I sat down with our CFO and senior vice president of finance, Terence Field, to discuss how to keep you and your money safe during the coronavirus (COVID-19). With so much going on right now, it was wonderful to have an engaging conversation with Terry about everything we are doing to keep our staff and members safe. This was streamed live on Facebook on March 18.
Learn about our response to COVID-19. This interview has been edited for clarity.
Oliver: We are coming to you live from VSECU headquarters here in Montpelier. Welcome to everyone joining us! We’re going to be talking about how to keep you and your money safe over the coming weeks. We’re joined today by our CFO and Senior Vice President of Finance, Terence Field. Welcome Terry!
Terry: Thanks Oliver, thanks for having me!
Oliver: And I, by the way, am Oliver Ames. I’m the social media specialist here at VSECU. We thought it might be helpful to address the questions surrounding our response to the coronavirus (COVID-19). What we’ve done here is compiled a list of questions that we have received from members and that we’ve been hearing out in the world.
Oliver: So right off the bat, let’s talk a little bit about how VSECU has responded and how we’re making sure staff and members are safe.
Terry: Our number one priority is member and staff safety. As soon as this started to become active about a week and a half ago now, we formed a pandemic planning team. Of course, we have a general disaster recovery and business continuity plan that incorporates a pandemic plan within it, so we activated that and started meeting on a regular basis.
Terry: What we’ve been telling our staff is exactly what our members are hearing from the CDC and the World Health Organization. Wash your hands; stay social distanced; if you feel sick, stay home; don’t go to your doctor, call your doctor; and things like that. We have also increased cleaning at all of our facilities when we can. The cleaners come in regularly and do deep cleaning and disinfecting every night. We have also been able to get supplies for staff such as hand sanitizer.
Oliver: One of the things that we have been saying internally is to be prepared, not scared. The reality is that Vermont, compared to how many cases we have, has been on the ball in responding to this outbreak. Simple things like washing your hands, coughing in your elbow if you need to cough or sneeze, and reducing the amount of contact you have with the public are all good ways to stay safe. I think what we are seeing here is the community values that Vermont has and that we here at VSECU try to embody.
Terry: As much as we work with our staff, we also want to work with our members to keep both safe.
Oliver: Let’s talk about personal finances and banking. What are some of the ways people can do their banking remotely?
Terry: We have lots of options for members to do their banking remotely. Of course the obvious one is our ATMs. You can do deposits and withdrawals at all our ATMs. Also frequently used is Online Banking. You can go online and look at your accounts, perform transfers, and more. Mobile banking is great too, because you can do almost all of the same functions on your phone as you can online. You can also call in and do transfers, deposit checks, check balances, and more. Of course, we have debit cards and credit cards which enable you to do most of your transactions without using cash. You can talk to people here in Montpelier by calling our Contact Center to apply for a loan, check balances, do transfers, and things like that. We even have bank by mail! You could send us something in the mail, and we’ll process it for you and send you a receipt if that’s what you’d like. You can apply for a loan online too. So, we have lots of options for members to continue doing their banking, doing their work with their credit union, without coming into the branch.
Oliver: I was reading a few articles recently that talked about using contactless payments as a way to reduce touchpoints. Many of our cards are contactless cards. If you are concerned about swiping your card through a terminal for gas or something like that, a lot of merchants now allow contactless payments where you can wave your card in front of the reader, and that will process the transaction for you.
Terry: I forgot to mention drive-through banking! We have that availability at our Montpelier, Williston, Berlin, and Rutland branches. So again, members don’t have to leave their car, and they can do their banking through the drive-through tubes. In our Williston, Berlin, and Rutland offices we have what we call video teller services. If you haven’t seen it, it is kind of like an indoor drive-through. You have a private, safe space where you can go, and it’s just you talking to the member service consultant on a little screen. You can do cash withdrawals and other transactions that way.
Terry: We have also deployed video teller services in five of our branches where members can go in, tap the screen, and talk to a member service consultant here in Montpelier who will process your transactions for you. You can do deposits, withdrawals, transfers, loan payments, and ask questions.
