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The five-year NBC TV series Friday Night Lights was the story of a high school football team in the fictional town of Dillon, a small, close-knit community in rural West Texas.

But this reality actually exists all across America.  The sports seasons are a central aspect of the high school experience for most American communities.  Especially smaller ones.

For example “Coach” Walz’s role in leading his high school football team to a state championship in Minnesota may be better known than anything he did as governor.

It was with much anticipation then, that last Friday I  attended the home football game of the Rensselaer, IN, Central High School versus the visiting West Lafayette team.  What I took away was not what I expected.

Here is a photo summary of a warm midwestern autumn evening on a playing field carved from acres of cornfields.

The team’s football schedule is announced  in every store window in town, featuring just five seniors.

A senior perk: painting their reserved spaces in the school’s parking lot.

The field of football dreams and past glories- 2014 State Champions.

The team ‘s nickname and mascot: the Bombers.

Warmups.   RCHS had about 30 varsity players; Lafayette about twice that number.  Many of RCHS’s better athletes play both offense and defense.

It was senior night.   The Bombers have only five members from this class.  As the coach stated: “I play a  lot of underclassmen who only show peach fuzz (not started shaving).”  Honoring the five:

Entering the field for the game via the Bomber tunnel:

Stands not quite full.

The band presents their pregame show to the music of Mussorgsky’s  Pictures at an  Exhibition. Halftime will be used to honor all sporting seniors.

The Difference from My Era

So far the evening was similar, albeit more modern in technology, to when I was in high school.  The special occasion for this game was recognizing every senior who had participated in a varsity sport during their four years of high school.

The halftime program featured each senior’s recorded talk while walking out of the Bomber mascot with their parents.  The players’ audio summaries included their sport teams, other school activities (Sunshine Club, FFA, etc) and post high school plans such as college or other career options (eg. lineman , CDL training, or the army).

A picture that captures this entire group of at least 50 athletes escorting their parents shows a major difference from my high school days.  Sixty years ago there were just three boys sports and no athletic teams for girls in high school.

If you look closely at the photo below, more than half of the senior athletes are girls.  Rensselaer has ten teams for them:  Volleyball, basketball, tennis, cross country, track, softball, soccer, swimming, golf and yes, even wrestling.

I guess that helps one understand how  both a former football coach and a woman now run as one team for the highest political offices in America.

Change often starts at the grassroots sometimes next to farmers’ fields.  From these opportunities we develop our self confidence and aspirations for who we want to be.   The Friday Night’s experiences are now open for all of us.

PS:  For those interested in the outcome, RCHS lost 34-7.   However the players’ intensity and fight never wavered.

 

 

 

July 30, National Whistleblowers Appreciation Day, is the publishing date for Community Capital,  Race, Equity and the Credit Union Movement.

Clifford Rosenthal and Michel McCray are co-authors. The book’s detailed case study is in Part Two.  In an earlier post, I quoted Rosenthal on its significance even today.

The story of Kappa Alpha Psi FCU and its abrupt liquidation in 2010 is recounted in five chapters by McCray with frequent observations from participants and referencing key documents from NCUA.

This excerpt from Chapter 12, Alice in Wonderland, presents a core issue.

Regrettably, NCUA evaluated KAPFCU as if it were a mature credit union, defined as being ten years old with $10 million or more in assets. The accounting rules and regulations are entirely different for these small, new credit unions—but KAPFCU was improperly evaluated based on the much higher standard by NCUA examiners.

Ignoring the improvement in KAPFCU’s NWR to 3.67% by June 30, 2010, NCUA opted to move forward with liquidating the credit union. KAPFCU challenged NCUA’s action, bringing the case to the federal district court in Washington, D.C.

Ironically, KAPFCU’s court case may be the most significant challenge to the NCUA’s authority in recent memory. This tiny African American credit union was contesting the constitutionality of the Federal Credit Union Act and NCUA’s rules and regulations themselves. KAPFCU’s chief complaint was that it had not been afforded the full flexibility allowed under NCUA rules, regulations, and supervisory authority for credit unions of similar size and character.  (page 178)

Tomorrow:  the clash of personalities and backgrounds.

