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This podcast provides you the ability to listen to new regulatory guidance issued by the National Credit Union Administration, and occasionally the F D I C, the O C C, the F F I E C, or the C F P B. We will focus on new and material agency guidance, and historically important and still active guidance from past years that NCUA cites in examinations or conversations. This podcast is educational only and is not legal advice. We are sponsored by Credit Union Exam Solutions Incorporated. We also have another podcast called With Flying Colors where we provide tips for achieving success with the N C U A examination process and discuss hot topics that impact your credit union.
Samantha: Hello, this is Samantha Shares.
This episode covers N C U A's
board briefing on Field of
Membership also known as F O M.
The following is an audio version
of that briefing in their own voice.
This podcast is educational
and is not legal advice.
We are sponsored by Credit Union
Exam Solutions Incorporated, whose
team has over two hundred and
Forty years of National Credit
Union Administration experience.
We assist our clients with N C
U A so they save time and money.
If you are worried about a recent,
upcoming or in process N C U A
examination, reach out to learn how they
can assist at Mark Treichel DOT COM.
Also check out our other podcast called
With Flying Colors where we provide tips
on how to achieve success with N C U A.
And now the briefing.
Todd Harper: The final item, um,
today is the new Charter and Field
of Membership update that was
requested by Vice Chairman Hoffman.
Staff presenting, um, this board briefing
include Martha Nenechuk, Director,
Office of Credit Union Resources and
Expansion, and Leilani Stamper, Consumer
Access Division Director, Office of
Credit Union Resources and Expansion.
Good morning, Martha.
Good morning, Leilani.
Always good to see both of you.
Please begin when you're ready.
Martha Ninichuk: Thank you.
Good morning, Chairman Harper, Vice
Chairman Hoffman, and Board Member Otsuka.
Thank you for this opportunity to
speak today about our continued
efforts to improve processes and
support the development of new federal
credit unions and the expansion of
established federal credit unions.
Slide two, please.
Today's briefing focuses on new
charter application data for 2024,
process improvements in chartering,
The Provisional Charter Pilot and
Field of Membership Updates, Slide 3.
Peer analysis of new charter applications
ensures their compliance with the Federal
Credit Union Act, Section 1753, and
the regulations governing new charters,
12 CFR Part 701, Organization and
Operation of Federal Credit Unions, and
12 CFR Part 701 Appendix B, Charter and
Field of Membership Manual, Slide 4.
I should note for those organizing
groups seeking a state charter, the
charter approval process is through
its state supervisory authority.
If an applicant also seeks to have the
state chartered credit union federally
insured, they'll need to submit an
insurance application to the NCOA.
The NCOA will review the application,
including the business and marketing
plan for insurability, and will conduct
a background and review of credit
officials and senior staff if the SSA
does not provide this information.
Federal share insurance approval will be
contingent upon the applicant obtaining
SSA approval of its state charter.
Additional information for
insuring new state charters
is found on our NCOA website.
Under support services, credit union
resources, and expansion and new charters.
Slide five.
Slide five reflects the number of credit
unions chartered since 2018 during 2024.
The NCUA chartered three credit
unions with the hope to, uh, have
four chartered by the end of the year.
Two of the four are participants
in the provisional charter pilot.
You'll hear more about the pilot
later in this presentation.
In 2024, one state chartered credit
union was approved, but it is not
included in the federal charter
numbers as shown on slide 5.
Slide 6, please.
Slide 6 reflects the average number of
days to review a complete application to
charter, or excuse me, to approve charter.
The average review and approval
time in 2023 was 152 days compared
to 215 days so far in 2024.
Over the last 12 months, CURE has seen
an increase in the number of unique
new charter applications with concepts
that take additional time for review.
For those applications that are more
complex, CURE works with subject
matter experts within the agency.
As well as the Office of General Counsel.
2024 was also the year the Provisional
Pilot was launched, requiring
additional time by staff working with
organizing groups in the pilot program.
Staff work with organizing groups with
the intent of approving the charter.
Not only are they focused on getting
the organizing group to a yes, but also
on providing good customer service.
Slide seven, please.
Over the last five years, field of
memberships for newly chartered credit
unions include Two, multiple common
bond, seven single multiple common bonds.
So far in 2024, there are a
total of three new charters.
One a single, one, single associational,
and two community charters.
Slide eight.
The data shown on slide eight
represents those actions taken in 2024.
In other words, application actions
this year may have been from
applications received prior to 2024.
But to date, in 2024, 14 new charter
applications have been reviewed,
3 out of the 14 applications were
approved, 1 was denied, 6 were deferred,
and 1 application was withdrawn.
Currently, CURE has 3
applications under review.
New charter process improvements
implemented last year have been helpful
in providing more transparent instruction
to organizing groups as they move
through the three phases of chartering.
Newly developed management tools
are used by CURE to assess the
status of new charter requests.
And board offices and the Office
of Executive Director to provide
monthly progress, progress updates.
At this time, I'd like to turn the
presentation over to Leilani Stamper, C.
U.
R.
E.
's Consumer Access Division
Director, to provide an update
on the Provisional Charter Pilot.
Lalani: Thank you, Martha.
And good morning, Chairman Harper, Vice
Chairman Hottman, and Board Member Otsuka.
I would like to take a few minutes to
update you on the NCWA Provisional Charter
Program and the implementation of the.
Last year, the Provisional Charter
concept was established to address
organizing groups challenges
to secure startup capital due
to it not being a legal entity.
A Provisional Charter is a stage in
the post chartering process where
credit union organizing groups become
a legal entity but have limited
authority until securing capital levels
estimated in their business plan.
The credit will be given approximately 12
months to secure additional capital and
meet other requirements as stated in the
letter of understanding and agreement.
Next slide, please.
CURE successfully developed and
implemented a pilot program for
the Provisional Charter Concept
during the third quarter of 2023.
The selection process for the
candidates to participate in the
pilot program involved a thorough
analysis of 63 organizing groups
that had completed their Phase 1.
