Credit Union Exam Solutions Presents With Flying Colors

Hey everyone, this is Mark Trico with
another episode of With Flying Colors.

This is another short take with
our recent discussion on one topic

from the OCC risk report, and that
topic today is retail credit risks

at credit unions and at banks.

How that inter relates, and
we talk about things like.

Student loan payment, resumptions,
recurring mixed economic signals,

the state of unemployment in
all 50 states, and what that

means and what the breakdown is.

Generational differences, Venmo and more.

As always, thanks for listening.

Another storyline is the retail credit.

Uh, performance remains
stable despite headwinds.

And that's a little bit, I think,
Todd, you might have touched on

the headwinds that the report seems
to talk about the past and the

future a little bit differently.

Any thoughts on, on
retail credit performance?

Gentlemen?

Bauer: One, one thing I, I've seen
that, that's changed recently is

right during the last administration
and a lot of student loan debt.

You could stop making payments,
but I think that with the current

administration now that's back on.

So it'd be interesting to see, I, I forget
how, what the millions of dollars in

student loan payments that are in arrears,
how that might impact consumer's ability

to make other payments depending upon
where they prioritize where, where, where

they prioritize making loan payments.

All right.

With inflation, the cost rate, that could
be a challenge and that could impact,

um, I think credit unions delinquency and
potentially charge offs in the future.

Um, I mean, I, again, the trend seems
to be for credit unions, delinquency and

charge offs seem to have leveled off.

Um, maybe, maybe even down a little
bit for this first quarter, but Right.

There's always you know, with that student
loan potentially hanging out there, that

could be an, that could be a concern.

I think that credit unions
need to, to address.

Treichel: Good point.

Good.

Miller: Todd?

I think the student loan thing is
gonna be a huge one in the future.

I don't know how that impacts,
you know, our accrediting people.

It definitely hits your borrowers
in those younger age demographics.

It's just somewhat interesting.

You know, the, you know, they talk
about headwinds and, you know,

which way is our economy going?

And Trump jumps this way then that
way with tariffs and this and that.

Delinquency levels are really manageable.

There definitely seems to be a pullback
in consumer spending are in bank credit

union lending standards because for
both banks and credit unions, auto loan

portfolios have shrank a little bit.

And I don't know how often that happens.

Maybe it was just because there was a
huge spike in purchases during COVID,

but auto lending numbers did shrink.

Um, I tracked unemployment by states
and if you look from December to May, 24

states had higher unemployment, but 26
of them had lower unemployment levels.

You know, so everything is
kind of mixed and muddled.

And if you look at the FDS
quarterly reports, they break

things down by their five regions.

There's a lot of performance
differences across regions.

So, you know, there's, there's
all these risks that are generic

to, you know, our credit unions.

But there's certainly different
economic zones in different parts of the

country are performing very differently
than other parts of the country.

Treichel: You know, we had the
sand states in oh 8, 0 9, right?

That's kind of what at NCUA it
was, where there was sand, there

was a problem, whether that was,
uh, Florida Las Vegas, et cetera.

Any, when you look at the 24 versus the
26 that had up or down, any, any, anything

pop out at you on an individual state?

I

Miller: didn't

Treichel: PO

Miller: look at individual
states or I didn't look at NCA's

performance by region or states.

But when you look at the banks,
basically your coast, your San Francisco,

New York thing are struggling more
than the heartland of the interior.

You know, last time the sand states I,
my first four or five years as a DSA,

right through that last recession,
it was all spent in Utah and Arizona.

And I closed a lot of credit
unions in Utah and so did the FDIC.

Treichel: Steve Dennis.

Any anything to add here?

Farrar: The one thing that I kinda observe
is there's this big differences in the

with all the generations in terms of
how they view a borrowing and, and how

they're doing their own finances, which
will affect future retail loan growth.

And to see how, uh, credit unions are able
to, uh, adjust their marketing for the,

you know, the borrowing type generation.

We'll see how that behavior, uh, is
in the future, but it's something

they definitely should be looking at
in the Yeah, that's one of the key.

I agree with you.

Treichel: That's one of the keys to
long-term survival, figuring out, uh,

where the borrowers, uh, how they're gonna
react so that you can make good loans

and, and, uh, add to the bottom line.

It's how do

Miller: you capture them as
depositors too, because Yeah.

They move their money around.

How do you get them to use your debit
card when you know, a lot of 'em use

Venmo and PayPal and Apple paid now.

So like the whole payment systems
are, you know, circumventing the

general credit union in banking
industry with these third parties.

And, you know, it, it'll come up
later maybe with fraud because the OCC

risk report mentioned some of that.

But like Venmo, people under 40, I had a
thing the other day I looked it up, how

many accounts there were people that are
using Venmo, most of them are under 40.

If I go through my history
here on copilot, I can probably

find it again really quickly.

So Venmo's transactions are up 80%
just over the last three years.

2025 first quarter here, Venmo
did $342 billion in payment

transfers between people.

Wow.

And you think of the
industry, that's not a lot.

And they're not the biggest one.

They're just the fastest growing one.

But it says 85% of their
users are under 40.

Treichel: So I'm one of the, I'm one
of the fif, I'm one of the 15% not,

Miller: I've used it maybe twice
in the last couple years when

I've sold stuff to other people
and got an account just for that.

So it's like, how do Fred gather up
and get these people to become members

for their transaction services,
for those checking accounts and for

those deposits, it's gonna be kind of
somewhat of a, a challenge, I think.

Treichel: And by the
way, here's my Venmo tip.

If you are on Venmo and you don't
know that you have to set some privacy

things up so that you can't, so that
your friends or contacts don't see.

Every time you send a Venmo, you might
wanna look at your privacy 'cause,

because my kids tip me off to that.

And then there are some other connections
I have that are constantly, um, or

frequently having payments to or from.

And it, uh, it's something that you wanna
make sure is not toggled in the wrong way.