It is a cliché, but true.  The well-being of any organization depends on the quality of board leadership.

Boards select the executive team and, depending on the organization’s bylaws, exercise ongoing monitoring of performance and strategic guidance.  In the case of a public board, politically appointed, the board becomes the primary face of the organization to its various constituencies.

Board leadership is a critical skill.  Some boards become so dependent on either the CEO (staff) or the chair that their performance is perfunctory, just follow  the leader. At other times in the same organization, boards are dynamic, bringing expertise, insight and critical mission debate.

Following is the front page of the January 2008 NCUA News.  The lead article is about minority board member Gigi Hyland’s testimony to Congress on the need for flexible and responsive mortgage loan modification options.

The topic was certainly timely in light of the subsequent financial crisis.  But what is even more interesting, is that she represented NCUA’s position. The Chairman and vice chair were republican appointees JoAnn Johnson and Rodney Hood.  Both also had  short articles in this edition about their activities.  But the lead story is Hyland’s testimony for NCUA..

The Changing Role of NCUA Board Members

Since the 2008-2009 financial crisis, the role of the NCUA board has changed.   Sometimes new members have very limited, or no, first-hand experience of credit unions or regulation.

Members have interpreted their responsibilities in different ways.  Some have viewed it as merely “policy making” with limited or no staff oversight.  Some view the job as a part time time responsibility.  It does not even require in-office attendance except on public board meetings which can now be done virtually.

The result of these various understandings, is the Chair can influence board member’s  substance and roles in very narrow or expansive ways.

The example above shows a board fully engaged in different responsibilities and communicating with its constituencies in a full and open manner.   This NCUA publication no longer exists.  Board members now just post individual statements, and sometimes speeches, on NCUA’s web site.

With Chairman Harper on an extended medical leave, the NCUA board’s role becomes more problematic.  The message is still the same however.  The quality of any organization depends on the board’s leadership.

This comparison from the communication of 2008 suggests the current Board has a lot of ground  to make up.   Perhaps a first step would be to restore the NCUA News in which each member has an opportunity to discuss what they are focused on.

Many participants see credit unions as having two operating options-either a federal license or a charter issued by one of the forty-five state authorities.  Within this second group is a small subset of approximately 100 cooperatively insured credit unions in ten states who are subject to only to their home state regulations.

Traditionally the choice of charter has been an important check and balance when a regulatory system, local or national, becomes unresponsive.   Charter conversions go both ways.  In 2023 there were 12 changes with nine state charters moving to FCU’s.

Traditionally state regulators and legislatures have been perceived as more accessible and responsive versus the federal system.  Some state FOM practices are less complex and  CUSO and other authorities more flexible.  For example, the majority of bank acquisitions have been by state-chartered credit unions.

A Multifaceted Charter Choice

But reality is not this simple binary selection. Operating options are more complex than either a state or federal charter.

In a CUSO magazine article summarizing NCUA’s yearend data, the writer pointed out several  of these other operating designations.

From the  December  2023 data summary: “NCUA reported that the number of federally insured credit unions (FICU) declined to 4,604—156 fewer than there were as of the fourth quarter of 2022.  Many of those may have come from low-income designation credit unions, whose numbers dropped by 129 from 2,612 in 2022 to 2,483 in 2023.

“Meanwhile, the number of “complex” FICUs—those with total assets over $500 million—increased by 5 to 714.”

These sub-classifications matter, as they grant additional authorities or impose different regulatory requirements.  Newly chartered credit unions have different reserving timeframes in their initial years.   NCUA will periodically update the status of Minority Depository Institutions (MDI’s) which it sees as a special class of charters.

Multiple Service Designations

In January of this year Callahans, using September 2023 data, published  a summary of three other “service designations.”   In their full analysis they showed how these operating authorities, low-income (LICU), community development (CDFI), and Juntos Avanzamos. will sometimes overlap.

