GTE FCU was founded in 1935 as the credit union for the Peninsular Telephone Company. Headquartered in Tampa, GTE FCU is now the fourth largest credit unions in Florida and with more than $2.1 billion in assets one of the largest 60 credit unions in the country. It has 600 employees and 37 branches. Unfortunately, Tampa was one of the first areas hit with the “credit crisis,” trouble in housing arriving in 2007. Previously, unemployment was 2%; now it is 8%. Home building is stalled in the region and currently a major car dealership is closing about every week. Tourism is down and the local economy, in Bucky Sebastian’s words, is “at a standstill.”
GTE FCU began struggling with the economic distress before most regions of the country?
BS: Yes. We have members in Maine, Louisiana and across Florida, but most are in the Tampa area, and from here south to Fort Myers was hit very hard, starting last year. Unemployment has quadrupled.
How has the economic trouble hit your financials?
BS: Our charge-offs have risen from 0.5% to 2%, mimicking the quadrupling of unemployment here. In addition, last year and at the beginning of this year, WAMU, Countrywide and Wachovia before they collapsed or were absorbed were offering outrageously high deposit rates in our market. They couldn’t get anyone to lend to them, so they went to the public to raise money. We at GTE FCU had a competitive 3.05% on a 1-year CD while these three for-profits were offering the likes of 5%. We have loyal members, but many are older people on fixed incomes and they switched out. We probably saw $300 million leave our credit union during those times. By the way, now that WAMU, Countrywide and Wachovia are gone, the highest competitors’ CDs are running 3.6 to 3.8%. Maturing CD money leaving our credit union has slowed considerably.
But back to impact: Lending demand is as low as I have known it in 20 years here. People are too nervous to want to borrow, so they aren’t.
As I see it, the real problem in our region is unemployment. If you can at least have some sort of job, you can make some sort of payment on a mortgage or a loan. But when you lose your job, you can’t and that’s really trouble for everyone. When persons lose their jobs, there isn’t even a potential relief by selling their homes, because no one is buying.
How about business lending?
BS: It’s holding up pretty well. We have about $110 million in business lending. About $6 million of that has moved into the troubled category. Two years ago, this would have been a minor irritant; now, though, it’s adding to a stressed situation.
What has GTE FCU been doing to deal with the challenges it faces?
BS: A number of things, of course. For one, we are not paying above-market rates. This was a very conscious decision on our part, not to fund any loan volume we couldn’t meet with deposits but rather with borrowing. We can borrow relatively inexpensively, and we have done so from the CLF and from the Federal Home Loan Bank in Atlanta.
We are, of course, looking very hard at every place to either raise income or lower expenses. We are raising some fees by a dollar or two. For example, some time ago regional banks here raised non-customer ATM fees from $2.50 to $3. We never followed suit for our non-networked users, but now we are. In addition, we are raising our lowest credit card offering by half a percent and our highest credit card offering b 1.5%.
We looked very hard at ways of saving money with the least hurt to our staff. There’s pain in our program, of course, but following was our best option. We are freezing salaries for 2009, and we are suspending our 401(k) matches to operate the credit union. We were faced with either this or passing along a large increase in health insurance costs; we as a credit union chose to pay for the health insurance costs instead. Our rational is that a skipped 401(k) contribution can be made up over the long term but a decrease in health care coverage cannot.
In addition, none of our staff will travel to conferences in 2009, and traveling of any sort will have to be clearly tied to the business benefit of the credit union. We will, however, as best we can keep up with the training of our staff.
What is GTE FCU doing to help members face their own challenges?
BS: We are very aware that behind every balance sheet and newspaper statistic there are people, families who sit over the kitchen table and try to balance their payments and income. Our members are the working men and women who made this credit union great. They built up the assets in it. For decades, we needed them to help the credit union grow and they responded. Now is the time they need us, and we are responding in kind.
When trouble began in our region, we sent out a letter to everyone with a real estate loan. The letter had a bold message across the top: “We can help.” We encouraged members slipping into trouble to come to us early, before their situations got out of hand. We’ve continued to send that letter out. We’ve modified mortgages. We’ve cut some interest rates in half. We’ve stretched some (temporary) amortization schedules to 80 years. We are working as hard as we can to keep families in their homes, because obviously it is both to their benefit and to ours. Taking these measures is going to lower the income of the credit union over the next couple of years, but over the long term families are immensely helped and so is the credit union.
In essence, GTE FCU is doing what we have always done, just more of it. We are doing everything we can to help borrowers work through their situations.
Have you mailed out a “we are safe and sound” type letter?
BS: No. I think in this environment it’s a mistake to do so. People have been too buffeted; they are looking through such rhetoric. Seemingly, the only institutions putting out these kinds of letters are the very ones who are in trouble but trying to persuade the public that they are not.
Of course, we continue to tell all our members that their savings are insured by the federal government, and to any person in the media who asks about our financials, we tell them what they are. But putting out such a letter after the public has seen three months of financial institution collapses is just a kind of flag that draws attention while not doing anyone any good.
Is there light at the end of the tunnel?
BS: Our region was about the first in the nation to run into trouble. We hope we are the first to claw out of it.