... SECU, taking the plunge?
The 7/1/2024 post [link] responded to a commenter's question: "Is it true that SECU's loan losses have historically been less than half of other peer credit unions ("industry standard")?
😎 The answer over the last 20 years: YES!
✅ SECU loan loss average: .28% CU peer loan loss average: .58%
Hope you noted from the data that over that 20 year period - regardless of the ups and downs of the economy, interest rates, wars, the Fed or "the backwardness" of the fair rate for all, non-RBL lending practices - SECU outperformed the "industry standard" in 17 of those 20 years. Here go back and check it out again [link to 7/1 post].
✅ When did SECU lending performance start sinking? [red indicates the better ratio]:
❋2004-2018 SECU had the better ratio
2019 SECU: .43% CU Peers: .46%
2020 SECU: .30% CU Peers: .36%
2021 SECU: .20% CU Peers: .19% What happened at SECU in 2021?
2022 SECU: .35% CU Peers: .24% ... got worse in 2022?
2023 SECU: .62% CU Peers: .43% ... and then slid even further in 2023?
😎 Well, the Executive leadership Team (ELT) has told the staff, the SECU Advisory Boards, and apparently the SECU Board three reasons for the plunge in performance:
1) It's happening to all credit unions. - If you just look at the CU peer averages above for 2021, 2022, 2023 you'll see this is not exactly true. Peer credit unions are performing below historical loss levels, SECU is over twice its historical loss levels - and climbing, or sinking, whatever.
2) It's "Mike Lord's (former CEO)" fault. - The claim is that the losses were "embedded" in the loan portfolio . "Mike Lord" created these losses under those "fair rate to all" loan policies, before "We" arrived in 2021. "We" didn't make these bad decisions! 'Course the obvious question is why did the fair rate to all lending policies only start to fail in 2021, 2022, and 2023 - after the "We" arrived?
3) The higher loan losses include that @$30 million snafu with the "Cash App" software in 2023. - Still hard to understand why a major operational mistake was included in loan losses [boosting the ratio by .07% from "very large" to "OMG"]; but okay, the "We" at least accept responsibility for that one - 'cause "Mike Lord" was long gone and 2023 wasn't a leap year!
😎 But let's pause a second and see what's happening with the "We's" lending/loss performance in the new, clean slate year 2024
✅ As of March 31, 2024: SECU loan loss ratio - .86%
(3x the 20 year average!!)
CU Peers loan loss ratio: .58%
(same as 20 year average)
😎 ... certainly hope the SECU Board isn't taking at face value what they may be hearing about their "new/new lending" policies... because the yacht appears to be taking on a lot of water!
The "We" seem to be running out of excuses... and to be slip sliding away!
At this rate, is the credit union "going bust" a realistic possibility at some point?
ReplyDeleteNo, that will not happen.
ReplyDeleteI don’t understand why Loan Administration and those responsible for collection specialists seem to not understand that current collection practices over 60 days delinquent are not working. Crazy is doing the same thing expecting different results? Charge off ratios are soaring because specialists are not being directed to discuss hardship with member and come up with workable solutions. “Promises to pay” just don’t work. We have always found great reward in helping our members through ”life happens” situations. We were trained to ask the member their “story”. You want to turn around the charge off ratios dramatically? Let the branches, who know the members, talk to them and come up with solutions instead of setting the member up to “fail”. Let the branches take over collections again. It’s the right thing for the member and will decrease charge offs back to where we always were—BELOW industry standard. We are different, let’s be proud of it and set ourselves apart once again. Let’s get our reputation back for helping the member when no one else will.
ReplyDeleteThe branches also streamline the charge off/repo for the member that’s not going to pay. Which does happen. No need to drag it out.
DeleteThe credit union was extremely well managed for decades. It is well built and financially solid. It will weather this storm just fine. However, it is going in the wrong direction. The current management team is not performing well. The board must take action. No reasonable board would tolerate it. If they do not act, then I am planning to vote against all incumbents.
ReplyDeleteThey will never admit they are wrong ... NEVER
DeleteThese people do not care about anything but power.
ReplyDeleteDrop the Mike!
ReplyDelete