Thursday, June 27, 2024

About That Soaring Delinquency Rate? According To SECU: "Everybody's Doing It"! ... through the roof!

Many SECU members have expressed their strong opposition to the discriminatory overcharging of risk-based lending (RBL), which is highly correlated to the race, age and gender of a member . The wrong members are being unfairly overcharged for the wrong reasons, which is detrimental to the financial health of the members -  and ultimately catastrophic for the reputation of the Credit Union. 

The SECU Board - and particularly the Executive Leadership Team (ELT) - have pooh-poohed those concerns and trumpeted the great improvements in efficiency and effectiveness that "tier-based pricing" (TBP)  has brought to SECU lending! 

When members point out that the financial results - in terms of loan losses and loan delinquency -  don't support those claims, the ELT becomes a bit miffed and has pouted authoritatively that those poor results are "industry standard". "Everybody" is suffering increased losses and delinquency due to rising rates, the Fed, mounting inflation, a weak N.C. economy, climate change, 2024 being a "leap year", the phases of the moon, and global warming, i.e. - "It's not our fault!"

The surge in loan losses and delinquency under "RBL/TBP" is costing the SECU membership literally hundreds of millions of dollars each year now.

✅ Let's take a look at how the 10 largest credit unions in North Carolina are faring with loan delinquency under exactly the same economic circumstances as SECU! 

 (Name of CU and 60-day delinquency rate at March 31, 2024)

  1. SECU  (Raleigh)                2.07%
  2. Truliant  (W-S)                     .95%
  3. Coastal  (Raleigh)                .56%
  4. Local Gov't  (Raleigh)        2.67%*
  5. Allegacy   (W-S)                  .44%
  6. Self-Help  (Durham)           . 95%
  7. Skyla  (Charlotte)                .66%
  8. Latino  (Durham)               1.10%
  9. Marine  (Jacksonville)          .92%
  10. Ft. Liberty  (Fayetteville)     .62%

✅ You'll note that all the other large credit unions in North Carolina (except Local Government*) are managing their loans with a delinquency rate generally less than one half the rate of SECU - regardless of the Fed, climate change, or the phase of the moon.

You might also like to note the SECU 60-day delinquency rate was 1.16% at March 31, 2019 vs. 2.07% in 2024 - granted 2019 wasn't a leap year!

This is not a minor matter for SECU, regardless of the pouting!

* SECU makes and "collects" most Local Gov't loans - the 2.67% ratio may be one reason why LGFCU is seeking "independence"!


  1. Loans screwed up? ELT, it wasn't me!

  2. Whoa! This one touched a nerve with the SECU lending policy makers. Now have a whole new slew of reasons for SECU's lack of lending performance vis-a-vis its N.C. credit union peers - different type members, they've been doing RBL longer, the loans being charged off at SECU were made under Mike Lord, those other CUs don't lend to bad people...

    In other words: "it's not our fault"

    But, clearly SECU ranks last - other than Local Gov't CU - in poor loan decision-making in N.C. SECU now has a "better" record for making bad loans than other NC credit unions - well above industry standard!

    1. ouch on local govy.. does their agreement allow them to sue us for poor execution (like the collections debacle?)

    2. Here's an example of the blame it on Mike Lord mentality:

      "So obviously the majority of today's portfolio was originated prior to RBL " - [not sure how much longer this "Let me explain"-type commenter can ride this excuse, but Mike Lord has been gone 3 years now. But, this type of personality rarely finds fault in a mirror, you know the sort! "It wasn't me... no, no it wasn't me"! ]

      "Therefore, higher delinquency is based on the same." [except that over the last 3 years, delinquency and charge-offs have doubled and tripled apparently from an ineptness in loan policy, underwriting and/or collections. Check the facts - that "Mike Lord portfolio" performed very well - at least until the last 3 years!]

      "Prior to RBL, we attracted C, D and E loans at better rates than the market,..." [Aha! Glad to finally see a clear, public admission that SECU offered better rates to the majority of SECU members prior to RBL. Thank you for your transparency - if not your service!]

      "... and had a higher mix of C-E than others, that was the strategy." [and the delinquency rate and charge-off rates were less than half of the much poorer N.C. "industry standard" losses now - despite how RBL discriminates and unfairly profiles those "no count" C-E members. In the past, they paid very well... until now, wonder why?]

