Sustaining Minority Depository Institutions’ Operations (5/25/2016)


Monica Davy: Thank you so much for attending NCUA Office of Minority and Women Inclusion listening session for
minority depository institutions. I want to just start out by saying that we are going to have an opening welcome by our Chairman Metsger. We’ll have that first, and then we’ll
introduce the panel. Chairman Metsger: Good afternoon, ladies and gentlemen. I’m Rick Metsger, Chairman of the National Credit Union Administration board. Thank you for coming to this exciting event featuring a listening session on
sustaining minority depository institutions. I’d also like to thank those credit unions that are currently participating in this program by self-certifying as a minority depository institution or MDI. Today we’ll provide you a brief overview of NCUA’s minority depository institution preservation program. You’ll hear from a
panelist of experts, internal and external to NCUA, who assist in preserving MDIs. MDIs are predominantly owned and managed by individuals who are minorities. In other words, the majority of your current and potential members and board members are either African-American, Hispanic-American, Asian-American,
or Native American. As an MDI, your credit union plays an important role in the communities you serve, because you are often the only federally-insured institution serving low to middle income, underserved, and unbanked populations. Now, without your services, loans to middle income consumers and businesses might
have to rely on non-traditional venues to fulfill their financial needs or risk having those needs unmet. Thus, your institution plays a vital role in meeting the financial needs of growing populations and minorities. According to Filene’s research, minority households are more likely to be unbanked or
under-banked compared to others. Credit unions lacking specific policies and programs to meet minorities’ unique financial needs can learn from institutions, such as yours, that have succeeded in serving minority households. Minority credit unions reported the following engagement efforts to be most effective in
serving their members, and they do this by targeting products to low income households, attracting pricing for low income households, providing financial education, counseling, and literacy workshops, and offering bilingual services. As of December 31, 2015, there were 625 credit unions,
or 10% of all federally-insured credit unions, that self-certified as being a minority depository institution. Now, these 625 institutions have 4.3 million members and $36 billion in assets. NCUA has coordinated efforts among various offices to promote and preserve
these institutions. NCUA staff will share information regarding these efforts with you today, and you will also have the opportunity to hear from the representatives of the African-American Credit Union Coalition, the Network of Latino Credit Unions and Professionals, and the National Federation of Community
Development Credit Unions. They will tell you about their work to help sustain the operations of MDIs. We also seek to obtain your suggestions on how to further enhance the MDI preservation program. I’m hopeful that it will provide an exchange of information to help us better service
MDIs and help make your institutions more viable. Monica Davy: Again, good afternoon and welcome to everyone who is participating virtually in this listening session that will be recorded and available for playback later. I also wanted to publicly thank NCUA for supporting my office-the
Office of Minority and Women Inclusion-for hosting this event, and thank the Chairman for his opening message. My name, again, is Monica Davy. I am the director of the Office of Minority and Women Inclusion. My office is charged with administering the Minority Depository Institution Preservation program. This program
was developed and established as prescribed by Section 367 of the Dodd-Frank Wall Street Perform and Consumer Protection Act. Credit unions who qualify as Minority Depository Institutions are those that self-certified as having a majority of their members and board of directors
who are minority. Credit unions self-certified as an MDI by responding positively to two questions on their CU online profile, and then by submitting their call report to NCUA. On June 18, 2015, the NCUA board approved the final Minority Depository Institution
Preservation program interpretive ruling and policy statement, number 13-1, which details the program’s objectives and goals. The purpose of the MDI Preservation program is to do four things-preserve the current number of MDIs; preserve the character of MDIs
in case of mergers or acquisitions; provide training and educational opportunities to MDIs; and encourage the establishment of new MDIs. OMWI publishes a list of MDIs quarterly on the NCUA website. Organizations use this list or request a custom list
by ethnicity to identify MDIs they wish to partner or to do business with. The program also offers a variety of initiatives to preserve and strengthen MDIs. These initiatives vary depending on the particular needs of an MDI. The preservation efforts are
provided by NCUA and trade associations, which are represented on our panel today. For NCUA, my office-the Office of Minority and Women Inclusion— acts as the facilitator to help provide MDI services and collaborate with these partners. Today each panelist will provide information on what their particular
office or organization does to assist in preserving your credit unions. Following their presentation, and most importantly-which is the reason why we’re here today— is we want to hear from the credit unions that are participating to get ideas from you as to how we could better serve you and to raise our attention to any particular
challenges that you have in sustainability so that we can come together in our collaboration to come up with particular ideas that we can use to help serve you. I’m just going to take few minutes to introduce the panelists that we have here today. First, we have Carla Decker, who is the president and CEO of the DC Federal
Credit Union and the co-founder of the Network of Latino Credit Union and Professionals. Next we have Rob Leonard, who is the director of the Division of Consumer Access in NCUA’s Office of Consumer Protection. We next have Tim Anderson, who is the chair of the board of the African-American Credit Union
Coalition. Next we have Martha Ninichuk, who is the deputy director of NCUA’s Office of Small Credit Union Initiatives. I love saying the acronym-OSCUl. Pamela Owens, one of the first friendly faces I met as I entered-I’m sorry. I skipped over Elliot. Elliot Weiss is the division of supervision analyst in NCUA’s
region 3. Then finally, we have Pamela Owens, one of the-I was going to say-one of the first friendly faces that I met when I first entered the credit union space at Tim’s conference for the African-American Credit Union Coalition. Pamela Owens is the vice president of programs at the National Federation of Community
Development Credit Unions. One housekeeping note-we want to make this conversation as engaging as possible. We have prepared information for you, but again the objective today is to hear from you. Our panelists are going to go through and talk about some of the services that they provide to our MDIs, but more importantly, send in your
questions. Send in your comments. Send in your challenges. To the left of your computer screen you’ll see a box that says Ask Questions or Submit Questions-to the right. I’m sorry. Please, throughout today’s panel discussion, feel free to submit questions or challenges, and we will collect them and read them out and have our esteemed panelists respond
to your questions. We’re going to start with Rob today to tell us a little bit about what the Office of Consumer Protection provides. Robert Leonard: Okay. Thank you, Monica. Good afternoon. My name is Rob Leonard. I’m the director of the Division of Consumer Access in the Office of Consumer Protection. The Office
of Consumer Protection itself has four divisions overseen by the director Gail Laster and the deputy director Matt Biliouris. My team combined with the efforts of our Division of Consumer Access itself, which is overseen by Rita Woods, is responsible for implementing NCUA’s chartering policies.
What that would include would be new charter applications, charter amendments, expansions of the bylaw-related matters, and low income designation. With respect to how we fit into the picture with MDIs, as with any type of credit union with limited resources, we can offer assistance
in two key areas. One area is assisting credit unions in remaining viable if a field of membership action would be to their advantage. Then the second is to provide access to resources through low income implementation. Those are the two key areas that we would focus on in our office. We look
forward to today’s discussion and thank all of you for giving up part of your afternoon to join us. Monica Davy: Thank you, Rob. Tim, would you like to go next? Timothy Anderson: Thank you, Monica. My name is Timothy Anderson. I am the chairman of the African-American
Credit Union Coalition-AACUC. AACUC is a group of-we were actually created to strengthen the global credit community. We’re a non-profit organization of African-American professionals and volunteers in the credit union industry that
really just focuses on credit union involvement with African-American credit unions and, particularly, this subject today on MDIs really kind of is in our warehouse. I’m excited to be a part of this because we have MDIs in our group that
are impactful in the credit union community. We believe with AACUC that we strengthen the whole credit union community with our MDIs. Clearly, we have programs that we focused on since our inception in 1999, strengthening MDIs, hoping
to involve as many MDIs as possible in the credit union movement. One of the things that’s critical for us is mentorship. We provide mentorship. We have a collaboration the Federation, and Pamela is here and she’ll talk a little bit about that, I’m
sure. We have a partnership where we mentor. We go into smaller credit unions, MDIs. We offer programs. We offer training. We offer just anything that we believe that can assist. Now, a lot of times it’s financial, and there is a lot to talk about with capital.
