Greetings. I'm LeeAnna Lott, and it is my pleasure to welcome you to the 2020 Local Government Federal Credit Union annual meeting. Due to the impact of the COVID-19 pandemic, our annual meeting is being held virtually, for the first time ever.
Before we begin, please, take a look at the interactive chat box on this page. At any time during the meeting, you can enter questions for CEO Maurice Smith, who will host a live Q&A session at the end of his report. At that time, he'll respond to the questions that we receive. At certain points, you may be asked to respond yes or no to a motion. A poll will appear in your chat window, giving you the opportunity to vote and participate in the meeting.
This year's annual meeting feels unusual, to say the least. In fact, all of what we do these days feels unusual. The one thing that remains consistent is that our members continue to serve North Carolina citizens. Please, watch the following brief video saluting those workers who keep North Carolina running during this challenging time.
And now, we welcome LGFCU members Barry Overman, his daughter, Brooke, and Darryl Stallings from Step of Faith Ministries as they sing our national anthem.
(SINGING) Oh, say can you see--
--by the dawn's early light, what so proudly we hailed at the twilight's last gleaming, whose broad stripes and bright stars through the perilous fight, o'er the ramparts we watched, were so gallantly streaming? And the rocket's red glare, the bombs bursting in air gave proof through the night that our flag was still there.
Oh, say does that star-spangled banner yet wave, o'er the land of the free--
--home of the brave?
Thank you so much for that warm rendition of our national anthem, and special thanks to Barry for being a member of the LGFCU Advisory Council. Mr. David Dear, chairman of the board of directors for LGFCU, is ready to begin. Welcome to the 2020 annual meeting.
Good morning, everyone, and welcome. I am calling the 37th annual meeting of the Local Government Federal Credit Union to order. A quorum of at least 15 members is required for the annual meeting.
Mr. Chairman, we have 17 members in attendance and 155 members viewing online.
Thank you. Seeing that we have more than 15, the chair recognizes and declares a quorum for this meeting. The assistant to the secretary shall record minutes of this meeting, and we now ask board member Paul Miller to give the invocation.
Thank you, Mr. Chair. Good morning. We know many of you are attending this meeting today through virtual channels. Some of you are here in person. But to each and every one of you who are here and participating, we thank you. We are so happy to have you. At this time, if we could, let's bow our heads for our invocation.
Dear Heavenly Father, we come before you today thanking you for all the blessings you have bestowed upon us. We thank you for another beautiful day, one that you've created for each of us to enjoy in our own special way. We thank you for our Local Government Federal Credit Union and ask you to be with us in all we do and say during this annual meeting.
But as we bask in your glory and give thanks for our blessings, we must admit that we have concerns for our well-being, the well-being of our fellow man, and for this wonderful country we live in. These concerns come as a result of the pandemic that has created so many changes in the way we live and work and fellowship and worship. It has turned our world upside down overnight and created stresses on each of us and our families that we've never had to deal with. We sometimes wonder if we will ever be the same again.
But we must remember that we are not the only generation to suffer a catastrophic event. Those before us have lived through trying times and survived, and we will as well. We are a strong country and a strong people, and that strength comes from the fact that we have faith in God.
When times are bad, we know to call on you, and you will hear our plea. You will give us the strength we need to continue, and you will show us the way to a better day. You promised us you would never leave us, and we find hope in that promise today. Our faith has always been our source of strength, and as a nation, we will remain strong as long as we call upon you. Please continue to teach us to call out to you not just in times of need, but to do so each and every day we live.
Lord, we're thankful for all of our blessings, and today, we thank you for the opportunity to be a member of this wonderful Credit Union. We thank you for all the good work it does and for helping to make the lives of our members better. The leadership and the staff of Local Government Federal Credit Union know that many of our members are worried and afraid during this time. We know that some of our members are out of work and struggling to make ends meet.
Lord guide and lead this organization in the way it should go, and help LGFCU to be a beacon of hope to our members in these trying times. Help us to answer their call and minister to their needs. Help us to hold their hands and walk with them and help relieve some of their fears and concern.
Show us the way, Lord, to be an instrument that you will use to make their world a better place in which to live and work. And, Lord, we pray that each of you will hold us-- that you will hold each of us in the palm of your hands through this difficult time and make us a better and stronger community of faith as a result of the journey we are on. All these things we offer in your precious name. Amen.
Thank you, Paul, for that heartfelt prayer. The first order of business is the approval of the 2019 annual meeting minutes. A link to download and inspect the minutes are available on the webpage. The chair will now entertain a motion for approval.
Mr. Chairman, the first motion was provided by Ruth Barnes from Atlantic Beach.
Do we have a second?
Having a motion and a proper second, the chair now ask our members who are viewing online to vote yes or no to approve the minutes.
As I wait for the votes to come in, I want to thank you for your time today. We recognize that there are a lot of things you could be doing rather than this. Your participation is a key element in the success of the Credit Union and a cornerstone of cooperative governance. I encourage all members watching today to view the links to the financial and audit reports and the Strategic Business Plan located on this page to learn more about how your Credit Union is operated and what our plans are for the future.
Mr. Chairman, the yeses have it.
Hearing a majority in favor, the motion is approved. At this time, I would like to introduce to you your Local Government Federal Credit Union board members. We have Vice Chair Lin Jones, Treasurer Ken Noland, Secretary Ruth Barnes, and members Paul Miller, Jeanne Erwin, Dr. Aaron Noble, and our board emeritus member, Al Richardson.
I would also like to recognize the two independent directors of Civic Federal Credit Union. We have Kellie Blue, who is the treasurer, and Willie Best, who is the immediate past chair. The chairman's report is available in the 2019 annual report to membership. A link has been provided on the webpage for your use.
Local Government Federal Credit Union could not operate the way it does without the contributions of our many volunteers. Often every month, the board appoints new volunteers to serve in a number of roles. We appreciate the work these bodies of volunteers provide to our Credit Union. Local Government Federal Credit Union has nearly 600 volunteers working on behalf of you, our Credit Union members. We have seven board members, 559 Advisory Council members, five Supervisory Committee members, and 20 Loan Review Committee members.
