Friday, June 13, 2014

Lighting It Up In Birmingham.... "Hold On" !

From "The Birmingham Business Journal" - 6/6/2014
Got to believe that Friday, June 6, 2014 was one of the "flash points" in the distinguished career of Mr. Merrill Mann, CEO of APCO Employees Credit Union in Birmingham, Alabama. Mr. Mann probably came in that Friday with some thought of a leisurely weekend of golf in Tuscaloosa or water-skiing down at Lake Martin.... ah-h-h-h-h, summers can be exceptional in Alabama!

Fire Power !
Match Play!
But, unexpectedly, by 3:00 o'clock in the

 afternoon; the "playing with matches", political recklessness of "some boys and girls" in Virginia had lit a bonfire under APCO's home office, threatening to torch the reputation of the largest credit union in Birmingham. At 2:55 pm APCO got blasted by the Birmingham Business Journal without warning nor cause. What a dangerous surprise, what a great way to start a weekend!!

For those of you unfamiliar with APCO, the credit union is one of the best, most conservatively managed CUs in the Country. Here are a few of its "key ratios" as of March 31, 2014:

Assets:                    $ 2.4 Billion
Well-Capitalized:         9.87% 
Delinquency:                 .48%
Chargeoffs:                   .47%
ROA:                             .77%
Growth:                       7.62%
Net Op. Expense:          .39%**
 (** and no that's not a typo!!!
- Peer Avg. is 2.43% !)

... and those numbers are not flukes or "one-offs", APCO Employees CU has always been this good!!

Liar Fire... !
So, why in the world would "someone" lead the WSJ and The Birmingham Business Journal to believe that APCO "... could see higher losses" [just for the record - looked back a dozen years and APCO has never had a loss!] and was "... an example of how the sector is piling into low-rate, longer term assets, increasing its exposure to potential significant losses if interest rates rise."?  
"Send in
the Clowns..."
Listen, APCO is so well run that it would take an idiot, an absolute fool, or "you know who" to screw it up!  And, it appears that "you know who" is trying to do just that!

But maybe Mr. Mann , the APCO Board, and all the 70,000 APCO members in Alabama "haven't gotten the message" yet. "They" (APCO Employees)  are at risk....

Sending a message... !
"I am concerned that the message [on rates] is not getting through, or it's getting through and they are choosing not to do anything about it..."  Chairman Matz

But to all the folks associated with the highly capitalized, remarkably well-managed, and wildly safe and sound APCO Employees Credit Union, here's a little "message" and some Southern Comfort from "down home".... 

"Hold On".... Shake it off !!
(and... "Bless my heart and bless yours, too!")


Anonymous said...

It does seem that APCO has a greater duration on investments and potential extension risk if rates go up.

I can not believe that NCUA and the credit union has not looked at the effects of a rate shock on the credit union. Also, if NCUA had concerns about the ability of the credit union to hold the investments to maturity they would force a reclassification to available for sale.

With the very low Operating Expense ratio, the ability to absorb the lower yielding return on investments would be enhanced.

We know credit union CEO's listen to Matz, and they have determined that she is just in over her head on this matter.

Anonymous said...

“Any person who knowingly and willfully states, delivers or transmits by any means whatever to any publisher, or employee of a publisher, of any newspaper, magazine, or other publication or to any owner, or employee of an owner, of any radio station, television station, news service or cable service, any false and untrue statement, knowing the same to be false or untrue, concerning any person or corporation, with intent that the same shall be published, broadcast or otherwise disseminated, shall be guilty of a Class 3 misdemeanor.” VA Code Ann. § 18.2-209. Speaking or publishing imputations of a woman’s want of chastity is also a Class 3 misdemeanor; if the defendant disproves malice, he will lessen the penalty he will receive if convicted, but lack of malice is not a defense to the crime. Id. at 18.2-417

Jim Blaine said...

NCUA's egregious and continuing "blind spot" is that they fail to understand that liquidity is 1000 times more important than "duration", or NEV, or SIRRT ratios...

It wasn't duration which brought down Lehman nor the corporates, nor the money market funds, nor AIG...

APCO has almost perfect liquidity in its investment assets... something that does not appear in NCUA silliness such as a SIRRT ratio.... bring in the clowns!

Anonymous said...

Absolutely agree with Jim about the liquidity comments. Only having access to the 5300 lead to the observation that this credit union had an unusual maturity schedule for their investments. Suspect that Ms. Matz was faced with the painful challenge of thinking before expressing a decision. Guess she decided on the latter.

When you compare APCO to SECU investments you get two completely different views of investment in credit union land. SECU is very short term in Treasuries and APCO seems to be laddered in Federal agencies with 1/3 being rather long in maturity. Neither is necessarily right or wrong for their individual circumstances.

Ms. Matz has no statutory authority to discuss publicly the circumstances of individual credit unions. Any concerns that she had about the investment program of APCO should have been handled through the regulatory process. Suspect that there is no identified investment problem with investments at APCO that NCUA can not prove and therefore what they can not achieve through proper regulatory channels, they attempt to achieve by misguided and potentially illegal public pronouncements.

Seems that NCUA has problems with public announcements of the Camel Code, but no problem with discussion credit union specifics. Talk about bring in the clowns!

Anonymous said...

I hope your commenter was joking. Because very few CEO's are listening or believing the garbage that is coming our of Matz's mouth and her office. Does she really believe we are so stupid to just go along because she says what she says and she is the Chairman. News flash everyone in the industry is talking about how incompetent and destructive you are for the industry. Thanks for uniting the industry to fight to preserve it by any means possible against you and your ego driven staffs.