Hey everyone, this is Mark TriCal with another episode of With Flying Colors. I hope you had a wonderful Memorial Day weekend and thanked your favorite veterans in your family or that you happen to meet during the day. I. It's a, an important holiday and it's good to remind those people how much we appreciate what they did for us. Typically, I do a new episode on Tuesday followed by a evergreen or a hot topic from a, the past on Thursdays.
But because we finally had a little bit of good weather, I switched that and did a evergreen podcast on Tuesday. And today is Wednesday. I'm recording a podcast on NCOs insurance briefing, but most particularly, I'm going to focus on camels and what they revealed about camels and why your camel code right now could be more important than ever. And I'll get to that at the end. You should see on the screen here if you are watching via YouTube.
If you're not watching and you're on a podcast app or on my website, I'll describe what we're seeing here. But NCA retooled their PowerPoint and you can still download the PowerPoint, but they turned it into more of a database from their end. You have this top line, the percentage of insured shares by Camel ratings and it shows code ones and twos. While they do their presentation, they can hover over these dots and tell you more specifics, although they actually spoke last about camel.
At this meeting they had in a while, which is surprising from one perspective because Camel readings actually got better. You thought they might have highlighted that. Particularly since Todd Harper, former board member relative to his lawsuit has said the sky is falling in camel codes are gonna get worse. So I thought they might have. Tried to point out that Camel Codes got better, but it's really within the line so flat here.
It's hard to see anything other than the line is flat, and this page doesn't show, in my opinion, as much as it used to until they get that Interoperative version of it out for everybody else. So hopefully they said that's what they're gonna do, but with their cutbacks, who knows? But the big takeaway here is the blue Camel codes. Camel threes declined from the fourth quarter of 2024 from 715 to 679. Code fours and fives declined from 135 to 129. That six plus 21, 27, 37, 42, a reduction of 42.
Now, some of those are mergers, right? So it's not a true net reduction from improvement, although those assets are improved because they're into a different bucket of camel codes, which would be the code one and code two category. This basket shows you a little bit more. This is the second. Slide that they do on Camel codes. And you can see there actually is one area where camel codes got worse and that is over on the left of the screen on code fours and code fives over $500 million.
So there, last quarter there were nine complex credit unions, and again, NCA defines complex credit unions as credit unions over $500 million. There were nine credit unions coded four or five that increased to 11. And excuse me. The assets went from 13 billion to just over 13 billion. 13.2 billion to 15 billion. So there were two units that went in at 1.8 billion net, and it's possible that three went in and one went out. But in any event, I. The trend there is negative.
There are WA was an aggressive stance taken in at least two credit unions over $500 million, coding them in a code four and a code five. Now, historically, code four means you're gonna be visited by NCUA every 120 days. Versus a code three, which is 180 days versus a code one or a two, which gets you into the regular exam cycle, and they've provided some relief there, which by the way is why your camel code could never be more important.
I. But again, I'll get into a little bit more details on that. The a hundred million to $500 million category. There also was a slight increase in Campbell Code fours. They went from eight units to nine units. They went from 1.2 billion to 1.4 billion. You could argue that you could look and see. All things being equal. If those are the same eight that there was one that went up, you could go try and find a $200 million credit union that might fit that category.
But it's also possible that there were moving parts in there and that you can't reverse engineer by the way, they used to have a. Four categories. They had the 500 million and I believe they had a $10 billion category. But as Camel Code started ter deteriorate, they figured out you could actually reverse engineer that. So they collapsed. I. The biggest category into one category, which is the 500 million above also known as complex credit unions.
So the smaller credit unions, less than a hundred million. The code fours declined from one 18 to 1 0 9, so a decline of nine, and they declined by 200 billion. Excuse me, $200 million in assets. A little bit of deterioration in two of the categories on code fours and the smaller credit unions actually got better. So what happened in code threes during the quarter the previous quarter, there were 69 complex credit unions, over $500 million, and that decreased to 64.
So four of those five, five of those shifted. However, a couple of those probably shifted to the, to. A couple of those were probably the credit unions that shifted from a code four or code five. 'cause you can go from a two to a four. It happens, you can go from a two to a five, but the most logical. Pivot would be from going from a three to a four. So I'm guessing that two of these went the wrong direction and went to the code fours and code fives and three of them actually improved.
And there was roughly, let's see, $12 billion, $11.3 billion in insured shares improvement in that category right here now in the a hundred million to $500 million category, if you fall into that. There was a slight deterioration, a slight meaning an increase of 1 92 credit union code threes last quarter, 93 this quarter, and about a hundred million dollars increase. So again, you could theoretically reverse engineer, but who has the time to do that, particularly since it's a small unit?
Alright, code three is under a hundred million dollars, 10.3 billion in assets previous quarter and this quarter, 9.5 billion. So that's an improvement of 800 million and an improvement of from 554 units to 522. That's 32. It looks like NCUA. Is getting nicer in the small credit unions on camel codes. Could that be related to the fact that they had some we just wanna watch 'em so we can go back in. Maybe the regional directors warned them saying, Hey, I don't need you.
Being on the small credit unions, let's be a little bit nicer. And on the big credit unions where our risk are we'll keep the game the same. Who knows? But that's what the you could. Paint that narrative. I'm not sure that narrative is exactly correct. Getting back to why your camel code is more important than ever, if you've listened to any of my recent podcasts or read anything in the press recently about NCUA in response to the Trump initiatives to. Decreased federal agencies sizes.
We know that NCUA is going to shrink by about 25%. We know that NCUA is under a hiring freeze. We know that they're losing a lot of really talented people. We know that they only have one board member Republican Kyle Halman serving as chair, and we know that they're going to be pressed to get their things done on time. They previously had. Problems getting their camel threes and fours done on time this year. They allowed some relief to that early on in January before Trump came in.