Selection criteria included a pre approved
field of membership, One organizing
group per region, the field of membership
size, their funding strategies, and upon
analysis, whether, whether the proposed
credient had a strong potential or not.
For growth and success.
Ultimately, CURE chose four qualified
candidates for the pilot program.
Next slide please.
To date, CURE has chartered two
of the four selected candidates.
The two federally chartered credit
unions are Tribe Federal Credit Union
and Fairbreak Federal Credit Union.
Tribe Federal Credit Union is a
minority depository low income
designated credit union serving
the city of Minneapolis, Minnesota.
Fairbrake Federal Credit is a minority
depository, low income crediting,
serving Memphis, Tennessee area.
Both creditings will have one year
to obtain the required donated
capital to become fully operational.
If they fail to reach their targeted
capital levels within a year, each
regional staff will decide to either
extend the provisional period.
merge or liquidate the credit union.
Among the two remaining applicants, one
submitted their Phase 2 application in
the third quarter of 2024, while the other
chose to withdraw from the pilot program.
We intend to review the pilot
program at the end of 2024 and
provide recommendations for
the program's future in 2025.
NCUA sees the provision of charter program
and our phased chartering process as
proven examples of NCUA working to find
solutions to charter new credit unions.
That concludes my remarks at this time.
Martha will provide an update
on field of membership.
Martha Ninichuk: Thanks Leilani.
Uh, slide 12 please.
CURE continues to improve its
field of membership application
process for credit unions.
Beginning in July of this year,
CURE implemented a new process using
the Capri Internet System, allowing
multiple common bond credit unions to
add all occupational and associational
groups to their field of membership by
inputting the group's information and
uploading documents, if applicable.
By enhancing the Capri system, credit
unions can now add all groups of any size
for multiple common bond credit unions.
A future enhancement for the Capri
system will allow credit unions to upload
their community and underserved area
application with supporting documentation.
The target date for release of
this update is first quarter 2025.
Slide 13.
This slide shows the field of
membership actions approved in 2024.
As you can see, over 7, 200 internet
applications were approved so far in 2024.
Slide 14.
Slide 14 breaks down the
underserved area applications.
CURE continues to see an increase
in the number of applications
to add underserved areas.
The top line of the chart, underserved
area applications processed,
reflects the total total number of
applications reviewed by CURE analysts
from 2020 to 2024 year to date.
The second line reflects the total
number of applications approved.
Line three reflects the number
of application deferrals, with
the last line reflecting the
number of applications withdrawn.
The increase in number of underserved
applications from 32 applications in
2020 to 87 applications so far this year
is a significant increase, especially
when the complexity of the underserved
application is taken into consideration.
The resulting workload is significant.
Cure analysts allocate a large number
of hours working with credit unions
on their underserved applications.
For example, as of September 30th, 2024,
Analysts spent approximately 10, 440 hours
processing 87 underserved applications.
When a credit union's application is
deferred and resubmitted, the analyst's
review time could potentially double.
We have heard industry concerns
about the time it takes to approve
these complex applications.
CURE continues to manage workload by
assigning applications based on complexity
and number of all pending applications.
Cure analysts continue, excuse me, Cure
analysts will continue to work with the
credit unions to ensure applications
meet all underserved area requirements.
And the NCUA will continue
to support, support, though.
process changes that provide
positive customer experiences.
In conclusion, the NCOA has supported
the growth of newly chartered and field
of membership expansions of already
established credit unions by streamlining
much of the application process in
addition to providing guidance and
information resources to credit unions as
they move through the application process.
It is hoped credit unions are better
able to understand the NCUA regulatory
requirements and recognize an
overall improvement in transparency
of the applications review process.
Thank you for your time today, and we
are ready to address your questions.
Todd Harper: Thank you so much, Martha and
Leilani, for your briefing on new charters
and field of membership expansions.
And thank you to the entire team
and the Office of Credit Union
Resources and Expansion, or C.
U.
R.
E., for short, for your continued work
to support the growth and development of
credit unions of all sizes, but especially
the efforts of small credit unions.
Low income credit unions, minority
depository institutions, and credit unions
that seek to deepen access to safe, fair,
and affordable financial products and
services in under resourced communities.
Here's work in supporting the chartering
of new credit unions and any credit
union seeking charter changes.
This bylaw and this field of
membership expansions and low income
designations is vital to a healthy
and diverse financial system.
And work delivering online training and
resources and providing grants and loans
through the Community Development and
Revolving Loan Fund enables eligible
credit unions to better serve their
members and communities financial needs.
In short, Cure's work aims to create
a financial system that works for
all, a philosophy that underlies the
purpose of the credit union movement.
As noted earlier, the agency has
approved three new charters thus far
in 2024, in addition to providing share
insurance to one new state charter.
There are also three new charter
applications under review.
Three or four new charters per
year may not sound like a lot, but
it represents positive momentum
and aligns with historic trends.
Undoubtedly, the emergence of non
depository financial institutions
and fintechs, as well as the
pressure to achieve economies of
scale, are contributing to the low
number of organizing groups seeking
to charter a new credit union.
And while the NCUA cannot alter
this economic reality, we are making
strides in the areas we can change.
Namely, assisting prospective credit
union organizing groups with gaining
the required capital, as well
as streamlining and reducing the
length of the chartering process.
The NCUA's provisional chartering program
allows organizing groups to show that
they have the capacity to start a credit
union, which in turn could facilitate
their efforts to raise needed capital.
As NCUA has already approved two
provisional charters, and another is in
phase two of the application process.
Decreasing the average number of
days from the receipt of a complete
application to an improved charter
certainly modernizes, facilitates, and
streamlines the chartering process.
A contributing factor to the
overall reduction in the review
process includes Cure's automated
management system for chartering.
And although the average number of days
is up in 2024, the time to complete
the process today is well below.
The levels that we saw in 2018 and 2020.