At this time, I would like to give a special thank you to all new volunteers appointed during the last 12 months. Your commitment to our organization is greatly appreciated. To all of our volunteers, please remember, Local Government Federal Credit Union is only as effective and as efficient as the efforts that we get from all of you. At this time, I would like to call on Lee Smiley for the Supervisory Committee report. Lee.
Thank you, Mr. Chairman. It is a pleasure to present this report on behalf of the Supervisory Committee for the annual meeting of the Local Government Federal Credit Union. It is the duty of the Supervisory Committee to ensure that all financial records present fairly the operations of the Credit Union, and that procedures and practices are sound, thereby protecting member deposits and rights. In accordance with the requirements of the National Credit Union Administration, we engaged the CPA firm of CliftonLarsonAllen to perform a financial audit of the credit union as of June 30, 2019.
The audit found the financial record proved to be a fair presentation of the financial position of the Credit Union. On behalf of the committee, the auditing firm also helped to ensure that accounting records are an accurate representation of the true picture of the Credit Union, that internal controls provide adequate protection, and that the Credit Union operates under established policies and procedures. The committee also reviewed policies for fairness, soundness, and efficiency.
In addition, the Credit Union employees in the internal audit department test the internal systems and processes. The internal audit team conducts periodic consultative and compliance reviews of each function within the Credit Union. I wish to thank the board and members for their confidence in the work we do for the Credit Union. And now back to our chairman.
Our Supervisory Committee provides an important service to the membership by ensuring the safety and soundness of the Credit Union. Thank you, Lee, for providing this report, and please relay our appreciation to the rest of your committee.
I will now call on Tony King from his home for the Loan Review Committee report. Tony.
Good morning, everyone. It is so nice to be with you, even in a virtual setting. This is so different from what we're normally used to and such a transition for all of us. And I know, if you're like me, you're really sick to the fact that we're not meeting in person. I look forward to the annual meeting every year so I can give accolades personally to our great leadership and to visit with members just like you and just enjoy our time together as we tout the successes of the Credit Union. And I miss that this year, and I know you do as well. Before we get started, I always have to ad lib. If you know me, you've been to annual meetings, not a shocker.
I've got a couple of shoutouts I want to send. First of all, I want to recognize my beautiful daughter, Madison, who today at 10 o'clock enjoyed a virtual commencement from East Carolina. Hence I've got on my East Carolina purple in her honor. And she, like, I know, many of your loved ones-- maybe your children or family members-- have had a very tough time this year not being able to enjoy that walk across the stage at their commencement but still having a virtual commencement-- which is very difficult, but not the same. And so congratulations to each of you who may have graduates, directly or in your extended family. And I hope you had a great day and look forward to great ceremonies in the next few days with those seniors of 2020.
Second of all, as usual, I want to send a great shoutout and accolades to our tremendous staff. Local Government Federal Credit Union is run by incredible professionals who have elite status at their jobs. And I just want to tell you, I want to thank you for Maurice and Mark and all of the staff as they perform their duties and as they make this Credit Union the success that it is in North Carolina and throughout the country.
That being said, let's get down to the meat of while I'm here-- or why I'm here, rather. As you know, I'm on the Loan Review Committee. I'm the chairman of that committee. And the Loan Review Committee serves a very special purpose for our Credit Union and for our members, members just as you. So today I'm going offer the Credit Union's Loan Review Committee report. So bear with me as I go through this, and then we'll talk about what the Loan Review Committee does. I'm pleased to present the Loan Review Committee report for the 38th annual meeting of the Local Government Federal Credit Union.
The Loan Review Committee fulfills two significant roles in the Credit Union. First, LRC gives members a way to appeal loan decisions that they've received. These loans may be denied through our usual delivery channels, like the branch when you go and make an application. And the second look by volunteers is afforded members through the Loan Review Committee-- as another opportunity to have someone hear your loan request.
Secondly, the Loan Review Committee offers you members a direct voice into the loan decision process. LRC members are not staff. They're not compensated. We are volunteers just like you. The right to appear before the Loan Review Committee of peers is a unique benefit for Local Government Federal Credit Union members.
This is truly one of the differences that make the Local Government Federal Credit Union membership exceptional. It makes it excellent. And it gives you an opportunity that most financial institutions don't give you. If you go to your branch and you make an application, that application may not be able to significantly show all of the issues that you may be suffering through at that moment of need financially.
It may not give the loan reviewer a clear sense of all those extraneous things that may be affecting your life, which lead to you needing a loan or some type of financial assistance. But fortunately, with a Credit Union, there's a group of individuals, such as myself and the other volunteer members, who meet every Wednesday, either phone or in person. And we will listen to your application on a one-on-one basis. And we're able to consider those extraneous things that might make a difference that the sheet of paper that you filled out for an application can't truly give the loan reviewer.
Members are given the option of hearing their applications presented to the committee via mail, telephone, or, as I said, in person. And often the committee members will meet with members just like you in person, looking eye to eye, face to face. In every instance, every application is treated equally, confidently, and respectfully.
Last year, the LRC met as [AUDIO OUT] weekly, like I said, to meet the needs of the members. We have some members that have served for more than 20 years on this committee. And it means something to us. We take this task to heart. We take it very seriously, because we know we are a last line of recourse for our members who may have significant financial needs.
And we look forward to hearing those requests considering the situation and, in all cases that we can do so, giving you another opportunity at application approval.
So thank you so much for your membership. Please, please do not hesitate if you ever need to contact me or anyone with the Loan Review Committee, to do so with any comments. If you have a family member or a co-worker or anyone that is going through this process and they can offer any insight, any recommendations of how we can do it better, you let Maurice or Mark know, any member of the staff, or you call me directly. We will certainly listen to your concerns.
You know, we're very fortunate to be members of this Credit Union. Let me reiterate one thing. We are members and we are owners. This is our Credit Union. And what's best of all is our staff understands that. They understand it's not their Credit Union, but they serve a membership. And I'm going to tell you, they do a great job at it. We've been chosen once again by Forbes magazine as the best credit union in North Carolina. And if you've ever had any one-on-one dealings with financial needs or with our board of directors or with our staff, you will certainly understand why we are number one in this state.
