... 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.
Bad decisions = Bad outcomes ...
ReplyDeleteNo Right Way to do the Wrong Thing!
Mr. B, this may be unfair to you but since we're talking about Unicorns let's assume you've got a Magic Wand as well. If you could wave it a few times what do you see as the highest priority changes to fix the financials AND improve member service quickly? (Pretty tall order, that's why I figured even you might need a Magic Wand.)
ReplyDeleteAfter following the Blog since its inception it seems pretty clear how things got off track but what would be the first steps to right the ship? Well, assuming you believe it could be righted before it takes on too much more water.
Interesting question, much needed if you're looking to create or rebuild a unicorn.
DeleteBut why not ask the readers/commenters to answer the question. Lets see what they say....
...you go first.
Pay competitive rates to savers like you use to.
DeletePut A rate for all back in place March 1.
ReplyDeleteMortgages now require more documents than ever and created more restrictions than before. Probably part of the equation as well for less mortgage lending. SECU used to be much more flexible and easy to work with.
ReplyDeleteDidn’t offer a 30 year fixed either
DeleteThis is due to the Secondary Market. The Board hires two CEO’s who supported this. Was no need for it. Did we need to improve? Yes, who doesn’t. Way too many changes that were costly and unnecessary. Ownership starts at the top. Maybe hire a few more Executives or hire a new Consulting Firm. That’ll fix it!
DeleteIs SECU selling their mortgages? Have they always done that?
DeleteSECU will be selling mortgages to secondary market over the next year if all goes to plan. Mortgage qualifications are already being changed to meet secondary market(wall street) guidelines. Disappointing.
DeleteMake tax prep work again. Looks like staff can do it if they understand why it is important
ReplyDeleteSECU appears top heavy with salaries and staff. May be time to break the golden no layoff rule to help get expenses under control. Hayes put SECU in that boat with unchecked salaries for execs and outside hires.
ReplyDeleteThey’ll layoff staff but the executives will not. Be carefull what you wish for when wanting the golden rule broke..they won’t do the tellers any favors
DeleteThey have already done layoffs “summer schedules” in MSS. The only ones that suffer are the members and the experienced employees.
DeleteIs a new summer schedule or the crazy one from 2023 that lots of mss quit?
Delete@5:02 Curious your opinion regarding your "won't do the tellers any favors" statement. Why would it just be tellers to suffer the consequences? Is it because they're "just tellers"?
DeleteJared Banesh is getting his wish. He was hoping that the experienced people in MSS would quit or leave due to the absolute disaster with shift bidding.
DeleteWhat I’m saying is the executives do not care about tellers. Personally, I do and see them just as important as any position. Every branch should be fully staffed with tellers.
Deletethought that used to be entry level, but one could advance by taking training modules? Is that right? I'm not an employee, "just" a member!
DeleteBelow market mortgage rates to juice demand and build loyalty.
ReplyDeleteStop the bleeding due to excessive charge offs. GOT to do a better job collecting!
ReplyDeleteThere are several issues that need addressed.
ReplyDeleteYou have employee issues and you have operational issues. It's a tall order, and One issue can't be remedied until October ... Look to the past and see what made SECU successful... Leaders always have a lot of voices chirping in their ear. Usually from the money brokers.
Discernment in a time of deception in crucial... Not everyone is your 'friend' or friends of the membership.
'They' are out for 'PROFIT".
Until leadership gets on board everything is futile.
Having said all that, my first suggestion is QUIT borrowing money you have to pay interest on!!!
Live within your means...
Adding Debt is not necessary for SECU to survive.
more to come ...
Can you 100% confirm that $5B has to be paid back by the end of the year? The explanation as to why we did it is that we can lend the money out at a higher rate than we borrowed. But if it has to be paid back in less than 10 months, that story, like so many others does not hold water.
ReplyDeleteLike most everything these folks say, it doesn't pass the smell test ... When Gym was rolled in as a trojan horse, I sensed something was amiss.
DeleteEspecially since there was so many qualified candidates from within ...
My gut feeling was this ain't going to end well...
and then you read who they were hiring from the outside (from the bio they sent out of the person)
Came from so-and-so with 20-25-30 years experience... (these folks don't come cheap!)
Leap frogging those who had worked 10-15-20 years for SECU and then see the new ones get max PTO, great salaries along with a great 401K match (members money may I remind you) (I'm guessing about salaries but you don't leave a place you have spent a career there for peanuts) and then paraded around like the second coming ...
Well here we are ... the proof is in the pudding or balance sheet!