So thank you for your good
work and leadership in that.
By facilitating the process through
which credit union organizers
can access the initial capital
needed for capital standards.
loss reserves and operating
expenses and streamlining and
automating the application process.
The NCOA is making it easier and
supporting promising organizing
groups to form a credit union.
Obtaining a credit union charter, however,
is not supposed to be easy or simplistic.
With a charter comes the responsibility
to promote financial well being of
members in a safe and secure manner.
sound and consumer
friendly men, uh, manner.
It also comes with certain
compliance requests and needs
like anti money laundering.
This delicate balance requires us
to both be purposeful and careful.
Within statutory safety and soundness
and consumer protection guardrails,
the NCUA is committed to working
with promising organizing groups
to get to yes whenever possible.
Thanks to the works of the CURE team
as well as the Vice Chairman's steady
focus on this priority, and I really
do want to thank his steady focus.
The NCUA has made meaningful strides
during the past four years in
facilitating the chartering process
so that organizers can pursue their
visions of people helping people.
Welcoming a new credit union into the
system of cooperative credit is good,
not only for the system, but also good
for the consumer, many of whom have been
unbanked or underserved for far too long.
And the NCUA's mission, in part, is
to protect the system of cooperative
credit and its member owners through
effective chartering and supervision.
Before closing, I do have a
few questions for you all.
First, if we could pull up slide
14, I'd like to get to a better
understanding about the number
of underserved applications.
It's risen considerably since 2020.
What, I mean, we went from 32 to 72
to 98, I mean, that's a large jump
and a large increase in workload.
It is.
What, what's behind those numbers?
Martha Ninichuk: Well, from our viewpoint,
our standpoint, there has been a concerted
effort by the industry to encourage credit
unions to expand into underserved areas.
Many times the underserved areas are
banking deserts, which credit unions
are uniquely structured to serve.
These areas actually also provide more
growth opportunities for credit unions.
Todd Harper: So it's, it's, it's,
it's that our rules have changed.
We have more applications coming in.
Yes.
They're bigger applications.
They're, they're,
Martha Ninichuk: Yes, they
are larger, um, applications.
So, multiple, don't forget, multiple
common bond credit unions are the only
type of charter that we can, um, or
that is able to add underserved areas.
Um, so, we see an uptick in multiple
common bond credit unions seeking to
serve underserved areas, um, where
they are able to increase more than 2.
5 million.
And population, which is more
than what a community charter
is, um, able to add without going
through the public hearing process.
Todd Harper: Right.
Um, for those credit unions with approved
underserved, um, expansion applications,
I understand that not all of them have
opened up the requisite number of branches
in those underserved areas within 24
months, uh, as required by our rules.
How is CURE handling those deficiencies?
Martha Ninichuk: Right, so
thank you for that question.
CURE identifies those credit unions that
have not established a service facility
within two years of adding an underserved
area, and that is the requirement.
CURE sends the credit union
a notification inquiring if a
service facility has been added.
to the credit union.
Um, if they have added a
service facility, we update our
database with the information.
If not, we ask the credit union if
they plan to open a service facility,
and then provide us a service status
report to review if the credit union
has been providing financial services
as stated within their original business
plan received during the Field of
Membership Expansion, um, application.
Ultimately, if a service This
facility is not opened and the credit
union does not plan to open one.
The underserved areas are removed
from the credit union's charter.
Todd Harper: I think
that's an important point.
I, I, I think of the movie Field of
Dreams, if you build it, they will come.
Um, if you have a plan to serve an
underserved area, you need to build it
so that they will come, uh, and, and, and
get access to those financial services.
Martha, my next set of
questions focuses on process.
If we could pull up slide five.
Um, that slide shows that in 2024, uh,
we chartered one federal credit union
and issued two provisional charters
for a total of three new credit unions.
What more can be done to shorten the
application, uh, to charter process?
And also, what's the most significant
obstacle to obtaining a charter?
I'm going to punt that to Leilani.
Okay.
Leilani, that question.
Lalani: Sure.
Sure.
Well, what we really believe and we would
like to continue to encourage Organizing
groups, um, to really go to our website.
We have some amazing resources there,
one being how to start a new charter
Kyle Hauptman: with
Lalani: step by step instructions on
that process, um, including as that is
detailed, each of our phases and what
that looks like for the organizer.
We also have resources and templates
that we share on the website.
So we believe that if the organizers
go to our website and get all this
information, it's When they do finally
submit the application, it will be
cleaner and have all of the required,
hopefully all the required information
needed so that when the coordinators
do review it, it's a shorter time.
Todd Harper: Um, Leilani, first of all,
let me give you a shout out, not only
to the work of the team in CURE, um, but
also I know this three phased process.
was something that originated in
our management development program
and that team, um, uh, really did
a great job of re envisioning it.
Um, Leilani, can you just
go a little bit deeper?
I know that the, uh, Vice Chairman
and I often talk about the
chicken and the egg argument.
You can't get a charter without
the capital and you can't get
the capital without the charter.
Um, uh, how is the provisional
charter helping that?
Lalani: Well, We've got
two charters, right?
And so they have hit the with
the two that we've chartered.
They have been actively trying to
get grants and Actively trying to see
if loans are possible and sub debt.
So we're in kind of
this um, Research phase.
Research phase to see what works and
what doesn't work, um, but we're hopeful.
We are hopeful that, um, we will be
able to, uh, bring a recommendation that
we would like to continue the program.
Todd Harper: Yeah.
So, um, uh, you may not know
this, but my dad started a
teacher's credit union in 1967.
His dad started a credit union
at a soap factory in 1934.
Um, and certainly, we've
seen greater complexity.
Do these provisional charters have
the, um, policies and procedures
that we would expect a credit union
to have in getting started before
they get the provisional charter?
They do.
Lalani: And then once they are chartered,
our field, um, examiner works closely
with them to ensure that the policies
and procedures that they need to move
their operations forward are in place.
Todd Harper: That's great.
