Tuesday, October 31, 2023

SECU - Risk-Based Lending - Critical To The Financial Survival Of SECU? #2

 https://prevaillawyers.com/wp-content/uploads/2015/07/texas-usury-trap.jpg  As mentioned yesterday, risk-based lending was the first concern - among many - of SECU members who believed the Credit Union has been changing for the worst. Many members spoke eloquently against "tiered/risk/race" based lending at the Annual Meeting  and the subsequent vote demonstrated that a pause for re-discussion and reconsideration was warranted. But that has not happened.

Thought it might be timely to walk back through the pros and cons of risk-based lending and have an open discussion of where the differences in opinion on this topic lie. If the Board does not want to listen to both sides of the argument, hopefully you will be more open-minded. What's the harm in listening?

We're going to take it slowly, because risk-based lending is a topic which will make you "glaze over" pretty quickly! So, in small steps, in small bites, ok?  Yesterday's first piece was simply to say a lower rate on a loan is preferable to a higher rate - whether you're "A-paper" or "E-paper". Hope we can all agree on that.

Today, would like to address the idea that SECU can't survive financially unless it adopts risk-based lending. There are two easy ways to demonstrate that that idea doesn't appear to have merit. First, everyone agrees that for the first 85 years, SECU grew every year in members and assets; and SECU never experienced a year when the Credit Union wasn't financially "in the black". All without risk-based lending.

The second confirmation that risk-based lending is not essential to the financial success of SECU was confirmed by CEO Leigh Brady in her report at the Annual Meeting. Ms. Brady proclaimed "record profits" at SECU over the last five years and showed this slide:


Those "record profits" were all achieved without risk-based lending, which wasn't introduced until March, 2023. 

Risk-based lending is not essential to the financial success of State Employees' Credit Union.

... are we ok so far?