Creating a Unicorn
He believed that long term success depended on creating unique value through innovation rather than following conventional wisdom or practice.
He would reference the unicorn as a standard for differentiation–mythical or real.
The Basic Question Animating His Commentary
Recently Jim began a series of blogs on SECU’s use of the the 30-year mortgage as the industry standard for home lending. A practice that includes periodic sales of those loans in the secondary market to minimize ALM risk.
This analysis began on September 18 with a blog titled: SECU “Reinventing The Wheel” With 1930’s “New/New” Mortgage Model.
Subsequent posts have demonstrated the advantage of ARMS for members in many circumstances, but not all. You can read his follow on daily analysis at the site.
What’s At Stake?
I chose this issue to illustrate what I see as Jim’s basic concern with the many changes suggested and introduced by his successors over the past four years. His critique is more fundamental than a difference of business judgment.
At the core is a profound philosophical difference in what it means to be a cooperative.
Jim’s believes the credit union is owned and exists strictly to serve the best interests of the members. The most important corollary is the coop’s loyalties cannot be divided between other stakeholders and their business values. Especially when choosing operational partners, interacting with regulators or even working with other credit unions.
Reading his critique of the industry standard of the 30 year mortgage, this concern comes through loud and clear. Yes, many persons believe and have been schooled to think that this is the optimum choice when it may not or would not be the best option.
For this is a product designed, facilitated and controlled by two quasi-governmental entities Fannie and Freddie. They determine what is best for consumers and their financial duopoly, not for the consumer requesting the loan.
When one looks at his other critiques, they often ask a basic question, Why is this action, change, or initiative in the members’ best interest?
What is occuring at SECU and many other credit unions is that industry stature and growth are the primary drivers of change. We see this reflected in mergers of long-serving, healthy independent credit unions, the buying of banks and outside businesses. Most critically this disdain for members well being is demonstrated in the elimination of any owner role in the election or other involvment at their annual meeting.
The coop model has been increasingly hijacked by leaders who inherited generations of member created financial wealth that they presume is now theirs to use as they alone determine.
One of the oldest lessons from all faith traditions is that a person cannot worship both God and mammon. A number of today’s credit unions have given up on honoring members’ interest as the highest good. Instead their goal is to become an industry asset leader, to paraphrase a recent CEO’s defense of mergers.
Or, as explained by the $9.0 billion Community America’s CEO Lisa Gitner (Kansas) in proposing a merger with the $3.5 billion Unify Financial Credit Union in Allen Texas: “Now, we have an opportunity to expand our reach and create more access to CommunityAmerica for you, your families, and even more people across the country. I’ve always led CommunityAmerica with goals that are defined by how many people we can help–not by how much revenue we can generate. That is the driving force behind a transformative milestone in our credit union’s history–and the reason I am writing to you.”
Or to put the issue more bluntly, what consumer or member is going to choose this credit union because it will now “have a presence in 18 states and 22 markets, with branches in Arkansas, California, Nevada, Tennessee and Texas?”
Two Forms of Competition Always Present
Two classic strategies for creating competitive advantage are a superior employee centered service culture. The second is to embrace innovation.
Following are two updates in both areas.
Minimum Wage in Banking Now Hits $25 per Hour
Bank of America will increase its minimum wage to $25 an hour next month, the final step in a long-term goal the company set several years ago. The move bumps pay up from $24, a level put in place last October, the company said Tuesday.
It translates to a full-time annualized salary of more than $50,000 and applies to all full-time and part-time hourly positions in the US. The change continues a series of hikes lifting the firm’s base pay from $15 in 2017. Source: Marketplace and (link)
Digital Assets and Innovation
I am a novice in understanding the world of digital assets from Bitcoin to all the stable coin options now being evaluated and offered by financial firms.
Whether used as a store of value or investment, payments between parties or for operating outside the regulated financial services sector, I have not been able to identify a compelling value proposition.
The hype and people rushing to get into this new form for financial service have only accelerated since the Genius Act passed by Congress last month.
Here is a summary of some activity and loopholes by analyst Aaron Klien from Brookings in the article: Interest by any other name should be regulated as sweetly (September 10, 2025)
Cryptocurrency is an asset masquerading as a payment instrument. Congress did not see through this illusion and created a dangerous loophole in the newly passed stablecoin law, the Guiding and Establishing National Innovation for U.S. Stablecoins Act, or “GENIUS Act”.
The law is premised around a simple trade-off: Stablecoins are exempt from bank-like regulation and in exchange are prohibited offering interest on their coins. The law’s ink is not dry and crypto firms have already found a loophole, calling interest “rewards.” If we don’t close this loophole, it could cause massive problems resulting in losses by retail crypto holders, a bailout of big crypto, or a financial crisis.
Bitcoin started with dreams of being a global currency but has become an asset and, for many, a profitable investment (so far). One reason bitcoin works so poorly for payments is its swings in value. Enter stablecoins, usually pegged to the dollar, eliminating this problem. Yet, stablecoins are primarily used for buying and selling other crypto, not for ordinary transactions. While about one in seven Americans report owning crypto, only one in 50 Americans used any form of crypto, including stablecoins, to buy anything other than crypto in 2022.
