A seasoned NCUA executive, Love has served as regional director of the NCUA's Region V office for 5 1/2 years, and she served as director of the former Chicago regional office. Love is a past NCUA deputy executive director and she has also served as deputy director within NCUA's Office of Examination and Insurance. Her NCUA career began in 1986 as an examiner in Northern California. She is a former principal examiner, problem case officer, supervision analyst, supervisory examiner and acting director of special actions. Love participated in NCUA's management development program in the early 1990s.
Love holds a degree in accounting and an MBA from St. Mary's College. She is a certified internal auditor.
TOM FIELD: Hi, this is Tom Field, Editorial Director with Information Security Media Group. We are talking today with Melinda Love, the new Director of the Office of Examination and Insurance for the NCUA. Melinda, thanks for joining me, and congratulations.
MELINDA LOVE: Thank you very much, Tom.
FIELD: What can you tell us a bit about yourself and your background?
LOVE: I started with NCUA back in 1986. I worked my way up from being an Examiner in the field through working in our regional office as an analyst, working as a problem case officer, and then working into management as a supervisory examiner over a group of examiners and then as the Deputy Director in our Office of Examination and Insurance dealing with policy issues, then I became the agency's Deputy Executive Director where I got to deal more with the internal workings of the agency, and then I became a Regional Director, first in Chicago covering seven Midwestern states, and now out in Tempe, Arizona covering the 13 western states plus Guam.
FIELD: Now what can you tell us about this new role that you are about to fill and sort of the expectations for it?
LOVE: The new role, the Director of the Office of Examination and Insurance is basically the agency's chief examiner. We look at establishing policies; work with the board on regulatory items, changing regulations, updating them. We also have the risk management office that works with our surveillance systems and oversees the supervision, decisions on our more complex cases that are out in the regions. We establish examination processes and procedures, work closely with training of examiners so kind of the national view of the entire program.
FIELD: Melinda, stepping into this role, what do you see as the immediate tasks that you have to tend to?
LOVE: Well, certainly coming up to speed with parts of the operation that I was not aware of since I am basically a Regional Director in one region -- there are four other regions with issues going on that I will need to come up to speed on fairly rapidly. Given the types of things going on in the economy, certainly looking at what is on our project list, how we are moving forward to help our examiners do their jobs better, providing high quality in these very tough times. That is going to be one of the first parts of it.
The good thing is that I have been in the Office of Examination and Insurance before, so I understand how it operates, I know most of the staff there. But anytime you get a new director, a new change at the top, you are really kind of massaging and polishing that corporate culture. It can have a definite change, so one of the things I have to do is I have to bring the staff together in basically a new cohesive whole under my particular management style, and then we will be able to go on from there.
FIELD: If you bring them out to Tempe that would be a good start. (laughter)
LOVE: Unfortunately I don't think we can do that.
FIELD: Now, Melinda, you mentioned the economy, and that certainly is the challenge for all of us. What do you see as being some of the unique challenges in this new role you are filling?
LOVE: I think the biggest challenge is going to be dealing with immediate problems and issues that are on the table, but at the same time building the types of examination tools we need for the future. So it is like you have to deal both in the immediate, this is what we have got to do today and we've got this big problem blooming, and we have got to deal with this right now, but also be able to have staff looking out and developing the type of infrastructure issues we need for the changing demographics in our examiner core. So I think that is going to be challenge is to be able to do both of those things simultaneously.
FIELD: Well that's interesting. Can you tell us a little bit about these changing demographics? This is the first time I've heard that articulated.
LOVE: Yeah. We have, like many government organizations, we have staff that has been around for a long time and have a great deal of experience in our staff, and over the last five years or so we have gone through a retirement wave where we have had a number of staff leave. An example of that was when we opened this regional office, we lost 14 of the people that were in the Concord regional office and did not want to relocate on the same day - 14 experienced analysts and managers. So as we have basically gone forward the last five years or so, we have been losing more and more of that experience, like all government agencies.
We have a lot of people now that are eligible for retirement, and so we have been bringing newer people on. Our jobs tend to be ones where you create skills and knowledge over time. We are very much a knowledge-based organization.
So as our percentage of folks with less than five years of experience increases, we have to kind of change the way we have done things; you know, the way our examination program is set up, change the way our reference systems are set up, for people that will have less experience (in terms of time) but are having to deal with the same issues.
So I think that is one of the challenges we have got, is as we are basically walking through the swamp and trying to stay away from the alligators, we also have to figure out a way to drain it. And a lot of that is being driven by the fact that we will have people that will be dealing with our problems that may not have seen the same problem 30 times over the last 20 years, but may have only seen it once or twice before.
