Today's guest is Chris Tissue from CU Collaborate. Chris and Mark discuss their work on getting a large community charter expansion for Dade County Federal Credit Union. This was the first and only NCUA-approved community charter expansion that required a public hearing due to its size. The public hearing process begins when a federal credit union asks to serve a specific local community. The proposed community must have a population of at least 2.5 million and include more than one political jurisdiction. Join this valuable conversation to find out more about this community charter expansion.
You can download a case study on the process here:
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Chris Tissue On Dade County Federal Credit Union's Large Community Charter Expansion
NCUA's First Hearing
In this episode, I'm excited to be here with Chris Tissue, who is the Chief Operating Officer at CU Collaborate. I saw in an email that you're also called the Head of Consulting for CU Collaborate. Chris, how are you doing?
I'm doing well. Thanks so much for having me. I’m wearing a few hats at CU Collaborate. It's good to talk with you.
You and Sam had reached out. I know that you were involved in a public hearing on a proposed community charter. We wanted to talk through that whole process. This was a rule that went into play when I was still at NCUA. If I have it right, unless they changed the rules from when I was there, they will do these hearings on communities that have populations over $2.5 million, and also, the boundaries of the proposed community extend beyond a single political jurisdiction. With that, Chris, if you want to prime the pump by talking a little bit about your take on this process. Maybe we can get some specifics about the actual one that did occur earlier this 2023.
There’s a deep subject matter here, but that is the nature with flying colors that we all love. I'll try to be approachable. You hit the needle in the head in terms of what type of expansion we're looking at. This is for community charters and federal community charters. This would be an institution or credit union that is looking to expand its community boundaries, most often within a statistical area.
The population size is greater than 2.5 million, which is the upper bound of the population that is considered to be what the MCA now calls a presumptive community, looking at census data. If you are a credit union, there are only some statistical areas in the country. About population size, you're looking at some of the biggest, most populous metropolitan areas in the United States if you want the credit union and still want certain people in the community who live, work, and conduct business.
I see that boundary, then it’s a two-part process. The first is the narrative process, which we may want to talk about a little. That deviates from what it would determine is a presumptive community. The second piece was the historical element of this for exceeding 2.5 million in population which you have spoken about in hearing, which had never been before.
If it's less than 2.5 million, there's no need for there to be in a narrative because NCUA is saying that size, we presume, is a community. You have to show that you can do it and you can serve them.
I will provide a bit of a history lesson that they couldn't share in the history of. It is interesting in terms of where the NCUA is going from my understanding in terms of what is even a community at all. There's this concept of common interest interaction. What lines people? What defines a common bond of individuals that is definable?
That's a pretty subjective thing. From my understanding, before the NCUA, it was common sense and smart rules around what they call a presumptive community. Before that, credit unions essentially are very subjective. We had to tell a story, and that is the narrative story. You’re probably shaking like, “This is better than I do because I came along when we had the presumptive community.” You have to show that there are various public service or public goods that connects the different geographies. It was this subjective, difficult thing. We now know what is called presumptive communities, and smartly, the NCUA references the federal experts here, which is the census department.
Our statistical area, which we're talking about, is a continuous portion of a statistical area that cannot exceed 2.5 million in population. Those are largely going to be your metropolitan areas, Washington DC in the States, Miami-Dade County, and New York. There's a ton of statistical area. That is one way where you don't have to tell that verbose story about common interest in interaction. We can use the census designation as the benchmark and move on to, as you said, the business and marketing plan.
One part is defining that it is a community. The next part is showing that you have the financial and physical service facility, the marketing plan, and all of the good business practices that they're going to effectively serve that market. While we're talking presumptive communities, I would also imagine if you're not in a metropolitan area, there's the rural district, which you might be familiar with as well. That's a population under one million and a density under 100 people per square mile and can't go into the States, not contiguous to the one that you are headquartered in. We're not going to talk about what's been up. I feel like it's worth mentioning if we're talking about presumptive community.
I think back to the narratives. Field membership used to be in the regions. I used to be a regional director. The packages would come up and it was a little bit like defining beauty. I remember a reference to the shopping centers in the hubs and the road systems, how they all interacted, and sports teams. It was always interesting.
