Friday, December 22, 2023

SECU - November, 2023 Financials [Have added a few notes 12/23]

 Got several "not so" comments, so here's a broader outline...

😎 Not much new here as we move toward year-end...

 

* SECU remains strongly capitalized; in fact, well over its Board approved target and range. Ranges seem to be more ornamental than meaningful in terms of directing Board action.

Folks often get confused about "capital" in a credit union, especially since it's frequently called by different names including "member equity", "statutory reserves", "safety fund".  Basically, "capital" in a credit union is the same as your personal "rainy day fund" for unexpected emergencies. Federal law mandates that a credit union accumulate capital - a rainy day fund - equal to at least  7% of assets to be considered "well capitalized - and safe and sound". So, SECU at 10.36% is very highly capitalized; in fact SECU is probably "over-capitalized", but that is a story for another day.

Lets just deal with the idea that SECU's capital at 10.36% is above the Board established range and well above the Board capital target of 9%. What does that mean to you as a member? Remember, the ratio compares capital to assets; 10.36% of $51.7 billion in assets = @$5 billion. SECU has a rainy day fund (member equity, statutory reserve, capital) of over $5 billion, which has been set aside over the last 87 years.  The Board target of 9% would indicate that all that is needed in the rainy day fund is $4.5 billion (9% x $51.7 billion assets = $4.5 billion) which means the Board has withheld $500 million ($5 billion - $4.5 billion = $500 million) from the members, perhaps unnecessarily. In past years, former SECU Boards set a capital range of 6% to 8% and managed SECU closely to always remain well-capitalized above the 7% target goal. At an 8% capital target, the Board would be withholding over a $1 billion which could have been paid out to the membership in some form of better rates or service.

* Expenses continue to rise and are well above historical benchmarks of less than 2.00%. This is over a $200+ million annual increase in operating costs. Getting back to the 2.00% target won't happen in 2024.

In the recent past, the typical expense to asset ratio was @ 1.85%, rather than the current 2.34%. That difference of .49% (2.34% - 1.85% = .49%) is costing the membership @ $245 million ($51.7 billion assets x .49% = $245 million) in excess operating costs each year.

* Return on assets has moderated as more funds are being returned to member savers - a move in the right direction.

The SECU Board has evidently gotten the message that savings rates are non-competitive and has lowered monthly earnings ("return on assets") in order to raise savings rates (on MMSA from 1.10% to 1.25%), which will also help slow down the further accumulation of excess capital. Unfortunately, 1.25% remains non-competitive in the market. SECU could move faster to correct the over-capitalization and non-competitive rates problems, but "professional pride", so far, seems to have claimed a priority over the members' best interests.

* Loan growth has moderated as market interest rates have increased, but the points to watch are the ever rising delinquency and charge offs. Clearly there are major and operational problems that need to be addressed in SECU lending - as critical as the issue of risk-based lending.

  The decline in new loan originations during November, 2023 may signal that the growth in loans may be subsiding. New personal, auto and mortgage loans originated in November, 2023 totaled $758 million vs originations in November, 2022 of $883 million, off -$125 million.  Operational problems such as collections appear to remain unaddressed. Best illustrated with the "provision for loan losses" in the first 5 months of this fiscal year at $91.4 million up 232% over last year ($27.5 million). That increase warrants a further explanation to the membership. 

* Assets have actually declined by over -4% (rather than the reported "+0.96%")  since last November, 2022, but the ratio is being artificially inflated by unnecessary short term borrowings - which increased to $2.25 billion during November, 2023. Reaching the "4.50% growth target" this year appears fanciful, even with the artificial boost from borrowings. Member deposits are down -$2.4 billion year-over-year.

Some commenters claim this doesn't matter. Here are two examples of why it does. If you deduct the "short term borrowings" of $2.25 billion from the $51 billion in "reported" assets and use the un-inflated total of @$49 billion in assets, then your capital-to-assets percentage jumps closer to 11% (rather than the reported 10.34%) and your expense-to-assets percentage jumps to around 2.50% (rather than the reported 2.34%) - the real capital and cost concerns are being effectively understated. The borrowings are also a bit silly given the $9-10 billion pool of available liquid investments. Far better funding/income options ("arbitrages") on behalf of the membership are readily available - except for that unfortunately limiting "professional pride".  

* Assets per full-time equivalent employee is an obscure ratio, but continues to reflect the 1000+ employees added over the last two years - as assets, # of branches and service levels declined. 

The Board seems oblivious to the many laments coming from both members and staff over the decline in service. Are those claims true? How does the Board know, or why is it afraid to find out? Pretty obvious that the "We Are SECU" pr campaign was an expensive joke; could the "faux member surveys" (the survey models being used are statistically irrelevant) also be misleading?  Joke and hoax - look out.