Obviously, I think all of us would like more secondary capital, but the things that we can provide, I think they’ve been a lifeline to the smaller church type of credit unions. Right now we’ve got a program in place with our mentorship that we actually send CEOs
in. CEOs from the African-American Credit Union Coalition go into these organizations and we provide assistance. Now, some of that is just writing policies-just as simple as helping write policies. At times it becomes a heavy lift for those small credit unions to even
have the policies required for the organization. Doing those types of training programs will help run them. Right now at my credit union-I’m also the CEO at the Government Printing Office Federal Credit Union-we’re mentoring a small credit union now. Some of those concerns that the
credit unions have are just resources. Those resources at times are financial, but again it can be helping to write the policies or helping to hire a manager. We’re in the process of helping this small credit union hire a manager to run the credit union. We are very
invested with MDIs at AACUC. Again, I’m just excited to be a part of it. Martha Ninichuk: Good afternoon. My name is Martha Ninichuk. I’m the deputy director of the Office of Small Credit Union Initiatives. As Monica said, OSCUl is how I’ll reference our
office. We’re truly a service facility within the agency. We are specifically mandated to assist small low income and minority depository institutions. We have a wealth of resources that credit unions really should take advantage of. I have to emphasize this one issue.
It’s all free. Again, it’s all free. The best way to find out about our services is visit the NCUA website. You go to the home page. You look at the service button. It does a dropdown, and you’ll see Small Credit Union Learning Center. It opens up the wealth of resources. We have
consulting, grants and loans. One thing I do need to mention here is grants and loans-you do have to be low income-designated credit union, but the number of MDIs that are low income-designated are truly-it’s a large overlap. I’d say about 80%. Please take advantage of that. We have a grant round coming up
starting June 1st, and it closes June 30th, so please be prepared. A little disclaimer here-this is the first time credit unions will have to register on SAM.gov in order to be eligible for our grant, so just keep that in mind. Don’t let the clock tick too far into June before you
apply. Consulting, training-we have on-demand training you can access through the website as well. We’ve developed a wealth of resources as far as guides: How to Use your low income designation, how to offer loan products to credit invisibles. All
different types of resources that, if you’re a MDI and you’re trying to find a way to reach your specific field of membership, come visit our website or give us a call and ask for consulting services, which I can go into a little bit later in the program. I’ll hand it now over
to Elliot. Elliot Weiss: Okay. Thanks a lot. Well, as Monica mentioned, my name is Elliot Weiss, and I’m a Division of Supervision analyst in NCUA’s Region llI office in Atlanta. Region III-we cover the southeast United States-those states in the contiguous United States-in addition to
Puerto Rico and the Virgin Islands. We handle supervision of credit unions, the examination of credit unions. During the examinations, we do provide some assistance, although during the examinations-the statistics from our region-we’ve got 169 MDIs in our region-and kind of along with what
Martha was saying-most of them are low income-designated. Most of them are smaller credit unions. Since they are smaller credit unions, we have this new examination-small credit union examination program. With that program, we mostly focus on lending, recordkeeping, and other internal controls, fraud-related,
items. The hours are pretty limited, as far as those examinations go, to do a lot more other than our pre-defined, well-defined scope that we have for that examination. However, there are parts of the examination-parts of other follow-up contacts where our field staff, when they’re on site,
do provide some additional assistance. Each quarter we report to Monica’s office on what we do in the region as part of our supervision efforts to assist the minority depository institutions. The most recent report that we had for March-there were several areas. The most common ones were management training
and so forth, bank secrecy act, compliance-that kind of thing-board of administration, exam concerns-following up on those which would spill over into mentoring and training, and in addition to that, recordkeeping. That’s a common issue. I know a couple of examiners that are very good at it that have provided several hours to new managers-
assistance to new managers in recordkeeping training. In addition, we refer the credit unions to other resources when we’re out there in the field. We may not have time. We might say that, “Okay, we’ll recommend you for consulting to OSCUl,” in which the examiners can recommend their credit unions to OSCUl for consulting assistance. In addition to
that, we’ll recommend them to the Federation. In one instance I can recall most recently, we had a question that came into the region about a specific loan program and setting up a 501C3 organization. We talked to them a little bit about safety and soundness, and we said regarding setting this up, since you are an MDI, that you might want
to consult with the Federation-the National Federation of Community Development of Credit Unions. We do that as well. Also, in some of our credit unions that are Latino-based, Hispanic-based, have a limited knowledge of the English language. Where possible on those
examinations, we try to get at least one examiner that is Spanish-speaking either to serve on the exam team or to be the EIC-the examiner in charge-of the examination. We try to assist from the examination perspective in that manner. Also, we see in our offices, mergers.
When things don’t work out, whether one-it’s a voluntary merger where the credit unions decide from a strategic perspective, we’re going to merge or whatever the case might be-we’re going to merge-or involuntary mergers, where we’re involved in selecting a merger partner. We are involved in that.
Since the beginning of 2015, there were seven MDIs that merged in our region. Two of them merged into other MDIs. Only one of them was a non-voluntary merger. The others-they just selected credit unions that were in their specific area that were the best fit for them. What we do in that specific situation where we assist them when
they are insolvent where we’re selecting the merger partner, there’s a laundry list of items that we look through that’s in that interpretive ruling and policy statement that came out last year that Monica mentioned-that we go through first. We look to see if there’s a MDI in the area that we can merge them in, in the state or nationwide, or any specific type.
If it’s like an African-American credit union MDI, then we’ll look to see if there are any African-American credit unions in the same city, state, or nationwide. Then we’ll go to see if there are any other types of MDIs, either city, state, or nationwide. Protecting the insurance fund, lowest cost mergers is always a top priority
for us, but I will say in this specific situation-I had one situation late last year where I worked on a merger-that was a non-voluntary merger where we went through this process, and it ended up being a win-win. We were able to merge the credit union, which was a Hispanic-based credit union-Hispanic MDI-into another one at the least cost to NCUA. It ended up being a win-win in that situation.