CREDIT UNION DESIGNATIONS
FOR U.S. CREDIT UNIONS-DATA AS OF 09.30.23

Source:  Callahan & Associates, Peer Suite

The report states 56% of credit unions have at least one designation.  Th e most common is NCUA’s LICU held by 55% of all credit unions.  The other two designations require certifications. Hence only 9.1% of credit unions are CDFIs and just 2.7% are part of the Juntos Avanzamos network.

The LICU Advantage

The LICU status is by far the most popular and important classification. The status is assigned by NCUA to a credit union in which a majority of its membership qualifies as low-income as defined in Section 701.34 of NCUA Rules and Regulations.

The potential operational advantages include accepting non-member deposits, offering secondary capital accounts,  qualifying for exceptions from the member business lending cap, and participating in NCUA’s Community Development Revolving Loan Program.

The Callahan article points out that the 2,590 LICU’s range in size “from less than $100,000 (Holy Trinity Baptist FCU, $25,899, Philadelphia, PA) to more than $20 billion (Golden 1 Credit Union, $20.5B, Sacramento, CA).  In the $1B-$10B peer group, 60% are designated as a LICU.”

Of the 432 CDFI-certified credit unions which can access grants from the CDFI Fund, 95% are also LICU’s.

The pervasiveness of the LICU designation has been a focus for groups who oppose credit unions. One critical study by the Tax Foundation expressed the following opinion of the low income designation  in a January 30, 2024 article,   After 90 Years, It’s Time to Wean Credit Unions of Taxpayer  Subsidies:

“More than half of all credit unions have been designated “low-income” institutions, a meaningless term. This designation appears to be little more than a signaling device to allow credit unions (and NCUA) to claim they are serving underserved populations without having to provide any documentation to back it up. The Congressional Federal Credit Union, which serves members of Congress and their staff members, has been a low-income credit union since 2022. Members of Congress are “hardly low-income customers.” 

Diversity of Purpose and Operating Models

These charter variations create opportunities that a one-size-fits-all regulatory structure may not accommodate. Most credit unions were founded with a unique, and generally limited, field of membership that gave them a unique “persona.”  Over time most have moved far beyond this initial market identity.

As the evolution continues, the imperative of a unique identity becomes a challenge.  Business model and/or technical innovation are necessary but often not sufficient for competitive differentiation.

While much discussion of innovation focuses on technology or new partnerships, the option to modify a credit union’s organizational definition can be overlooked. Yet these choices may be more strategic in establishing a special market profile.  These designations are more than a brand; they are a commitment to a special expertise when serving members.

Other collaborative service networks besides those above have been or are being created.  These emerging organizations sponsor specialized products, virtual distribution options, innovative member services and even specialized support organizations such as Inclusiv (a CDFI) or the Global Alliance for Banking on Values.

The critical factor is choices of organizational design and networks.  The ability to draw upon many options, not just a single charter model, can help keep credit unions aligned with their member-owners changing circumstances.

 

 

 

 

In “The Prologue” to The Canterbury Tales Chaucer celebrate nature’s awakening life and, in humans, the need to once again gather together on pilgrimages.  “April” comes from the Latin aperire (to open) and apricus (sunny) as the month of the sun and growth. (Source: Jefferson Reads)

From “The Prologue” to The Canterbury Tales:

When in April the sweet showers fall

And pierce the drought of March to the root, and all

The veins are bathed in liquor of such power

As brings about the engendering of the flower,

When also Zephyrus* with his sweet breath

Exhales an air in every grove and heath

Upon the tender shoots, and the young sun

His half-course in the sign of the Ram* has run,

And the small fowl are making melody

That sleep away the night with open eye

(So nature pricks them and their heart engages)

The people long to go on pilgrimages …

Emily Dickinson’s poem of spring and the sacred:

A Light Exists in Spring

A Light exists in Spring

Not present on the Year

At any other period –

When March is scarcely here

A Color stands abroad

On Solitary Fields

That Science cannot overtake

But Human Nature feels.