  .... interesting times!

 

25 comments:

  1. I can attest that the bulk of this 1000+ employee increase has not added much value to the company. The branches and departments who actually need the help are still being denied.

    ReplyDelete
    Replies
    1. Branches and contact centers are extremely short staffed

      Delete
    2. Was in a Cary branch yesterday, ATM was down and one person behind teller line and person on drive through was taking care of drive through and helping inside. Long line of course. I have send little help on teller line at Wade Ave branch. So sorry for branch frontline employees. Yet, I received friendly service. They don't deserve this treatment. - Charity

      Delete
    3. Should I get paid more for having to go to the office everyday? The cost vs sitting at home with no oversight and little production.

      Delete
    4. Hate to break to you but the call centers are busier than any branch come dream of. I’ve worked both

      Delete
    5. It’s getting old seeing branch employees bash call center employees. The ques are slammed 24 hours. They track our numbers and data Records calls and review them….fail to see your point when some branches have 5 members walk in the whole day

      Delete
    6. Should call center employees get paid more than branch since they talk to more members everyday vs 5-10 members a day in person like branch employees do?

      Delete
    7. just remember they want us divided ... but one thing is obvious, the 'new' folks don't care what either ones concerns! They are obsessed with the A paper folks and themselves!

      Delete
    8. Do not let them divide us. Branch, call centers, we're all in the same boat and we're on the same side. The change needs to take place with the Board and Executive management. Keep the faith. Four more in 24 and we take control of the Board.

      Delete
    9. @7:00 PM You are so right! We're ALL in this together. All the tit for tat stuff doesn't matter - there's strength in numbers and all of us have to stick together to hold our wonderful credit union together! The end goal is save SECU, right?!?!

      Delete
  2. Assets have not declined in November as you indicated, and are not “artificially” inflated any more than a consumer’s or business’s assets are when they borrow. Both the asset and liability exist. The asset can certainly decline in value more quickly than the outstanding liability, but that hasn’t happened here. Quite the reach there.

    ReplyDelete
    Replies
    1. Perhaps not "artificially", but inflated nonetheless if all you are doing is borrowing to fortify a cash position.

      Delete
  3. "Both the asset and liability exist." So does arithmetic.

    ReplyDelete
  4. If you borrow money and put it into your wallets then your assets have increased. Call it artificial insertion. The money is in your wallet - but it aint your money. You owe it back to the bank. So here the SECU borrows money and bingo assets are up. Call it smoke, mirrors and morons. They are borrowing at a high rate and investing at a low rate. Maybe they can make it up in volume. PONZI SCHEME. The trends on Operating Expenses, Delinquency and Charge Off are all INCREASING. This is not a good trend. Hope the CEO gets a big fat bonus - it would be in keeping with the STUCK on STUPID display of the bored of directors. If this was a public traded share holder Wall Street enterprise both the bored of directors and CEO would be summarily fired. Get rid of 4 more in 24!

    ReplyDelete
    Replies
    1. I guess SECU doesn’t need to pay back depositors then. Only when the money comes from the fed.

      Delete
    2. Fed funds rate is 5.25-5.5. Pretty sure most loan rates are above that at the moment. Don’t believe they are borrowing at a higher cost than they are getting on the assets.

      Delete
  5. Not that they’ll listen but you might want to email Leigh and “the 8” on this board the solution to their horrendous management of member money: At least ask the question, why do “you” continue to borrow money instead of cashing in existing securities? Is it just to fudge the balance sheet?
    https://www.secujustasking.com/2023/11/secu-october-2023-financials-deposit.html?m=1

    ReplyDelete
  6. Replies
    1. Ditto this ... It's our only way to end this... Hopefully, I never count my chickens before they hatch

      Delete
    2. Their continuing trashing of the cu is painful but it will assure their fate. Hang in!

      Delete
  7. Borrow short lend long.

    ReplyDelete
  8. SECU, like any valuable asset, is not inherent or guaranteed. The folks running things require constant oversight from member/owners to protect against the greed that can take hold of an organization.
    We were spoiled by past admins .... as you see Industry Standard doesn't operate the same ... They view members as 'profit'!

    ReplyDelete
  9. These board members should thank their lucky stars they don't have to debate the founders of SECU .... they would be shredded for their "new" policies!

    ReplyDelete
    Replies
    1. wish they would debate. It would draw quite a crowd and members could finally hear Brady/Haze and Friends defend their New Industry Standard policies to the membership.

      Delete
  10. The Happy Holidays message from our CEO included a picture of, I am assuming, the top dogs at SECU. Nothing professional about the look of that! Sad we look so disheveled now.

    ReplyDelete