Those are two different ways in which we work. Monica Davy: All right. Can I follow up with one question? Elliot Weiss: Sure. Monica Davy: There is something you mentioned earlier, and it may be obvious to all of the listeners, but I just want to be clear. For the small credit union examination process, it’s a limited examination. MDIs that fit the definition of small automatically get that small
credit union examination process? Elliot Weiss: Exactly right, Monica. Basically, it’s just based on the asset size of the credit union. If you’re $30 million and below-and it’s based on the CAMEL rating as well. Once you’re a 3 or below, automatically, they get that examination, from my knowledge. If you’re a 4 or 5 then there’s the option involved. It’s
in one of the instructions that we have, as far as the program goes, but you’re right. It’s asset-based. Monica Davy: Thank you. Pamela? Pamela Owens: Thank you very much. As mentioned, my name is Pamela Owens. I’m with the National Federation of Community Development Credit Unions. We’re better known as the Federation. I just wanted to give you a little
bit of background of the Federation. We were established in 1974. We have a mission of financial inclusion, especially in low income communities. We have over 200 credit unions. Our credit unions range in size from over $5 billion to under $5 million. Just in context
to our conversation today, over 40% of our member credit unions are MDIs. We’re very excited to be here, and especially with my two colleagues from AACUC and also from NALCUP because we have a mentorship program which is really
dedicated to MDIs and making sure that they have the resources and they have the operational support that they need to succeed. Monica Davy: Thank you. Martha? Carla Decker: Good afternoon, everyone. My name is Carla Decker,
and I’m with the Network for Latino Credit Unions and Professionals. NALCUP has as its mission to link credit unions to Latino communities and vice versa. Our stakeholders are generally credit union professional leaders for Latino credit
unions that serve Latinos or have an intention or an interest in serving Latinos and the Latino community at large. Our role is that of facilitator. We are a membership association of sorts. We don’t charge membership dues, and our annual events are free of charge.
What they intend to do is to bring people together, to establish relationships, to learn about what resources are available in terms of Latino credit union leaders already within the system who have a proven track record and expertise in serving the community, to also link to other
external resources and I guess resources available through the trades and through other organizations, partnerships like the internship partnership, resources in the trades such as [Cobata] or other programs that are available through leagues that provide services
to low wealth individuals, regulatory compliance services, and things of that nature. We also have a-I guess take the opportunity to really highlight what success or best practices are available. For instance, in our last convening in Washington DC in
February, one of the programs that we highlighted was the (inaudible), which is a national award of recognition that designates a credit union with demonstrated capacity in actual serving Latino communities. That is a program that is now hosted at the Federation. Again, more than anything,
our role is that of convener. The reason for that is because we want to inspire credit union professionals, Latinos in particular, who are in mid management to meet and learn from those Latino leaders who are already serving credit unions. We also want to make sure that mixed
or perceived barriers in some of the Latinos might be broken, and so we openly invite every credit union that is interested in serving Latinos to come to our conveyance and really hear about the programs that are available, if nothing else, just the relationships that you can
build in terms of finding out how to serve Latinos. Lastly, of course, the Latino community is also a stakeholder. In that regard, the NALCUP ensures that issues related to the Latino community are brought to the forefront, that we hear from legislators and reach out to regulators to create
awareness for these specific challenges. We are really delighted to be able to participate in this conversation. The Latino community, obviously, is one that is growing. It is going to be even a greater significant market in the future. At the same time, I think that
post-financial crisis-we know that the recovery in the communities of color has not had the same pace or the same success as the white population, for instance, and so we think that this conversation is truly important, not just to the community, but also to credit unions in terms of opportunity for business and to create an
impact in these societies. Thank you. Monica Davy: Okay. Thank you. We have two questions. The first one is just to repeat some information that was stated up front, so I will answer that one. Then I’ll have a question that I’ll put to the entire panel. The question is, can you repeat the information about where exactly we can find a list of MDIs? If you go
to NCUA’s website at NCUA.gov, if you look under the leadership boxes and go to the Office of Minority and Women Inclusion, there will be a link there for a list of minority depository institutions. Okay, and we provide that list quarterly. There’s also a report that we do to
Congress that will also give you much more information about those institutions. The other question was, how do you self-certify as an MDI? That’s through your online credit union profile. There are two questions that you have to answer. The first question is
whether or not more than 50% of your current members or potential members are minority. The minority categories are African-American, Hispanic-American, Asian-American, and Native American. If 50% of your current membership or your potential membership,
based on census data, fits that category, then you check the box yes. The other question-and it’s an and. It’s not or-but you also must have at least 50% of your board members must be of those four categories that were just listed. A question from the audience- Female:
I was just going to comment. Is it board and committees and senior management? Monica Davy: The question from the audience is whether or not it’s board and committee members and senior management. There was a recent change within the last year that it’s just board. Okay. Martha Ninichuk: Monica, can I
bring up a point? Monica Davy: Sure. Martha Ninichuk: Offline, before we started the listening session, we were discussing—that we know there are more MDI’s out there, and they are not checking the box stating their designation. Why would that be? We faced the same situation when we were promoting the low
income designated credit unions. Credit unions were hesitant in saying, “Yes, I know I have low income membership,” because they thought that they would come under more regulatory scrutiny and unequivocally they do not. If you check that MDI box, you’re just self-certifying. That
does not mean the examiner is going to be at your door more often or that the examination period is that much longer. It’s just a designation a certification, and it exposes you to and you can get a lot more services because of it. Monica Davy: While we’re at this point, we also
talked a little bit before when we were preparing-what are the benefits to being an MDI? I think that there is some response out there from credit unions who could qualify, and their response is, “Well, why would I? What is the benefit for it?” Martha Ninichuk: The benefits-one specifically that was alluded to
earlier is consulting. When the examiner is at a credit union and they see that the credit union could need additional assistance, they do contact OSCUl. We offer a menu of services on our application, such as budgeting, marketing, internal controls, recordkeeping, new product
development. The way that it works is either the examiner gets the credit union to apply or the examiner nominates the credit union themselves. Then twice a year, we analyze the credit union applications and get the credit unions enrolled for a six-month period. At
that time, our consultant contacts the credit union and says, “You’ve chosen these three services as far as assistance. Let’s have a discussion here. Is this truly what you need?” Then you enter into a conversation between the CEO and the consultant, and the examiner is informed. Okay, these are the three services that
we’ve decided we’re going to help you with over this six-month period. That assistance can come in many forms. If it’s marketing, then we can provide the credit union, say, a marketing plan. If it’s budgeting assistance, then we can help that credit union by providing them with tools, how to develop a budget. We have videos that we
can refer them to, webinars that we can refer them to. We do strategic planning where the consultant would actually come onsite. There are a wealth of services and resources from our EDSs-our economic development specialists-who are consultants can assist MDIs with. Monica Davy: Anybody like to add to
that? Pamela Owens: I just wanted to say thank you so much to Martha for pointing out that it wasn’t going to be additional regulatory scrutiny. In speaking with credit unions which I know definitely should be designated as MDIs, their biggest concern was about additional regulatory
scrutiny, so thank you for clarifying that. Monica Davy: I’ll just get on my soapbox a little bit. What we heard the chairman talk about was in many communities sometimes MDIs are the only form of financial services in some of these communities. NCUA is charged with preserving them. The only
way that we can really keep account of how many there are out there-what communities they’re actually serving-is by having access to this data-what MDIs exist in what areas. I mentioned that one of the things that we have in our program is to encourage the chartering of new MDIs. If we see that a potential area-in
certain areas-there aren’t enough MDIs serving those particular communities, that’s a place where we can actually get involved with encouraging the development of new charters. Timothy Anderson: If I may, I’d like to say thank you to Martha as well, because clearly at the African-American
Credit Union Coalition, we’ve had those discussions with respect to those credit unions that have not self-designated, simply because they view perhaps additional regulation. That’s one of the things that I think leads to another point I’d like
to make, and that is-and we kind of talked to this prior-is there any sensitivity during the examination given to those MDIs, because clearly the service area that they serve isn’t the same. There should be some sensitivity
with respect to lending, delinquencies, rise in delinquencies, and I hear that a lot, because, again, once size doesn’t fit all. They’re serving an underserved area that are going to have some perhaps problems, and is there consideration given for that.