So once again, thank you for the opportunity to appear before you virtually. Please, please be safe and prudent as you get out, and I look forward to seeing you again in person very, very soon. Take care.
Our Loan Review Committee really demonstrates the credit union spirit of members helping members. Tony, thank you very much for that heartfelt presentation. Please let the rest of your Loan Review Committee know how much we truly appreciate their hard work. And now I will call on Aaron Noble for the Nominating Committee report. Aaron.
Good morning, Chairman Dear. Thank you for the opportunity to present the report from the Nominating Committee. I'd like to recognize the members of the Nominating Committee who it was my pleasure to serve with this year, Lin Jones and Paul Miller. In accordance with credit union bylaws, the chairman of the board appoints the Nominating Committee, and it is the charge of this committee to review the qualifications of prospective candidates for the board and make nominations to the membership.
The committee has voted to submit the following nominations. Ruth Barnes, Atlantic Beach, North Carolina, for a three-year term; Jeanne Erwin, Cary, North Carolina, for a three-year term; and Ken Noland, Wilkesboro, North Carolina, for a three-year term. Chairman Dear, the Nominating Committee submits these nominations and recommendations to the membership.
Our bylaws provide for nominations from the floor in the event a vacancy where there is no nomination. There are no such vacancies. There were no petitions received from the remembers for nominations, so the chair will entertain a motion for the election of the Nominating Committee's selection by acclamation.
Mr. Chairman, I make a motion to accept the report of the Nominations Committee.
Having a motion and a proper second, the motion is approved. Thank you, Aaron, for your report, and our appreciation to the committee for their hard work.
Now, as I call on Maurice Smith for the CEO's report, I would like to remind our audience they can submit their questions to Maurice at any time. And if you could include your first name and location by city, we would appreciate it. Maurice, you're up.
Thank you, Mr. Chairman, and thank you all for being here today. Under normal circumstances, I would be with you in a crowded assembly room giving a report to you all about the virtues and what your Credit Union has done for last year. Some of you have joined us here today, and thank you for being here.
But here we are. We're not all together in the same place. But nonetheless, this is still a meeting of the membership of Local Government Federal Credit Union. This is my 27th year of attending an annual meeting of this Credit Union. I still get goosebumps thinking about what this means to the membership, you assembling here to practice your rights as members of this cooperative.
We still live by the same principles that we formed with 37 years ago. Those principles are egalitarian philosophies that all members are treated and created the same, they're also the same as democratic control, that the members of the board are elected by you, and the fact that we're a not-for-profit institution. Our focus is on you, not on the profits of the institution.
But today feels different. Doesn't feel like other annual meetings that we've had. So the world feels like it has changed.
Now, you might imagine, and I hope you would expect, that your Credit Union plans for events like this-- well, not quite a pandemic. But we plan on business disruptions, on recessions and bad things happening in the economy. We have tabletop exercises that prepares us for high unemployment, changes in the interest rate. We have reserves that we put aside for the mitigation of risk. We think about what kind of business continuity and interruption plans should we have in place.
So while we didn't necessarily think about a pandemic for this year, we did arrive with the expectation that whatever occurs that could affect your Credit Union, that we should be prepared for it. But we've learned during the season some new language.
COVID-19. I presume there was a COVID-18, a COVID-17. I didn't know anything about them. But here we are today with COVID-19. Our language expands to social distancing. It sounds like an oxymoron. How can you be social and distant at the same time? But with technology, we're making it work.
But also you think about essential businesses. So what is an essential business? If you're collecting a paycheck from a business that supports you and your family, that contributes to your community, that seems pretty essential to me.
But also, we have shelter in place. You should know that many of your Credit Union staff persons are working at home today. We are doing this for the protection of the Credit Union, for the protection of their colleagues, and for their families. We have built the technology to allow our staff to do their jobs away from the office. There's a skeleton crew here doing what we have to do. But for the most part, we are continuing to serve you, to address your needs, and take care of the services that your community stands in need of today.
But some things have not changed. Yeah, the world seems a little different, but you should know that your Credit Union holds some values still dear to our hearts.
So there's a momentum that occurs in recessionary times. It's called flight to quality. This is when consumers and institutional investors are looking for places to put their money, places to do business when times are bad. So we have high unemployment. We've seen all sorts of disruptions in our environment, in our merchandise, in the way we do business.
So flight to quality says you go someplace where you can feel a little more secure. Well, during these times, members come to the Credit Union for a place of integrity, a place that says, here's our values, we hold on to them, we want to go some place and feel safe. We are the Local Government Federal Credit Union. We have chosen to serve you for a reason.
Now, serving local government isn't just a target market for us. It is who we are. We are you. I have said to you in the past, just we as ordinary citizens sometimes, we just take for granted that society works as well as it does, that when I roll out this green can on Thursday morning, that somebody is going to take away my garbage. If I turn on the tap, clean water's going to come out. That if I need assistance and I dial 911, someone's going to come to my aid.
We just take for granted that society works as well as it does. But the fact of the matter is it works as well as it does because of you-- the first responders, the dedicated people, the folks who make local government work. We take enormous pride in serving you because you serve us.
Now, much of the business and much of what we share with you about financial services and what we do as a Credit Union deals with inanimate topics-- interest rates, covenants, risk mitigation, yields, all sorts of fairly technical terms of art about how our business operates. But we should not lose focus on the fact that everything that we do, every technical term, every process, every computer program, is focused on people-- you and your family. And I don't know how we become successful as an institution if we do not have compassion for the members and the communities that we serve.
So what I'm speaking about are the core values of your Credit Union. These and other values represent who we are as an organization.
Now, you would expect during times like this that institutions might change the way they do business. But what is the point of having core values if you can change them with the seasons? We are who we are. We serve you no matter what the season is, and we are proud to be the institution that you want us to be. Now, Chairman David Dear, he states it well when he says, "When you judge our performance, we encourage you to look beyond the numbers."
Now, we are a financial institution. You would expect, and perhaps you are accustomed, to meet in meetings like this to bring you lots of numbers about how your Credit Union is operating. I have some more numbers for you today. But I want you to look beyond the numbers. I want you to hear the story for what the numbers represent, because that reflects the core values of your institution and how we do business.
