CUBI.Pro

Just a few years ago, as I toured the credit union conference circuit discussing loan portfolio risk, I was often asked about Risk Concentrations.   Specifically, many would ask me if there were some best practices that I could share with them related to what their concentration thresholds should be.   I would explain that the practice of setting concentration risk thresholds was not about finding the magic threshold that examiners were seeking, but actually going through the process of measuring risk and determining the level of risk the credit union could live with.    The initial NCUA guidance was provided to credit unions in 2010 and over the subsequent years, credit unions began to solidify their concentration risk polices.   Little more has been said on this topic, until recently. Like many risk advisories from regulators, there is a tendency to focus on the issues for some time and then move to the next issue as concerns shift.   The mistake t...

By Michael Cochrum, CUBI.Pro Recently, I’ve been speaking to credit unions who have announced a major shift in lending strategy.   After many years pursuing auto loans in a highly competitive indirect market, several of my clients have decided to take a breather and concentrate more heavily on lending directly to their members.   This shift comes because of several factors, including a slowing of vehicle sales shrinking the marketplace and increasing competition for loans, rising rates which have temporarily shrunk yields as portfolios adjust to rising costs of funds, and in some cases, fatigue from constantly battling competitive forces over several years.   While all these reasons provide justification for change, it is important to understand the effect that a rapid change in strategy will have on portfolio performance in the short-term. While a rapidly growing portfolio can hide, or dilute, delinquency as new loans increase the denominator used to calculate ...

The prospect of using data to make better business decisions can be very exciting. Intuitively, we know that our decisions are better supported by as much information we can possibly gain in the decision-making process. This enthusiasm, coupled with Big Data hype, has enticed many credit union leaders to begin a data journey in their own organizations, investing in software and man-power in hopes of gaining access to intelligence dashboards and decision support analytics. Unfortunately, many of these projects have failed, at least in attaining their initial promise, leaving these same business leaders disappointed with the results and accountable for the investments made. It is possible that you are in the same position today, either considering your first step on your data journey or struggling to get a project to the finish line. This article identifies challenges that organizations encounter when attempting to complete a data project. No Data Strategy Al...