Elliot Weiss: Yeah, and there is some. The examiners I mentioned before, in a lot of cases these are smaller credit unions, and so have this defined scope. At the same time, about five years ago a letter was published by NCUA-a letter. I think it’s 10CU1-supervising CDCUs and low
income-designated credit unions, which the majority of these MDIs are. A lot of that goes into the various characteristics of what is the characteristic of these credit unions, how should you look at these specific items when you’re at a credit union-rising delinquencies-a little bit higher delinquencies, perhaps, than a credit union
that is not low income-designated-that is a non-MDI. It wasn’t specifically termed that in that letter, because the term wasn’t around officially then. I remember being on that working group along with people external to NCUA, credit unions were on that working group. It was a NCUA and a credit union working group that helped develop that letter. Actually,
it was a revision of a letter from 2005 that we had. There’s been for the last at least ten years-there’s been a letter out there that said this is what characteristics of low income-designated credit unions and CDCUs. How we use it in our region-our regional director has occasionally mentioned it during our meetings that she had with our staff. Okay,
this is this letter out here. This is what is characteristic of the CDCUs and low income-designated credit unions. Additionally, I’m aware of some of the SE groups that will discuss it during their meetings. That’s how we look at it. Martha Ninichuk: I’d like to follow-up on that. It’s something I think all of us here have a responsibility,
is we need to educate the credit union managers how to have that discussion with the examiner-this is why my balance sheet looks different, and I have a strategy behind it. They just can’t say, “Well, yeah. That’s my membership and I’m going to have high delinquency. ” It’s not good enough. You’ve got
to give the examiner some confidence that the credit union understands their field of membership that they have, their policies and procedures in place, to mitigate risk. It’s an educational process. They have to feel comfortable to have that conversation with the examiner if the examiner really isn’t understanding their business model.
Monica Davy: Okay, so I have one question here that I would like for you all to take a stab at it. That is, what do you think is the primary challenge threatening the sustainability of MDIs, and is that challenge unique to MDIs? Robert Leonard: I’ll take that. Thank you. I think
I’ll answer the second part first, as I don’t think it’s unique to MDIs, but I think the two things that affect any credit union that has relatively limited resources, whether it just be a small credit union, a low income credit union, or an MDI-and they’re not all synonymous
in terms of that-is two things. One is having the ability to retain quality management and succession filing. Then the second is the economies of scale and the ability to offer services on a competitively and at an affordable rate. I think those are the two things, and I don’t think they’re necessarily linked to
just MDIs, but would affect all credit unions with relatively limited resources. Carla Decker: I totally agree with you, but I think that there is also the issue of the economics of the market and the fact that people of color have not rebounded from the
recession as well as others have. The members’ finances basically drive the credit union’s finances as well, so I think that there is a challenge in terms of the-I guess there’s a challenge, but there also needs to be a sensitivity
about the economics of the people that we serve. Timothy Anderson: I’d like to piggyback on that. Certainly, I agree, Carla and Rob, certainly, and I think you make a great point there. I think it is unique to MDIs, and the challenges, as Carla
stated, are enormous, and especially when you’re looking at the minority population-people of color-they are then. If that’s your largest membership base, then clearly it stands to reason that the credit union would
be affected as a whole. I do believe that it can be unique to those MDIs that serve that population. Martha Ninichuk: What we see in our office many times is that there is an aged CEO, and they don’t have any succession
plan or contingency plan, if something would unexpectedly happen to the manager. We also see credit unions that are just offering basic services, so the field of membership continues to dwindle away until that credit union isn’t
sustainable any longer. Especially with MDIs, it’s hard for them then to find a merger partner when they’ve taken those resources down to the bare minimum and they don’t have any bargaining chips left in the merger agreement. Again, we try and assist credit unions to
anticipate the future to make sure that they’re not dwindling away their resources and how to bargain if they find themselves in a merger position— what they can ask as far as a merger package. These are some of the issues that we see. Elliot Weiss: I agree with everything that’s been said so far. Succession
planning is a big thing, as far as retaining management. I’ve seen it from my experience as an examiner. As an economic development specialist-I was an economic development specialist for several years-and I went into both MDIs and non-MDIs at the time, and a lot of it was succession planning. Can you retract and retain someone whose
been a longtime manager for 34 years in the smaller credit union and pay this person what they want to be paid and the benefits and so forth, and they just put their hands up and say, “No. We’ll just merge into another credit union. ” Also one thing-and it’s not an pressing issue, but it’s still an issue that I’ve heard more recently is that some
officials in some of the MDIs that I’ve seen have had an issue where it’s been an Hispanic-American credit union where they have a board of directors that English is not their primary language. They prefer to get training in their native tongue to help them get their training. When I was in supervisory committee training and we had a supervisory committee, and one of our
credit unions had said, “Look, we can’t retain these people. They want to drop off of the committee. ” We talked to OSCUl at that time and said, “Look, is there any way that you can translate the supervisory committee training into the Spanish language?” Fortunately, at the time they were in the process of doing so. Bill Myers came back and said, “Yes. We’re
doing that right now. Funny you should mention that. ” Soon enough, a month or so later, it came out. It’s basically that and just a lack of awareness of what’s out there and the training that’s available. Pamela Owens: I guess I should say ditto to everything that’s already been said, but I also just wanted to bring
up one of the points about many of the MDIs that are designated right now are much smaller credit unions-many of them are faith-based credit unions. I agree that there is a dwindling membership. One of the things the Federation has tried to do is to bring new and emerging-I can’t say younger-a new
and emerging leadership into many of these credit unions. We’ve had some successes, but it has been difficult. Another thing that the Federation has done is we’ve created a technical assistance hotline for credit unions-they don’t have to be just MDIs-for them to call. If there is a
specific question that they have, call. We’ll try to answer it, and if we can’t answer, we’ll make sure we find an answer for you. I think it is— many of these are smaller credit unions. Many have an older membership that are passing on. They’re not the best at recruiting new members,
which can be a challenge. Sometimes it’s resources. Sometimes it’s capacity. It’s almost kind of a full plan on how to sustain these credit unions, because in many instances-and I’m in New York, but our membership is national-you can find another
financial institution within a block or two of where the credit union is at, but many of these financial institutions are not interested in a membership that is being served by these MDIs. They still would not be able to have accounts
there. The credit union really is the only financial resource for their membership. Monica Davy: Tim? Timothy Anderson: Just briefly, Monica, thank you. I just wanted to kind of follow-up on Pamela’s point and clearly the discussion about the economics-it matters, because
at my credit union, for example, we serve the under-served in DC. In that area, there are banks and credit unions all over the place, but some credit unions and banks just aren’t interested in serving the folks that we serve. The economics play a part. One of the things that recently came up with was an
eviction protection program, because if folks can’t pay their rent and it’s not about products and services at that point. We go in. We do financial literacy. We do teaching how to do a budget. If you can’t teach them how to manage their money, then they aren’t going anywhere for
financial services. It comes down to economics. It comes down to those that we serve. I think it speaks to the larger question that it can and probably is unique to MDIs. Monica Davy: Thank you. Thank you so much. Rob, this is a question for you. Can you describe
the profile of MDIs-roughly what percentage are single-seg, association, and multi-seg and community charters? Robert Leonard: I do not know the most current figures on that, but I would assume that they probably have a higher concentration of
single common bond when compared to all credit unions. Just I think some of the more traditional forms of MDIs are the faith-based. The last time I looked at the numbers for all credit unions, it was about-I would say-about 30% community. I would say, maybe
20% single common bond, and then the rest would be mobile common bond-somewhere in that neighborhood. I would imagine for the MDIs, they would probably have slightly higher percentages of the associational common bond or single common bond due to the number that are faith-based. Monica Davy: Then what
about federal versus state? Do you have any rough percentages? Robert Leonard: Generally, we don’t accumulate information for the state-triggered credit unions on that by membership type on that. I would assume the distribution would be similar, though. Monica Davy: Thank you, Rob. Robert Leonard: Sure. Monica Davy: This is another question
that has come in from our listening audience. Can the panel please help define what they mean specifically in terms of asset size when they refer to small credit unions? Elliot, that one is probably for you. Elliot Weiss: Well, as defined in our regulations, it’s $50 million is the- Martha Ninichuk: One hundred million. Elliot Weiss: A hundred million now?