It waits upon the Lawn,

It shows the furthest Tree

Upon the furthest Slope you know

It almost speaks to you.

Then as Horizons step

Or Noons report away

Without Formula of sound

It passes and we stay –

A quality of loss

Affecting our Content

As Trade had suddenly encroached

Upon a Sacrament.

Easter In Ukraine

A note from Music Mission Kiev

As Easter approaches, the joyous celebration of new life, hope, and renewal is juxtaposed against the backdrop of ongoing conflict in Ukraine. Yet despite the solemn realities of war, many still find comfort and fortitude in the timeless traditions and spiritual significance of Easter. It serves as a reminder of the enduring power of faith and the resilience of the Ukrainian people in the face of adversity. Hopefully, it will also magnify your own Easter celebration. The Orthodox Easter is celebrated on May 5th in Ukraine this year; more than a month apart from our March 31st Gregorian calendar celebration. For Christians everywhere, Easter marks the resurrection of Jesus Christ and signifies the triumph of hope over despair, light over darkness, and life over death. It’s a time when families gather, communities of faith come together, and hearts are lifted in praise. Hand-painted Easter eggs hold particular meaning in Christian symbolism. They represent the resurrection of Christ and are often adorned with traditional designs, each carrying their own significance. Triangles, for example, characterize the Holy Trinity.

 

(https://www.youtube.com/watch?v=98Qt6FJ-kz4&t=390s)

Christmas decorations at Chevy Chase Presbyterian Church

Advent wreath

Christmas flowers-Lo How Roses Ere Blooming

The tree with wrapping paper chains and  children’s decorations

Indoor wreaths

Bell choir at the ready

An empty sanctuary waiting for Christmas eve worshippers

At the National Cathedral’s nativity scene animals, shepherds, magi,  Joseph and children are ready to welcome baby Jesus and Mary on Christmas eve.

In a recent conversation with a newly chosen CEO on creditunions.com, the following was a comment on what she believed was necessary for her effectiveness:

JV: In a leadership role, it’s crucial to surround yourself with individuals who are comfortable telling you the truth. People naturally want to please the boss and tell them how great they are and might hesitate to disagree or deliver unpleasant information. It’s important to create a safe space where people feel comfortable voicing their opinions and assisting in decision-making.

Everyone has a little bit of an ego. It’s nice to hear that praise, but that can make it too easy to believe everything is going well, so you must actively seek out different perspectives.

Now that I’m in this role, I realize the importance of this kind of transparency. I knew it before, I’ve supervised hundreds of employees and billions of dollars in business, but now that I’m in the CEO role, I can see it even more clearly.

NCUA’s budget and Operating Decisions

Credit unions have both formal and informal ways to present their views to the NCUA board.  One process was the recent 2024-25 budget hearing and subsequent comments submitted.

But will this process make a difference?  Or is it just political theater in which suggestions are requested, but then the Agency proceeds to do what it intended in the first place.

Eleven comment letters were sent to NCUA and posted on its website.  These five short excerpts reflect aspects of “truth” that these commentators believe should be considered at December’s budget approval meeting.

From VCUL:

We urge the agency to provide a more comprehensive and detailed explanation of the growing expenditures for the agency’s Modern Examination & Risk Identification Tool (MERIT). While we appreciate that a platform like MERIT is ever evolving and that its core building blocks will require ongoing maintenance and upgrades, we believe credit unions are rightly justified in demanding greater transparency regarding costs. The agency spent more than $54 million on MERIT’s development, with an additional $3 million budgeted in 2024 and 2025. It is fair to question the return on investment for both credit unions and the agency absent a more detailed explanation of program costs.

