Capital Adequacy

In a December 12, 2019 article on cutimes.com, Roy Urrico writes: “TransUnion forecasts balances and originations to grow for most key credit products and serious delinquency rates to either decline or remain steady for auto and unsecured personal loans, cards, and mortgages.”

Jim DePlessis writes in a December 5, 2019 article in cutimes.com that mortgage loans have been doing relatively well  for lenders in 2019 but auto loans have decreased from a year ago.

Credit unions (particularly smaller credit unions) will find it more difficult to compete in a shrinking auto loan market.  Fortunately, there are ways to profitably reach deeper into the auto loan pool by effectively pricing risk into lower credit-grade loans.

Joyce M. Rosenberg, in a September 30, 2019 article in apnews.com,writes that small businesses are having difficulty expanding their companies because traditional lenders are cutting back on lending.

Credit unions may find this an opportunity to expand lending providing they: (1) carefully track profitability of individual services; (2) price loans based on individual risk; (3) have policies in place to assure compliance with regulations and risk control, and (4) manage the risk in loan portfolios.

Amanda Dixon, in an October 2, 2019 article in bankrate.com, reports that ATM and Overdraft fees have risen steadfastly over the last 20 years.

Credit unions have become dependent on fees even to the point that some subsidize their loan programs with fee income. This trend has attracted the attention of litigators and legislators. Credit unions should make sure their loan programs are profitable and not dependent on fee income to subsidize lending.

A September 9, 2019 article in apnews.com written by Martin Crutsinger describes how consumer borrowing in July, 2019 was the highest in two years.

This is good news for credit unions so long as they are participating in the loan growth, risk is being managed and lending is profitable.

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