Okay, so that’s right, and it’s $100 million now that would be considered a smaller credit union. As far as a small credit union examination program goes, right now it’s the $50 million threshold. Then when I looked at, as far as our region goes-I looked at it from the perspective of the small credit union examination program
because it’s supervision. It’s what we do. From that perspective, I looked at it from the smaller size-like in the $30 million and below, but yeah, $100 million. Monica Davy: Okay. There are two questions that are very similar here, so I’m going to read both, so just in case I’m
missing something from one. Does or will the NCUA conduct due diligence in determining the impact of an MDI before approving a merger, field of membership expansion, or field membership charter conversion? I think that that’s the question. Both of them are kind of similar. Rob, do you want to take that one?
Robert Leonard: Sure. I’ll probably defer to Elliot on the merger part of it, because our office doesn’t directly-I mean, we work on the compatibility part for the field of membership, but not the merger itself. I’ll let Elliot touch on that one. With respect to the field of membership, generally our position on field of
membership is competition is good for the consumer, so the more choices that they have available, the better. It’s also kind of important to note too that there is a lot of existing competition from other types of financial institutions, like Pamela mentioned before about how in her neighborhood there could be any number of different ones. I’m sure
they’re not all credit unions. I’m sure there are other types on that. No matter what, they’re going to have to meet-any credit union is going to have to meet the competition to become meaningful for who their members are. Certainly, we do hold credit unions accountable for community-triggered expansion, for them to demonstrate that this is a
marketing plan-that they intend to serve the entire community. For example, if the area has a large concentration of people where English isn’t the primary language or their most comfortable language, we wouldn’t expect to see bilingual advertising and plans for that-plans to reach out to organizations
in the community that can help them better understand the needs of those. We certainly hold them accountable for that that way in looking at it, but generally take the position that competition generally is beneficial for the consumer. Elliot Weiss: As far as mergers goes, in our region when we look at a merger, we’ll
look to see what the paperwork is there. As far as due diligence goes, we’ll do due diligence on the credit union that’s merging, but also the credit union that’s the continuing one and how they can serve this field of membership and how they can serve the members of this other credit union. One thing we mainly look at is to see how are they
going to serve these members, do they have an office facility in the area, are they going to retain the staff of this credit union? What are they going to do? As far as the credit union, how are the members going to be treated as far as are there going to be any bonus dividends. As part of our regulation, say if
this MDI has built this very good net worth ratio over the years and it’s 15%, 20%, and this continuing credit union has got a 8% or 9% net worth ratio, well, what are they going to do? Are they going to distribute this income to the members that they’ve built up over these years? What are they going to do? I know our regional director
takes a pretty close look at that when these mergers come in. For the regulation, if the net worth ratio is five percentage points higher-like if the merging credit union is a 15% net worth ratio and the continuing was at 10%, they have to describe it. They have to put that in their merger-their plan. Also, if there’s going to be any financial arrangements that they’re planning
to pay the merging credit union’s senior management. We look at that as well, but the main thing is we look to see how are they going to be served. What is it going to impact financially. Preserving safety and soundness is our main goal in the region. Is the credit union going to be safe and sound after the merge with the continuing credit union. Also, in the same
vein, we also do look at the members. Is this going to be best for them and how can this continuing credit union best serve the members. If they’ve proven it well in their package, then we’ll approve it. That’s how we look at it. Monica Davy: Okay. Anybody care to add to that? Carla Decker: If I could just- Robert Leonard: Yeah, please. Carla
Decker: I agree with that and I think that there needs to be a business case for the merger in ensuring the continuity of service to the members. Ultimately, it is the— I guess, ultimately, we’re looking out for the members. From a network perspective of percent Latino Credit Union Professionals, one of the interests
is also in preserving that character of the credit union. The representation and the leadership of the organization, both the professional leadership but also the volunteer leadership. I think that when there is a merger in which the MDI leadership is lost, that the character of that
new organization or the larger organization, the surviving organization, is lost to a certain extent. That’s one of our concerns. Monica Davy: Elliot, is that something that we consider? Does the NCUA consider that as far as change in the leadership or preserving leadership with the merger
process? Elliot Weiss: We look at it as far as-not so much the board of directors-we’ll look at it as far as the management. I won’t say safety and soundness, but in some cases, like this new concept of network mergers-I know OSCUl had a webinar recently about that, which was designed somewhat to help with preserving the character of
these credit unions. There will be this main board of directors, but then there will also be committees from these merging credit unions that will be there to help in guiding the new board of directors, or I should say the continuing credit union board of directors as to okay, this is what our character is like and so forth and helping kind of
run as individual units basically as almost subsidiaries of that. In most cases, we’ll look to see, as far as what the continuing leadership looks like from a safety and soundness standpoint, but within the network mergers. As far as the continuing-when it’s an assisted merger, we’ll dig more deeply in as far as that goes. If the credit
union is failing. Then when we can step in, when we guide the merger, then we’ll look and say, “Okay, are there any MDIs in the area that will help preserve this character?” Then we look to see, from that perspective, that the character will be preserved. Martha Ninichuk: That’s what I was going back to-what I said earlier is we’re not a compliance
office but a service office. What we try and do is before the credit union gets to that point where the agency has to actually step in and take over and do the merger process, is to educate the board members what their rights are and what are their options and try to keep the essence
of the credit union intact even after the merger-how they can negotiate those terms. It’s a learning process. Monica Davy: Pam, you had something to add? Pamela Owens: Yes. I just wanted to echo Carla’s point. I definitely thing
there has to be a sensitivity in terms of preserving the character and culture of the credit union that is being merged. If there is an MDI credit union within the community, I would hope-and I understand there has to be a business
model. I do understand that-but I would hope that they would be looked at as a preferential merger partner, because of preserving the culture, preserving that sensitivity to the needs of the community that’s being served. Monica Davy: Just so you know, as part of the
rule that the board approved here at NCUA, has that exact thing in mind, so that we have a preference-an order that we go in. Our preference order is to try not only to preserve it as a minority depository institution, but actually match it with the community that it was serving before. That is something that we consider. We have to balance that
with the safety and soundness, but it’s definitely-the rule calls for that. Pamela Owens: Wonderful. Monica Davy: Okay, so here I have a comment and an observation, and I would love for anyone who want to react or respond to it. It is our experience that many from a minority community are
able to pay their loans with much higher debt-to-income ratio. However, NCUA examiners want us to never-and it’s unlined-make loans to those with debt ratio over 55%. Elliot, I think
that’s yours. Elliot Weiss: It’s one of these things-never say never, okay. Every situation is different, and I understand that examiners are coming in, and I’ve seen examination reports where they’ve said you will not make a loan with a
debt ratio over 50% or a credit score below 600. I’ve seen it before. One thing that we’re doing so far as our supervision manual, we say, okay, if we’re going to tell a credit union that they can’t do an activity-if it gets to that point where say the net-worth ratio drops below a certain level and we say,
“Don’t grant certain loans under a certain credit score, above a certain debt ratio,” well, we’ll say okay, in the document of resolution put in there what does this credit union need to do in order to improve, in order to be able to do that activity again, to be able to grant these D&E paper,
basically, that the lower credit quality, if you will, based on credit score paper. A lot of that might be-and there are letters that come out with regard to concentration risks. What are your risks as far as that goes? The kind of things that we would recommend in that situation-maybe not saying you can’t
do it never ever, but you need to set limits in your policies as far as limits as a percentage of your net worth generally, as to this is not what we’re going to keep in this kind of paper-this D&E paper. I would say when we see that in the office, we have that conversation, okay, can they do this again? When can they do this again?