I like the number side of things that are safe and sound, what's your capital, what's your delinquency, and those kinds of things. When those discussions led into the narrative, it wasn't necessarily my forte, but I had good people in NCUA who worked on it. Some of that is being reborn, over 2.5 million in this particular instance. That's interesting.
I'll throw some of these things out here to see because I did not listen to what happened at the hearing. I know there were some states that already had done it when this row was put in place. There were states that would put these notices in these hearings or briefings. Part of it also is it gives people the opportunity to say, “We think this is a good idea or a bad idea.” When I say people, that includes organizations on the banking side of things, the American Bankers can say, “We don't.”
Let's say it was going to be ten states with 30 million people. They could come and say, “This is why we don't think it's a community and this is why we have concerns with it.” It is a form of due process that allows those people to be heard. If anything I said there, as we start getting into the hearing that you participated in, feel free to jump on that. CU Collaborate is hired by a credit union. It's going to be over 2.5 million, and you know that you start needing to go down this path. Maybe you could explain the process of that.
Generally speaking, for the field of membership, we should always remember that Federal Charter in the states, and you alluded to that there. That is a benefit of all credit unions, or at least those credit unions that reside in states, which is not all 50 of them. For specific programs, I'm going to highlight only one. There are only so many statistical areas in the country that have more than 2.5 million people in population.
There are only so many statistical areas in the country that have more than 2.5 million people in population.
We're talking about the densest and populated metropolitan areas that this would even apply for, but you as a community chrater may serve a single county, which is that single political jurisdiction that you mentioned. Maybe the entire county. In this case, there's Miami-Dade County. Dade County Federal Credit Union championed this from an industry perspective. Miami-Dade County is 2.6 million in population.
They're already starting above what is allowed. Their desire was to expand from Broward County to the North, which I believe has something like a point 7.8 million population. It puts the result in the proposed field of membership of six million or something. We're blowing the top of that 2.5 million. If they want to stay federally charted, don't consider the Florida State Charter. They can either go this route and expand to another community, or many of them will consider a federal multiple common bond like going to a completely different route.
They try it even though they smartly want to continue in the community charter. They are super accomplished and have great financial performance. They're successful. They serve NCUA. They have a story, so it made a ton of sense for them to stay in the community and try to overcome the challenges. They are now going down a path that no one has ever done in terms of the open hearing.
There is that narrative approach, but sometimes the narrative approach is also used if you want to add a county outside of the statistical area. Many credit unions will host a county that is adjacent to the statistical area. The narrative approach is still something that we see some folks wanting to do for that while keeping it under 2.5 million. The narrative is applicable to both. In this instance, they have the dual element of that narrative promise, which is, if you can remember or maybe have tried to block it down, is verbose, typical to adjudicate and find evidence for, and do a lot of research.
The open hearing route, which, as you mentioned, is part of it. We're going to do the process lined in the regulations. The last thing I would say is it makes a lot of sense, and I appreciate that the NCUA has this. We know that not everything is going to fit into these nice census blogs. If that's the case, they're still up, and we'll still consider these alternative functions. It's just you have to do a little bit extra work.
As you're talking through this, in your background, that's Hollywood, Florida's beach behind Chris as we're talking. That is Broward. I'm not there at the moment, but that's my residence and where my business is based. I'm expecting I'll see some branches popping up because part of what you had to talk about was how they're going to serve, and that usually includes, “We'll build X number of branches over a certain period of time,” or something along those lines.
There's an element of showing that there is a common interest and interaction, and you alluded to some of the categories. The NCUA doesn't say, “You have to stick to these.” There are thirteen different categories like central economic, public service, sports teams, and entertainment. You find yourself describing an area, and it's fun from that perspective. You get to jump to it. I've been in my area, and I've been in Fort Lauderdale and see that, but it's fun to dig deep into.
From our consultants and me, particular, it scratches that curiosity. You have to describe an area in ways you never thought you would have to. You're working through those thirteen categories and, hopefully, some others to show that there is no common interesting interaction, but that's only one piece of it. It’s saying, “This is the legitimate community.”