So we have to build systems that assist them in walking through the process to ensure that the quality of the work we do stays the same.
FIELD: No, that makes sense. Now I hear a lot of the banking regulators are bringing on additional examination staff now. Is that true of the NCUA as well?
LOVE: Yes, it is. We actually were on an 18-month examination cycle, and with the changes in the economy and the stressors on credit unions, we have shortened that cycle up so that we can be in more frequently to assist them in developing corrective action plans, trying to get a head of problems as much as we can.
So with that change in cycle ,we basically budget down to the hour for our examiners. So we had to add staff for that, and I want to say we added 45 FTE's nationally for that program.
So we added staff there, and what we have tried to do as we filled those positions is we tried to entice back some examiner staff that had left and gone elsewhere just so that we aren't bringing on all totally new people. And we have actually been very lucky in this region, as we filled positions we have been able to get some really talented people over the last two years and to the agency, with a lot of really good skill sets and we just now need to bring them up to speed on the credit union piece of it.
FIELD: Now Melinda, what would you say are the unique capabilities that you bring to the job?
LOVE: Well, my experiences having worked in the Office of Examination and Insurance, having worked in how the agency runs through the Deputy Executive Director position, and then the two regions I have been Regional Director of -- one of them had primarily small credit unions, and one had primarily large credit unions. And so I think all of that gives me a different perspective than somebody who maybe only worked in one type of region or that didn't have that central office background.
I think one of the things that is maybe a little bit different about me, I think I bring to the table the ability to look both big picture and see the big picture and think strategically and think in terms of alternatives, and then turn around put that into detailed action plans so that you end up driving the action plan and biting the big stuff off in little tiny chunks that are much more palatable.
I think I have that ability to be both big picture and task-oriented at the same time. I also tend to be a fairly creative person. I am one of those people that use different colors and have a calendar that is color coded, so I tend to be a little bit more creative. If you do a Myers-Briggs personality type I have different type of personality than a lot of government employees, and so I think I bring that to the table as well.
FIELD: Very good. I would like to ask you sort of about the credit union landscape in general. We hear a lot in this economy that the credit unions stand to grow and to benefit from people that might be fleeing some of the banks because of what they have seen or their just lack of consumer confidence. What do you see as credit unions' real opportunities, as well as their threat right now in this economic landscape?
LOVE: Well I do think they do have the opportunity sine they are more member centered, member-friendly, I do think they have the opportunity to bring more people into the credit union movement. Hopefully they will bring younger people into the credit union movement as well because one of the things we have seen is kind of many credit union leagues or trade associations have talked about the aging of the credit union member and so trying to attract younger members in, I do think there is the opportunity to do that.
What we would tell credit unions is they need to do that on a very measured basis. Growing exponentially in these troubled times is probably not a smart thing to do. But having that steady membership growth and having it be real members and not somebody that is going to be there for a car loan and may not even realize they belong to a credit union, but rather somebody who is going to use multiple services at the credit union and really become one of those members that you can develop some sort of loyal base with. I certainly see that as an opportunity for them.
They may be able to expand some of their loan programs, although this may not be the best time to do that. But certainly, again since they are more member-centered, they may be able to assist people that are having problems elsewhere. Of course that is also one of the threats that faces them, too, is that they do too much of a good thing, even if it is an altruistic good thing, could end up hurting a credit union.
I think one of the biggest things we are working with credit unions right now on is to understand the levels of risk in their real estate portfolios. Especially out here in the west, where we have had such incredible declines in real estate values. Just trying to make sure that credit unions really know what they have on their balance sheet so that they can make good management decisions going forward on those things.
They can look at if they are doing loan modifications, how much of a certain loan modification can we do safely within the net worth capital structure of the credit union. If we do too much of this, for an example, if we take all of these 15 year loans and now make then 40 year loans, we may have fixed the credit risk problem, but we may have just given ourselves an interest rate risk heart attack waiting to happen.
So trying to balance those things is really, really critical. And as with anything, times change, and member expectations change, and member needs change, and one of the difficulties for credit unions since they tend to operate on a much narrower margin, is the ability to build infrastructure to adapt to the new member requirements and needs. That can sometimes really stretch them, and so I think that is one of the other issues they have to come to grips with is how do they build an infrastructure since it is a fairly sizeable commitment of capital.
How do you build an infrastructure that is adaptable and nimble enough to deal with changing member expectations towards the future? I think that is important so that they can remain relevant long-term. Long-term I think their ability to remain relevant is one of the biggest threats that face them.