Now, some of you have seen this chart before. This illustrates the total assets for the Credit Union from 1990 until last year. What's remarkable about this is this chart does not show any year where the Credit Union lost assets or we shrink in size. What's remarkable about this is that you and your fellow members continue to have support and confidence in your Credit Union to continue bringing your resources to your institution. We don't take that for granted. But while the Credit Union is over $2 billion in total assets-- those are big numbers-- we can't lose focus on the individual families and households that are represented by those numbers.
So here's a bit of a tale of the tape about your Credit Union, some statistics. I'll just touch on a few of them. But this is just some highlights of what we have done with you through last year. Last year, we surpassed 350,000 members of your Credit Union. But you're not just members. You're owners of this institution.
My dad told me a long time ago, if you own something, that makes you the boss. So I have over 350,000 bosses, and we listen to each and every one of you. One in every 29 North Carolinians is a member of this Credit Union.
So if you think of the Credit Union as sort of like a family, then you have a whole lot of cousins in North Carolina who are part of your Credit Union family. You see also that we have-- that we've made mortgage loans. Over 6,220 loans were made to you and your fellow members last year alone.
That's a lot of mortgage loans. Don't focus so much on that number. Focus on all the backyard barbecues that were made possible through your Credit Union. Focus on the bathroom renovations, the picket fences, the extra bedroom for grandmother, for all the things that were able to be accomplished with the loans that your Credit Union made to you and your fellow owners.
You see some other statistics there about who we are as an organization, what we have done. We are proud of those numbers. But we didn't do it just as staff, not just as volunteers. This was all done through the cooperation, the support of you and your fellow members.
So here's a little bit more information about your Credit Union. So you would think as an institution, financial institution-- you might wonder, so what metrics do we use to determine success. And growth is one of them. So we have before you a chart to sort of illustrate some of the more important growth metrics that we monitor as a management team and as a board of directors for you.
The first one I'll highlight is the total assets for the Credit Union. And you'll notice here on the chart, we use this other graph-- this other column called Peers. Peers are like-size, or similar size, credit unions nationwide. So essentially, it's all credit unions in the United States over $1 billion in total assets.
So as you see, if we compare our total asset growth for LGFCU to our peers, we are roughly about the same in terms of growth pace to other institutions that look like us in terms of total size. Total deposits, we're growing a little bit faster than some of our peer credit unions. Total loans, roughly about the same pace that we're growing there as well. But take a look at that investment number. You see that we had negative growth in investments compared to our peers. There's a story there.
So when the Credit Union takes in a dollar from their membership, we have one or two things we can do with it. First of all, we invest it. But we can put it out in marketable securities, safe investments. We're not going to put it in anything risky to put at risk your hard-earned money. Or we can loan it out to the membership. We prefer to loan it to the membership.
So as we roll down our investment portfolio, as you see the negative growth in investments, the money they're taking out of investments, we're putting that in loans to you and your fellow members. That's what a credit union is supposed to do. We are proud of being able to roll down investments and invest more in you.
You see our total net worth for the Credit Union grew a little bit slower than our peer credit unions did because we paid a little higher dividend rate than some of our peer institutions. So we have invested the money back in you and in your communities as opposed to holding on all of that for the Credit Union. And you see the total membership for the Credit Union has grown a little bit faster than our peers as well.
Here's a little more inside baseball for you. So now we're going to get into some of the more technical aspects of how we judge the performance of the Credit Union. You've seen the growth rate, but let's look at some of the metrics in terms of ratios. There's a story here to be told as well.
So the first one we have here is cost of funds. Cost of funds is how much the Credit Union has to pay to receive your deposits. Essentially, that's the dividend rates that we pay. And as you can tell here, the cost of funds, the dividend rates that we are paying you for your deposits, is higher than what our peer institutions are paying their customers or their members. Look at expense to income. The expenses it takes to operate this institution is just about comparable to what peer credit unions operate at.
Expenses to assets-- now, our expense to assets are higher than our peer credit unions. Let me share the story with you about that. So if I'm running an institution, if I want to be able to get my expense to asset ratio down, then the way to do that is to attract members who have larger deposits. So then that pushes up the asset number. If your expenses stay the same, then your expense-to-asset ratio naturally goes down.
Now, if we were anything other than a Credit Union, focused on the egalitarian principles of treating all members the same, we would be shopping for members who had larger deposits to bring to the institution, as opposed to those who just had a few dollars to invest in the Credit Union. The ratio might look better, but are we really truly serving the needs of the membership? So there's a story there we want to share with you.
Provision for loan losses is the amount of money we put aside for the eventuality or the probability that some loans will not get paid back. We make loans to members with the hopes that they are going to pay us back, they're going to pay you back. This is your Credit Union. But sometimes bad things happen to good people, and they're unable to pay us back. And so we put aside reserves in that case that the loan is not paid back.
So you may see from this graph here that we put aside almost three times amount of reserves for bad loans as our peer institutions do. What that does, it allows us to take more risk and more chances and have more faith in you, because what we are doing is we're saying, we're going to make some loans that maybe we may not get all our money back. But we are prepared for that. We've put aside reserves. We want to keep betting on you.
Take a look also at our charge-offs. As you might imagine, if you take more chances and have more faith in the membership, you're going to have a few more charge-offs. These charge-offs are loans that just don't come back. Something happened to a household. They're unable to pay us back, and we have to write off that loan. It's unfortunate. We want to continue working with members to get them back on the right track. But a cost of doing business is sometimes a loan will not be paid back. We want them to be paid back, but we want to continue to take chances and help our membership.
And a return on assets-- essentially, that's the bottom line. Seems kind of contradiction in terms for a not-for-profit institution to have profit. But we call it return on assets. That's the bottom line. And as you may see, we're not quite as profitable as some of our peer institutions. But when you take more chances, you pay more in dividends, then it reflects on the bottom line, and we are perfectly fine with that.
So you wonder, really, how is my Credit Union doing? You heard from me. I think we're doing really well. And we are positioned for the kind of market that we're going in today, a receding economy.
