Thursday, February 29, 2024

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:


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.