Oliver: What are some ways that people can keep themselves safe right now from scammers and fraud?
Terry: If it sounds too good to be true, it probably is. VSECU is never going to call you and ask for your account number, your social security, your pin, or anything like that. The only time you will be asked for your personal information is if you initiate a call with our Contact Center. We will then go through the normal verification process to make sure we can identify you so that we can process your transaction safely. If you are getting a call from someone and you didn’t initiate it, you should be very suspicious. Also be very suspicious of unsolicited emails, especially ones that ask you to click on a link. Unfortunately, there are a lot of bad actors out there that are trying to take money away from our members. We have two people in our fraud department, and they deal with this on a regular basis.
Terry: My advice to members is to be particularly cautious, especially now. Be cautious of emails you are getting. If you don’t know who sent it, don’t even open it, just delete it. And again, if you’re getting phone calls, don’t give out your personal information. If you think someone calling you might be VSECU, please contact us, and we can verify that for you.
Oliver: What would you say to members who are worried about accessing their money if things get worse?
Terry: We’ve talked about all the different ways of getting to your money, so I do not think getting to your money is ever going to be a problem. We have lots of ways for members to do business with us.
Terry: I think about money in two ways: there is physical cash and then there is everything that you have at VSECU, which is not necessarily in cash. I’ve talked to a few members already who are worried about getting cash. We order cash on a regular basis; we monitor our cash levels. We track how much cash we use, and in times like this, if we are seeing an uptick in cash, we’ll order more to be able to meet supply. We aren’t going to over order, however. My point to members is that taking cash out of the Credit Union is not safe. The safest place for your money right now is in the Credit Union. We have controls, we have insurance, we have vaults, we have procedures, and we work with armored car companies. This is what we do, and this is what we’re good at. So, for the members who are thinking, “Well I’m going to take out an extra several thousand dollars,” I would encourage you to talk to us first. I don’t think it is a good idea. I’ve talked to some members who say, “I have a vault in my house.” The reality is that you do not have the vault systems that we have. You do not have the insurance that we have. You do not have the alarm systems that we have. I am very confident that we will be able to meet your cash needs now and in the future.
Terry: The banking system in the United States is one of the strongest in the world and the Federal Reserve Bank has clearly stepped in to do whatever they need to do to maintain this banking system. We have a lot of resources available to us to draw on if we need to bring in more liquidity. I’m talking about being able to fund check clearings and things like that. We have a lot of capacity to do that.
Oliver: What does it mean to be federally insured?
Terry: The National Credit Union Administration, they are our insurer. They insure our members’ accounts. All members accounts are insured up to $250,000. If you have more than $250,000 on deposit with us, talk to us. We can help you. There are strategies that we may be able to deploy to help get more insurance. For the vast majority of members, $250,000 is going to be plenty of insurance. This institution, in the thirty years that I’ve been here, has never had a year where we have lost money.
Oliver: That’s significant!
Terry. It is! We have a very strong capital position. What is capital? Think of capital like your rainy-day fund. Capital is the money that we have set aside over the last, almost seventy-five years now, in the event that something happens like this. We have about seventy million dollars in capital. That is a substantial amount of money. If you take an average year for us, our net income is about three million dollars. Let’s say we made zero dollars in 2020. That is extremely unlikely, but let’s just say that. That means we would have to draw down three million dollars of that seventy million dollars. We’d still have sixty-seven million dollars left and would still be considered well-capitalized. Now that’s an example; it is extremely unlikely that is going to happen. My point to members is that we have a lot of resources. We are a safe institution and have the NCUA insurance fund. That’s what I would tell members if they are really feeling concerned about the banking system and taking cash out. I’m happy to talk to members about this too, because I want them to understand that we are a very safe and sound financial institution and that taking out large amounts of cash just isn’t safe.
Oliver: What are some other dangers of taking large sums of money out of your accounts?