Um, one other question I have is
I, you talked about the number of
deferrals, uh, uh, that we've seen,
um, uh, on, uh, the new charters.
What's the reasoning
behind these deferrals?
Martha Ninichuk: Well, most times
deferrals are, you know, um,
Come from a myriad of reasons.
Um, there's different components to the
application, um, but mainly, the business
plan is not supported, uh, in full by
the other components of the application,
so they don't all tie together.
So they have a business plan, a
marketing plan that doesn't tie in.
They have a performance statement also.
Um, you know, that
projects over five years.
That data doesn't support the products
and services that they want to offer.
I mean, it is a complex process, as
you said, starting a, a new charter
is not necessarily an easy task.
Um, but for each deferral, we write
explicit directions on what, uh, the
organizing group or if a credit union
has a field of membership deferral,
what they need to do to comply.
And then we actually hold a phone call.
Uh, with the credit union or the
organizing group to walk them through
it, um, As they are actually looking
at the documentation themselves.
Todd Harper: I really like that
high touch, uh, that you do, because
I think that that's important.
Is that helping when we do deferrals to
get people ultimately through the process?
Yes,
Martha Ninichuk: it might
take a couple tries.
Todd Harper: But my ticket,
couple of well and and you know,
I will say this, you know, one
lesson that I learned from my dad.
Um, he was treasurer of that
credit union when it got started.
Uh, and he also took out the first loan.
Don't ask him to bond internal controls.
Uh, certainly.
Uh, but, um, as the, as the, The CEO of
the credit union said at the time, we
can't just make money on investments.
We have to make money on loans.
That's what we do.
And that's why he took that out, the loan
for the camper trailer, uh, that, uh, I
certainly got to benefit from it as a kid.
Um, one last question.
I think this is a really important one.
Um, it's not just that we get
new credit unions chartered.
It's also important to know,
how are they performing?
Are they getting past five years?
Are they getting, you know,
I know the first five years
we spend careful attention.
Are they getting past ten years?
What does the data show there?
Lalani: I'll take that question.
Okay, Yolanda.
Todd Harper: Sure.
Lalani: So, um, So, the performance right
now varies, um, so it's really hard to
tell, but, um, to date of since 2018,
we've had, um, one credit in eMERGE, but
all the rest of them are in operations.
And I'm happy to say that, um, We
have the, the rest of the remaining
credit unions have been able to
provide products and services
to approximately 15, 000 people.
They have a total assets totaling 51.
9 million, shared deposits of 34.
8 million, and loans of 15.
4 million.
So they are operating and pursuing
their, their, their mission.
Todd Harper: Yeah, and I think we
have to be a little careful when
we say loans, because a couple
of those credit unions are indeed
Islamic credit unions associated.
Um, with mosques that, uh, and, and
it's against, uh, Islamic law to have a
loan, but they, they have set up a fee
structure that, uh, as a substitute,
um, for, for the interest overall.
Um, thank you so much for
those insights, uh, Leilani.
In closing, the chartering of a new credit
union is often the culmination of years
of high hopes and hard work by organizers.
Consistent with the law, we at the
NCUA need to facilitate the work.
That's why the NCOA is making meaningful
improvements to its chartering process
where possible to bring new and more
federal credit unions into the system.
In doing so, we are providing consumers
with greater access to safe, fair,
and affordable financial products and
services within the cooperative model.
One last point that I just would like to
make, I thought that, um, together all
of the work that you and your team did
at the MDI symposium, uh, last, um, It
was earlier this month, uh, the week's
flyby, uh, but earlier this week was
really an important set of work and I
hope that we continue, uh, to do that
because I got a lot of positive feedback
from those credit unions that attended,
many of which were new credit unions.
In fact, one of our key presenters
was a new credit union, uh, himself.
With that, let me turn it
Kyle Hauptman: over to the Vice Chairman.
Speaking of our, uh, good work at
our events, I believe our MD, our
DEI summit was in Minneapolis,
That is connected in some manner to
the fact that We've had two recent
ones, quick charters in Minneapolis.
Martha Ninichuk: Why,
Kyle Hauptman: why we picked it,
Martha Ninichuk: I
Todd Harper: mean, versus
Cleveland or someplace.
I actually think it was we were
thinking to try and get out of just
the state, so that we could get more
Kyle Hauptman: people and
different people to the table.
It was remarkable that before, you
know, uh, I think it's important that
because a third of the credit unions
in this country are state charter.
We make announcements about we did
a charter, but I think it's equally
important to say we've granted
insurance because it's still the birth
of a new credit union and Often their
state has kind of finished theirs
and their answer is we're all set.
You just got to get insurance from NCUA
So it is still announcing the birth of
a new Credit union so I think we should
make and and the the ways we've tried to
You know, what gets measured gets done,
what gets praised is considered good.
Uh, we give shout outs to
new credit unions, we praise
our staff for getting going.
Uh, let me start with this though, um, Any
of the new ones you've been around for the
last, you know, four years at least, um,
may I ask, what's the largest amount at
their birth of deposit, insured deposits?
What I'm trying to get at
is, the new credit units are
almost always small, right?
There's no such thing as a charter for a
5 billion credit unit we've had, right?
You could convert from
a bank or something.
Yeah, what's the, what's the largest
risk we've had in any of these
new ones in the last few years?
Do you know, ballpark risk?
I don't,
Martha Ninichuk: uh, unless Leilani's 20
million would be high probably, right?
Yes, 20 million would be high.
I would say probably, and again,
I am totally just throwing it
out there, probably the highest
would be around 5 million.
Yeah.
Kyle Hauptman: The highest, and
I think, you know, is it half
a million with the minimum,
Martha Ninichuk: or capital
at least, uh, the dollar?
The capital is really tied
upon the risk associated.
Kyle Hauptman: It would be unusual to have
anything below half a million, you know.
Nowadays.
Yes.
Uh, there's a handful out there
that have six digits in assets
that still exist, you know.