    3. No mystery here. There is $541 million in mortgage delinquency, and a 2.22% DQ rate on 75% of our portfolio. Truliant's mortgage DQ rate is .34% and Coastal's is .13%. This relatively higher DQ is quite clearly not driven by TBP / RBL, but do we know what is causing it, and should we be worried? Our mortgage portfolio is roughly double the size of pentagon's, but our 30+ DQ dollars of 1.27 billion is about ten times the amount of theirs. Local Gov's mortgage DQ is 3.51%. Wow.

    4. The case against RBL is it worked for 80 years - look at growth, low losses, and the lack of lawsuits. Many problems with that..a couple.. 1)Growth every year isn't hard.. flip the lights on and grow at the rate of population growth. 2) you look at aggregate loss rates which are influenced by asset class mix and the performance of those asset classes. SECU has a huge mortgage concentration and it's a high DQ, but low loss product, especially with the mod and pray approach traditionally used here. Any reasonable comparison needs to be at the asset class level, so good idea to compare other NC CU's! That's been done in depth by LA. From 2014 to 2020, SECU loan growth was 47%. LG, Coastal, and Truliant combined grew 64%. Same period, SECU asset growth =61%, others combined = 79%. Look at auto losses, the first RBL product and largest non-mortgage loan portfolio. From 2014 to 2020, average annual loss rates: Truliant .58%; Coastal: .46%, LG: .94%, SECU: .92%, exactly double Coastal. 2016 annualized auto losses.. T=.50%, C=.16%, LG=.86%, SECU = .87%. So in total from 2014 to 2020, SECU materially lagged other local CU's in loan and asset growth, and had auto charge-off rates that were materially higher than for a sustained period, during one the longest stretches of econ growth on record. One rate for all a superior model? Perhaps, for whatever reason you tell yourself, but the data seems to suggest it's not because of lower losses or higher loan or asset growth.

    5. 2:23 pm - Interesting observation acknowledging overall delinquency (DQ) is much higher than peer credit unions - 2 or 3 times higher is not "relatively higher", a "rounding error", nor a one-off, 'leap year aberration".

      Much of the rising delinquency is, as pointed out, in the mortgage loan portfolio, which is the largest segment of SECU lending.

      Historically folks will fight hard to keep their home loans current, while letting other debts go; because their family needs somewhere to live. Soaring delinquency on SECU mortgages, therefore, is cause for concern - especially with the huge uptick in NC home prices, a strong NC economy, and low unemployment.

      Generally, if the mortgage goes, everything else will go too - not a good omen.

      The commenter ask an appropriate question about the SECU delinquency problem: "Do we know what is causing it and should we be worried?"

      So: 1) Should you be worried? Oh hell yes!
      2) Do "we" know what's causing it? Apparently not, if the current answer is "Mike Lord"!

      Delinquency levels are also a reliable forecast of future loan losses - now well over $200+ million a year and accelerating... so get your waders on.

    6. relatively mean as a comparison to others, not about the amount of the difference. it could increase a lot in absolute terms, but still not be high relative to others. you are absolutely right, of course. the DQ is many, many multiples higher than others. LG way worse even... a big problem here not explained by the local economy.

    7. As to 3:16pm Think the character flaws in this thought process can best be summed up by the commenter's own remarkable "attitude" toward SECU overall, its staff and, of course, the members.
      Note well:

      1) "The case against RBL is it ["it" = the fair rate for all lending approach] worked for 80 years - look at growth, low losses, and the lack of lawsuits. Many problems with that."

      Appreciate again the affirmation that: 1) SECU grew strongly for 80+ straight years, 2) enjoyed low loan losses [well below "industry standards"], and 3) was rarely sued [because it actually practiced transparency and "acting in good faith" with the member-owners]. Not sure how those three affirmed facts are a problem? But, thanks for the honest assessment and resounding endorsement of SECU and its staff prior to 2021!

      "... SECU has a huge mortgage concentration and it's a high DQ, but low loss product, especially with the mod and pray approach traditionally used here."