But don't take my word for it. We would like to prepare you to be able to assess us on how well we are doing. So each year we get a CPA opinion. And last year, we receive an unmodified opinion. That's a technical term that essentially means it was a clean opinion from the auditors. And our audit is posted online at lgfcu.org, so you're able to go out and take a look at it for yourself and read all the details you would like about what the auditors think about your financial institution.
We are a regulated institution by the National Credit Union Administration. So every year there's a team of examiners come in the front door, and they spend a couple of weeks poring over every single detail of our Credit Union lives to make sure we're doing the right thing, make sure we're complying with rules and regulations, make sure we are following all of the laws, making sure that we're taking care of the membership. We passed with flying colors.
But we also ask you from time to time, in surveys, how are we doing. And we take a look at those results to get an indication of how you think about your Credit Union. But the final arbiter of how well we're doing is based on your perspective.
You know how we're treating you. You know how well the services are. You know how competitive they are, because you can shop around in your own communities. So we ask you to make that judgment every time you do business with us. How well are we doing? How well are we taking care of you and your family? If you get a negative report about how you think we're doing for you, then share that with us. We want to know so we can make improvements.
Now, I'm not one to do a whole lot of bragging about your Credit Union. OK, I'll just brag a little bit. For the second year in a row, we were rated the number one credit union in North Carolina. How about that?
Now, I'd like to take all the credit for it. I'd like to brag about it some more, saying I did it. No, you did it. You're the members of the institution. You made us who we are. This is your Credit Union, your institution. Thank you for your support in helping us reach this achievement.
But we've been through this before. I'm talking about the coronavirus-- well, not exactly that. We've been through disruptions in the economy before. Last August, I celebrated my 40th anniversary in the credit union world.
Yeah. I've been around for four decades. I've seen a lot of things in four decades. I've seen rising rate environments. I've seen inverted yield curves. I've seen unemployment go up and down. I've seen crime rate as high as 18%. This is my-- probably our fifth recession that I've seen. I've seen, I think, just about everything except negative rates. I haven't seen negative rates in this country, and I have not seen a depression. But I've seen most everything else, I believe.
And throughout it all, your Credit Union has thrived. We were built for these conditions. When this Credit Union was chartered in 1983, it was chartered in the middle of a recession. We were built for these times.
We know, when times are tough, you, your household, your communities, you're counting on us. You're counting on us not to abandon you. You're counting on us to have the services that you need. You're counting on us to always be there for you. So we've seen tough times before. I have no doubt whatsoever that we shall get through this as well.
But here's the playbook for you, because we have a secret playbook on how we get through this. So don't tell our competitors, but here it is. Here's the secret sauce. We're going to listen to you. That's right. We are a Credit Union. We're owned by you. We are you.
So we're going to start by listening to you. You know what your family needs. You know what your community stands in need of. And sometimes you just want somebody to have a willing ear to listen to your concerns. We're here for that. So if you have a gripe about something that we haven't done quite right, you have a suggestion on how we can improve on our services, you have an insight on something that's going on in your corner of North Carolina that you believe that we should know something about, we are going to listen to you.
This seems like a simple proposition, we're going to keep making loans. We learned the last recession that a lot of financial institutions stopped making loans. They felt burned because some of the loans weren't paid back. And it felt like, let's just pull back from the economy, and let's just wait this out. And then when things are good again, then we'll come back into the lending business.
What kind of credit union would we be, at a time when you need us the most, that we shut off the services that you need the most? So we're going to keep making loans. We are still in the lending business. So if you and your family have a need for credit-- responsible, affordable credit that's going to help you live a better life-- we want you to pick up the phone. We want you to go to the website. We want you to visit us, because we are still in the business of helping improve your lives through the credit that we offer. We will help you work out problems.
Now, in going through a recession, take a look at the kind of job losses that we've seen and some of the challenges that the economy is going through. You would expect that some of us are going to have more challenges than others. And you want somebody who is going to help you figure out what to do next.
What should my investments be? How do I stretch my dollars? How do I feed my children? How do I take care of repairs for the home that I've put off, but now in this environment I no longer have that luxury? How do I take care of educational expenses? You have some challenges in your lives. We're right here to help you figure that out.
And we're going to live our values, as simple as that. I shared with you earlier the core values of our organization. We're going to continue to live them. And we're going to be the Credit Union you expect us to be, regardless of what the economy's doing. You still need us. We still need you. And we're going to live out the values that we said that we are going to do.
It's been a pleasure sharing with you a few thoughts about your Credit Union, about our performance, and particularly the relevance of your Credit Union in this kind of environment. These are some of my colleagues who work with us here at the Credit Union supporting and helping you. I've said before, we've hired this group of people who had this pollyannish view that they think they can change the world. And even with a pandemic going on, they still have this overly optimistic perspective that they can do something about that to make the world different. That's exactly why I'm proud to have them as colleagues.
But we exist to serve you. It doesn't matter whether we're sitting on our sofa at home, telecommuting, or here in the office or out on the road. We're focused on you and your needs. It's been a pleasure serving you this year. Thank you for being a part of the annual meeting, and I'm looking forward to hearing some of your questions and comments and addressing what's on your mind. Thank you, Mr. Chairman. I turn the podium over to you.
Thank you, Maurice, for that very informative report. But more importantly, thank you for your excellent leadership. If anyone has any questions for our CEO, please submit them in the chat box below. LGFCU staff members Jennifer and Terry Phelps, will be reading the questions as submitted. If you are ready, Maurice, we can begin the session.
Thank you, Mr. Chairman. I'm ready. In fact, this is my favorite part of the annual meeting that I get to hear from you, so I'm looking forward to your questions.
Good morning, Maurice. The first question comes from Meredith in Cary. She wants to know, "What is next for LGFCU? And has COVID-19 changed how LGFCU will operate in the future?"
Well, thank you, Meredith, for your question. We've thought often about what does the new normal look like. So COVID-19 appears to be a frightening episode for your Credit Union and for your community. So what's going to be new for us?
Some of the same things. We're going to continue to serve you. Now, we're looking for new ways of doing that. We have to think about how do we serve you in a safe way, how do we protect our employees, how do we make sure our systems are available to you. But we'll continue doing some of the same things that we have done in the past.