But, what I'm trying to get at is, you
know, Is the good thing about this and
trying new things and we know that they're
not all going to succeed, even the best
franchising companies that they don't
all work well, even if they have the best
processes, but they're usually really
small risk financially for us, right?
So I think, uh, you know,
we have to weigh risk.
We have, uh, all of these credit unions we
put together, adding it up are a rounding
error to some of the results we get.
You know, uh, we have quarterly
fluctuations at some of the
larger ones that the wharf.
You know, in capital and in earnings
and operating income that dwarf
the total risk for all of these.
So, um, that's another benefit
is that from a risk standpoint,
they're usually very small.
And if they're growing irresponsibly,
we have mechanisms to tap the
brakes, which we have done before.
Um, uh, here's my prepared remarks.
Uh, you presented, uh, June of last year.
Uh, I would encourage future
boards who obviously can do
what they want to keep this.
Uh, I will take credit or blame
for trying to create this a annual.
thing.
But at least for me, this
is way more interesting than
some of the briefings we have.
I'll tell you that, uh, that
briefing last year was focused
on new charter modernization.
So I appreciate this year, um, putting
the FOM, uh, information in there
where, uh, this has been a priority
to me since my first board meeting.
I actually mentioned it before
that when I went through the
settle confirmation process.
To me, it's an inclusion issue.
If we're making it any hard, For any
group of Americans to decide to have their
own financial service provider, we are
only paying lip service to all the words
like financial inclusion and everything.
Um, and for over 90 years, forming
a credit union has been the
answer to financial inclusion.
Hundreds of thousands of
immigrants, religious groups,
factory workers, and more.
Americans should decide how many
financial services provider we have.
Every single one of the charters ever
granted, it was somebody out there
who wasn't totally satisfied with the
existing financial services marketplace.
Why would you start your own?
Uh, so, you know, 1934, uh, the
Federal Credit Union Act was signed
by President Roosevelt and it put
the credit union division inside the
foreign credit administration, okay?
NCAA itself didn't exist until 1970.
So, there was no federal
charter until 1934.
By that point, there were
almost 3, 000 credit unions.
So, the first 3, 000 that were created
in America had no interaction with
anybody in our nation's capital
because they were state chartered.
And federal deposit
insurance didn't exist.
So right or wrong, that process
was, I'm going to say, probably
easier, uh, and quicker.
So those people had an advantage
for getting there early.
Okay, three, the first 3, 000 never
touched anyone in Washington, chartered
by the state, insured elsewhere.
Things were a lot simpler in a lot
of ways in 1934 than they are today.
Getting into a completed charter
application could take years.
Um, the complexity of
financial services has changed.
What hasn't changed is the importance
of financial services to people
of modest means and to having
one that serves your community,
however you want to define that.
Last year, we had the chart.
I'm holding up what you put last year.
And charters per year, you
have that one this year too.
And then this one was from receipt of
a complete application to getting a
charter of those that got a charter.
Very useful thing to track.
The one thing I remember looking at
is we've noticed there's a lot of
roadblocks to getting to complete.
Right?
Where at that point you would
not be in any part of this graph
because you are, you are not a,
uh, you have not fully applied.
And that we're tracking now.
Right?
And you put that up.
Right?
Um, and I know it can be acknowledged to
pin down the exact start date sometimes,
and you had to pick one, uh, I know
for a fact there are groups who've
talked to us, had meetings, including
with then chairman Hood, but they don't
consider themselves to have applied.
They were window shopping,
just talking about it.
Maybe we could track that somewhere, just
indications of interest, but, um, but,
um, it's good to be able to have them.
Uh, date when it starts, because
getting to complete application,
uh, has been a roadblock.
People have walked away, uh, that
would never, ever have appeared in
this anywhere, because, uh, uh, nor
would they be, have ever been rejected.
Uh, their, their charter was
denied, because they never
got to a complete application.
Uh, much like applying to college, you can
be there, you can't be admitted or denied.
Until you have a completed
application, you know, test scores,
you got to get your transcript sent.
Uh, and colleges have a lot of
incentives to have a lot of applications.
So, if a lot of people were getting stuck
in that part, where they never fully
applied, uh, they have, uh, they'll take
actions to make that process, uh, easier.
To make sure you get, to make it clear.
Here's what you have to do.
Let's make it easy to do it.
Um, and so the people get stuck in it.
If my college was having a lot of
problems versus others, There's
something wrong here, right?
Because those people are not
in our admissions rate at all.
They're neither approved nor denied.
Um, I won't belabor the point.
There was a group that had
an unusual, uh, application.
Interesting, I thought, they were
trying to do something different.
And I agreed with the decision,
I, um, that to deny them
the charter at that time.
I agree with that.
That was another reason.
But a big part of the answer that
they got, um, was they didn't have any
lending income in their initial phase.
They could have added it, and they
had many conversations with CURE.
I have the documentation.
They had face to face meetings.
They gave the, uh, business plan,
which I also have, and the dates
that all these things were sent.
And they, uh, When they got denied for the
charter later, it was kicked back to them.
They couldn't believe no one ever
told them you have to have lending.
I know most groups do, so
you don't have to mention it.
But they couldn't, imagine you're
opening up your college envelopes.
You know, am I going to get in?
Am I going to get in?
Imagine you spoke to the
admissions director multiple times.
Imagine you didn't think that you
had to have your test scores sent.
You didn't think you
personally had to take action.
Maybe you thought the college
got it automatically, right?
You could be wrong.
But imagine you said that multiple
times to the admissions office, right?
In writing, I think I've
done everything I have.
I don't need to take action
for you to get my test scores.
And then it finally came around.
Did I get admitted?
Did I get in?
Did I get waitlisted?
No, none of those.
You never had a complete application.
Why?
Because you didn't finish your S course.
I literally told you ten
times that I didn't think.
So that was, could they have been told,
even though it was an unusual case, uh,
and most people have lending income,
you, in your initial app, in your
application, you have to have lending.