If their net worth ratio is below 7%, then they’re what they call in prompt corrective action, so in that case there are some limitations there, but if it’s generally a credit union that’s got a higher net worth ratio, unless the net worth ratio is dropping significantly, then we can have that conversation when we develop the document of resolution. Okay, let’s take a look
at this. Before you grant this, maybe you want to develop some additional policy limits as a percentage of net worth for this specific type of-it’s a little bit higher risk loan. That’s how we look at it. Carla Decker: I just want to follow-up on that. I appreciate the response. I also did want to point out that, particularly in the Hispanic
community and maybe just in the underserved community overall, people avail themselves of non-traditional forms of credit. It’s very difficult then to document those non-traditional forms of credit because of being non-traditional they vary the whole gamut of different types of
documentation. I would suggest as an advocacy-and perhaps that’s not the role of NCUA-but the trades and perhaps it is the role of NCUA from a consumer stance-is to maybe advocate on behalf of including some of these non-traditional forms of credit and credit
reports and credit scores, whether they be rent payment or remittances or any other type of debt repayment that can be documented. Monica Davy: Okay. All right. Next question-we’re going to get to the subject of CDFIs. The question here is what are the benefits of becoming a CDFI
and can NCUA help MDIs become eligible to become a CDFI? Pam, maybe if you took part one of that question-the benefits of the program? Then, Martha, could you take the second part of that-how NCUA can help MDIs become eligible? Pamela Owens: Sure. There are a tremendous
amount of benefits for credit unions that are eligible to become CDFIs. One of the major benefits is that you are now eligible for various grants that the U.S. Treasury Department makes available, usually once a year. These grants can be
anywhere from-at the low end-I believe it’s $100,000 to-at the high end-$2 million. They can be used for shoring up capital at the credit union. They can be used for building out, if you’re looking at building out
another branch. There are a variety of uses. Also, for those credit unions that are in partner relationships, many times if they are looking for grant funding, one of the first questions will be, “Oh, is your credit union low
income-designated? Is your credit union a CDFI?” There are tremendous, tremendous benefits for credit unions that are eligible, and that’s why we were so excited that NCUA is helping credit unions to receive that
designation. Martha Ninichuk: OSCUl is working with CDFI to double the number of CDFI credit unions to 265 by the end of the year. This has been a huge endeavor by our office working in tandem with CDFI. What we’re doing is we’re trying to
streamline the application process. What will happen is credit unions will send us their area’s share and loan data. We’ll analyze whether or not the credit union qualifies under the target market parameters, so the penetration of loans to CDIF-qualified areas. The credit
unions returned the analysis and additional data from the 5300 profile, because NCUA holds that data. We are saving the credit union a huge amount of time and effort by doing this frontload analysis first and then notifying the credit union of the results of
the analysis. The credit union then takes this information that we send back to them. They complete a shortened or a streamlined application that CDFI has developed specifically for credit unions. Then they will review. If the credit union completes the streamlined application,
CDFI will actually review the application, and the determination will be made that much quicker, because we have the data. They trust the data that we are giving to the credit union, so we are really excited. We have obtained 12 credit unions to pilot this process. We
just began that process this week, so we will bring the 12 pilot credit unions through the process during May and June and then tweak the program where we need to and then open up the CDFI streamline process for the credit union industry as a whole
in July. We are having an interagency webinar June 23rd for those of you that would like to learn more details. At this time only elite credit unions are eligible for the streamlined application process, but all others will continue to use the traditional requirements.
Again, if you’re interested, please join us on the June 23rd webinar. Monica Davy: Okay, another question here-our credit union operates in an MSA-metropolitan statistical area-on the U.S.- Mexico border where the majority of the population is Hispanic, and we are
a CDFI LIDCU and a MDI. We also have assets approaching $1 billion. How does a credit union our size secure relevant MDI services? This is an LID credit union, but approaching a billion in asset size. Martha Ninichuk:
Secure relevant services? I don’t know if they’re talking about for a membership or from- Monica Davy: I think they’re talking-I’m assuming they’re talking about from NCUA. Are they eligible for consultant services? Martha Ninichuk: Absolutely. If you’re
a low income-designated credit union or MDI or a credit union less than $100 million assets, those are all qualifiers. If you’re a MDI approaching a billion assets, you still would qualify for consulting. Of course, we would take a look at other credit unions that are asking for our assistance during a
specific enrollment period, and if there are credit unions that-you know-maybe can’t afford additional services through another vendor and the credit union that’s a billion has an ability to hire somebody-they have the income available-then we’ll offer our free services to that credit
union that’s in more need, but it does not disqualify them from our consulting services. Of course, if they’re a low income-designating credit union, they’re eligible for our grants as well. Monica Davy: Okay, next question-what opportunities may MDIs have to reach Millennials,
especially in view of Millennials desiring non-traditional financial services? Martha Ninichuk: You want to take a stab at that? Carla Decker: I’ll go first. In the Latino population, the median age is 28 years old. If you are serving Latinos, more than
likely, they’re half within your membership-a large proportion of Millennials-or within your potential field of membership you have a large proportion of Millennials. Then in terms of linking to your services, I think it goes back to the question of challenge and capacity, because clearly a smaller
credit union-a credit of $100 million or less-would need to make a significant investments in being able to provide these services or services that are relative, services that are relatable to a young person, including some of these non-traditional, I guess, banking products and services. The good news
is that there are opportunities to learn from others. There are best practices, and there are resources starting with the Federation and— I don’t want to take away your thunder-but the Federation and an opportunity to avail themselves of data processing
services at a fair price that are suitable for SNE services funding research. Then really just I guess reaching out to other credit unions in the marketplace that are successful at serving Millennials. That’s why we say that
is the role an NALCUP in terms of just being a facilitator or a conveyor for these types of credit unions. Pamela Owens: You know, I think that this is an incredible opportunity to engage Millennials in a variety of ways. One is through-we were just talking
about the credit union being a little bit older of a movement. This is the opportunity to engage Millennials not only as members, but also as employees. One of the things, as I mentioned before, the federation has tried to do is to bring younger people into the credit union movement, not just
in a teller capacity which is very important, but also in terms of a management capacity for at credit unions. In addition, we were looking at a study which I think was by Filene, which said Millennials really want to be involved. While they are very much interested in the services, they also want to be
a part of something bigger. I think that the credit union movement is such a great fit for being part of that something bigger, making a difference, and especially looking at some of the communities that our credit unions serve. In terms of products and services, I think that Millennials don’t
like fees. They really don’t like fees. We have credit unions that are doing fantastic with so much no-fee products and services. Doing a white paper on how you reach this group and how you do it without having fees is a great opportunity to share knowledge. I
think that there are just so many different levels to engage Millennials, but what I encourage you to do is to actually engage them. I think that we discuss a lot about how important it is. I don’t know if we’re actually doing it enough. I also wanted to give a plug
to the NCUA grant program that’s going to open on June 1st, because one of the opportunities is for student internships, and that is so important-so incredibly important. This might be an opportunity to engage a Millennial working at the credit union. Monica Davy: Okay, Martha, this is your chance. Martha Ninichuk:
This is my chance. Thanks, Pam, for the plug. Pamela Owens: No problem. Martha Ninichuk: We’ve had some great stories coming back from credit unions that have had interns assist them developing web pages, helping them with their marketing plans, developing phone ads-just really incredible stuff.