President Trump that is, and they elongated their cycle, allowing billion dollar plus credit unions to participate in. The longer exam cycle. Previously, if you were over a billion dollars, you had to have a calendar exam done. Every year, they changed those rules so that if you are a code one and code two with stable management, stable meaning you've been there for a while, I. That you could have that elongated.
They did that, in my opinion, like the airlines do their thing to, when they added 30 minutes to every flight, they wanted to make sure that they were on time. I think that's what NCA did. But then under the proverbial Mike Tyson quote, they were punched in the face and told that they needed to shrink. So they've since tweaked that even further allowing a longer cycle for.
For every type of credit union, even the ones credit unions now can have a little bit more time based on what they said at the board meeting last week. Which gets me back to if you're a code one and you're a code two and you're in good shape, NCUA is gonna be scrambling to get things done. They don't have time to focus on, on, on. Bank purchases, they don't have time to focus on things that are not examination related, and they don't have time, in my opinion.
Once all these people start leaving and you have people that are leaving at the end of the year, you have people that already left. But NCA is a little bit in, in a shocked triage type statement. Type condition right now. And because of that, if you're a good credit union, a code one or code two, you're gonna get ignored a little bit more.
And if you know what you're doing and legitimately are code one and code two and 99% of you pick a number, 98% actually should be coded at two that are a one that are coded at one or two. You're gonna get a lot of leeway and that NCOA is just not gonna show up. They're not gonna have time for you. However, if you are a code three or a code four or a code five, you will. Get most of the same level of attention. However, they're not gonna have all the resources that they need.
They're losing a lot of regional lending specialists. They're losing a lot of information specialists. They're losing a lot of pcos. They're losing a lot of supervisory examiners. You have supervisory examiners on the West Coast in particular do doing double duty, so they're gonna be stretched. They're gonna be stressed.
And because of that, when you're negotiating with them as a code three, code four, or code five, they might they will, they possibly could be a little less willing to be friendly because they're pissed off that their friends left. They're pissed off that they have to do all the work. They're frustrated because they have more put on their plate a as whether they decided to stay and were eligible or whether they were.
Six months short of being eligible for retirement or six months short of being eligible for the early retirement. There are folks there I know who wanted to leave, but they fell short. And they even mentioned in their board meeting that there were people who applied to leave that didn't meet the requirements. If you're in good shape and you're a code one and code two, you want to keep it that way. So NCUA. While they're having all this turmoil it doesn't bother you.
And if you're a code three, code four, code five, it's gonna be extra important that you communicate with them well. Extra important that you get the information to them that they ask. Put it in a format that makes it easy for them. Try and make their job as efficient as possible so that they see. That you are a good code three that might be moving to a code two but getting their attention is going to be substantially more difficult. I will tell you that.
Sadly, in a lot of my clients, in a lot of my conversations, I hear conversations like the specialist was there for only a week. And they didn't look at what we provided. And then when we asked them to look at it, they were already gone. And when they looked at it, they said, Hey, I don't have time to look at it. 'cause I'm three jobs on from now. That's only gonna get worse. Making your communication efforts while they are there. Extremely critical.
So have a good communication plan when they come in. Have a good communication plan as far as corralling the conversations that happen in your credit union. And we have different podcasts that talk about that. I'm gonna hit one more topic here for the day before I go enjoy the sun outside. And that is this. At the end of the board meeting I was very curious what Kyle Helpmann might say or not say. And I'm reminded a little bit of a Van Morrison song with a, with the line in it.
What's the sound of one hand clapping? There's one board member. They have stated publicly via a leaked email from the executive director that the board member can act on anything. He's not yet acted on anything public. He's done two briefings. Briefings are not actions. They established under the Dennis dollar era when I was the deputy executive director and Dennis Dollar was the chair, the only board member that you could do briefings.
They put in place a delegation of authority saying back then to resolve that saying or to address that, saying that the NCUA board, if there's only one, could take essential actions. They've publicly said that one, if there's only one board member, one board member equals a quorum. Todd Harper, Tony, Tanya Ska in their lawsuits have indicated that they believe otherwise.
Ultimately, this may be decided in court, and there are some things that came out from the Supreme Court indicating that Trump does have broader authority to fire at some other agencies that possibly could impact the cases that Harper and Ska believe that they have. We're gonna have to watch that closely. But in any event, what wasn't said. Was remain calm. I have the ability to take the actions that I need. They did not reiterate it at the table.
Why they could have just thought it wasn't appropriate, or they don't wanna touch that third rail because I don't believe that they really believe that a board of one can change regulations, that a board of one can approve a budget. The good thing is NCUA back when I was there, we put in place a two year budget. So there is a budget for 2026. They just need to and those purse strings can be controlled by a one one board member and the executive director.
And the reality is, I don't think that they think they can actually take those other actions and that there could be lawsuits that would challenge it. However, the plus is republicans tend to want less regulation, therefore credit unions will likely not sue if actions are taken, although some consumer group might. So we're gonna have to watch. For what happens there. I'm curious what happens there. And with that I will have one additional podcast. Most likely.
I teed it up last week about what the future state of NCUA will be. I've got some thoughts on how they may collapse some of the organizations with NCUA to be more efficient. Alright, that's it. I appreciate you listening as always. I hope you'll listen again soon. We're on YouTube, we're on your favorite podcast app. If you like the show, if you could go out and give us a five star rating, we would really appreciate that.
Or better yet share the podcast link with some folks at your credit union or some of your friends in other credit unions. I, again, appreciate you listening, and this is Mark TriCal signing off with flying colors.