Why SECU Lending Needs To Change And Bears Watching...

   

 Careful!... or you will definitely get mauled! 

Now that you are an expert on "TDR's" [post link] and have an honest understanding of the principal reason SECU's delinquency "dropped $581 million, down 51%!" overnight, lets take one last glance at the remaining, overall delinquency situation at the Credit Union.

Any major TDR  adjustment in the hundreds of millions of dollars will make future comparison of delinquency "awkward" at best. Why?  Because many loans that were delinquent over the last six months are now "undelinquent", or much less so. The goalposts have moved a bit!

So, what do you do?  You increase your focus on the 3+ month (90+ days) delinquency totals, rather than tracking the 60+ day delinquency totals. Why?  Because while TDR adjustments make many 30, 60, 90 day delinquent loans "undelinquent"; TDRs generally do not greatly impact the 90+ days delinquent accounts. 

A commenter indirectly pointed this out yesterday by noting that according to the SECU's website financial summary [link], 3+ month delinquency had increased from 1.11% in March, 2024 to 1.39% in March, 2025. Note that the increase in 3+moth delinquency to 1.39% is after the large TDR adjustment.

✅ What do those "%s" mean in real dollars?  The 3+ month delinquency at SECU has increased from $376 million in March, 2024 to $495 million in March, 2025. That's an increase of +32%. During the same period, outstanding loans increased by only 6%.

😎 The 3+ month delinquency level of $495 million is an excellent "leading indicator" of future SECU loan losses over the next two years.

SECU is making a substantially larger number of bad loan decisions than in the past. The SECU Board should address the problem.

 

  Or should SECU members be expected to just grin and bear it?

 

 

 

 

SECU Lending Performance: A Little Struggle Over Transparency...

   Better Things To Do?

There was a locking of horns over SECU lending yesterday in the comments [link]. Makes for some mindless reading, apologize for wasting your time. 

Here's the condensed version.  Much of the controversy in this blog since the arrival of the "new/new" in 2021, has been over changes in SECU lending policies and practices. Not surprising, since at heart, lending is what SECU is all about. 

Centralization, abandonment of local, branch decision-making, risk-based lending, the elimination of credit committees, failure of effective collections are among the changes questioned. Weakened financial performance, with greatly elevated loan losses and delinquency, seem to justify the concern.

✅ The latest brouhaha centers around the level of delinquency on SECU loans. At 12/31/2024, SECU 60+ day delinquency surpassed $1 billion ($1.15 billion) for the first time in history. But by 3/31/2025 the 60+ day delinquency had dropped an incredible "$591 million (down 51%!)" to $556 million. Simply asking how that was achieved set off a range war of opacity. Not sure why.

Eventually it was pointed out that many SECU loans had been "modified" (a process called "troubled debt restructuring" or TDR) between 12/31/24 and 3/31/2025. Basically SECU borrowers who have experienced legitimate financial hardships have their loans "modified" and brought current. A fresh start, a great process, again called a "TDR".

😎 By the way, a TDR is the best argument ever against risk-based lending and for member credit committees. If it is quite reasonable to listen to and help members who have financial problems after a loan is made, why isn't it equally reasonable to listen to and help members who have had legitimate financial problems before a loan is made?

✅ So everything's good now? Hard to say, here's why:

At 12/31/2024:   60+ day delinquency:  # loans - 27,000   balances - $1.15b

At   3/31/2025:   60+ day delinquency:  # loans - 17,000⬇ balances - $ 556m⬇

At 12/31/2024:   SECU TDR's                  # loans - 13,700   balances - $256m

At   3/31/2025:   SECU TDR's                  # loans - 16,400⬆ balances - $479m⬆ 

❋ SECU appears to have modified and brought current only @ ⬆2,700 member loans (16,400 - 13,700) in an amount of $223 million ($479m - $256m), while the total # of delinquent loans dropped by ⬇10,000 (27,000 - 17,000).

 ❋ TDR balances increased by only ⬆$223 million ($479m - $256m), while total delinquent balances declined by ⬇$590+ million ($1.15 b - $556m).

😎 Something still doesn't seem to quite add up. Even after subtracting for the TDR's, how were the # of delinquent loans reduced by 7,300 (⬇27%!) and delinquent balances by @$370 million (⬇32%!) in just 90 days? 

 Hope the answer is: "Great management!"

 

Incredible results?