Also, developing association boards where they consist of young individuals that keeps the board of directors more on point of hey, what is this younger generation really want and need-a really interesting dynamic between the two types of boards,
so that’s great. Back to our grants-internships, we have up to $4,000 available per credit union that applies and would become an advocate. We also have training-so training for board members, your governance leaders, official families-that’s up to $3,000. Cybersecurity
which is a huge issue for all credit unions right now-this grant initiative will assist a credit union supporting or advancing their cybersecurity software and programs in protecting member information. That’s up to $7,000. Then our last grant initiative for this period is
capacity and growth. This is an initiative for credit unions wanting to implement a new loan or deposit product or implement a growth strategy for greater outreach to their membership. That’s up to $15,000 per credit union, so that’s our largest initiative. Timothy Anderson: If I may-and
certainly, I agree with Pamela and thank you, Martha, for sharing those programs and the information on grants. At AACDC, we believe in engagement as well. We have to involve the Millennials and we have. At our conference last year in Philadelphia we established right after we came out of that
conference an advisory group of Millennials. I became the new chair last year, and if I heard it once, I heard it a thousand times-and that is, “We want to be involved. We have ideas. ” We’ve got Millennials that we want to just not only come up with programs, but we want to hear from them
what do you want? That process has been going on, and we’re really pleased with that, but also with our internship program. It’s one of our signature programs at AACDC. We have HBCUs around the country that we place students at credit unions throughout the country. We’ve got large credit
unions over $2 billion in assets and as small as a couple of hundred thousand. We believe that obviously the Millennials have replaced us the baby boomers as the largest segment, so our focus at AACDC is simply what do you want and how can we deliver it? Monica Davy: All
right. I have one more, and it’s a CDFI question. If a low income CDFI is privately insured, how are they listed or found on the website? That’s all I have. I don’t have any context of that. Timothy Anderson: I don’t understand that. Monica Davy: They’re not listed on the website.
That’s the simple answer. They’re not listed on the website if they are privately insured. Okay. We’re going to move on to a topic of field of membership. Rob, you’re probably going to take a stab at this initially. Robert Leonard: Sure. Monica Davy: Are MDIs changing charter types or trying to
expand their field of memberships? Then this is the second part of this. Would MDIs be helped if the proposed field of membership rule for NCUA is finalized? Robert Leonard: Okay. Yes, I would say quite often it is the interest among MDIs in expanding their field of membership. Probably the most
common that we see are community charter actions on that. We have seen quite a few on that where credit unions where they’re serving a majority of minority-of population where they want to expand and get further outreach. We do see quite a bit of that. I think the new rule, when it goes
through, that is anticipated-will help all credit unions. It would certainly give more opportunities for minority credit unions, as well as all others. Monica Davy: Any other comments or feedback on the field of membership rule and its impact on MDIs? Timothy Anderson: Yeah, thank you, and we were having this
conversation prior to, and one of the things that I believe and I hear from credit unions at AACDCs MDIs-we all want and we embrace the field of membership expansion. It’s going to be good for everyone. However, are the unintended consequences that if you expand this growing
ability now to go into areas that were predominantly served by MDIs, is there the unintended consequence that could adversely impact the MDI. Now, again-and we were talking about this, Rob and I-and you know we believe choices are good, and so as
many choices as members have, then that’s going to be good. However, there is some concern that it could have unintended consequences. Elliot Weiss: I do want to say that I know there was a part of this new rule for multiple common bond credit unions that can use an Internet
as an option for a service facility, if you will. The thing that I remembered also, being when I looked through this, is that I think that-and Rob can correct me, if I’m wrong-for a credit union multiple common bond balance, that wants to add another served area, that serves facility requirement
hasn’t changed, right? It’s not Internet. It’s still like a brick-and-mortar facility that has to be in the area. Robert Leonard: No. I mean, it would basically-the Internet would be on as a vision of the new rule-rather that is proposed, I should say-the Internet would be the facility of that. For an
underserved area, though, that would not change. Elliot Weiss: Right. Robert Leonard: Yeah, the underserved area for that-it must be a brick-and-mortar facility— a multiple common bond credit union that is underserved, because we’ve interpreted that as a statutory requirement, so yes. Elliot Weiss: Thanks. Monica Davy: There
is one more specific question here. You may have answered it, but I’m going to read it just in case. Would MDIs benefit if community chartered credit unions could add underserved areas to their field of membership? Can this be done by regulation or does it require a change in statute? Robert Leonard: Okay. You would answer the question
yes, and I think it would benefit other credit unions immensely because it would increase the flow of credit unions that would be eligible to add underserved areas. Yes, a MDI-that would be an enormous help. That is, however, a statutory change, because Congress would need to allow that
because the Federal Credit Union Act explicitly limits the ability to add underserved areas to multiple common bond credit unions. It would be the statute. It wouldn’t be within a regulatory program. Monica Davy: Okay, so this question-it kind of goes to the conversation
we were just having about balancing, preserving MDIs, but also acknowledging choice for consumers. What is in place to allow MDIs to become or remain competitive when there are so many larger credit unions that engage in the same community in which they lose their membership
participation to the credit unions that offer more? What is in place to allow MDIs-or I guess we could even say for smaller credit unions-to become or remain competitive when you have those larger credit unions out there that just can offer more to their potential membership? Martha
Ninichuk: That’s a difficult question. I was a credit union manager at a faith-based institution for many years, and it all boils down to I think the type of service that you offer your members. Is it quality service? Is it high touch? Are you offering the products that they’re looking for? If
you can deliver in that manner, you just hope that you attract or maintain your membership and continue to grow. The competition is tough. Monica Davy: Pam, want to add to that? Pamela Owens: You know, I think that’s a very difficult-that’s a challenge
that many credit unions face. I think back to one of our credit union members-a faith-based credit union-that a larger credit union with more resources and more products and services-opened a branch in their community.
