Happy New Year! 2025 Will Be...Will Be!

           

" If you're not committed to anything.... you're just taking up space."

  Have you noticed, you are a unicorn? ... celebrate that!   HAPPY NEW YEAR!

The Dramatic Impact Of SECU Risk-Based Lending (RBL) On New Car Loans!

  Soaring new car loans at SECU!

The SECU Board of Directors decided to introduce risk-based lending at SECU in March, 2023.  Risk-based lending (RBL), as you will recall, uses credit scores to predict the probability of default of a member loan based on a secret, "hush-hush" algorithm of data. 

Using the past to predict the future is an exceedingly suspect idea. If using past performance data to predict the future was a valid concept, then certainly we should use it in more important ways, like predicting national elections, the stock market, or the weather!

Regardless, the SECU Board knew what was best for the membership; and even chose to ignore the adverse discrimination - particularly for AfAms, young folks and females - which unfortunately accompanies RBL. After all, most banks and credit unions use the RBL approach, so why not charge those "guilty until proven innocent" borrowers a bit more? 

But equally important, the SECU Board also bought into (hook, line and stinker) the senior staff assertion that RBL would bring back in droves SECU "A-members" who were financing their new cars elsewhere. 

So let's take a look at the record after a little over a year of RBL at SECU. As background, there were 447,919 new vehicles sold in 2023 in North Carolina and 2024 looks to be another good year too! The "average" car price was @$47,000 so that's @$21 billion in new car sales in 2023 alone plus an apparently similar amount in 2024!

✅ Here's what the SECU new car lending portfolio record looks like now (as reported to the feds):  

September, 2023:   🔆 #of new car loans:  39,007   🔆 $ amount of new car loans: $1.065 billion

September, 2024:   🔆 #of new car loans:   40,891   🔆 $ amount of new car loans: $1.138 billion

 Portfolio gain of:              # gain: +1,884 loans              $ amt: +$73 million

A net gain of less than 2,000 loans and less than $75 million out of @600,000+ new vehicles sold for @ $25+ billion.

... impressive results, to say the least!

On Ethics ...

  Dame Maggie Smith - Downton Abbey

"Principles are like prayers: Noble of course, but so awkward in business."

Santa Claus: The Four Step Program ...

1.)  You believe in Santa Claus.

                                              2.)  You don't believe in Santa Claus.

                                              3.)  You play Santa Claus.

All I Want For Christmas Is...

Have asked Santa for a weed eater - with a "comment wacker attachment" - for Xmas. More heat than light generally in yesterday's tirades!  Easiest way to get a "blog day off" is to let the "commentariat"  run free . Will try to get back to the basics...

Some commenters felt that I was trying to avoid the reference to the performance of SECU in "September, 2011". Honestly wasn't sure how that was relevant, particularly since it was the year following the greatest economic downturn in the U.S. since the Great Depression.  Not exactly a "normal, random, average" year to choose!

But reluctantly, did go look up the official NCUA data for September, 2011. Here's the official performance record of SECU vs. its peer group (aka "industry average"!): 

["red" = better performance]

Delinquency:    SECU:    +3.75%    Peers:   +1.51%
Charge-offs:     SECU:    +0.25%    Peers:   +0.90%
Net-op. costs:   SECU:    +1.64%    Peers:   +2.52%

Growth in:
Net Worth:       SECU:   +13.93%     Peers:    +8.55%
Deposits:          SECU:   +10.78%     Peers:    +7.15%
Loans:              SECU:    +5.06%      Peers:    +1.86%
Investments:    SECU:    +4.96%      Peers:     +3.76%
Assets:             SECU:    +12.13%    Peers:     +6.69%
Members:         SECU:    +25.59%    Peers:   +20.28%

Again, not sure why one would pull a single ratio out of this particular year to challenge SECU performance. Would you?

Last 3 years offer much clearer, more obvious examples!

As they say: "Can't see the forest for the weeds!"
 