The experts are expert at BS'ing ... Time to cut the FAT!!! The sooner the better, else we will never be on the road to a healthy outcome.
Five figure signing bonuses for some of these outsiders.
DeleteWhen I say cut the Fat, I want to be clear that I mean C-Suites ... not front line or supporting cast.
DeleteOh and we don't need to pay all these Consulting Firms and outside people to do credit union work (Printing comes to mind). Get stuff in-house (more control/security) and keep work instate and also lets help our fellow Credit Unions instead of kicking them to the curb!
7:59 you seem way off base
DeleteAre mortgages sold on the secondary market?
ReplyDeleteThey are wanting to get into the secondary market, but have not yet.
Delete30 year fixed rate kept on the books is a recipe for disaster. go back to Adjustable Rate Mortgages.
DeleteWhy do they want to?
DeleteAt 7:51am. Money and they can reduce staffing costs by forcing mlos on to a commission based pay structure.
DeleteQuit treating branches like the Red-Headed Step-Child. Give them the staff and training they need, and bring the educational incentives back. Whether some on the Board or in Executive management want to admit it they are SECU's primary delivery channel - treat them appropriately. Heck, they could be a whole herd of Unicorns.
ReplyDeleteThey always were!! Well said.
DeleteDecentralize decision making in order to provide a quicker, more effective service level to members. "Raleigh" rarely knows what's best for members to be honest. And they don't listen very well either.
ReplyDeleteDecentralization is needed across the board. Let the worker co-op do its thing Ms.Brady. The board isn’t really even needed theoretically for a worker co-op to work. They are just in the way at this point.
DeleteA board should be there in case of a rogue CEO, but when they're in cahoots, it's time to vote the board members out so a new board can then tell the CEO to shape up or ship out!
DeleteWe have 8 board members that now need ousted.
They have shown the member/owners (and former execs) that they really don't care what they think. It's actually quite rude and disrespectful.
Why is that? What is in it for them that we don't know of that they act this way? Nobody risks their reputation for nothing...
When it’s a worker co-op…members and employees should be able to vote a rogue ceo out in theory. It’s not truly a worker co-op when the board and ceo just ignore the voices of the people and do as they please
DeleteA CEO/BOD who understands “send us your mama” instead of “send us a co-signer”
ReplyDeleteYay ... clap clap clap ...
DeleteFrom the very beginning, the MLS group was drawn in to that role with the promise of having to do ‘only one thing’ and that was to make mortgages. The employees in the group (most of them long term, seasoned employees) left members waiting in the lobby or on the phone for other services. This group of seasoned employees needs to be fully ‘returned’ to the branch employee group, under the branch VP’s supervision, and directed to serve all members who enter or call that branch with any/all services.
ReplyDeleteThe loud minority.
ReplyDeleteWhen a team has lost its way what does (or should) it do? Get back to the fundamentals!
ReplyDeleteYou start brick by brick to restore the foundation ...
Not all is lost unless you give up ...
'Don’t give up. Don’t ever give up.'
Keep it simple. No need to compete with more sophisticated businesses offering more complex products. Tax prep, financial services, etc. Keep things in house especially IT. Keep jobs in North Carolina. Decentralize. offer everything in the branches. All hands on deck!!
ReplyDeleteY'all doing good, keep at it. Pitch in with some suggestions... the future awaits you!
ReplyDeleteHave been a little surprised that no one has mentioned the SECU Strategic Plan, which the Board trumpeted last year, as the almost Biblical salvation to all future SECU problems
It's already March 2024, where is that much anticipated guide to SECU leadership for 2024... are we running on fumes? (No need to answer that one!)
I believe the new Strategic Plan just came out. But no one really pays attention to it. It's a "check the box" document. The work gets done in the trenches cause the devil is always in the details. SECU has the folks to get anything done but in many cases they have been handcuffed and blindfolded.
ReplyDeleteEmpower the folks that deal with members and quit believing that the Almighty resides in Raleigh. She, He, They most assuredly do not.
Where can a member fin it? On the website?
DeleteI wish our VPs would hop on the phones and take some calls instead of having meetings all day…Q’s are busy. Get on the phone and take calls instead of having meetings 24/7. VPs use to be in trenches with us. What happened to that?
ReplyDeleteThis will absolutely NEVER happen. Why has nobody asked the question why people are transferring districts or positions so much? VPs/SVPs should be looked at quite a bit more for the work they are doing/not doing. Some less than stellar ones out there collecting those fat checks mentioned above who do little to nothing on a daily basis.
Delete