The other piece, as you mentioned, is the marketing of the business plan. You have to show that you have the ability to serve the area. You’ve got physical infrastructure that provides access to everyone in a community. You've got to marketing plan and budget appropriate budget. People are seeing you in the space. You're able to have new members. There is a safety in soundness thing. In most fields of memberships, it's a non-starter. There are those components and the open hearing piece as well. That's the scope of what the NCUA is looking for, what the burden of the application is, and what we work so closely with our clients on to develop.
At the hearing, I presumed Martha Nemechek played a role in it, and maybe some other staff from NCUA. Could you describe it? Maybe it was at the NCUA board table where the NCUA board meets. How did that happen? Once you got into the building, who was there at NCUA? Who participated from your side and the credit union side?
If the NCUA read, and I'm guessing they read, thank you because this is a collaborative. I started to make these many regulations. It was written at a very summary level, and now that someone wanted to do it, it is like, “How's this functionally going to play on?” I’m appreciative to the staff that care and who’ve done extra work in terms of putting all the procedures under it, which wasn't a work in progress when you're doing anything for the first time. It makes sense. Ultimately, it's 2023, so everything's virtual, and this was no different.
Even though they were broadcasting from the boardroom, Martha was overseeing it, but all the presenters were presenting virtually. The way that is done is pretty democratic. They release a notice to the Federal Register. Anyone who sees that notice, the first come first serve, there is a one-space reserve for the applicant or the credit union to present on their case, which should happen. There are six other presenters.
There are five that are first come, first serve. Whoever gets in lines first gets to present, and it can't be people from the credit union. I'm sure they also reserve the rights for one final one. There's not super clear guidance on what the criteria are and who gets to make that. I suspect it provides for a diversity of opinion. That is essentially how you decided. Presenters get up to 30 minutes. No one at the actual meeting took 30 minutes. Everyone put their perspective pretty tight and their comments tight. It was overwhelming. It went very smoothly for the first-of-its-kind process.
I'm glad it went well. In this particular instance, was there anybody from the banking side that did chime in, or were there crickets from the banking side? Did anybody present?
Fortunately, everyone presented was in favor of the proposed expansion. My understanding, too, is the scope of the meeting is about the common interest in interaction. Is it a community or not? There is, understandably, no airing of the credit union's business and market plan. The scope makes a lot of sense to me. We are focused on a community or a common bond. That is also an important thing to remember.
They're discussing this. It's an open hearing. You can have John from down the street present as long as he gets first in line about how much he likes his dog and how great this dog is. That is democracy, but John from down the street screen isn't reading the federal rights regulations looking for this type of thing. Everybody who presented had subject matter expertise within different domains and provided a pretty interesting diversity of perspectives on the proposed community.
It's focused on whether is it a community because it is what the federal credit union allows a membership to be. We're getting to the bottom of that and have done what's been presented to meet the legal hurdle, which is the intent of the whole process.
Fortunately, everyone kept it pretty on-topic.
You go through the process of getting ready, do your presentation, the credit union has a presentation and NCAU might ask some questions, and the hearing is done. From that point, what are the procedures there? Is it NCUA says they'll get back to you when they're ready or if they have any questions? What did you learn from the process as it relates to the steps after the hearing?
There isn't any Q&A. That's appropriate. How would you keep that in mind across the different presenters? It's very interesting from that perspective. It's one after another prepared remarks. I may be remembering the exact language, but about 30 days later, it is ultimately their decision. It's there already. It's not just the open-hearing piece of it, but it's also the application itself.
They understand the business of marketing plans. Even though the hearing is one piece of this, I don't think that would or could say, “It's 20% hearing and 30% this.” They're thinking about the totality of circumstances a lot. To me, if it’s under that number, I will make their final recommendation. I want to say that was it. Thirty-eight some days later, the credit union received their approval letter and was happy with the results and excited about getting to work. Hopefully, serving you at Hollywood Beach up there. That's all the process.