The second largest expense in the agency’s proposed 2024-2025 budget is Contracted Services.. . the actual cost for contracted services in 2024 is much higher and is estimated to be $70.1 million, but that cost is offset by the prior year’s unspent funds. If these unspent funds were not available, the total cost of these services would increase by $28.7 million, a 70% increase compared to 2023, an amount which is reflected in the proposed 2025 budget.

From OCUL:

The NCUA’s operating budget in 2010 was $201 million as compared to $382.1 million in this proposed operating budget. While the proposed 2024 operating budget is an 11% increase compared to 2023, it adds up to an overall 90% budget increase within the last fourteen years, far exceeding inflation rates over the same period. These year-over-year increases reveal an alarming pattern; a large and ongoing increase in credit union funding for ever-expanding NCUA spending.   

OCUL is concerned with the NCUA’s strategic choice to invest credit union funds for further staff expansion. . . the NCUA Board reported a mid-year surplus of $3.5 million that was subsequently used to hire additional staff; specifically, the NCUA sought to hire two (2) new Credit Union Resource Expansion (CURE) positions and four (4) new cybersecurity positions, with a projected cost of $1.6 million. Not only is the NCUA Board requesting to hire 28 positions, including 11 entirely new positions, and 13 additional consumer compliance specialists, which is an increase in examination time for consumer financial protection reviews equivalent to 11 examiners, this Budget now has to account for positions in 2023 that were hired with a budget surplus.

From ICUL:

Illinois state-chartered credit unions are subject to the Illinois Community Reinvestment Act (IL CRA) which will add a significant compliance burden and associated costs, in addition to significant examination fees. Credit unions are the original consumer advocates and already do the work to ensure its members, regardless of financial condition, have access to financial products and services at a fair price. The NCUA’s desire to add complexity to its existing consumer compliance examination is unnecessary, especially considering Illinois credit unions and many across the country are already facing additional scrutiny by its primary state regulator.

From CUNA:

The value credit unions deliver is disproportionately obvious among those who really need help. . . Today, the nation’s credit unions remain mission-focused: promoting financial wellbeing, delivering outstanding value, and providing helpful advice, especially to those of modest means.

The just-released Federal Reserve Survey of Consumer Finances, for example, shows that net worth in the consumer sector rose by a record 34 percent in the three years ending 2022. As a group, bank customer households now reflect mean net worth of $1.3 million and median net worth of $220,000; totals that are respectively 140 percent and 23 percent higher than the comparable measures within credit union member households.

From NAFCU:

The credit union industry is strong and well-capitalized. As of June 30, 2023, the industry’s net worth ratio was closing in on 11 percent and had risen over 40 basis points from a year prior. CAMELS rated 4 and 5 credit unions represented just 0.3 percent of total industry assets, a figure that is roughly half its pre-pandemic level. Thanks to strong loan growth in 2022 and rising investment yields, credit union net interest margins are up 40 basis points versus a year ago.

Will NCUA Listen and Align?

These are critical issues for Agency review. There were also two important points of context: the member mission of credit unions and the sound state of the industry.

Another observer made these comments about the underlying condition for a more responsive budget:

To change the budget, you must CHANGE the game – change the targets, the challenges must be new and raise the bar for the work.

If a group has no intentions to change the world, restart a fire, or set vision for something new, then there will not be anything new.

To change the budget, you need to inspire–put the spirit of “need better”, “deserve better” and “expect better” to ensure all segments of our industry do better.

To craft a better budget – the key is a willingness to rally the industry to want one, as the foundation for a better future and execution from top to bottom.

Only when NCUA is properly aligned with their audience,  mission and futures will all the players be working for a shared mission.

Is there leadership that will pick up the torch for others to follow-within NCUA or credit unions- on this ever-expanding use of credit union funds?

 

 

On Capital

“The ultimate safety and soundness is not the level of capital but how well the institution is attuned to the market. If it is not tuned well, it is going to fail no matter its level of capital.  If it is tuned well, it will retain and attract members and will be healthy.” (pg 54)

Note: From the Coach’s Playbook, a collection of the thoughts of Ed Callahan’s observations  on key credit union issues.