Terry: Well, you’ve got to transport it, and I cannot help you once you leave our facilities. I can tell you that when you are behind these walls, I know how safe you are. I know the controls we have in place. I know the alarm systems. I know the vaults. I know the insurance. I know what we do to keep your money safe. Once you leave here, I cannot help you. I do not know what is going on out in that world. As we were talking about earlier, there are a lot of bad actors out there. Not just from the fraud standpoint, but there are people, and I hate to say this, that would knock you over for five dollars, let alone for $50,000. Also keep in mind that if you are storing cash at your house, which I think is a very bad idea, it isn’t just you that you are putting at risk. You are putting other people in that home at risk. If you are in an apartment building, you are putting other people in that apartment building at risk. Effectively, what I have told people is that you are putting the community at risk. If, god forbid, somebody should get robbed, that money is now on the black market. Someone is going to, and I hate to say this, buy drugs and guns with that, and that isn’t good for the community.
Oliver: What would you recommend members do right now with their money?
Terry: I would encourage members to keep their money here and to not take out more than what they need. I do not recommend people carry a lot of cash on them. If you are feeling the need to take some cash out, do it in an orderly process and spread it out over a period. Don’t come in here and think that you are going to take out $50,000 cash. First of all, we probably wouldn’t have it, because we try not to maintain that much on hand at one time. If we get to that point, we’ll ask you to spread it out over time. That lowers the risk a little bit. Three weeks from now we may be in a totally different environment. You may say, “I don’t want this cash, I want to put it all back here because I feel perfectly fine with what is going on in the banking system.” Or you might say, “I’ve gotten scared, and I don’t want to have this all in my house.” So, spread it out and do it gradually.
Oliver: Can you talk about what it means to operate on the same days as the Federal Reserve Bank?
Terry: The Federal Reserve Bank has a calendar that they publish each year that details all the holidays that they are going to be closed. There is an expectation, because we are a member of the Federal Reserve Bank of Boston, that we are going to be open when they are open. If we aren’t, we need to notify them. They are expecting us to come in every day, take those checks and transfers, and clear them against our members’ accounts. When the Federal Reserve Bank is open, we’re open, we’re doing business, we’re clearing members’ checks, we’re accepting their electronic payments, and we’re getting cash orders.
Oliver: Let’s talk a little bit about how credit unions are particularly resilient to changes in the economy.
Terry: I think one of the biggest differences between us and the large commercial banks is the size of the deals that they are willing to take on. They are looking at fifty million dollars to one-hundred million dollar deals and loans. This means they are taking on a lot of risk. While these types of loans may be important for the state, and important for the economy, they don’t fit in our marketplace. That is the biggest difference between credit unions and big commercial banks. They are looking at bigger deals and taking on bigger credit risk.
Oliver: What should someone do if they are worried about paying their bills?
Terry: Well, I’ll start with us of course. If you have a loan with us, or a credit card, and you know right off the bat that you are going to be under stress to make those payments, call us. The most important thing when dealing with a situation like this is communication. We cannot help you if you don’t talk to us. I encourage all members, and this doesn’t just apply to us but also to other vendors you work with, to talk to us. In a lot of cases, these businesses are going to be more than willing to work with you to work out payment arrangements. We try to be as flexible as we can when working with members to help them through times like this. This isn’t the first time that we have seen our members struggle to make loan payments. So, talk to your creditors. Talk to us, talk to other people you owe money, and get ahead of it.
Oliver: Can you tell me about our skip-a-pay program?
Terry: We do have a Skip-a-Pay program. It isn’t something we do a lot of marketing about, but it is something I would encourage members to talk to us and call us about.
Oliver: You can call us any time and we’ll help talk you through all the resources that we have available. If you are experiencing issues with continued income, visit labor.vermont.gov to see if there are any benefits that the state can provide you at this time. There have been some changes in policies due to COVID-19 that may affect you.
Terry: This is a very dynamic situation. It is changing daily, if not by the hour. I would encourage members to go to resources like these and look at them frequently. Things will be continually changing over the coming weeks.
Oliver: We recommend the Vermont Health website, the CDC website, and the World Health Organization website. While we are trying to give you the best information possible, we aren’t the experts when it comes to health and wellness.
Oliver: Let’s talk about the near zero percent interest rate that has been announced recently.
