Declining Auto Loans, The Quest for Deposits, & The Silent Killer of Small Credit Unions

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Declining Auto Loans—Are Credit Unions Too Reliant?

Let’s face it: The auto loan market is in free fall, with record declines in new and used car loans. Interest rates are high, consumer habits are shifting, and younger generations are opting out of car ownership altogether.

Credit unions that have historically leaned heavily on auto loans are feeling the pressure. The challenge? Finding ways to diversify portfolios without sacrificing stability. From HELOCs to small commercial loans, leaders are exploring new opportunities to replace lost revenue.

Becky Reed put it bluntly,

"Are credit unions over-reliant on auto lending? Many are. They mostly do autos and real estate—and that is the very definition of concentration risk."

Takeaways

• Diversify lending portfolios to reduce concentration risk

• Explore opportunities like HELOCs or small business lending

• Prepare for longer-term impacts of high interest rates

Source: Report Shows Record Drops in Credit Union Auto Loans - Credit Union Times

▶️ ▶️ Listen To Jon's Episode

The Quest for Deposits—Unconventional Approaches for Tough Times

Competition for deposits has never been tougher. High rates are driving retention challenges, while unconventional ideas like cannabis banking, small business lending, and cross-selling are being floated as solutions.

The real issue? Many small credit unions are struggling with their cost of funds, lagging behind larger institutions offering higher dividends. This lag has left some credit unions upside down, forcing them to reevaluate their strategies for staying competitive.

Jon Hernandez emphasized:

"We lost the opportunity to write loans at higher rates because we didn’t have the funds to do those loans. That behavior of lagging isn’t acceptable moving forward."

Takeaways

• Focus on deposit retention strategies alongside recruitment

• Ensure ALM practices align with today’s interest rate realities

• Explore new markets and unconventional opportunities thoughtfully

▶️ ▶️ Listen To Jon's Episode

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The Silent Killer of Small Credit Unions

Succession planning is the elephant in the room for small credit unions. Boards are reluctant to pay competitive salaries, and CEOs are often overburdened, leaving little room for preparing the next generation of leaders.

This lack of foresight often leads to closures, mergers, and a loss of independence for credit unions unable to adapt.

Jon Hernandez shared his perspective:

"It’s not just about replacing a CEO. You need to have a credit union succession plan in place for the entire institution. If things get tough, you have to be ready to act."

Becky Reed added,

"Boards don’t want to pay market salaries for CEOs, but people aren’t going to take these roles for what you paid someone 30 years ago. It’s your fault you’re in this position."

Innovative approaches like fractional CEOs, lending executives from larger institutions, and rotational leadership programs are emerging as viable solutions.

By shifting away from traditional methods, credit unions can build resilient leadership pipelines and maintain their independence.

Takeaways

• Start succession planning well in advance

• Invest in leadership development for internal candidates

• Consider alternatives like fractional leadership or executive lending program

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