Could they have been told that?
Like, is there a universe in which
someone has said, we look at your
business plan, you know you have
to have lending income, right?
National Credit Union Act, our
interpretation, your interpretation,
which I consider correct.
Yes.
Uh, mentions credits.
There's got to be something
in there with credit.
They were never told that
and they couldn't believe it.
Uh, months later, they got rejected and
one of the reasons was you'd have lending.
We could have easily added that.
Why didn't anybody tell us?
We told them many times.
Could they have been told that?
Martha Ninichuk: Yes, I find it hard
to believe they were not told that.
Kyle Hauptman: They
were absolutely stunned.
Um, and No one could find any
documentation that they were.
As a matter of fact, I have
documentation the other way around.
It's not in their business plan.
It's not in their performance.
And you know, I understand that
that's what the credit union act says.
But anyway, they find out it was
not in the documentation I have.
As they said, here's what we know,
here's what we're planning on doing.
Um, anyway, I'm glad we tracked the time
it takes for a group to formally identify
their field of membership until they
successfully complete their application.
That is a separate measure that
I think is very interesting.
Um, and let me ask you about
the provisional charter.
So I, uh, I'm proud myself and
my advisor behind me, Sarah Bang,
that that was kind of our idea.
But it is just an idea.
I, we don't know if it's,
you know, Uh, Eureka.
Right?
Because we can't get CDFI funds, we can't
even apply until we're an institution.
So I think we all agree on the
problem, but this is why we
have, you know, beta testing.
How is it, I mean, was it a good idea?
Is it working?
Should we change it?
Do we not have the right groups yet?
Or what?
Yeah, I'll take that,
Martha Ninichuk: uh, question.
Thank you.
I, I think, uh, As with any
pilot, you're going to find great
things and you're going to find
things that don't work so well.
Um, I think with the organizing
groups, it's still a big change for
them from when they're working through
the application and now they're open.
And that's when the real work starts.
We hear that all the time
from the organizing groups.
Wow, we've shifted from CURE to the field.
And there's a lot of things we need
to comply with, there's a lot of
things we need to do in order to get
that, those credit union doors open,
um, besides finding the capital.
So it's a matter of education, um, the
organizing groups, getting the right
people in the positions, and getting
them trained up besides, um, So that's
why they have 12 months, um, during
this period to do all of that work.
And then at the end, we'll see if,
number one, they obtain the capital
that they signed for within their
letter of understanding agreement
saying, we commit to, uh, obtaining
this amount of donated capital.
Um, and then the field makes the
determination of, um, You know, are
you ready to open up your doors?
And then we'll make an analysis at that
point on how successful the pilot was.
Kyle Hauptman: Gosh, I know we
capped it at a certain number
of these because it was a pilot.
Martha Ninichuk: We did.
Kyle Hauptman: Yeah.
We did.
Okay, I know people do that.
And just the basic, the idea that
we thought was good, chicken and egg
problem, has that actually been solved?
Meaning when people say,
I can get the money.
I just need a charter, like, have
those checks come in right away,
like, did that actually work?
Martha Ninichuk: That hasn't yet happened.
We're not at that point yet.
Kyle Hauptman: We're not
Martha Ninichuk: at that point yet.
This
Kyle Hauptman: doesn't
work unless that's actually
Martha Ninichuk: true.
Yeah, it's still difficult for the
organizing group to find the money.
Kyle Hauptman: Don't just believe,
you know, we'll get the money.
Have someone say, I'm a grant giving
operation or I'm Treasury's fund, I
will write a check the day I get this.
You know, you can, are you
talking to the check writers?
To verify that yes, these people
actually will get the money.
There is a chicken and eggs issue.
Oh, we always
Martha Ninichuk: verify.
Okay.
And they don't have any
Kyle Hauptman: obligation
from our standpoint to do it.
But they say, yes, it is my plan.
If the Martha Credit Union gets a charter
that, uh, they get the charter on Monday,
I'll give them a check on Tuesday.
Right.
I mean, that's what they say.
Yeah.
We, well, we haven't gotten to that
point to see if it actually worked.
Correct.
Okay.
And those other groups, the check
writers, they, they're not going
to stand around forever, so it's an
incentive for everybody to get this done.
Um, I'll stop there.
Um, a lot of credit, I mentioned
immigrants, uh, a lot of, there's
actually, and you mentioned the
Islamic, uh, finance, I remember, uh,
learning Sukuk, you know what that is?
That is an, uh, Islamic bonds, like
we trade treasuries, government
bonds in this country, that's
mostly out of Dubai, a little bit
in Singapore, there's that whole
fascinating world of Islamic finance.
Governments have to raise money,
and people raise money, It's
kind of like that, but anyway,
it's a whole fascinating field.
But this is why it's terrific that this
country still has over 8, 000 depository
institutions, banks and credit units.
A lot of countries in the world.
Imagine all we have was city Wells, B of
A Wells Fargo, 4 trillion banks, right?
Probably work.
All right.
If you had.
Solid job, direct deposit, spoke
English, was an American citizen,
had a social security number, uh,
They probably do okay, and that's
what a lot of countries are.
I live in Australia, they have
four banks, and the government
won't let any of them merge because
they need to be down to three.
Over 98 percent of Canadians
are one of six banks, right?
That's how it is.
The fact that we have, um, we
have ones that know the corn crop,
like they know the depreciation
schedules by, you know, they're all
over this country, there's that.
The ones that answer the phone
in Haitian Creole in Florida, I
assure you Citigroup will do that.
But, and we want When I, when I
mention, we talk about true financial
inclusion, is letting any of
these people have their own, okay?
Um, and when you look at the ones that
are, what we call ethnic credit unions,
some of them are explicitly ethnic, like
the ten Ukrainian American credit unions.
But a lot of others are
de facto an ethnic group.
I mean, because maybe a, a place
of worship, the very first one in
America was an immigrant group.