Now, we're going to pay very close attention to the governor's orders about how we should operate, how the economy should reopen, how do we keep ourselves safe and healthy. So those are some of the things that are on our minds. But as we go into the future, we're going to look for new opportunities to serve you, and we're going to do that in a safe, healthy way.
Now, if you have ideas on how we can improve the services in your community, in the midst of a pandemic or here afterwards, by all means, please let us know. We're looking forward to your suggestions on that in the future.
This question, Maurice, comes from Justin from Shelby, also related to COVID-19. He would like to know what you see as the most important opportunity that has arisen as a result of COVID-19.
Ah, very good question, Justin. So let me think about that for a moment. So I mentioned earlier that I've been in this business for four decades. I've seen a lot of changes in the economy. There's an opportunity for your Credit Union in this moment as well.
So we learned the last recession that financial institutions react in different ways. Some pull back. Some go to the sidelines and say, I'll just wait this out. When the economy is better, when employment is higher, when I find opportunities to get back out and do business in a least riskier way, then we'll come back out to the market.
But this is an opportunity for your Credit Union to demonstrate to you and your community and your fellow members why we are a cooperative, the fact that we are owned by you as members, and that serving you is our highest responsibility and duty. So these are the opportunities we have in terms of demonstrating to you the philosophy of a credit union and what's dear to us.
But there's some other opportunities as well from a business standpoint. It breaks my heart to see on the television each evening long lines of our neighbors looking for food, to see a high unemployment rate and know that some families are suffering today. So call me a little pollyannish, but somebody needs to do something about this. And I don't know anybody more equipped, more prepared, perhaps more determined, to get into this fight than your Credit Union.
Now, you should know that I have a number of objectives and goals that are given to me by the board of directors. One of those is to do something about poverty. Yeah, that's right. What are we going to do as a Credit Union to fight poverty, to find a way that households can thrive, to live better lives?
So what would the world look like if we could do away with soup kitchens and long lines for unemployment? What would it look like if financial institutions, cooperatives, credit unions, in particular, decided that we're going to take this moment in history to do something about this?
There may be another pandemic in the future. There may be another recession in the future. But we are learning lessons today. What should we do today that is going to prepare for the next event and help protect our households and our communities? Thank you for your question.
This question comes from Nancy in Raleigh. "Due to COVID-19, funding to our communities will be very limited. Some local government employees may be reduced in force. What services or resources will be available?"
Thank you, Nancy. So this has to be on the minds of our membership, because due to this pandemic, seeing what's going on through your employment, your access to financial resources, the unemployment-- if it doesn't affect particularly you in local government, maybe it does somebody in your family. So what services can we offer?
Well, the first service is to make ourselves available. So if you need your Credit Union, we are going to be here for you and provide the same services that we have provided before. Prices may change because interest rates go up and down, but the various services that we offer to the membership, they're here for you.
As I mentioned earlier, resources that are available to you is that we stand ready to help, have conversations, and work out any issues that you might have with your loan with us. Now, if you're at home and you have a loan and you believe there's going to be some difficult days ahead to be able to pay your loan, to honor your obligation to the Credit Union, we want to hear from you. We want you to pick up the phone, share with us what's going on, give us ideas on how we can best serve you. We have some resources as well, some things that we can do that we can tailor-make just for you. We offer financial counseling and financial planning at the Credit Union as well.
So these services are available to help you think through what are your choices and how might you make the best decision for yourself. Our Compass financial management system is available online for you as well for you to go and take a look, how can you find suggestions, articles, information that's also available on our website to help you think about, during these times, what resources should I seek, what decisions should I make, what objectives should I be thinking about. They're all available to you. So if you find yourself, you and your colleagues, members of your community, members of the membership, looking for answers, we'd like to engage you in that dialogue. Thank you.
This question comes from Franco from Monroe. He says, "With some form of social distancing being the new norm, has there been more of a sense of urgency to roll out an LGFCU app, so that our members can effectively tend to their banking needs remotely?"
Franco, thank you for your question. We've been talking about producing an app for the Credit Union for the last several annual meetings. Let me give you an update on that.
We find out in a time like this it's particularly important to have electronic and digital services to serve the membership, because it is a bit frightening getting out into the public. So we had intended to announce to you at this annual meeting that the process for coding, the programming for an app had begun. Well, it's been a little bit of a disruption here in the last few months, so that's been put off just for a little bit. Can't give you an exact timetable for it, but I want you to know it's a high priority for us and we are working on making that app available.
But in the meantime, the kinds of services that you might look for through an app are also available through other channels at the Credit Union today. So you're still able to access Member Connect through your mobile phone or some other digital device or a desktop computer and be able to get balances on your account, transfer money, to communicate with your Credit Union, perform a number of services through our online products.
You can also use our telephone services as well, Member Access, to be able to contact us and let us know about-- basically retrieve your balances on your account. You can call our contact center. There are folks there waiting to have conversations with you as well. And just an old-fashioned email or a text message to us as well, we're happy to respond to you.
So short answer is, the app is on the way. Little bit of a disruption in the preparation for that. But in the meantime, we hope these other services will suffice to get you the services and the products that you need until that app is available. Thank you.
This question comes from Kimberly out of Asheville. First she said, "Sign me up to help solving poverty in North Carolina." Her question is, "What are the decision-making levers used to determine how much capital and by which vehicle will be deployed to each community?"
That's a good question. So let's talk about the definition of capital from the credit union standpoint, and then let's talk a little bit about how we actually assign that by community. So we are a financial institution. We are a cooperative. And so as a financial institution, we are required to have a certain amount of capital. In our world, sometimes we call it net worth.
So net worth, or capital, is essentially the savings account for the Credit Union. And we put aside this savings to prepare for bad things that could happen-- recessions, pandemics, disruption to our operation, higher costs, credit risk. So we have this savings account, this capital, put aside to prepare us for the things that could occur.
But then there's also working capital, which is, basically, the cash that we have on hand and whom we choose to loan that to and how we divide up the resources and services to the community. So we think about these choices, if you will, about which communities to provide services based on our philosophical objectives, the things that really set the core of our organization.
