CEO Message to Members Regarding Bank Failures:

March 14, 2023

Dear members,

I want to start this message with two statements: 

• Your money is safe and sound at Skyline Financial Federal Credit Union.
• We did not come this far, to come this far.

As we wrap up the first quarter of 2023, banks being conserved by the FDIC (Federal Deposit Insurance Corporation) was not on anyone’s new year’s resolution or quarter one strategic plan. As scary as that sounds for the customers of those banks, members of our credit union are in a much better position.

Skyline Financial Federal Credit Union officially chartered on January 1, 1935. Since then, it has survived not only starting in the middle of the great depression, but it has continuously survived through 11 more recessions over the course of its 88 years in existence. This does not go without saying that there have been some challenging economic, operational, and profitability struggles along the way. Our credit union is in better shape today than it has been over the last 20 years. The financial statements for February 2023 we finalized, and I am happy to report that we are performing 18.88% better than budget when it comes to our income statement and our assets have grown 4.8% where we surpassed $40 million in assets. Skyline Financial Federal Credit Union is growing organically through word-of-mouth advertising and continuous online and in-person presence within our community. Again, it does not come without challenges, but we are making our way through.

Nationally, there has been a net increase in consumer expenses compared to pay raises of 6%. In other words, it is 6% more expensive today to buy the same gas, groceries, and heating oil than it was this time last year. Locally, we have seen rents for a 2-Bedroom apartment in Waterbury go from $850 a month to $1650 a month just in the last 14 months. As expenses go up, individuals are utilizing funds in their saving and checking accounts which decreases the depositor’s financial institution’s liquidity. So, when banks like SVB, are trying to early term some of their investments to backfill that liquidity run off, or in other words, money leaving the bank, it comes with operational losses and negatively impacts key ratios that are regulated by a federal government agency, where in SVB’s case, the FDIC.

In the media you will hear the words “liquidity” and “run on deposit” among many other phrases being tossed around, but those two are being used the most. Liquidity is a challenge for institutions nationwide right now. Economically, there were early signs of liquidity concerns in June of 2022 where it was evident that our local economy was experiencing a paradigm shift in expenses. Last year, I set in motion a liquidity recovery plan as it was obvious members had to spend more money than they were making because their pay checks did not increase as much as their expenses did causing members to be in a crunch for cash. Due to the plan initiated by me, and approved by our board of directors, at the end of December 31, 2022, we remained in a solid position with a capital ratio of 7.03%, and according to the public call report and within the recommended operating ratios of the NCUA (National Credit Union Administration), we are well-capitalized. 

Our Asset Liability Committee is comprised of five individuals, of whom are credit union management experts with over 30 years of experience and Skyline Financial Federal Credit Union team members. The committee meets quarterly and recently met on March 8th, just two days before the news struck about the publicized bank failures. Liquidity and capital preservation were the main topics of discussion to ensure that we are operating and managing within the expectations of the NCUA’s ratios. Our preservation plan has proven to keep us solid through 2022 and we expect we will continue to remain solid through 2023 and forward. Our investment portfolio is mostly comprised of short-term certificates of deposit which are principal guaranteed and provide the credit union with a steady stream of income. Combined with our laddered investment approach, we have a positive flow of investment redemptions available to the credit union monthly for the next 3 years with no gaps in performance. It is important to note, Skyline Financial Federal Credit Union is not involved in crypto investments or other high risk investments of any kind.

Finally, all publicly traded banks and community banks are regulated by the FDIC. All credit unions, including Skyline Financial Federal Credit Union is regulated by a similar agency, National Credit Union Administration or more commonly known as the NCUA. All deposits at Skyline Financial Federal Credit Union are insured up to $250,000. It is important to know that your money is safe in our institution and that you can access the funds when you need it. 

So, I will say it again: we did not come this far, to come this far. 

If you have any questions, please feel free to reach out to me directly by calling or texting 203-313-4498 or emailing me at james@skylineffcu.com any time.

Thank you for your membership,

James A. Higgins, MBA, CUDE

Skyline Financial Federal Credit Union

President and Chief Executive Officer