Wednesday, February 15, 2023

BusinessNC Article - LGFCU Going All Digital, No Branches

 Local Government credit union going all-digital, cutting ties with SECU

Local Government Federal Credit Union has developed into one of the state’s biggest financial institutions with $3.8 billion in assets, while being tied at the hip of the much-larger State Employees’ Credit Union. There are no Local Government branch offices; instead, members use SECU’s 273 branches as needed.

It’s worked well, with Local Government membership soaring more than 35% to about 400,000 since 2016. It had a 1% return on assets and 11.6% return on equity last year, both solid measures for financial institutions.

But over the coming year, the Raleigh-based credit union plans to sever its financial ties with SECU in a shift that means some big changes for its members.

Starting in March 2024, Local Government won’t be directing 25% of its revenues to SECU, or more than $40 million annually. As a result, its members won’t have full-service access to the $50 billion credit union’s branches across North Carolina. Instead, Local Government’s members will transact their business exclusively through digital channels, operating similar to Charlotte-based Ally Financial, a public company that doesn’t have branches.

“We aren’t running from State Employees’,” says CEO Dwayne Naylor. “We are running to our members.”

N.C. state and local government employees were part of the same credit union until 1983, when a new structure was set up after complaints from some N.C. bankers. The new Local Government credit union served city and county employees and had its own management and board, but it didn’t operate branches or have loan officers. Members used SECU’s facilities and worked with its staffers for auto or home loans.

Over the last decade, however, Local Government’s board has discussed a split that would allow for new services and a more notable brand, says Ken Noland, the board chair and town manager of Wilkesboro. That led to the 2019 charter for the new Civic Federal Credit Union, which operates as a digital-only operation and has essentially the same leadership as Local Government.

Civic now has $100 million in assets and about 5,000 members. But its technology infrastructure is capable of growing to as large as $50 billion, Naylor says, providing the structure to allow for the split from SECU.

There’s no financial pressure to change. Local government’s assets have doubled in the last six years. But the credit union’s board thinks change is necessary to stay relevant in a fast-changing market, Noland says. He notes that Wells Fargo has closed all but one of its Wilkes County offices, while Bank of America no longer has a branch there.

While he hopes State Employees’ keeps its two Wilkes offices open, Noland says he’s confident that other town staffers are willing to do their banking business through Local Government’s website instead.

Local Government expects to add about 150 workers to complement its 215 existing staffers with a goal of providing better customer service than ever, Naylor says. They’ll absorb the extra cost with revenue that previously went to State Employees’

“It takes courage and a strategy to run to our members when things are already looking perfect,” he says. “We know we are asking for some behavioral change here.”

The impact on SECU is expected to be minimal because Local Government’s contribution makes up a fraction of its $1.5 billion-plus in annual revenue.

Naylor worked at SECU for 17 years before joining Langley Federal Credit Union in Virginia. He joined Local Government in 2013 and became Civic’s president in 2018. He succeeded longtime Local Government CEO Maurice Smith earlier this year.

Local Government has its annual meeting on March 24 in Raleigh

 Since "things are already looking perfect" I've decided to eliminate branches for LGFCU members - should be an interesting annual meeting!

David Mildenberg
David Mildenberg is editor of Business North Carolina. Reach him at


SECU Risk-based Lending #4

 To: SECU Board of Directors


Dear Chairman Ayers,

Here's an easy one for you and the SECU Board to consider concerning your approval of risk-based lending for SECU. By the way, you do have my full permission to post these commentaries to the SECU website, if you feel they would help inform the membership of your thinking. Have certainly been asked many times: "What were they thinking!?!" Believe members are very interested in hearing from you!

Credit Score Tiers At SECU Under RBL
_____      ______     _____      ______     _______          
l         l      l           l     l         l     l           l     l           l
   A   l      l   B    l     l   C   l     l    D    l     l    E     l
l          l      l          l     l         l     l           l     l           l
720-850            719-660          659-600         599-540           300-539       - credit score ranges
 5.75%                6.25%             7.75%             9.25%            10.25%       - interest rate for tier
     0                   +0.50%           +2.00%           +3.50%           +4.50%       - extra rate surcharge

Above are the credit score tiers and rates approved by Chairman Ayers and the SECU Board for used car loans under risk-based lending (RBL). Chairman Ayers and the SECU Board claim that the RBL rates are fairer for the SECU membership - taint so!

Here's an example of why! Take a look at the two rate scores highlighted in yellow, do you really believe there is any significant risk difference to SECU from a member who has a 599 credit score - "D" paper - and a member who has a 600 credit score - "C" paper? Only the SECU Board evidently believes there is any real difference in risk between these two members - and wants to penalize one of them with a 1.50% rate hike.

Over the life of the loan, that 1-point credit score difference (600 vs 599) will cost the member with the 599 score an extra $800 in interest (see RBL #3) - just shy of a week's pay for the average State Employee ! That sound fair to you?

And, while you're thinking about it, do you really believe there is any difference in risk between a score of  600 and 598? Or for that matter between 600 and 597? Nah, the SECU Board just arbitrarily chose where to "draw the line"  - the SECU Board could have just as easily set that "C" paper range at 580-699! Ask them next time you see them - they'll admit it!

Also ask Chairman Ayers and the SECU Board how they decided that your credit score is more important to them than you are to them - as a person, a member, as a fellow human being .

As Thomas Paine said: " A body of men [and women] holding themselves accountable to nobody, should not be trusted by anybody," 

Amen to that!


Significant Dates In SECU History

 To: SECU Board of Directors

Dear Chairman Ayers,

 Significant Dates in SECU History

Nothing significant seems to have happened at SECU in the last  two years - 2022, 2023.  Is that why the new SECU Ad Campaign lacks much substance? 

What did the members get "educated" about with the new ad? Oh, and how much are you spending to "educate" us? Just Asking! 

SECU Member Education Ad

Did see you did give away a lot of money in 2021.