So, if stablecoins aren’t used for payments, why do people own them? For many, it’s the same reason they keep money in banks: earning interest. The new law prohibits interest, but what if someone called interest a different name? Would it pay as well?
Coinbase, the largest American crypto exchange, proudly markets 4.1% “rewards” for holding USDC, the largest American issued stablecoin. Crypto.com offers variable rewards based on market conditions, while highlighting its latest partnership with Trump Media Group on their crypto. Its competitor Kraken offers even higher: 5.5% rewards. Notice Kraken marketing an annual percent yield (APY) notation to look like interest. That’s what this is.
Technically, the new law only prevents stablecoin issuers like Circle, which issues USDC, from offering interest. Coinbase, Crypto.com, and Kraken do not issue these coins, they just hold their customers’ coins. Imagine if E-trade or Merrill Lynch offered customers money for letting them “hold” their stocks, and you’ll see the parallel.
The economics of this loophole are problematic. Crypto exchanges generate profit to pay “rewards” to people who deposit crypto through a combination of payments from the stablecoin holders and potentially using depositors’ funds to make their own investments. The larger the rewards customers are being paid, the riskier the investments generating that money. Banks do this with your deposits, but with tight limitations, constant oversight, and federal deposit insurance that fully covers 99% of depositors. Crypto exchanges have none of these guardrails, as FTX demonstrated when it took customer assets to speculate and collapsed. . .
Credit Unions Invest in Crypto
Klein’s analysis continues for another ten paragraphs. What makes his concerns relevant for credit unions, is that there are numerous crypto related firms and credit unions now investing in stable coin services, The primary goal is giving members access to the purchase and holding of digital assets.
Yesterday CU DAILY reported “Stablecore, a platform that enables community and regional banks and credit unions to offer stablecoins, tokenized deposits and digital asset products, said it has raised $20 million in funding, including from a credit union-backed fund.” (link)
Stablecore’s purpose is to serve as a “digital asset core,” unifying the critical components of digital asset offerings into a single platform. The credit union CUSO making the investment was Curql.
Both these announcements may challenge credit unions who are uncertain about their core values and competitive advantage. So before you reach out to match competitors thrusts, remember success comes not from playing the game you find, but from defining the game you want to play.
Do Cooperatives Change Market Practices?
An historical note to start: Today is Constitution Day in the United States, because it was on this day in 1787, at the old State House in Philadelphia, that the final draft of the Constitution was signed.
From Jared Brock on capitalism’s financial incentives:
Turning anything — money, houses, scotch — into investment products skyrockets the price of things.
Financialization… the process of turning anything into an investment… skyrockets prices.
Think Taylor Swift concert tickets, Beanie Babies, baseball cards, cryptocurrency, etc.
Turning an item into an investment increases its price.
We’re currently witnessing this with the financialization of classic cars, high-end wine and scotch, and fractional investment in paintings.
A rare piece of canvas covered in colored paint is only “worth” $100 million if the investor knows he can rent that painting to a museum and re-sell it for $110 million in the future.
Because it’s more profitable to get rich by monopolizing stuff and lending it for a profit instead of actually working to create new stuff to sell, the rich are actually incentivized to bid up prices instead of creating new useable goods and services for others. Shareholders are actively trying to destroy our wellbeing for profit.
From a credit union observer:
“Cooperatives are the future of our ecosystem. It is how we take care of each other, how we take care of our community, and it’s how we can create generational wealth for all of us moving forward without being a part of this really extractive system.”
The question: Do credit unions practice both these economic goals for example in mergers and bank purchases? Is being a part time coop good enough?
Credit Union Members on Housing’s Margins
Who can credit unions help the most in this time of economic transition? What one economist calls a “bifurcated” consumer economy.
If credit unions fail to serve members facing the difficulties described below, who will?
Housing At the Margins
From a Marketplace (link) report last week:
, , ,real estate data firm ATTOM reported that foreclosure activity — which includes default notices, auctions, and bank repossessions — was up 18% in August compared to a year ago. In fact, foreclosure activity on properties across the U.S. has been rising for the past six months.
It’s not up to pre-pandemic levels, but it does signal more trouble in the economy.
Home ownership is the single most important step to financial well being for the majority of Americans. Does your credit union have a program to help members who are having difficulty meeting their mortgage payments? What options do you offer?
Evictions
A related but different challenge are members facing eviction from rental properties when coping with job loss or other economic crisis.
A film from March 2025 talks about the many factors contributing to evictions. There are two trailers one for the longer movie, Evicting the American Dream (link).
The second three minute trailer focuses on evictions and the economic forces driving this process. (link) Most impotantly this short excerpt shows the impact on the consumer’s credit report as well as all those listed on the eviction notice, often all the family including children.
Credit unions were formed to provide an option for those on the margins of the economy supported by the participation from the whole community including those who are doing well.
