SECU - Consider This: Chapter 24 - The FAFSA Unicorn

... different by design! 

Esse Quam Videri - "To Be, rather than to seem."

So, what is FAFSA? ... and what does it have to do with SECU? 

"The Free Application for Federal Student Aid, or FAFSA, is a form students must fill out to get federal financial aid for college. The U.S. Department of Education, colleges and state agencies use the FAFSA to collect financial information about you and your family to determine how much financial aid for which you can qualify."

Do you think that a college education is important to the children of many SECU members? Well. if you think that a college education can be "a ticket out", then FAFSA is the key; paying for college is an expensive burden to most working families. Filling out the form is a ritual conducted each Fall all across America by folks with college hopeful teens.

The correct filing of the form can make the difference in getting into a college. It is not a simple form and most parents have no clue as to what's involved. Opportunity or problem for SECU? The current leadership would probably - much like the tax prep program - say "let someone else help" the members. 

   In the past, SECU chose instead to help, to wade in on behalf of SECU members. The Credit Union partnered with the N.C. College Foundation  [CFNC link] to train staff, provided computers, opened branches on weekends, and paid the staff who volunteered to help the members double overtime. Worked well, everybody "won" - that's a unicorn! And by the way, the "idea" didn't come "from Raleigh", it originated from the local branch staffs who recognized the member need. Many of the staff had their own kids who needed to apply, too!

Providing the FAFSA service had some costs and for those "most profitable year-type" folks, it didn't appear to help the bottom line. But, in addition to the vast member goodwill and loyalty created...  go back to the CFNC link and check out the organizations in North Carolina with which SECU had the opportunity to work on FAFSA - every N.C. high school, every N.C. Community College, and every college/university - public and independent - in North Carolina.!  

Those institutions all learned about SECU and saw the commitment of SECU to the people and to the educational and economic fabric of North Carolina. And, did you happen to notice the quote with which CFI leads on its website - "Those who are happiest are those who do the most for others - Booker T. Washington".   Esse Quam! 

Think helping with FAFSA was better "marketing" than "We Are SECU" or a Super Bowl ad? 

If you're in doubt of the impact of this service, if you're that "type"; let  me point out one more thing - this little line item on the SECU January, 2024 financial statement: "Savings Deposits 529"  - $148,224,805.

By earning the trust of everyone in the North Carolina educational community, SECU was selected as the base savings account provider on the North Carolina 529 Plan, which is a tax- exempt educational savings plan. Most states have 529 plans for their citizens, last time I checked no credit union in the Country was a core provider.

Ya' reckon $148 million in deposits, probably helps the bottom line?

... hey, but there is an even better story on this topic tomorrow! Esse Quam!

 

SECU Financials - January 31, 2024

  ... a glance up the road.

We need to get back to some positive discussions of unicorns, hopefully that's where the future lies for SECU.

The recent diversions on risk-based lending (RBL) and tax prep seemed necessary. Those were two of the important, core topics in the 2022 Annual Meeting resolution, which helped kick off this discussion and resulted in the replacement in 2023 of three incumbent SECU Board members. While we look to the future, we shouldn't forget what brought us here in the first place! 

To many people, RBL is a step backwards to the discriminatory lending of the past, harmful to the majority of SECU members - especially those of color, young, and female. Tax prep was a service which had "lost its way and staff support internally" at SECU and was dropped, despite the benefits to 100,000+ SECU members. Both were unusual ideas - treating all members equitably on loans and providing services such as tax prep which had a tremendous impact on North Carolina well beyond the narrow measure of SECU's "bottom line".  Idealistic? Perhaps. But, that's what it takes to build a unicorn. So, let's take another brief look at where we are financially after the last couple of years at SECU... and then get back to that unicorn.

January, 2024 at SECU is much the same as prior months. You already know the "bad news" story: 1) @ $5 billion in member deposits have departed due to low rates, 2) loan losses and delinquency are at historic highs,  and 3) expenses are through the roof. And, there is that "little matter" of the "unusual" $5 billion loan from the Federal Reserve. Check the past posts, lets not rehash.

* Remember assets are inflated by that $5 billion Fed loan, so expenses are actually higher, capital, too.

 

✅Would like to introduce you to a couple of new questions:

1) SECU FIRST MORTGAGE LOANS ORIGINATED: 

January 2024:     $179,935,269    January 2023: $305,469,402. 

Quite a substantial drop in new loans - probably the result of soaring home prices and mortgage rates. Would you expect this decline in volume to continue in 2024? 

2) Growth of SECU Mortgage Loan Portfolio:

January 2024:  New First Mortgage Loans made:         $179,935,269    

January 2024   First Mortgage loan payments made:    $156,247,965

That's about "breakeven"  in terms of "net" mortgage loan growth. Mortgage loans represent @ two thirds (66%) of all loans at SECU and the largest source of income. If interest earned on mortgages levels out, how will the continuing rise in expenses be offset?

3) SECU has reorganized operations to create single skill "mortgage loan specialists" (that's all they do), who now have substantially less work. What will be done with those employees? 

4) The $5 billion Fed loan:

Interest On Borrowed Funds:  YTD 2024:  $70,425,272    YTD 2023:  $249 (!)          Net increase YTD: $70,425,023.             The $5 billion Fed loan was required "to maintain liquidity" by SECU, but must be repaid by the end of 2024.  

Will the loan be paid off quickly to avoid the increased $70 million expense? When repaid, if deposits have not returned, will the loan be renewed and the $70+ million expense continue? 

  ... the plot thickens.