RALEIGH, N.C.–Few credit unions in the country have their loan portfolio scrutinized publicly as does State Employees’ CU, and that continues to be the case.
The scrutiny comes in large part because of its oversized presence in North Carolina and the profile of its former CEO, who documents various issues related to the credit union on his blog.
In its newest review, BusinessNC reported the loan portfolio at SECU, the second-largest credit union in the country at $55.8-billion in assets, has seen some “negative trends, which is a notable signal given the institution’s importance,” the report stated.
BusinessNC stated that because SECU doesn’t operate outside of North Carolina, doesn’t focus on wealthy clients or make business loans, its finances “tell a story about how middle-income, working-class North Carolinians are faring.”
‘Soured Loans’ Cited
BusinessNC, which made clear the credit union is well capitalized and the trend lines do not indicate any financial problems, cited questions raised on the blog of former CEO Jim Blaine over why SECU has seen more “soured loans” than in previous years, noting it reported losses of $72 million in the first quarter this year, compared with $47 million a year earlier, $20 million in 2022 and $17 million in 2021.
It should be noted that SECU is not alone in the trendline, as credit unions across the country have seen rising delinquencies, especially on credit cards, an issue NCUA has publicly flagged as a concern on numerous occasions.
On his blog, however, BusinessNC noted Blaine said SECU has reported a higher loan loss ratio over the past few years than the overall industry, which “reverses a decades-old history of fewer charge-offs than other U.S. credit unions. During the recession years of 2008-10, for example, the industry wrote off about 1% of its loans, while SECU’s ratio never topped 0.3%,” BusinessNC stated.
In its response, SECU stated Blaine’s conclusions are based on data from all credit unions, and that a more accurate comparison would be to CUs of more than $10 billion in assets.
Peer Group Comparisons
SECU officials referred Business North Carolina questions to Callahan & Associates, which told the publication SECU’s annualized loan-loss ratio was 0.86% as of March 31, compared with 1.44% for the $10 billion-plus peers.
BusinessNC further cited data from 2010-2020 showing SECU’s ratio averaged 0.31%, or $31 per $10,000 in loans. Since 2019, the ratio has increased 80% at SECU, compared with 60% at the peer institutions, according to Callahan’s statistics, cited by the publication. “
The data further show delinquencies at SECU have increased to 2.07% of all loans as of March 31, compared with 1.18% at the large peer group.
But a Callahan’s spokesperson told BusinessNC that SECU’s delinquency rates “have historically been far higher than peers,” which “aligns with SECU’s stated mission to serve North Carolinians of all backgrounds.”
The Balance Sheet
SECU reported $65.7 million Q1 net income, quarter, compared with $143.6 million one year earlier. Net income totaled $364 million last year, compared with $626 million in 2022 and $557 million in 2021, the report stated.
In addition, SECU’s loan portfolio totaled $33.9 billion as of March 31, an 11.3% increase from a year earlier, with mortgages representing than two-thirds of the total.
As CUToday.info reported here, SECU has also moved to risk-based pricing on its loans after decades of one rate for all borrowers, another issue of disagreement between Blaine and the credit union’s current management.