The thing that I often mention is an egalitarian philosophy. What kind of credit union would we be if we decide that we're only going to serve the urban communities and not the rural communities, or we're only going to serve communities on one side of North Carolina and not the other side of North Carolina, or we're just going to serve the larger municipalities and not the smaller municipalities?
An egalitarian philosophy informs us that all members are equal. We treat you all equal. You don't want us to make differences. So the services that we offer, we think first, how do we offer the services so that every member has access to it. Hence the importance of the digital services. So if you have access to internet services, you are able to get to them.
We're really proud of our partnership with State Employees' Credit Union, having 270 branches located in every county in North Carolina, and providing that access to you as well. That's a powerful resource for this membership. But if we think about how do we assign capital based on community, we really don't think about how do we ration services.
For a cooperative, where everyone should be considered and treated equally, rationing should be a repugnant notion, that some people deserve it more than others. So we're going to fight our hardest to ensure that every community that we can reach receives equal services and resources from the Credit Union. That's a really good question, and it goes to the core of who we are as an organization, why we exist, and how we treat you and your membership the same. Thank you for that.
This question is from Susan from King. She asks, "Would you consider broadcasting live every year for those who can't attend or recording for view on demand?"
Susan, good question. You know, earlier, this morning, we were having that very same conversation. This feels like the new normal. Because in the past, we've had these annual meetings, and several hundred members would come to Raleigh for an assembly. And we would talk about the business of the Credit Union. We would present reports to you, much the same way we've done this morning.
But we've always felt, you know, we have members around the state that it's not so easy for them to just get in their car and drive for hours to come to Raleigh to hear about their Credit Union and what we're doing. I'm imagining here-- we haven't had a conversation with the board just yet, haven't assembled a management team just yet. But I'm beginning to feel like this may be the way to go.
Sure, we'll have assemblies and bring you to Raleigh for these meetings, but being able to have the ability to simultaneously broadcast what we are doing to you from the convenience of your office or home or wherever to see what your institution is doing-- stay tuned. I imagine you're going to see this happen again.
This question comes from Theresa out of New Bern. "When do you expect to be back in the Quorum Center?"
Theresa. So let me remind everybody why we are out of the Quorum Center. Good question, by the way. We're out of the Quorum Center because three years ago, there was this little fire in downtown Raleigh. I think it was a four or five alarm fire. It was reported maybe the largest fire in Raleigh since 1922. And essentially, what caught on fire was the construction site for an apartment building that was located directly across the street from the Quorum Center, the headquarters for LGFCU at the time.
Well, the Quorum Center was damaged as a result of it. And thankfully to the bravery and commitment and the dedication of the first responders, and particularly the firefighters from the city of Raleigh, they came and they saved our building. But it took a little bit of a hit.
So in the meantime, we've been reconstructing the building, imagining what it could look like. And it was a mixed-use development, so it meant we have residential tenants living in the building and we have some commercial tenants as well. And we asked the construction company that was rebuilding the Quorum Center, put the residential folks in first. It's their home. They're probably the most inconvenienced.
Secondly, our commercial tenants, let's go ahead and move them in next. And last, finally, the Credit Union will move in. We already had another headquarters building. We're pretty comfortable over here. We want to make sure that everybody else was accommodated, and then we would move in. Last week, I toured the sixth floor of the Quorum Center. It looks great. The furniture is being moved in. The wall coverings are put up. All sorts of little details are being done.
So the anticipation is probably late June, early July, we'll be moving folks back into the Quorum Center. We're looking forward to it. But thank you for your question. And maybe we'll have to have a open house, a pig pickin' or something when we open it back up. You can come back in, and you can see the new digs. Theresa, we're looking forward to showing it to you again.
This question is from Tom out of Asheboro. He asks if LGFCU will adopt risk-based lending. He also adds, for the first time in more than 30 years, he and his wife had to seek another financial institution for a vehicle purchase. They were able to beat LGFCU's rate by 2 and 1/2%.
Tom, that's an age old question for our Credit Union. So let me, for the rest of the audience, explain what risk-based pricing is, LGFCU's position on it, and then maybe give you a little bit of a nod as to an alternative for you as well.
So for those who are not familiar with the term "risk-based pricing," is when a financial institution gives you a rate on a loan based on your creditworthiness often it's based on your credit score. So if you have a higher credit score, the financial institution believes you are less risky, less likely to default on the loan, and you get a lower interest rate on your loan. Good for you. But if you have a low credit score, the financial institution may deem you to be riskier and think, well, it's a higher probability you may not pay me back. And because it's more risk, I'm going to charge you a higher rate on your loan.
Historically, LGFCU has not offered services to members based on risk-based pricing. So the rate that every member gets on a loan is the same. So if you want to get a personal loan, it's 10.75. It's on automatic payment. That's the same for every member regardless of your credit score, your credit rating, how long you've been with a credit union or anything. You want to get a mortgage loan, it's going to be the same rate for you as it is for every other member. There's something democratic and egalitarian and cooperative about that feeling, something about a sense of community to us.
But we recognize there are some members who feel, you know, I've done a good job protecting my credit. I've worked really hard to build my credit score, and I'd like to be rewarded for that. So you may have heard of this other endeavor we started a couple of years ago called Civic Federal Credit Union. And so Civic has a different kind of pricing arrangement for its loans, because we're giving members a choice-- how would you like to do business with your Credit Union.
So now, clearly, you have two separate institutions on how to do business. So I invite you. Go to civicfcu.org. Take a look at its offerings as well. It works well with LGFCU. You have two institutions, two different approaches to services. I'm betting one of those will be exactly what you're looking for.
This question comes from Sherry out of Wendell. "Could the annual meeting be hosted outside of Raleigh, such as Charlotte or Greensboro?"
Well, Sherry, that's a good question, and it's a little bit above my paygrade That's the kind of question your board of directors have to answer. And I hope you're not getting me in trouble by me throwing them under the bus and tossing this question at them. But we'll take your question as a suggestion of something we should consider for the future.
We have members all over this state, and maybe Raleigh shouldn't be the mecca for all the annual meetings. Maybe we should go other places as well. So how about we take your question as a suggestion for advisement, and, Sherry, we'll get back to you and the rest of the members on that. Thank you.
