2019 CEO Report
March 25, 2020
As you know, our Annual Meeting has been postponed until we can determine an appropriate time that will be safe and in compliance with Government Mandates. So that you will have information now on how Weyco Community Credit Union as a financial institution is doing, I have prepared my annual speech in written format.
2019 - A Good Year
In March of 2019, WCCU implemented a new 3rd party underwriting group for mortgages. This relationship has given us a better mortgage platform. One advantage is a second set of eyes looking over our mortgage packages and gives us a more thorough review. Another advantage is the ability to have an escrow account for the yearly payment of insurance and taxes. This is something we have not been able to do before now. All of our mortgages at this point will include escrow.
WCCU increased the deposit rates on two different occasions. This gave more money back to the membership. Our CD rate structure had become one of the best in our area. The purpose of a Credit Union is for the collective financial improvement of its members. The rate structure we were able to provide was accomplishing that primary goal.
WCCU addressed some staffing needs by creating a career path and normalizing salaries to market standards. The career path gives all employees an opportunity to increase their skill sets and is a vehicle for promotion. The career path gives each employee something to strive for and a chance to learn something new. For the membership - this means more employees having the knowledge to help with any need you have. It allows for the member’s question to be answered by the first person they talk to. In 2019 we also reviewed the salary structure for the new career path and put a salary range to each position. This is an incentive for employees to learn more and take on more responsibility. Our staff has done a tremendous job and this path gives WCCU an opportunity to reward those employees who go above and beyond.
WCCU has implemented a new phone system that can spread phone call volume across the organization. The goal and purpose are to get the member’s phone calls answered quickly and efficiently. It also allows a quick transition to our Automated Response Unit where you can transfer funds or find out the balance in your account at any time of the day. Internally the phone system will show when an employee is on the phone or not, and the call can be routed to their voicemail or another employee. With any new system, we have been working out the kinks but overall it is performing as expected.
2020 – Where Do We Go From Here
2020 has started off with a whirlwind of uncertainty. With COVID-19 throwing a monkey wrench into the economy engine, WCCU will have to adjust. The economic forecast for the immediate future is not sunshine and daisies. During this global event, every time you turn on the TV or radio there is a lot of talk about the financial uncertainty of many companies. Let me reassure you that at this moment the organization is well capitalized and doing well. Our loan portfolio over the recent year grew very well which means more funds went to help local members. Our investment portfolio shrank, which again is investing our money back into the members through loans. While rates are low, we are still paying a very fair market rate to our members.
While the economic forecast is not positive and you can understand why, basically, the economy is heading for a recession. Be certain that WCCU has weathered many economic downturns with success. In 2008, the financial world took a major hit and plunged us into a recession. Recessions happen and can be a positive thing as long as it is not cause for overreaction. A recession is when there are two consecutive quarterly declines in GDP (Gross National Product). So, if manufacturing and retail stores sell less goods for 6 months in a row, technically you are in a recession. Some are worse than others. There were other recessions, but the effects were not as noticeable. Remember everything that goes up, must come down. The recessions are the downward movement.
In understanding the impact of the financials for the Credit Union, you need to understand how the Credit Union generates its income for the membership. For each dollar that is deposited into the Credit Union, we have to invest it. It is either invested in our members through loans or invested in safe, guaranteed investments like Treasuries and insured CDs. With the current rate environment being near zero, the Treasuries and Insured CD markets are paying near zero. From this past February to March these markets went from 2.5% to 0.75% in available investment returns. This significantly lowers the investment income for the Credit Union. While we have been lending more over the past few years, lending can’t outpace a significant drop as we have seen. WCCU has been forced to lower its deposit rates and may have to lower them even further depending on the depth of this recession.
With lower investment income comes lower net income after expenses. WCCU will likely invest net income into our loan loss reserves in anticipation of delinquent loans. This may cause the Credit Union to reduce or not show any net income for this year. The focus of the organization will always be Safety, Liquidity and then Yield. With safety comes prudent decision on investments and making sure we are adequately reserved for any major losses. Liquidity is making sure we have funds to cover our members’ needs. Finally Yield is making sure there is a return for your investment (your deposit). While our net income may suffer, the Credit Union will continue to serve our members’ needs. I want to ensure the membership that your money is safe and secure with WCCU, and we are here to help you.
While our net income may suffer, the Credit Union will continue to serve our members’ needs. Weyco Community Credit Union has been through recessions in the past. It went through the Great Recession (2008). We are still going strong and will after we get through this. Here are some things to expect when going through a recession and what we will do to offset it:
- Delinquency will increase – WCCU has provided the staff with a memo outlining guidelines for this situation. We want the membership to know we are here to help. In the previous recessions, our delinquency spiked BUT we didn’t have our current extension policy in place to help members who are affected by things outside of their control.
- Charge Offs will increase – this will go hand in hand with delinquency BUT by the time Charge Offs happen, we will have exhausted all efforts to help that member.
- Loan growth may slow – Pricing our loans and actively promoting the loan portfolio will help keep the flow of loans going. Remember Loans are what turns the lights on. I would rather invest the CU’s money in our members through loans than investing outside the organization.
This is a difficult time for our members, our staff and our country. WCCU is in a good position to help our members. We have funds to lend and our expenses are in check. This is a great opportunity to move our credit union forward and most of all help our members and potential members during a very difficult time. Looking back at the financials from 2008, WCCU had a strong showing during that low rate environment. Now is the time our members need us the most, and financially we are in a great position to help. We just need to focus on HOW to help the members.
One last note – Financial Institutions are considered Essential Services so if a “Stay at Home” order is enacted, Weyco Community Credit Union will still be open in order to service your financial needs. How we deliver those services may look a little different (using the drive thru, appointment only lobby use, etc.) but we will still be here for any member or potential member needs.