SECU: Monitoring The Performance Of Your Credit Union - Credit Unions: 101

 

Took a little break, but lets get back to Credit Unions: 101. 

Looked for a "fresh start" after the 2024 Annual Meeting to see if there were truly important issues which the membership should address with the current SECU Board. The record of SECU from 2021 to 2024 has been tumultuous. The best path forward remains unclear to many of us. Sometimes in predicting the future, it helps to take a glance at the past. How did SECU arrive at this point in time?

We have looked at the 1915 N.C. laws which organized credit unions [link] as a new type of financial institution, designed to give access to credit to working men and women [link]. Noted that most credit unions  were originally organized in the workplace as a valuable employee benefit [link]. Over time eligibility for membership was expanded to include former employees, retired employees and family members [link]. And most importantly, the fact that each member - that means you - is an owner, a share holder in SECU [link].  These days, for a family of four, your SECU share ownership is worth @ $16,000. So, you might want to pay attention. Most of us could use an extra $16K - right!

As SECU, and other credit unions, grew in size and scope; the direct, tight-knit relationship with the employer declined. "The credit union" became viewed as a separate, independent organization - rather than an employee-benefit feature of the employer. As subsequent generations of family members joined (children, grand-kids, their families), SECU became a fixture in all North Carolina communities - locally managed, locally engaged, locally focused. For folks in hundreds of North Carolina communities, SECU simply became "our local credit union".  That seemed to be a winning formula.

The changes proposed by the SECU Board seek to adopt a different formula. We want to take a strong look at whether the new direction, new culture are the better course for SECU shareholders in the future. We will try to re-ask those questions about why the proposed changes are of benefit to SECU shareholders and North Carolina - and, of course, do they make sound, practical business sense. Hopefully the SECU Board will be transparent in sharing the reasoning, research, and "the numbers" which guide its decision-making on each new direction.

But before we ask, we need to look at a few other factors which must be considered in looking to the future: federal insurance, tax exemption, lines of business, other financial institutions, policy vs. purpose, local control, mergers, ownership, and what is "the definition of success" for SECU. 

So, back up to speed after the break, get another cup of java, going to dig a little deeper...

... $16 grand for your family ?!? Worth asking some questions...

 
  

 

SECU: Why Credit Union Members No Longer Pay Close Attention, Why You Should...

  .... Who owns SECU?

Ever thought about that question? Sure you haven't! Well, do think about it... who does own that little $50 billion North Carolina enterprise?

When credit unions were first organized, every member could readily answer that question. Joining a credit union meant you were part of a small, select group at work, on a military base, in a church, or within your local community, which was banding together to help each other. Your fellow members were your co-workers, fellow worshipers, friends, and neighbors - you knew each other.

You and your fellow members had a common need, a common purpose - access to affordable credit. The credit union wasn't about making a profit, it was about working together to help each other. It was a cooperative effort to improve the financial prospects of each member, of each family.  Separately you couldn't do it, together perhaps you could. 

Why did credit union members pay close attention? Because the loans being made by the credit union were being made with the savings dollars of other members. [Still works that way today!] Some members put their savings into the credit union, which used those deposits to make loans to fellow members. Savings deposits had a special name at credit unions; they were called "shares". Why shares? 

Because each member's savings deposits were at risk of loss based on the performance of the credit union. Each member was an owner, an investor, a stakeholder in the success or failure of the credit union. Each member owned and shared an equal part of that risk.  

If the loans were not repaid, each saving member shared in the loss! At the beginning of the year, you might have $500 on deposit in savings; but if major loan losses occurred, you might end up with only $400 at the end of the year. Your share of losses was deducted from your share account! Members kept close track of their credit union - and helped assure loans were prudent and got repaid. 

SECU members knew their life savings were at stake. They knew they "shared the risk". They knew they owned SECU - and why that shared ownership was important!

Why aren't SECU members paying attention anymore? What has changed?

... as a member are you still "at risk"? If you don't know, shouldn't you ask?