They thought they were kind of a goner. They found that their membership actually increased because their members were very high touch members with very challenging credit histories. This credit union, within the limits,
was able to work with them and develop products and services. Even though the other credit union did have more products and services, their members really liked more of that high touch service and needed more of that
high touch service. They also developed products and services and were very specific to that community where credit scores were very challenged. A lot of people were getting back on their feet, and there was a lot of
loyalty to the credit union that was able to help them when they were at a very difficult time in their financial lives. Carla Decker: Monica, if I could just add that engagement-relationship-is key in this case. You
deliver that through products and services. You also leverage partnerships. Wherever there are advocators of that MDI community that can serve as your referral, that can serve as that link in a relationship between you and the consumer, that’s where the difference also
lies. I want to give two very quick examples. One is we provide a financial services to members of Gossip in Maryland, and they provide legal services-integration services-to their own members. We as the credit union provide the financing for those immigration applications. Competition
is then obliterated-no large bank, no fancy financial institution actually will finance these $600 loans. Likewise, we bank the participants of a city’s summer youth employment program. This year alone we have banked 700. If you talk about attracting Millennials and how do you
engage them, then it’s through these very specialized services, being there with products and services that are relevant but also having that partner that basically opens the doors and makes that introduction for you. Timothy Anderson: If I may, I’ll just piggyback on that, and certainly agree that-and I can remember back-and I’ll
use the four-letter word-in my banking days, community banking. We had to differentiate ourselves. We did it better than others. Martha is right. That’s a tough one because competition is competition. Our view is that we’re going to differentiate ourselves, and we’re going to do this better than the big banks. I think in credit union world
it’s the same thing. As Carla just mentioned, you know, there are services that we provide and products that we provide that others won’t. Again, we’ve got to find our niche, and then I think that’s how you compete. That’s how you retain your members, and your members will want to stay with you. Monica Davy: Okay. We have about ten minutes left. What I’m going to
commit to from my office is that for those questions that we were not able to answer, that we will publish answers on our website for the questions. We just want to make sure that while we have time left that we solicit input from the audience as to what we can do to make the program better. Keep sending them in-questions as well as suggestions,
but there’s one here. Is assistance available to credit unions that are not interested in a merger but lack financial resources to grow their membership and are strategizing to serve low income in underserved communities? I think that’s for Martha. Martha Ninichuk: Absolutely, you would contact
our office through our website, fill out a consulting application form. Do it before the end of May, because we’re starting our next consulting round as of July 1st. Yes, a consultant would be available to come out to your credit union and discuss with you a marketing
strategy, an outreach strategy, look at your products and services. Are they priced correctly? Are you offering the right types of products? We can help you build an overall business plan. Monica Davy: I remember when I first came onboard and when I meet with Martha and Bill, just trying to understand the concept of the small
credit union, I asked them, “Doesn’t every credit union want to be larger?” Their answer was no. Martha Ninichuk: No, absolutely not. Monica Davy: Right. Martha Ninichuk: They have a specific business model. They have a specific field of membership. They do a great job in providing financial services. They have their business model in mind.
Monica Davy: Okay, so, Pam, I’m sorry. She wanted to add something. Pamela Owens: Well, I just wanted to again give a shameless plug to my credit union mentoring program, which is a collaboration between AACUC and NALCUP and the Federation. This
might be an excellent opportunity for that credit union or any credit union to engage with a mentor about serving a minority community. We have credit union professionals that have signed up to serve as mentors for short term and long term assignments.
This might be the exact kind of opportunity to warm that plate for them. Monica Davy: Pam, can you address-we talked about this a little earlier-the small credit union or the MDI or LID that fears the mentor relationship because they believe that there is some intent to take them
over. Can you address that? Pamela Owens: Sure. I think that many of the smaller credit unions are a bit fearful that if a mentor comes in, they’re actually looking to merge in that smaller credit union. One of the things that we’ve said, if this is a mentorship, then it’s also a partnership and
that if it is a person from a larger credit union that’s coming in, they’re truly coming there with a specific skill set, strategic planning, marketing, accounting, operational expertise. They’re coming there to help. That is something that we have drilled into our
mentors-something that they have signed up for and said, “This is not about merging in. This is about helping. ” This is a credit union movement, and one of the things that has kept me in the movement for so many years has been how collaborative it can be. I think this mentorship program that our three
organizations work on really shows that collaboration and that partnership. Monica Davy: Thank you. We’re going to take this last question. I’m not sure who the proper person is to answer it. I think there is someone in the audience that probably could, but I won’t put them on the spot. Can you address the regulatory burdens
MDIs currently face? I think the question behind that is probably is NCUA focused on that reducing regulatory burden and particularly with respect to MDIs? Elliot Weiss: I think we hear from like MDIs and from non-MDIs. It’s a regulatory burden that’s out there. I’m not going to say anything
about what potential regulatory burdens there are. I would not be thinking about reducing in on, but there are a couple out there. I know some of them were started under the prior chairman or will be continued under the current chairman. They are in the field of membership-related issues. Also, there is a final rule that was just passed regarding
commercial lending that is going to ease the regulatory burden for those MDIs, those low income credit unions, that do commercial lending, where it’s going to make things-as far as like having to get a waiver from our office on say a personal guarantee on a member business loan, on a commercial loan, or say you want to grant a loan to somebody that’s got a high loan-to-value ratio on a commercial loan,
well, they don’t have to get that waiver from us. However, there are going to have to be some policy and procedure-related issues that are going to have to be more stringent from that perspective. Reducing the regulatory burden from that perspective, also from the perspective of field of membership-related issues. As far as like any future ones, I can’t comment on that. That
is done by another office. Monica Davy: Rob? Robert Leonard: I would just like to add that the board has been very consistent about expressing their desire to reduce burden of these that they would count as an agency. Certainly, where I deal with mostly was with the field of membership aspects of it, although the board has, again, without those
changes been very sensitive to that. Monica Davy: Okay. Thank you. Martha, we have two quick CDFI questions that I think you may be able to take quickly. Is the streamlined CDFI application process available now? Martha Ninichuk: We’re just at the pilot period, and we have our limit of 12 credit unions already designated to the
pilot. The streamlined process will open officially in July for the remaining credit union community. Monica Davy: Okay, and if I understand this question correctly-you may have already answered it, but just bear with me-the CDFI certification process has changed, forcing more frequent recertification? Is the streamlining
assistance for MDIs available for recertification as well as initial certification? Martha Ninichuk: Great question-we’re not there yet. This is our first attempt. This is the-I would say-phase one of our partnership with CDFI, and that is to do the streamlined application. Next step, we hope to look at recertification.
Monica Davy: Okay, so the last four questions I have here are really about suggesting how we can make our program better, so I’m going to reserve those questions and we’ll publish some responses. In closing, I just want to thank everyone who was participating virtually in this listening session today.
We are pleased you are able to join us to learn more about the MDI program and the services provided by NCUA, the African-American Credit Union Coalition, the Network of Latino Credit Union and Professionals, and the National Federation of Community Development and Credit Unions. We appreciate the opportunity to hear directly from you and
to learn about the challenges facing your organizations. We know this will help us all serve you better. I would also like to thank each member of our panel for coming to share with us today and for their dedication into serving MDIs. Immediately following this session, you will receive a survey by email requesting your feedback and offering an
opportunity to indicate your interest in serving as a mentor to an MDI or being mentored, if you are an MDI, partnering with a failing MDI to preserve the MDI’s minority character, or partnering with an MDI to help them provide a particular service such as loan participations or vehicles or mortgages or debit cards.
Again, we value your contributions today and look forward to working with you in the future. Thank you again for your time and attention to this important program.

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