SECU: The "New/New" Launched In Haste, Leaving A Bad Taste?

"New" Coke = "New/New" SECU?

  "Déjà vu all over again"? - Yogi Berra

[Comments active- very!]

😎 We've been taking a look over the last few days of examples when strategically questionable "cultural changes" at successful companies have - unhappily - led to some "unintended consequences". Here's the "classic"!   

Just to refresh your memory, the Coca Cola Company in 1985 rebranded one of the top 3 corporate images in the United States - if not the world - "by changing the formula" for it's best selling soft drink, Coke.

The Board and senior management at Coca-Cola were so smugly certain of their wisdom that they failed in their due diligence. The Board didn't feel it was necessary to ask consumers what they thought or to explain why "the new" was necessary.  It took less than 90 days for the Coca Cola Board to rescind its disastrous decision - it was an avoidable, very public, very costly mistake. 

Don Keough, the CEO of Coke at the time, said: "When senior leadership made the decision to change the formula, they underestimated the deep personal attachment people had to Coca-Cola. As an employee, it was an uncomfortable and almost surreal position to be in... it was sort of like we were starring in a bad movie." [At least the leadership "owned-up" and adjusted!]

At SECU - over three years later - it remains unclear to most SECU member-owners what exactly the "new/new" SECU actually means... improvements in cost of operations, quality of service, overall performance are not readily apparent. 

How much more time will be necessary for the "new/new" results to become apparent? It only took the Coca Cola Board ninety days "to see the light".

Why not just start talking honestly about it to us as your fellow members...

 

Why would the SECU Board be afraid to do that?.

SECU: "Culture Matters" - It Means More Than The Bottomline, Or Should!

😎 Lets not get too hung up on healthcare! 

Mission Hospital is simply an excellent example of a highly successful and esteemed North Carolina institution which has changed its culture [BCBSNC is a similar case]. That change in culture is starting to play out and is creating many concerns for folks in Western North Carolina. 

Mission moved from local ownership with local control to investor-ownership with national control; moved from not-for-profit to for-profit operations; and appears to have turned from a focus on people and quality to a focus on profit.   

  But those "cultural" issues are not unique to healthcare or not-for-profits! Boeing, the largest airplane manufacturer in the U.S., has confronted similar cultural issues. Entirely different business, exactly the same problems.

"The Atlantic Magazine" published an expose ["What’s Gone Wrong at Boeing" (authored by a UNC-CH grad)] last year after Boeing was found to be responsible for the deaths of 346 people in defective plane crashes. Here are a couple of excerpts about why culture matters: 

"Boeing was once among the most respected American companies. It helped NASA put a man on the moon. It built the 747, the most famous passenger airplane of all time. The firm’s reputation for safety and excellence was such that people used to say, “If it’s not Boeing, I’m not going”." 

In 1997, Boeing merged with another aircraft manufacturer, McDonnell Douglas, in what turned out to be a kind of reverse acquisition—executives from McDonnell Douglas ended up dominating and remaking Boeing. They turned Boeing from a company that was relentlessly focused on product and quality to one more focused on profit.

"Corporate culture can be a notoriously squishy topic—too readily subject to broad generalizations. But even if corporate cultures are hard to characterize accurately, they’re still real."

"As the management theorist Edgar Schein defined it, the essence of corporate culture is “the learned, shared, tacit assumptions on which people base their daily behavior.” That ethos is hard to instill using only financial incentives or the threat of firing." What’s really needed is a culture of professionalism—and that’s what Boeing seems to have lost over the past 20 or so years.

To me the struggle over the last 3 years at the credit union has been to ask, encourage, or force if necessary, the SECU Board "to come clean" with the member-owners about what their "new/new culture" means for us as members. It should not be too difficult to specifically respond to that 2022 Annual Meeting resolution. The SECU Board promised they would...

 😎 Somehow, "We'll let you know when it happens" seems a little inadequate given our performance since 2021....

 

SECU, flying with Boeing into the future...  by the seat of our pants?