When was the last time your credit union loaned to a member who had an eviction notice on their credit report? How do you identify and reach out to those whose paychecks are not enough, or maybe lost?
Should we just serve those doing well who easily fall within our rule bounded services or worry about proverbial “lost sheep?”
Words to Start Your Day
From a CEO’s monthly staff update. This story is about a senior consumer loan specialist’s impact in just one month with member comments. People make the difference.
“Chad received twelve 5-Star reviews from members in just one week. One new member shared: “Chad was very patient, answered all my questions, and got our loan processed in under two weeks!” Another noted Chad’s quick responses and expertise: “He went above and beyond to help me understand my options. Chad should teach classes on customer service excellence.”
“When helping one member with a colorful credit history, he evaluated her relationship with the credit union, coached her on how to improve her credit and found a way to meet her loan needs. The member called Chad back with friends on the line so they could all ask him questions about credit rebuilding strategies.”
Members Own Words
I’ve banked with you guys for 10+ years. I feel like you’re fair and you’ve always been willing to help me when I need it. Example I had like 4 overdraft fees happen at one time and when I called, the agent was knowledgeable and explained everything and waived some of the fees I had put the wrong card. You guys were nice enough to understand the mixup and help me. Other banks I’ve had are just like “tough-deal with it,” you’ll keep getting fees until paid. When I got married, I refused to give up my account with you guys.
I have been with the Credit Union for over 20 years, and they always are willing to help and give their customers the best service and rates. I cannot say this for many credit unions in the area. You gave me a loan to pay off my debt and gave me a better interest rate than any other credit union. I have gotten multiple loans through you and they always make it simple and keep you informed. Just recently Chad helped me get a home equity loan. Thanks, for all you do.
Great customer service. Answered all questions, made the whole process seamless and done within 24 hours. I enjoyed the service so much. I just refinanced my second vehicle with you.
There’s not enough space to share my gratitude to Ms. Jessica who showed genuine care for a confused aged person.
We live in odd times.
hashtag#CEOs, I know you’ve had frustrating encounters with auditors and regulators. They can feel burdensome, even annoying. But this latest move from National Credit Union Administration (NCUA) isn’t a win for the reduction of “regulatory burden”—it’s something far more concerning.
Although the headlines highlight the elimination of reputation risk, please read further. In addition to eliminating reputation risk as a rating, NCUA has discontinued assigning ratings to all seven risk categories:
• Credit
• Interest Rate
• Liquidity
• Transaction
• Compliance
• Reputation
• Strategic
Imagine someone removing all the smoke detectors from your building and telling you, “Don’t worry, we’ll let you know when we see fire.”
The purpose of these risk ratings was never busywork. At the aggregate level, they provided field offices, regions, and national leadership with a top-down view of where risk was accumulating. From a staffing standpoint, if a credit union’s liquidity risk was rated high, it signaled the need for additional expertise at the next examination.
Examiners and ERM professionals assess each category based on quantity, direction, and the quality of risk management. The point was never to penalize higher-risk profiles. It was to ensure that if you accepted a higher risk, your management practices were robust enough to handle it.
America’s Credit Unions, NASCUS, and American Association of Credit Union Leagues
How is this a win for the members and the safety and soundness of credit unions? Why do we only hear about tax status, and none of these moves requested are discussed with the same intensity?
A couple of foot notes: NCUA Credit Risk Webinar
On July 15, 2025, in an NCUA (https://lnkd.in/ednAJjCE) credit risk webinar, an examiner (Min 13:49) discussed the benefits of key concepts like risk appetite, risk tolerance, and risk capacity. Those are excellent tools for boards and executives. They’re the backbone of modern ERM.
But here’s the contradiction: NCUA is now saying those concepts are helpful for credit unions to adopt, while simultaneously discontinuing examiner use of risk ratings for the seven categories (credit, liquidity, interest rate, compliance, transaction, reputation, and strategic).
National Credit Union Administration:
Additional Actions Needed to Strengthen Oversight
On Sept. 23, 2021, the Government Accountability Office issued a report stating NCUA has opportunities to improve its use of supervisory information to address deteriorating credit unions. By more fully leveraging the additional predictive value of the CAMEL component ratings, NCUA could take earlier, targeted supervisory action to help address credit union risks and mitigate losses to the NCUSIF. As of today, one of the recommendations is still open, and another is partially addressed.
END
As Hauptman tries to burnish his reputation with the administration’s anti-government ideology, the dangers of a single political point of view determining regulatory priorities in a so-called independent agency becomes clear.
This press release is not about ensuring the safety and soundness of members’ funds or enhancing the cooperative systems critical roles. It is simply posturing for another assignment in an administration bent on governmental disruption.
The financial and institutional integrity of the cooperative system requires a competent, active regulatory oversight. Institutions that manage financial assets for others are especially vulnerable to self-dealing. That is why almost every form of money lending, transfer, safe-keeping and advice is subject to governmental licensing and oversight.
Without effective supervision not only will credit unions continue to be lost, the playing field will become crowded with internal and external predators trying to cash in on the abdication of, and disrespect for, regulatory oversight.