57th Annual Membership Meeting Recap
CEO’S 2022 Annual Report
On April 4, 2023, I started in my role as the CEO here at Patriot. During the first few months in this position, I have enjoyed meeting and speaking to members and others living, working, and doing business in our communities. I consider myself extremely fortunate to be working with a future-focused, supportive board of directors, engaging executive leadership team, and collaborative team of managers and staff at a credit union with strong financials and a vibrant geographic market area to serve.
Patriot is positioned for future growth and continues to focus on a mission of “People Helping People” through a strong culture of servant leadership with respect and professionalism. While the progress that Patriot made in the past year occurred prior to my joining the credit union, let me take a moment to recap the successes and challenges from 2022 before I provide my observations of the current and future perspective for the credit union.
Coming off the tail-end of the pandemic, 2022 was nearly unprecedented with the Federal Reserve increasing interest rates multiple times to a level that we hadn’t seen since the millennium began. As a result, mortgage rates pushed past 6% after years in the 3-4% range causing fewer mortgage loans to refinance than we had experienced in quite some time. On the flip side, higher rates on IRAs and certificates were a welcomed sight to savers, many of whom had parked money in savings or money market accounts as they awaited an increase in dividend rates.
Some sectors, particularly the automotive industry, continued to deal with supply chain issues, in many cases related to a shortage of computer chips. Some financial institutions were impacted by the chip shortage getting in credit or debit card stock, something that Patriot avoided by securing ample supply to serve our members. But computer chips weren’t the only item in short supply and high demand, other items like building materials drove up the cost of building or home renovations.
In addition to material shortages, many companies, particularly those in the service sector, experienced staffing shortages including Patriot. For more than half of the year, our Gateway branch lobby was closed and we transitioned the staff to the Waynesboro Financial Service Center from the Waynesboro West branch, where low activity and staffing challenges impacted the branch on North Grant Street.
Despite these supply challenges, our team pulled together and successfully opened a new branch location in Shippensburg in May as well as a new ATM location in Waynesboro to offer more convenience to our members. In addition, Patriot employed elevated initiatives on fraud detection and prevention, as well as enhanced digital services through our online and mobile banking platforms.
In particular, Business ACH origination was introduced to all business members to permit authorized staff to pay invoices electronically via ACH as well as to support payroll functions. Additionally, Patriot rolled out Business Mobile Deposit and Business Bulk Remote Deposit for added convenience. Our experienced team of business lenders – Eric Foreman, Mary Cordell, Brittany Leppert and Salma Sufi – have assisted many area businesses with borrowing solutions to meet their growth and operational initiatives.
Business services are just another way Patriot, as a community-chartered credit union, can serve the needs of the community. Your investments at Patriot remain local and support those who live, work, attend school, worship or do business in our area.
From a financial perspective, net income generated by the credit union in 2022 surpassed budget by almost $1 million. Patriot surpassed an industry milestone topping $1 Billion in assets, while loan growth was 10% and shares grew by 7%. As we moved into early 2023, the financial sector was hit with several large bank failures, however, Patriot continued on the path of stability, strength, and security. For over 120 consecutive quarters, 30 years and running, Patriot has been awarded a 5-Star rating from Bauer Financial for safety and soundness.
Coming out of the pandemic, the Federal Reserve has boosted interest rates 11 times to their highest level in 22 years during the past 18 months (since March 2022). Their desire is to pre-empt a recession, and it appears to be working despite the pains that it is causing on some households. As we entered 2023, we fully expected the beginning of a recessionary period with higher unemployment and diminished lending activity. While there are surely signs of an economic slowdown, it has been much milder than many economists expected.
Home loans have been slowed by higher interest rates, raising the monthly payment and decreasing affordability for some consumers, and by limited inventory of available homes resulting in higher prices and fast sales in many cases. Contributing to low inventory are current homeowners who either own their homes clear of any mortgage, or the 63% of mortgage owners with rates locked in at under 4%. Conversely, auto lending has remained strong throughout the year, as manufacturers have been able to meet inventory demand, some of which had been pent up due to limited availability in the past 18 months.
Unemployment remains low, enabling many consumers to continue to stay current with their loans and overall obligations. With a potential recession, we planned for delinquency through increased allowance for loan loss reserves. Nationwide, credit conditions have tightened and there remains concern over credit card and student loan debt. However, Patriot members have generally remained current on their loans – although consumer households on the lower end of the income spectrum are being impacted more significantly.
Savings and checking accounts, which were buoyed by stimulus money during 2020 and 2021, have taken a significant hit, thanks in part to inflation resulting in higher costs for goods and services. After a year in which consumers stocked away 3 years’ worth of typical savings, most financial institutions including Patriot have seen the erosion of savings accounts to meet household expenses caused by inflation. And as interest rates moved up during the past year, individuals also saw the opportunity to move money previously parked in lower earning savings accounts into higher yielding share certificates. As a result, competitive pressure on deposit growth to fund the continued consumer and business borrowing needs has impacted nearly every financial institution in the first half of 2023.
We are anticipating that the recession we expected to occur in 2023 will most probably be delayed until the latter part of the year at the earliest and more than likely not until 2024 and is likely to be much less impactful than originally anticipated. Some economists are even suggesting that the risk of recession occurring has declined to a minimal level, as some of the economic data supports.
I’m excited about the future for our credit union, our team, our members, and our community. We at Patriot, believe strongly in community and member experience. As a credit union, we can typically offer lower fees, better loan rates, higher savings rates and a more personalized approach to service to our members, all while maintaining a strong focus on serving our local communities. Our staff are your neighbors and members of the community – – – it’s where they shop to support local businesses, worship, volunteer, and raise their families.
In closing, I would like to take a moment to recognize my predecessor, Brad Warner, who retired after 43+ years in the financial services industry. Brad led the credit union from $524 million to over $1 billion in assets in his seven-year tenure as CEO, as the credit union grew to over 220 employees and ten branches. He was instrumental in positioning the credit union for the future.
Finally, I want to thank you for welcoming me to this community and I look forward to serving you. Please remember to recommend us to your family and friends when they are in need of financial services.
Ron Celaschi, CEO