That's comparing and contrasting. If something gets on the agenda for the NCUA board to vote on, that's because the discussions held at the executive level and at the board assistant level imply that we think we have to vote. Taking that and looking at it relative to this, it is going to start taking the time of the credit union in their own staff time when they get down to that. Is it a community part? The other pieces are probably all checked if they're going to have the hearing, which is why it allows them to say, “We can get back to you in 30 days.”
That's a great observation. Read the regulations. What is one of the interesting things that we learn? We’re sourcing out side by side with NCUA like, “What does the regulation say?” Interestingly, the regulation doesn't say anything about a pre-approval or, “We think this is good.” There is a ton of work and aspect that goes into this open hearing, like any good, well-run meeting. Not to mention getting something through the register.
The regulation doesn't say anything about a pre-approval, but there is a ton of work and aspect that goes into this open hearing.
I can never speak for any NCUA, but you’re the interpreter and I can try and interpret. If I were to provide my personal perspective on it, I would say that they're looking for a complete application. They’re not going to put something that was slapped together out there and waste all their staff's time. There is an element of quality control and quality assurance. I'm thinking that this has a legitimate chance, and we're going to put it through that. The regulations say that a hearing happens regardless of whether they believe it is approvable or not. Ultimately, they would hang their hands in reality. I don't they are going to waste a bunch of time and resources with applications that don't have a chance.
The trick there for them is deferral. Comparing it to the NFL, if you haven't got into the playoffs and won your three playoff games, you can't go to the Super Bowl. If you haven't proved that you can serve the community, build enough branches, and have the marketing ability, etc. they will keep pushing it to the credit union, saying, “You answered the five questions, but because of those answers to those five questions, we now have three more questions,” which gets to the totality of the circumstances.
They'll make sure that while there will ultimately be a hearing, the one path that never leads to a hearing is if they defer and keep having to ask questions about the quality of the package that has been put forward. That means you guys put together a good package. The credit union put a good package so that you can even get the audience to have that hearing and the results were good.
The credit union and CU Collaborates got to be thrilled. This is the first one and, probably, there are other big credit unions that might be contemplating it relative to that. Not that you can reveal where things are going, but do you anticipate being for NCUA in the next couple of years on your second go-round with this?
I would bet on it. Again, we're talking about not a whole lot of very popular. There are not a ton of credit unions that know of the ones that we think know. It's a very short list. There are only so many credit unions that operate in the biggest metropolitan areas in the United States, and of those, how many are a community, want to remain a community, or have gone State Charter? This is what many states will do essentially from a field of membership perspective. That is their competitive advantage.
There have been a lot of credit unions that said that market type that they were probably paying attention to, even now, which is good at the thing that can be done. There's a process for that. It is being a trailblazer and jumping to the deep dive. Especially when you look at their regulatory environment, let's look at precedent and what's been done, and maybe something is defined super clear.
When you look at their regulatory environment, let's look at precedent. Let's look at what's been done and not chase something that isn't fine.
It's great that they did that. It's like being a beta tester on new software. You wanted the kinks worked out, but they helped work the kinks out, and they won. They got what they were asking for, so that's kudos to them, you, and CU Collaborate. Chris, are there any other thoughts relative to that process you think we should chat through here that the readers might be interested in as it relates to the process of these hearings?
You and I covered the pertinent parts of it. From my perspective, the takeaway is to operate in a huge metropolitan area of Los Angeles, Houston, and New York City, almost in all those large to square areas. You want to retain your community charter and you are not that maxed out. The other thing that we talked about a lot is narrative. That research project is right around the common interest and interaction. There's a preliminary step before you say, “I'm going to go down this path of doing a little bit of research and due diligence to see if there's an argument to be made there.” There may not be, depending on what the different counties are you might want to be on what you have.
The only other piece I would advise any other credit union that's reading this is, before you fully commit and know that it's a thing, you do a preliminary like check the tires and research the central economy. Do they have a sports team that gets people excited and pulls from all the different areas? You mentioned data. If you look at the NCUA’s guidelines for the narrative application, is it there? The NCUA is always going to put the most persuasive among the categories.