FIELD: So, it strikes me that you are looking on one hand to attract young people, young people looking for a good banking experience. Their expectations often are going to be electronic and mobile banking. so is that one of the areas you are talking about as an investment that you have got to be prepared to do?
LOVE: Yes. I think so; and understanding that you know, it can change. I mean, the mobile banking is what we know today, but 10 years from now it might be something different. And so if you have gone too heavy in investment into one type of delivery system, you may not be able to adapt ten years from now when a different delivery system is what members are then expecting.
FIELD: Melinda, ten weeks from now if it could be different (laughter).
LOVE: I know, I know.
FIELD: Now last year, vendor management was certainly a resonate theme in what the NCUA was telling the credit unions to expect from their examinations. What are going to be the key areas of regulatory compliance that examiners are stressing in 2009?
LOVE: I think we are still going to see a lot of emphasis on due diligence with vendors, with products and services and delivery systems. Looking at real estate portfolios, certainly we are going to see a lot of emphasis on that. Since we are having economic issues throughout the country and not just the places that are hard hit with the real estate declines, increases in unemployment, certainly looking at credit unions risk management systems, looking at their ability to control delinquencies, looking at their collection activities. I think those will all be high on the list.
I think one of the things that we will be looking at as well is the strategic approach credit unions are taking. Are they trying to expand portfolios at this point in time and if they do, do they have a solid strategy to do that? Not that we think that they necessarily need to contract, but they need to make sure they are making smart decisions in this kind of turbulent economic climate, and then be business as usual over the last ten years is not the business as usual going forward. And so I think helping credit union management teams come to understand that, especially ones that may not have been hit yet, to where it is on the horizon. I think those are going to be some of the key things that we do this year.
FIELD: Now it has been about four months since examiners have been out meeting with federal credit unions at least about Identity Theft/Red Flag Rule compliance. What can you tell us? How are credit unions doing in complying with the Red Flags Rule?
LOVE: We actually, at least in this region, haven't pulled together any general statistics so I can't tell you this many credit unions are in compliance or not at this point in time. However, as with any new regulation or new rules that go into effect, we kind of do a multi-step process.
Our first contacts with credit unions are really geared more towards education, walking through with them what the requirements are, what the expectations are, making sure that they have got the systems and that they are getting up to speed. And then our next contact we start looking more at enforcement so we are definitely working in that education process still at this point in time. Making sure that all of the credit unions understand what it is they need to do and putting action plans into place with them to make sure that they get up to speed. But as far as like, I don't really have any statistics at this point in time as to how many are in compliance or not.
FIELD: Is this something you think that you are going to pay significant attention to over the course of the next several months? I am just wondering if by the time they get to November 1st and it is a year, is there a certain place you want to be or certain metrics that you want to be looking at by then?
LOVE: I think this is one of those things that is a critical issue for credit unions to protect their members. So I don't think we will have the level of resistance to compliance with this that we might have with compliance with some of our other rules. Because credit unions are member-centered. Since I have not been in the E&I position yet, I am not effective until March 16th, I don't know what national statistics they are gathering and what national metrics they have set up there as yet. I know we are, like I said in that training contact phase out here, and we should have made those initial contacts at least we should have all of those initial contacts made I think by the end of the third quarter, just because we will have run through the cycle by that point in time.
FIELD: Right. So since you have got a little bit of time before you start in your new role, what should the credit unions know about you and the job you are going to be doing?
LOVE: I am a big believer in dialogue. I think talking with folks about issues, listening to them, I think that is really critical. I think it is critical internal of the NCUA, that I have dialog with examiners and managers throughout the country. I think it is critical to have that kind of dialogue with credit unions.
Some of the things we do here, an example would be if a credit union has an issue and they want to come in and talk to us, we make the time to sit down and meet with them and just chat about either where they want to go strategically or if it is a supervision issue, so I think credit unions need to know that I am open to talking with them and hearing what is on their mind, hearing if they have got alternatives because I certainly don't believe that we have all of the answers and that's probably the biggest thing they need to know about me is that I am one that likes to listen to what people have to say and act accordingly.
I am also very much a fact-based decision maker. I don't do things just based on my gut. I pretty much require all of my staff when we are looking at decisions to build me the business case, and then we will make the decision from there. So those are probably the two biggest things.
FIELD: Very good. Well Melinda, I appreciate your time and your insight today, and I wish you luck in your new role.
LOVE: Okay thank you, Tom, I appreciate it.
FIELD: We've been talking with Melinda Love, Director of the Office of Examination and Insurance with the NCUA. For Information Security Media Group, I'm Tom Field. Thank you very much.