We have another question from Franco from Monroe. This is regarding COVID-19. He asks, "What relief opportunities are available for members that are experiencing hardships? And how is that information being disseminated?"
Franco, good question. So there's a number of things we're doing to help mitigate the risk that our members are feeling, the hardship they're feeling as a result of COVID-19. So let's start with just a few of those.
So if you have money in a share certificate, a CD, if you will, and you need to access your money early, talk to us, because there's a penalty for withdrawing out of a share certificate. But talk to us and see what we can do to sort of ease that burden for you. If you have a mortgage loan with the Credit Union and you're finding some difficulty in making that loan, because of a temporary layoff or unemployment, have a conversation with us, because there are ways that we can address your loan to give you a bit of a vacation on the payment, if you will, to allow you to use your resources for other things with your family. If we need to extend the payment on some other loans, a credit card or a personal loan, we want to have that conversation with you as well.
But the one thing I want you to understand, Franco, is that the mitigation efforts and the resources and the tools that we have for the membership need to be custom made. So the things we can do with skipping a payment, extending a payment, you know, waiving a fee here or there, those are the kind of things we'd much rather have an individual conversation with you about, because the challenges for the various households within the membership are diverse and very different.
And there's no one-size-fits-all for everyone. But I'm betting that we have a size that will fit you or any other member who might step forward and say, I need some help. Here are my circumstances, and here's what you can do for me. It may be, let's reduce their expenses. It may be, I need more cash flow, or I need a better way of managing and budgeting, or I need a tool that's going to help me figure out where is my money coming from and where is it going. We have some choices, and we have some option for you.
But it all begins with not trying to design a cookie-cutter approach. Let's have an individual, one-on-one conversation with you, any member who has a need, and let us fashion an approach that's going to help you and your family. Good question.
The question comes from Todd out of Morganton. Since bringing up Civic earlier, has Civic experienced the participation and growth as expected?
Sorry, read that question again.
Since bringing up Civic previously, has Civic experienced the participation and growth as expected?
Very good. Thank you, Todd, for that. So Civic is pretty much exactly where we want it to be at this point. So let me explain to you the enormity of what it took to create another financial institution. Civic Federal Credit Union is the first de novo credit union, financial institution, in North Carolina in, I think, about two decades. De novo-- what I mean by that is a brand-new financial institution created from scratch.
So when we formed Civic, we thought about, well, how large could it be. How many members could we bring on? What does it take to actually gain this kind of market share we think this institution can enjoy some day? But then we stopped and thought, well, let's lower expectations a little bit. Let's slow down just a little bit. Because Civic is not an ordinary financial institution. It's working in companionship with LGFCU. It's offering a different suite of services than LGFCU. And we want to make sure we get it right.
Now, you don't often find in a marketplace two separate financial institutions that are working closely together. We share some things in common. We're focused on local government. We're focused on North Carolina. We're focused on being a Credit Union, and we're focused on the philosophies that make us different from everybody else on planet Earth.
But if we think about the future for Civic, the way I sort of think about it, it's sort of like a marathon, not a sprint. We are methodically and thoughtfully building a brand-new financial institution for North Carolina. And for the members who have joined, they tell us they really like the services. They like the features. They like what we're providing for them. But we have a long ways to go.
So if you are a Civic member or decide to become a Civic member and you kick the tires and you have suggestions on how we can improve those services, or you learn something from Civic that might be useful for LGFCU, we want to hear those suggestions as well. But right now, Civic is underway. LGFCU is proud to have it as a sister institution, and we're going to both work well together to serve you and local government.
Maurice, this is the final question from Brenda in Smithfield. "Are there any plans to roll out more contactless payment options?"
Ah, Brenda. So contactless, I guess you're speaking about you taking your debit card and being able to tap it at a point of sale, and that way you don't have to touch the keyboard that somebody else has touched in a pandemic type environment like this. That's an important feature to have.
So I imagine we are probably busy behind the scenes thinking about what kind of new services can we offer from a contactless standpoint. I don't know exactly what those look like. But just as sure as I'm here telling you about the things that the Credit Union has done and the things that we're working on, there's a whole bunch of folks behind the scenes hurriedly and busily working on new innovations, new products, new services, and technology. So you take something like a debit card or your mobile phone, or whether it's Apple Pay or some of the other devices, or mobile wallets, and helping us figure out how do we introduce new technologies to make it easier for you to do business and now, in this environment, to make it safer for you to do business.
So if you have an experience, any of you, with a technology elsewhere that you believe your Credit Union should adopt, by all means let us know. If there's something that we're offering that could be made a little more efficient, a little more enjoyable for the user, by all means let us know, because we want to look for those improvements.
I've used the contactless services as well. Particularly when I go into a store and I say, well, I don't want to touch that machine because I don't know who else touched it before me, it's really quite convenient to do so. So you can count on us. We're going to continue working on that option.
Well, I want to thank you so much for all your questions. This is the fun part of the annual meeting for me, is the listening and hearing from you and what's on your mind. And now, back to you, Mr. Chairman.
Thank you, Maurice. And thank you to the membership for those excellent questions we have out there. And thank you, Maurice, for your very thoughtful responses. If any members viewing today have new business or old business, please enter it in the chat box now.
While we wait, I'd like to mention to our Advisory Council members watching, the annual volunteer meeting has been tentatively rescheduled for November the 20th. More information will be shared as we get closer to the event. And if you are a member of the LGFCU Advisory Council, we thank you for your unselfish service to our Credit Union.
Mr. Chairman, there were no submissions received.
Thank you. If any members viewing today have an announcement, please enter it in the chat box now. While we wait for any responses, I say on behalf of myself and the board how much we appreciate Maurice, Mark, and the rest of the Local Government Federal Credit Union staff for adapting to unprecedented circumstances to put together this virtual annual meeting. We would also like to thank Creative Visions for their partnering with us to help make this event come together for the benefit of you, our membership.
Mr. Chairman, there were no submissions received.
Thank you. Thank you for being a part of this unique 37th annual meeting. The business meeting is now adjourned.
This concludes Local Government Federal Credit Union's 2020 annual meeting. Thank you for joining us during this virtual presentation. Please visit our website at lgfcu.org to review the 2019 annual report. Have a great day.