Monday, May 15, 2023

SECU New Culture/New Direction - (Your) Money (@ $290 Million A Year) Is No Object!

SECU is required to report quarterly financial data to the National Credit Union Administration (NCUA), an agency of the federal government. One of the main benefits of federal reporting is that "folks", who have a tendency to spin, dissimulate, and prevaricate, have difficulty fudging the facts once reported. 

We discussed yesterday (5/14/2023 post) the -5% decline in assets - to @ $50 billion - over the last year at SECU. The credit union seems to be headed toward its second consecutive year in reverse gear - despite the SECU Board asset growth target of +8%.

Lets take a look at how well the SECU Board is controlling the cost of operating your credit union in the midst of this "turnaround". If growth and expansion have declined at SECU, what would you expect to have happened to SECU operating costs. You probably guessed wrong, because you're not thinking like an SECU Board member! Guess again!

Here's what the SECU Board reported about operating costs in the 3/31/2023 financials:


For most members the percentage (%) figures above won't have much meaning. Are they good? Are they bad? What do those percentages really mean? This is yet another example of the "half-truth disclosure" format that the SECU Board has been using - remember those gobbledygook "Fireside Chats"! "Hey, we told you (sorta), it's not our problem, if you don't understand!"

What you, as a member-owner of SECU, don't understand; and, what the SECU Board is not leveling with you on, is financially penalizing you - and every member.  

How much? A WHOLE LOT - @ $290 million a year!

Here's how you calculate it - remember using the SECU Board's own numbers above.  Mentioned yesterday that when CEO Mike Lord left the helm in September, 2021 (just 18 months ago!), he and a very fine, capable "legacy" staff were running an @ $50 billion asset SECU with an "expense-to-asset ratio" of 1.70% (and had been doing so for years).  So, lets translate that into real dollars ($$$) by multiplying the "%" (1.70%) x the assets (@ $50 billion). If you do that arithmetic, the answer is $840 million. 

In other words, in the year CEO Lord left, the yearly operational cost of operating SECU was $840 million. Yes, it's a big operation! (Hopefully the reason you didn't know that is SECU used to not act like it was too big for it's britches"!) 18 months later, the SECU Board reported (see above) that the cost of annual SECU operations (the "expense-to-asset ratio") is now 2.28%. So, lets do the math again. That would be 2.28% x $50 billion (assets still @ the same as in 2021) = $1.140 billion. The annual cost of running your credit union has increased by $290 million per year ($1.14 bill - $850 mill. = $290 mill.) since September, 2021.  A 34% jump in annual operating cost! To most folks that's real money, to the SECU Board evidently not.

That's $290 million a year out of your pocket! 

The SECU Board has a fiduciary duty to the member-owners of the credit union. Does their performance in controlling costs meet that standard - or your expectations?

 .... $290 million is a lot of quackers.