      Guess the commenter's view of the world is best summed up by "the mod and pray approach", which pretty well slanders the SECU staff's dedicated efforts to work with members when they encountered financial problems over the years. The SECU staff took that "people helping people" idea seriously, personally, and to heart. "Their" members were real people, not just ... And yes, SECU staff often prayed that things would work out for their members. Hope you're not seeing that as a "problem" too.

      3) "Growth every year isn't hard.. flip the lights on and grow at the rate of population growth."

      If growth is as easy as "flipping on the switch", why has growth stopped at SECU since 2021? Other NC credit unions have grown too and that's great, but from a much smaller base. Such a major ["convenient"?] error of omission in any analyses always marks the data as suspect .

      For example, SECU has $50 billion in assets; while Truliant - the second largest NC credit union - has assets of @ $5 billion. Truliant's $5 billion in total assets is about equal to the $5 billion in deposits which SECU members have withdrawn from SECU since 2021! Looks a bit like comparing an apple to an orange....

      Many members fear that the SECU Board and ELT have recklessly "switched off the lights" at SECU...and are now stubbornly operating in the dark.

      4) "One rate for all a superior model? Perhaps, ..."

      One can always hope that you'll "see the light", but a sea-change in attitude and hubris probably will require a good bit of "mod and pray". Would you be up for that?

    8. 5:48 No problem. Accept that you were using the phrase "relatively higher" in good faith.

    9. Maybe they should benchmark against the banks that they want to be like.

    10. Well, 2:13pm/3:16pm is back! Still squirming frantically - trying to avoid "the light".

      **"some follow up to @6:27."
      "1) Yes, SECU grew. Strongly? Compared to what? It's been shown not to have grown as fast as the local market."

      As Cool Hand Luke was told: "What we have here is a failure to communicate."

      The core problem may be that our "2:13/3:16 commenter" is simply of the classic personna-type best described by the axiom: "Can't see the forest for the trees."

      So, "Compared to what?" - the bigger picture! SECU, as you know, is the second largest CU in the US at @ $50 billion in assets - give or take a $5 billion prop up loan from the Fed. (NavyFed in Virginia is by far the largest).

      If CU size and growth are related to population, etc as our commenter opines, then lets check that out with a little broader and more fairly balanced vision.

      North Carolina is the 9th most populous state in the US and at $50 billion+-, SECU is by far the largest CU in the State.
      Here's a list of the 10 most populous states in the US with the asset size of the largest CU in each state:

      1. California - $29 billion
      2. Texas - $18 billion
      3. Florida - $16 billion
      4. New York - $12 billion
      5. Pennsylvania - $8 billion
      6. Illinois - $19 billion
      7. Ohio - $8 billion
      8. Georgia - $10 billion
      9. North Carolina - $50 billion+-
      10. Michigan - $12 billion

      ... why is SECU so far ahead in terms of size if population is the key? (in case you're wondering, SC -$5 billion, Tn -$8 billion).

      Clearly something unique has been happening in North Carolina! Something doesn't "add up", does it? Look closely, isn't that a unicorn?

      And that's the concern about the current lending losses and delinquency at SECU - those soaring costs "are adding up" at the expense of the SECU membership.

  3. If we do a whole bunch more we can make it up in volume.

    1. LOL .... Exactly ... 'spend more to control inflation thinking'! 'Transitory inflation' after printing trillions ... (said with a straight face) ... experts ... but experts at what?!

  4. It's only been since March of last year that RBL was implemented at SECU. It takes time to get all the kinks worked out. SECU Leighduhship is working on that. Tiers have been reduced from 5 to 3 and more members have been denied loans because the credit scores (determined by unknown algorithm from outside agency) are too low to qualify. Leighduhship needs more time!! And profits are soaring!!!!

    1. “Unknown algorithms from outside” - are you sure it’s an outside design?

  5. maybe we can borrow another 5B from the fed until we get this turned around ...

  6. All started with Gym Haze. Definitely would not have had RBL without him. Bad decision from a self centered leader and bad decision from the board signing off on this. Bring our lending criteria’s back . Those work

    1. so how was success measured on those old criteria? what's the basis for saying they worked?

    2. Better rates, better financial results, better service from well-trained home grown staff. Losing it!

    3. @12:33 clearly you are not from the credit union.

    4. Never forget who hired Jim Hayes to do their dirty work. The SECU Board of Directors. Hayes was handpicked by them. The Board is responsible for this current mess.