Sometimes, even the date might be there, but it might not be publicly available. Colleges and universities, can we get attendance data out of them from where they're pulling their student body? That deep analysis can be a little bit frustrating because you feel like the argument is there, but the data is not. Before I send any credit union down that path, I would encourage them to just do the preliminary research to see if we're checking a lot of those boxes and if we think there's a chance. That's the piece that I mentioned. I’m super excited about those. There’s a lot of work and a project that takes longer than your standards. Certainly, it’s worthwhile to show the industry that it's possible and that there is a path for these types of great news.
Totally off-the-wall question, and it relates to a LinkedIn conversation you and I had. I posted a bunch of books that I was reading out. I like autobiographies. I had a couple of them that were related to the bad genesis. One of which was Phil Collins’ Not Dead Yet. You had recommended one to me, but I'm starting to get into the habit of asking guests what their first concert was, what their last concert was, and what their favorite or best concert was. What are your thoughts on the concert front?
It’s hard, but I love music. The book that I recommended was Scar Tissue which is Anthony Kiedis. He's the lead singer of Red Hot Chili Peppers. I read his book. I also read a Keith Richards one, which was outrageous. You want to read some interesting autobiographies. Rock and roll is the point. I'll leave it at that. I feel like my musical taste in the ‘90s is alternative rock.
I didn't get to see Red Hot Chili Peppers until I was in DC in my twenties. They've been around for decades at that point, and that was always like a bucket list. There are a few musicians that unfortunately passed away in the ‘90s. I would have loved to see Sublime, but they were super interesting. Also, Brad Nowell, like so many others, came to addiction.
Red Hot Chili Peppers is one of the best. Also, it's a niche. I'm from Pittsburgh, and there's a band called Rusted Root. They have a show at 9:30. There was no one there, which I love. Normally, a 9:30 club in DC is packed, and you can't move. That was an element. I was also dating my wife at the time. The first concert was the Clarks in Pittsburgh. They're a Pittsburgh band, so they are pretty niche also. I saw a band called The Revivalists, which I enjoyed. There are a lot of musicians, like the Anthem in DC.
I love the Anthem. There are a couple of Revivalist songs I know I've got in my playlist. I can't remember what they might be. I saw Genesis play the last two concerts of their last Domino tour a few years ago. It was in Boston. That's where they first ever played when they came to the US, so they closed it there. Phil Collins didn't have to sit down, and he's not in good health, but it was fabulous. The first concert alone without my parents was Cheap Trick at Budokan tour, but I did see Sonny and Cher with my parents at the Minnesota State Fair.
The last concert was Duran warmed up by Chic and Steel from DC. Chic with Niles Rodgers was one of those delights where you show up, and you know a couple of Chic songs, but then Niles Rodgers produced and wrote a lot of songs for David Bowie, Madonna, and many others. They played hits from that which was one of those, “I didn't expect that to be as good as Duran.” In my mind, it was better than Duran, who was also good.
I'm jealous.
My favorite surprise ever was when we went to see 10,000 Maniacs back in the ‘80s at a very small venue. As you said, when the places are small, it's a little bit more intimate. The warm-up was Tracy Chapman, and her album had just come out. I knew Fast Cars, her first album. She came out and sat on a stool with a guitar and blew us away. We didn't even have to stay and see 10,000 Maniacs. We did, and they were good, but Tracy Chapman blew our minds that night.
It was live music. I wish I could see more of it. It is not always available, but I do it if there is time. I love the buy-the-tickets thing.
Buy the tickets. You don't know when they'll be gone. Chris, back to business here. If someone is reading, like to reach out, and they're in one of those big statistical areas or field membership-wise, their state chair wants to convert, and the federal charter wants to expand. If they want to reach out, find you, and talk to you, what's the best way for them to connect with you?
Our website is the easiest multiple pass there, CUCollaborate.com. I would also mention if folks are interested in the case study, we have the case study up on our website for the Dade County expansion as well as some others soon. We redid our website. We’re excited about it. If you want to chat, we have a little chat button on the right.
Chris, thank you so much for your time in educating us on how this process works.
Thank you, Mark. I appreciate the opportunity.
Readers, I appreciate you. I hope you read again soon.