French Canadians, now it's a, it's
not an ethnic French Canadian credit
union, it's a church credit union,
it's a French Catholic church.
It's a church.
But it is a fact.
Knights of Columbus is not
technically an ethnic credit union,
but it was Italian American men.
Uh, the one last year,
Alpha Kappa Alpha, right?
That's not technically a thing, but
it's an African American sorority,
one of the divine nine, right?
Historically, uh, HBCUs, so it's
essentially a, uh, African American women
Even though by, um, the way it applies is
just this fraternal organization, right?
Uh, uh, Vice President
Harris is a, uh, AK member.
I don't know if she joined the credit
union, but, uh, she's an AK from Howard.
Um, and what, what I care
about is the groups now should
have the same opportunity.
You can't not notice that most of
the ethnic credit unions or quasi
ethnic like Knights of Columbus, I
don't know, it's from the earlier
period of American immigration, right?
Uh, Central Europe, Southern Europe.
And post 1965, when this country
kind of opened back up again, is
primarily Asia and Latin America.
Those people should have just as
much chance as the Italians and
Slavics and Poles did, uh, before.
One of the benefits, um, so out of the
last decade, uh, from the countries
from Mexico, India, China, Venezuela,
Honduras, Guatemala at the top,
and then the last couple years, uh,
separate, Operation Allies Welcome was
Afghanistan from the war, from there.
And Operation Uniting Ukraine, Ukrainians.
One of those two, of Afghanistan and
Ukraine, has the advantage of other
people from that country came when it
was easier to start a credit union, so
they're Ukrainian American credit unions.
These people, they can work
under that refugee program.
From what I've been told and what I've
seen, they're showing up often with very
little English ability, second or third
language, you have to rush in Ukrainian.
Credit invisible, no FICO, unemployed.
If they had a job in Ukraine,
they quit it to come here.
And guess who's giving them a share
account and unsecured credit cards,
unsecured, because it's hard to operate in
this life sometimes without a credit card.
These people, and they're doing what
generations of immigrants have done.
They are hustling.
They're doing what they can,
you know, driving Uber eats 70
hours a week and their default
rates, unsecured credit cards.
Think about this.
Can't necessarily fill out
the application in English.
Literally no FICO history whatsoever,
credit invisible and unemployed
and their default rates are lower
than the industry average for
both credit and unsecured credit.
Why?
Okay.
Well, because this is what credit
unions do when they're done well.
An affinity group.
They know if they don't pay, first of
all, it's going to be another Ukrainian
that's going to come out of their pocket.
And secondly, if you default on this
credit card, I assure you, no one
is ever going to give you one again.
You're a long way.
Uh, feel free to walk into any of the
big banks and they serve a purpose and
say, hi, uh, uh, don't speak English.
I don't have a job.
I have zero credit history.
Can I have an unsecured credit card?
No way.
Um, and it's terrific.
And I just think that the, you know,
that the Venezuelans, Hondurans,
uh, Pakistanis better deserve the
same chance to have that as opposed
to Slovaks, Italians, et cetera.
Um, that's just my.
view as to why I keep,
why I keep at this, okay?
A couple questions.
So last year we had useful
days of complete application
to charter if it was granted.
Um, that other number, last couple
years, do you have an average length
of time it took from when they kind of
step one, they at least identify their
field of membership, it's legit, from
that to the completed application?
Martha Ninichuk: Yes.
So I just want to, um, I
just threw a lot at you.
No, no.
That's all right.
I just want to restate.
Phase one is when the organizing group,
uh, submits their paperwork to get
their field of membership approved.
And once their field of membership is
approved and the type of charter, of
course, that they're going to apply
for, we invite them to start phase two.
Phase two is the meat of the application.
So that's business plan, marketing
plan, performance statement, okay?
And, and.
Uh, identification of capital.
That's phase two.
Phase three, it's basically
wrapping it up, right?
We've got to get the regular
NCUA forms filled out.
We complete the letter of understanding
and agreement with the field staff.
Um, and then the charter issuance.
So, from phase one completion, when we've
approved the field of membership, Um, and
I took those three, um, institutions that
were chartered in both 2024 and then 2023.
So from phase one completion until they
submitted the completed application,
the average number of days was 860.
Kyle Hauptman: Okay, and
Martha Ninichuk: And then 2023, from phase
one completion until completed, I'm sorry,
phase one completion until they submitted
a completed application, 860 days.
And then in 2023, 627.
And then the second set of numbers
averaged from phase one application
to charter approval was 1, 187.
days.
But let me break it down further.
187 days total.
Organizing group, out of that 1, 187,
they had the paperwork for 873 days.
And then when they submitted it and we
did our analysis, we had it for 314 days.
So that one, the one number that stands
Kyle Hauptman: out there is 800 something.
That's over two years.
That's to get to a completed application.
Martha Ninichuk: That is from phase one
to a completed application submission.
Kyle Hauptman: So for over two years,
there's a group that feels, and
we feel, they are actively want to
start a credit year, but they're not
at the completed application phase.
Okay.
Martha Ninichuk: Right.
So what can happen is phase one,
we approve them, and it might take
them six months to get back with
us to even submit an application.
So it's the data we can track,
but the nuances is hard to
be reflected in the numbers.
Kyle Hauptman: Yeah?
Yeah.
Um, especially when Yeah.
This is what averages are for.
I, I'm going to suggest that we, so
the FDIC puts the name and they do it
once they have a completed application.
Okay.
They put the name of them.
You can get all their averages and means.
I mean, if you want to, you can
just export the Excel and you
can sort by all these things.
I would suggest, uh, Mr.
Chairman, I wouldn't mind if we
put averages and this sort of
stuff up in the de novo area.
Maybe we can put high and low or something
like that, because obviously averages
can be thrown off by a weird situation.
Um, but I think it might
be useful information.
Because a lot of people, the one
thing I hear over and over, we
don't really know where we are.
Like, is this?
