... anyone disagree on that?
Why keep harping on and on about risk-based lending at SECU? Because risk-based lending is failing and the costs to members of this error in judgment by the Board of Directors are escalating rapidly.
That it is possible for SECU's Legacy Board to err should not be in dispute. The Board kicked off its losing streak with a remarkable CEO mis-hire in 2021. No argument there! That CEO, eighteen months later, abruptly disappeared without notice nor explanation; although a "$6.2 million" related liability remains on SECU books to be satisfied.
A 40-year working partnership with Local Government FCU evaporated in the face of a "no formal proposal-proposal" Board merger threat. Board-centric ambitions for "regional expansion", "anyone can join", and "commercial banking" have fueled distrust by a skeptical Legislature and opposition by the banking industry. An 85-year consecutive record of growth has ended and savings rates are no longer among the best in the market. Operating costs have soared.
The SECU membership loudly signaled its displeasure with these misadventures by booting out all Board incumbents at the 2023 Annual Meeting. But, the Legacy Board does not like to listen and persists with its destructive pursuit of cascading calamities.
How do you know risk-based lending is failing? Even if you are not yet convinced that risk-based lending discriminates against the majority of SECU members - especially those who are young, black, female and of modest means - there can be no argument about the actual, severely adverse financial results. Loan losses at SECU have [link] jumped from $70 million in 2021 to $196 million in 2023 with more bad news dead ahead. Loan delinquency - well below "industry standards" in the past - is now 3 times higher [link] than other credit unions of similar size in 2024. Those are facts - indisputable!
Risk-based lending is now costing SECU members - that means you - literally hundreds of millions of dollars annually in excess interest costs, higher operational costs, and loan losses. That's why the Board is desperately scrambling with "new RBL enhancements" - trying to lipstick the porker!
But what is really going to destroy the reputation of SECU is when you find out that the Legacy Board believes all this is your fault! Moi?
That's right, you're the problem!
... stay tuned to learn how you have erred!
Seems misleading at best to say RBL is the cause of the increase in delinquency. How many of the charged off loans were made with the “one size fits all” pricing structure. Btw, ever tried on of those “one size fits all” caps, they don’t tend to fit everyone well.
ReplyDeleteSure. "Misleading" because the Brady Bunch just needs a little more time to implement this. Rushed through by Hayes you know. Give it time . You'll get used to it.EVERYONE does it like this. Mediocrity is fueling this one. "One size fits all" led to 85 years of success, satisfied members and employees. AND the money stayed in North Carolina, in the pockets of members and employees to be spent in local economies. Used to be a lot of thought in how SECU was being run. Now? Whatever the latest consultant knows how to do, is what the Brady Bunch implements. This Board can't think. This Board doesn't mind your money leaving our state-- outsourcing everything as fast as possible. October can't arrive quickly enough. Stop this madness!! Four in 24!!!
DeleteExactly. Losses are rising across the industry, collection processes were changed, etc. you are observing the effect of adverse selection based on providing under market rates to higher risk borrowers, while the lowest risk members got their loans somewhere else at much lower rates. Subsidy has consequences. Tying higher losses to RBL is disingenuous at best. Did RBL capture a higher share of lower risk members? What does vintage performance look like? Are the losses all coming from post RBL vintages? Higher losses feed your narrative but you’re not showing, and likely not seeing, anywhere near the right amount of data to make that claim.
DeleteRBL at SECU has been implemented using a number(credit score) generated by an outside company using a secret algorithm. Member circumstances are not examined in house. If you meet credit score requirement, the loan is made by SECU. That means that SECU is originating bad loans in all tiers. (yes, a certain % of borrowers in each tier WILL default on the loan! SECU now MAKES those loans and does not weed them out as in the past!) There is no longer screening beyond credit score. The folks that don't repay, get the money. The folks that pay, pay exorbitant interest because the credit union has handed over the loan process to the credit bureau algorithms. The credit union is orginating bad loans. Everyone used to get A rates, which were published. Loan officers screened applicants to week out the 8% or so that were going to default and the local loan officers did a damned good job too! One of the lowest default rates in the industry. Everyone got the A rate. Lowest loan losses around. Can SECU say that now? Time won't cure this. Denying everyone won't cure it either. Bad business policies, implemented poorly. Three years is enough time to have success. When does The Brady Bunch expect to be AT industry standard, rather then BELOW industry standard? How long does This Board need to be standard mediocrity? Forever won't be time enough to cure the arrogance of This Board.
DeleteAt 3:47am, sounds like you need some sleep. If loan officers are not underwriting loans anymore, then what are they doing all day??
DeleteYes. I'd like to know. Pitching in at the branch in any capacity needed?
DeleteAs an SECU member, I was always so impressed that the loan officer across from me was making decisions. From what @3:47 says, I am shocked to find out that all decision making ability has been shifted to a third party now!
DeleteI would gander that the rushed process of centralizing collections had a much larger impact on delinquency and losses than RBL did. Missteps were definitely made, as they always are, but that one seems to have had the largest impact (financially speaking). I’m not necessarily a proponent of localized collections (that’s comes with its own set of issues and risks), but Jim Hayes seemed to want to rush most things through, which is why SECU financial performance declined.
ReplyDeleteHappen to see Gym's track record prior to SECU? Why he was hired in the first place is a mystery to me!
DeleteWhat was that all about? There was not a more incompetent person in the entire credit union industry, and dangerous to boot with the biggest failure in CU history on his watch.(WestCorp cost SECU 10's of millions too. That's before the 6.2 for Hayes that is still on SECU's books.) Makes you wonder if This Board can read. We know that This Board and The Brady Bunch can't read financial statements and Don't want us to.
DeleteWell, we know it’s not their fault!
ReplyDeleteRight. The Board is above reproach and reason. It is costing us our CU and jobs to confirm their incompetence. Bloody bad job. Big loss to Nc.
Delete