A LETTER TO OUR
Members
The macroeconomic environment and impact of interest rate increases over the past two years continued to dominate the banking landscape in 2023. It was challenging to grow deposits across the industry; commercial bank balances declined by 2%, representing the largest outflow in the past half-century.* Many financial institutions faced liquidity issues, and several large banks became insolvent.
Amidst this backdrop, the Credit Union continued to exhibit stability, safety, and soundness. While commercial bank deposit balances declined and many banks faced liquidity issues, our deposit and loan balances increased by 1%. Our capital ratio, a key measure of financial strength and stability, remained at the high end of our peers at 13% and well above our regulators’ guidelines for a well-capitalized credit union (7%).
As market interest rates rose, we were excited to provide highly competitive money market and share certificate rates that provided members the best opportunities to save in more than a decade. Our March share certificate special achieved record participation, and a campaign in the latter part of the year provided members with "extra appreciation" rewards for growing their balances.
As the interest we paid on deposits rose significantly, our net interest margin and earnings decreased. Core earnings from operations in 2023 remained positive at $3.8 million.
A key highlight of 2023 was the record member experience scores we achieved.
GAAP net income was negative $17.4 million, driven by a $21.2 million reduction in the value of derivatives we use to manage interest-rate risk. This decline partially offset the $93 million gain in derivative value we experienced in 2021 and 2022. Our hedging program continued to work as designed to help mitigate the impact of interest-rate volatility, as the underlying economic value of our long-term mortgage loan portfolio moves in the opposite direction of the value of our hedges.
A key highlight of 2023 was the record member experience scores we achieved. New records were achieved by our mortgage, consumer lending, and call center teams, where 99%, 97%, and 92% of survey respondents indicated their experience was excellent or very good. Branch scores were also strong at 98%. We appreciate the feedback that members provide to us in the regular surveys, which helps us continuously improve the service we provide.
As market interest rates ro se, we were excited to provide highly competitive money market and share certificate rates that provi ded members the best opportunities to save in more than a decade.
In 2023, we were pleased to welcome members of the former Chevron Texaco Employees Credit Union (CTECU).
The merger, consummated in July 2023, brought 1,300 members and $22 million in assets to the Credit Union.
We launched two new branches (in Houston and El Paso) and progressed towards three new ones in the first half of 2024. The latter includes a new branch at Three Allen Center in downtown Houston, relocation of the Houston Galleria branch to CityWestPlace in the Westchase District, and a move of the San Ramon branch to Chevron’s new office location across the street.
Additionally, investments we have made in the call center and our emerging video banking offering are intended to ensure a highly personalized experience regardless of physical location. We are also continuing to expand self-service options within digital banking, with the ultimate objective of having members be able to conduct most of their activity within the online or mobile applications.
There were many other exciting developments in 2023, including new state-of-the-art consumer lending technology, which created a highly streamlined application experience for members. We also conducted much of the integration work towards a new loan origination system that will provide members with a convenient experience for obtaining a mortgage.
Member Jerry Hoag with Pascagoula Branch staff
Operationally, we maintained a laser focus on prudently managing risks. We made key process and system enhancements to bolster our protection against increasing fraud and cyber threats across the industry. Our credit portfolio continued to demonstrate soundness, with a low net charge-off rate of 0.13%.
Finally, in 2023 we charted our future direction through the development of our new 5-year strategic plan. As always, our focus will be on delivering a personalized and convenient experience and providing excellent value to members.
We are excited about where the Credit Union is headed and are grateful for the opportunity every day to help our members achieve their financial goals and aspirations.
