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.

SECU Financials March 31, 2023 - "Growth Is The Only Thing On My Radar".

 

Guess we should go through this stuff a couple of shovels at a time...

Eighteen months ago, Chairman Chris "Mr. NFPP"* Ayers, the SECU Board, and the current management inherited an organization with an unbroken (and unmatched!) 85-year record of growth in assets and membership from CEO Mike Lord. And, what is most interesting, growth had never been a driving force at SECU!

The theory then was, if SECU delivered exceptional service, unique, low-cost products; while keeping operational costs low and rates competitive, that members would beat a path to the credit union's door - bringing their families and colleagues with them. Growth was not seen as a goal, but as a result - a result of fair, efficient, member-focused service. That "strategic plan" appeared to work. 

Here's where SECU stands according to its "recently released" 3/2023 financials: 

 

✔ SECU is entering its second straight calendar year of declining assets, off 5% over the last twelve months .

✔ Here's what the current CEO said in a memo "To: All SECU Employees" (that's about 7,000 folks, if you need to confirm the source!) soon after his arrival at SECU:

 "If all goes well, honestly, 3 years from now I hope we are serving over 3 million members...have assets over $70 billion...I don't intend to have our credit union shrink in the future...growth is the only thing on my radar."

✔ But even better, Chairman "Mr. NFPP" Ayers and the SECU Board have a Board-approved "Asset growth" target in their financial plan. Want to guess what the SECU Board's approved "Asset Growth Target" is for the financial year 6/30/2022 to 6/30/2023? ....+ 8%!

A +8% asset growth target, added to a -5% decline in actual growth (through 3/2023) would mean that the SECU Board and current managment are off their estimate by -13% - not exactly a "rounding error" in anybody's "strategic plan"! Could this be indicative of the overall quality of leadership planning at SECU? Many members - and a growing number at that - certainly think so.

'Course I haven't seen the latest SECU Board asset growth target (they didn't publish that!). Could be with this SECU Board, that when you miss a target - and start feeling like you may be held accountable - you simply change the target!

Kinda like what the Board did with those new, highly suppressive "Board Election Procedures"!

 

"A body of men and women holding themselves unaccountable to anybody, should be trusted by nobody.' - Thomas Paine

 * "NFPP"= "No formal proposal proposal"