... was surprised to hear that!?
✅ Commenter: "You always overlook the positive, what about loans?"
😎 Was a little surprised by that one! Thought that SECU "new/new" lending was the #1 problem which had precipitated this 3 year exercise in distrust, distress and distaste. But okay, let's go back and look at the official SECU Board "Key Ratios" Scorecard one more time. [link]
✅ The three lending "Key Ratios" tracked by the SECU Board are: 1) Loan-to-Deposit, 2) 3+ month delinquency, and 3) Net Chargeoffs.
The one ratio which has been heralded as positive progress is the Loan-to-Deposit measurement. It is very positive that more members are borrowing from their credit union. Over the years this ratio has fluctuated from a low in the 50% range to a high in the 90% range.
The most recent major reasons for the fluctuation are the near global financial collapse @ 2010/11, the Pandemic, and the near zero interest rate market over the last 5 or so years. The SECU Board has also been misled to believe that the absence of race-based lending (RBL) was a major factor in a lower loan-to-deposit ratio.
What appears to be more accurate is that coming out of the pandemic/zero rate environment, SECU was "overpricing" its loan products - a very understandable lapse. What rate should SECU charge for an auto loan when dealers are touting "zero percent financing" with cashback incentives?! No SECU rate can compete with that.
One critic (actually - not to mention names - it was Mike Lord!) argued that all that was needed to "restart the lending engine" was to lower rates. He was right! And the SECU Board did just that, but tacked on RBL as a rate penalty for the majority of SECU members - but haven't we talked about this before? [link]
😎 Same with the other two lending ratios. The 3+ month delinquency has skyrocketed and is 81% above the SECU Board's own target [link]. The Net Chargeoffs were $233,621,567 in 2024 alone; the highest in SECU history [link].
😎 Yes, more loans are being made, but a much higher percentage of those loans are bad loans.
One of those "We'll make it up on volume!" situations?
... or move the goal posts so it looks like we're doing better than we are ...
ReplyDelete