Terry: The Federal Reserve Bank has been very proactive during this crisis. They acted on 3/15 by lowering the Federal Fund’s rate to a range between zero and twenty-five basis points. They’ll probably try to manage it as close to zero as they can. Twenty-five basis points converts to one quarter of one percent. They brought the rate down to make liquidity available in the banking system.
Oliver: Can you define what liquidity is?
Terry: Liquidity is not cash; it is my ability to get funds as I need them. For instance, I might sell mortgages on the secondary market, and that generates liquidity. I might sell investments, and that generates liquidity. So that liquidity coming back to me is money I have here for settlements. Say I need ten million dollars next week to cover check clearing because members are writing lots of checks. I might go out and sell some investments, the money from which goes into our settlement account. As checks come in, they get cleared and merchants get paid. The Federal Reserve Bank is working very hard across the country to keep liquidity in the system to make sure that banks and credit unions can continue to loan, they can continue to fund withdrawals if members need cash, they can continue to fund checks that are clearing, continue funding credit cards, and those sorts of things.
Terry: We have a roughly sixty million dollar investment portfolio, which may sound like a lot, but when you are close to $850 million in assets, it’s a small percentage. My investment target is about ten percent of our assets. This is one of our primary tools to manage our liquidity. If I have excess liquidity when members are bringing in money, if I’m not loaning it out, I’m investing it.
Terry: As a result of the rate cut, we are going to be earning a lot less on our investments. Consequently, we aren’t going to be able to pay as much on our deposits. We will need to be proactive in managing our cost to funds. And you’ll see that on the other side of the balance sheet too. We’ll have to be more accommodating on the loan side too. These two things don’t necessarily work in tandem however. In other words, if the Federal Reserve Bank cuts the Fed Fund by seventy-five basis points, you won’t see a loan rate come down seventy-five basis points, but you will certainly see some changes. All financial institutions are going to be looking hard at their deposit rates, looking hard at their loan rates, and seeing where they can help their members, or their customers, while also recognizing they have to lower their deposit rates.
Oliver: You wrote a great blog post a few weeks ago about how the Federal Reserve Bank impacts interest rates. You can find that here!
Terry: For those that don’t follow it as closely as I do, that isn’t the only thing the Federal Reserve Bank is doing. For example, they have been very involved in the overnight repo market. They have been literally pumping billions of dollars into the overnight repo market to keep it liquid. Members need to be aware, and I’m sure they are from watching the news, that the federal government is working very hard to create some stimulus. All of these things are going to help us down the road. It may not feel like it right now, but we will eventually get over this. There are a lot of things going on that the economy will benefit from, and our members will benefit from, down the road.
Oliver: Wonderful! Let’s end on a brief word about the economy.
Terry: The first thing I would tell the members is that the stock market is not the economy. If you go back a month-and-a-half or two months, we would be talking about low unemployment, low inflation, and relatively modest growth. We were really in a sweet spot. Now we’ve pivoted. Now this crisis is upon us. It has certainly changed things a lot, but I think we will get back to where we were. It will take time, and it is going to be painful for a lot of people, you’re right. A lot of business have closed. I don’t think we’ve felt the full impact of this yet, and it’ll definitely ripple through the economy. Overall, my personal feeling is that the core economy was good going in, and I think it can be recovered. I like the things that the Federal Reserve Bank is doing. I like the things I hear from the federal government in terms of creating stimulus, and I think it will help eventually. This is a rough patch, but I think we will come out the other side. I think eventually you’ll see those stock numbers go up; you’ll just have to be patient.
Oliver: Now of course we are not financial advisers….
Terry: No, we are not.
Oliver: If you have additional concerns, please talk to one of our member service consultants and they can help you find the resources to help you navigate the economy. Anything else you want to share Terry?
Terry: I appreciate the opportunity, Oliver, to talk to you. Hopefully members are listening to this and again, I agree with you. If they have questions, please contact us, and I’m happy to talk to members any time about this stuff.
Oliver: Fantastic! Thanks so much for joining us.
Terry: You’re welcome!
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