We know it's not going to be, we're not
going to open our doors tomorrow morning,
but 10 years would be really bizarre, and
none of our partners would stay with us.
Five years is really long.
They want some kind of handle,
and the easiest thing to do,
without passing judgment on their
application, is just say, actual
data of what's happened, right?
Some of them are complex,
some of them are not.
Um, anyway, I think that the maybe
averages and, Uh, that sort of
data, I think, might be useful.
Todd Harper: I thought that there
were some plans already underway
to achieve that, uh, uh, So,
Martha Ninichuk: um, yes, the, the, we
are developing the requirements for a
new charter system, which would take
the application, uh, Um, Part of the
software program would have a status
tracker where the organizing group, not
the public, but the organizing group
could go in and see where they're at.
So, first phase passed,
second phase in progress.
You know, they can check along the way.
Third by is chartered, um, so they
will have that within the app, actual
application if, if that's developed.
Kyle Hauptman: And, um, one of
the, uh, annoying things to start
anew is you got to have bylaws
and policies, you know, started.
AI kind of helps with this, actually, but
that's something that takes a lot of time.
Do we have, we were talking
about sample templates, you know,
that, for various creations.
Do we have those, are
those provided to groups?
Where can they find those?
Martha Ninichuk: Absolutely, on
our website under new charters.
Kyle Hauptman: Yeah, so some of that
paperwork, oh, we have to create
all these bylaws, what do we do?
Okay.
You know, it might not
be as hard as you think,
Martha Ninichuk: and
Kyle Hauptman: they are frequently
changed once you're up and running.
So you don't have to,
Martha Ninichuk: and a lot of times
we partner organizing groups with
newly chartered credit unions so
they can learn from The group that
just went through the process is a
nice thing about help each other.
Todd Harper: That concludes my remarks.
Thank you so much.
Uh, board member.
Tonya Otsuka: Thank you.
Um, and thanks Martha and
Leilani for the presentation.
Um, thank you to everyone in here
for the work that you all do.
I know it's not just limited
to the presentation today.
You all provide to credit unions, manage
the community development, revolving
loan fund program service, a resource
to small credit unions list goes on.
Um, so chartering new credit unions
is integral to maintaining a resilient
and during credit union system.
Um, You know, the vice chair, for example,
mentioned how our country is unique.
We have thousands of financial
institutions, depository institutions,
um, including thousands of credit unions.
Um, and so charting new credit
unions is very much part of that.
New credit unions allow for more
individuals to gain access to greater
financial opportunities, such as saving
for retirement, buying a new home,
getting a loan, getting a credit card.
It also creates, um, increased competition
in our financial system, which I think
is Extremely important, because that
ultimately leads to credit unions,
looking for better ways to serve
their members and attract new ones.
And is important if we want to maintain
the financial system, the banking
system that we have in this country.
Um, so on that note, I support cure
having the resources that it needs
to process applications in a timely
manner, including the expansion of
capri, which I believe is the software.
System, um, that you were referring
to to have better functionality.
So that that correct.
Yeah.
Thanks.
Credit unions.
Um, the organizing
groups have more insight.
And that you all and the staff have
the resources to better handle the
increased, um, amount of applications of
underserved area applications of other
types of charter applications that you
guys are handling your presentation.
Um, showed a slight uptick in the
application processing time for new
charters, even though it's still much
lower than what it was prior to 2021.
so I would like to work with my
fellow board members and your office
to make sure the new chartering
process is running smoothly.
We're communicating which credit with
credit unions in a timely manner.
Um, that kind of thing.
Um, I also want to thank you.
Um.
For your work on processing applications
for underserved areas, credit unions,
being able to serve these areas, despite
their original fields of membership,
I think, speaks to the purpose of our
system of cooperative credit, which is to
provide credit to those of modest means.
However, we do need to continue to
ensure that credit unions are indeed
serving those communities, especially
since we've had a significant uptick
in those applications since 2021.
So I really appreciate the work that
you all have done to improve the process
so far, including making sure that
credit unions are actually providing
the required service facilities in
underserved areas, because ultimately
this program exists to serve communities
forgotten by the traditional bank.
System, and I want to make sure
that we have not lost sight of that.
So, actually making sure people in
underserved areas have A branch, a
facility to go to, to get the access
to those services is really important.
Um, so appreciate all the work that
you have done working with my office.
My staff as well.
Um, I have no further questions,
but look forward to our continued
engagement on that issue.
Thank you.
Todd Harper: Uh, thank you so much, Board
Member Otsuka, and thank you to both you,
Martha, and Leilani for your presentation.
Um, before I close today, I just
want to make a quick observation
that, um, this is of course the 90th
anniversary of the Federal Credit
Union Act occurred earlier this year.
credit union.
Um, a day occurred last week.
Um, and as part of that, um, our team put
out a new video that I encourage everybody
to take a look at on our YouTube channel.
Um, you mentioned Franklin Delano
Roosevelt earlier today, uh, Vice
Chairman Hallman, and, and he, uh, a
quote in that, in that video says, the
test of our progress is It's not whether
we add to the abundance of those who
have so much, it is whether we provide
enough for those who have so little.
That is what credit
unions are working to do.
That is especially what new credit
unions, low income credit unions,
community development credit
unions, um, are working to do.
They're the ones that are
providing the character loans.
Uh, uh, as I would frame it, um, they
are the ones that are working to make
sure that people of different faiths
can get access, um, to buy a home.
They're the ones that are helping
people who are incarcerated.
To maintain an account, we need to
do all that we can to make sure that
everybody in our financial system can
have access to financial, um, services.
It will make it for a stabler democracy,
a better democracy, uh, and for us all.
Um, with that, that
concludes our agenda today.
There being no further
business, we are hereby
adjourned.
Samantha: This concludes
the F O M Briefing.
If your Credit union could use assistance
with your exam, reach out to Mark Treichel
on LinkedIn, or at mark Treichel dot com.
This is Samantha Shares and
we Thank you for listening.