As Prepared for Delivery on February 28, 2023
Thank you so much for the warm welcome. I always look forward to the CUNA Governmental Affairs Conference because it’s such a great pleasure to have an opportunity to visit with old friends, and at the same time to see so many new faces.
By my count, I believe this is my seventh appearance at the GAC, given that I’ve served two terms on the NCUA Board. So, as I was preparing for this visit, I looked back over what I had said to you all in previous years. And looking back, I’m struck by the progress we’ve made in just the last few years on so many issues.
We’ve advanced a number of vital regulatory reforms to provide your institutions with greater flexibility while ensuring the safety and soundness of the credit union system. Just think about the work we’ve done on CUSOs, loan participation rules, support for Minority Depository Institutions, providing guidance for hemp industry businesses, and the list goes on.
While I was chairman, I was proud the NCUA was able to establish an Office of Technology and Access. We also established the ACCESS Initiative to bring greater focus and clarity to our financial inclusion efforts. In 2020, we hosted the first Diversity, Equity, and Inclusion Summit, which is now an annual event in its fourth year.
We’ve streamlined the chartering process to encourage new credit union charters, bringing several new institutions into the system over the last couple of years. That’s another area where my Board colleagues have shown tremendous leadership, and it’s been a pleasure to work with them to get that done.
I hope I’m not speaking out of turn, but in the next few days, we’ll be announcing a refund from the Share Insurance Fund that should be in the neighborhood of $281 million to 2,900 credit unions. Those notices will be coming out next month, so that’s something you’ll want to keep an eye on.
But my point here is not to provide a laundry list or to run a victory lap. I highlight these things for a simple reason: almost all of those measures benefited from the informed advice and input we received from credit union leaders like we have here today. Those achievements, and so many others, are a testament to the power of industry advocacy and feedback, and they wouldn’t have been possible without the people in this room.
My own approach to regulating the industry can be summed up simply: I’ve always said we need a regulatory system that is effective without being excessive, and I believe the purpose of regulation is not to hinder credit unions — the purpose is to empower credit unions so your institutions can provide the highest level of service to your members and your communities.
That’s especially important for an industry like this one, where we have such diversity in the size and types of institutions and a broad geographic distribution. The diversity and range of the cooperative finance movement mean there are few “one size fits all” solutions. So that requires a more nuanced approach, a more balanced approach, a more collaborative approach to regulation. And that balance would not have been possible without the feedback and cooperation we’ve gotten from industry leaders.
And as we move forward into 2023, I hope we can continue working in that collaborative fashion because we’re facing some serious challenges: heightened competition, demographic changes, technological changes. I don’t have to recount those for you because you confront them every day.
And certainly, there’s the elephant in the room, the troubling economic outlook, which is made all the more uncertain by the mixed signals we’re getting. We’re seeing strong numbers in the monthly jobs reports, and the economy expanded at a solid 2.7 percent annual rate in the last quarter — slowing somewhat but still showing gains. But against those promising numbers, we still have high inflation that’s punishing your members and higher interest rates that are affecting your risk profile, and there’s still a substantial risk of recession this year.
Given the conflicting indicators, I’m not going to try to interpret the numbers or venture a definitive forecast of what’s going to happen. But I will say this: my first tenure on the NCUA Board coincided with the 2008 financial crisis and housing meltdown. Up to this point, this is not a repeat of the last crisis. We very well may be facing a recession, but the advice I give the industry is don’t be alarmed but be alert and be prepared.
Even with the economic uncertainty and other challenges, I want to emphasize that I feel a tremendous sense of optimism about the direction of the cooperative finance industry. From my perspective, I look at how the industry has performed over the last couple of decades.
When I joined the NCUA Board in 2005 — my first tour of duty, so to speak — we were overseeing around 8,700 credit unions that held some $700 billion in assets and had 85 million members. Almost two decades later, those numbers have changed dramatically.
First, the industry is serving a much larger number of members. As of September 2022, credit union membership numbered around 134.3 million. So, you’re looking at a 58 percent increase in the number of members, and those numbers continue to grow, with 5.7 million new members added over the last year.
It’s a similar story with asset growth. In September of last year, federally insured credit unions held a total of $2.15 trillion in assets, again a dramatic increase over 2005. Now, I will emphasize, too, the number of credit unions today is smaller than it was during my first tenure. Today we have around 4,800 credit unions owing to consolidations, closures, and other industry changes. That suggests the industry is becoming more efficient and doing more with less. But at the same time, as I noted a few moments ago, we’re looking to encourage more charters because we would like to see the number of new institutions growing over the long term. So that’s something we must continue to work on.
But it’s not just the numbers and statistics — my optimism for the credit union movement is also rooted in the stories about the great work that credit unions are doing every day.
For example, last year, the NCUA approved a new charter for the People Trust Credit Union, a minority-led institution in North Little Rock, Arkansas (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) . The founder of this credit union is a gentleman who started his career as a barber and later went on to establish a barber college to serve his community. He saw that some of his students needed financial help, so he started a non-profit loan fund to help people in his community get loans and build up their credit scores. After that fund was certified by the Department of Treasury as a community development financial institution, he then took the next step of launching a credit union to provide a fuller array of financial services. That’s a remarkable story of someone seeing a need in the community and taking action to create opportunities for others.
Or take what’s happening in Iowa, where GreenState Credit Union launched an initiative, called “10 Over 10” to boost homeownership opportunities among minority populations. GreenState had, at the time they announced the initiative, about $10 billion in assets, and so they made a pledge that they’d direct 10 percent of their total assets, $1 billion, to home loans for people of color over the next ten years. So far, I understand, they’ve committed about $300 million toward that goal, so they’re almost a third of the way there.
There are so many other examples: Over in Lame Deer, Montana, we have the newly chartered Morning Star Federal Credit Union (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) , which plans to provide affordable financial services to under-served Native American populations. In Maine, the credit union league raised $1 million (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) to combat hunger in their state. In San Antonio, Texas, the River City Federal Credit Union opened a “micro-branch” at a popular community center (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) , staffed with just two employees, to provide financial literacy counseling.
I love these kinds of stories, and I could list them off all day, just from what I’ve witnessed working at the NCUA and traveling around the country and visiting with industry leaders. But just those handful of examples illustrate the case the credit union industry remains a vibrant, innovative part of the financial services ecosystem, and the ethos of “people helping people” remains as compelling today as it was a century ago when the cooperative finance movement really started picking up momentum. Your mission is to keep that momentum going and to carry the values of the credit union movement forward for future generations.
In closing, in these uncertain times, I encourage everyone to be confident about the future of credit unions and the cooperative finance movement because the industry’s performance numbers continue to show that there is a strong demand for the services your institutions provide and the values they represent.
Those are the values at the heart of our financial inclusion mission: giving a hand up to people of modest means, creating opportunities to build wealth for working families and marginalized communities, and nurturing a strong sense of local control and ownership. Since we’re near the end of Black History Month, I’ll share a thought from the African American writer and thought leader Booker T. Washington, who noted that “The highest test of a civilization is in its willingness to extend a helping hand to the less fortunate.”
By that standard, credit unions are passing the test, and you should know I will continue throughout my tenure on the NCUA board to work with you to ensure the cooperative finance movement is sustainable for the long term. Thank you all so much for your leadership on behalf of the industry and behalf of your members. I look forward to continuing to work with you to get results.