From Delinquencies to Deposits: A Smarter Approach to Portfolio Resilience
Delinquencies Are Climbing. Net Income Is Thinning.
The outlook for lending and deposits? Still murky.
Auto loan growth remains sluggish, while HELOCs and mortgages gain traction. Other deposits ticked upward in Q1 2025, but loan-to-share ratios have stalled — a reminder that not all momentum is created equal.
This isn’t the first cycle of uncertainty — but it may be the most complex.
Deposits are rebounding. But is it enough to offset rising delinquencies?
Delinquency rates rose to 80 basis points in the first quarter — the highest level in five years. Delinquencies and charge-offs are rising in parallel, with the highest activity concentrated in auto loans and credit cards.
For a deeper conversation on the latest delinquency trends, risk strategies, and credit union priorities, check out our recent episode of The Allied Angle podcast, featuring Vice President, Strategic Partnerships Randy Salser and Chief Client Lending Consultant Jack Imes.
Asking the Right Questions, Taking Actionable Steps
Let’s cut through the noise and focus on what actually moves the bottom line. These timely strategies — with a digital overtone — will help bolster portfolios for the next wave of delinquencies.
- Build on industry momentum. In the face of fragile finances and high interest rates, Americans are tapping into their equity and consolidating debt — fueling growth in HELOCs. This is a win for credit unions and a prime opportunity to leverage secondary capital for balance sheet growth.
- Embrace targeted product diversity. Key life stages create powerful opportunities to deepen member relationships, improve retention, and increase share of wallet. Strategically bundle loan and deposit products to meet evolving needs:
- Serve first-time homebuyers with bundled mortgage, home equity, and escrow offerings.
- Support students entering repayment with consolidation tools and rate incentives.
- Expand lending reach with niche products like green loans or EV financing.
- Prioritize depth of reach before breadth.
- Help members sidestep delinquency. Personalized financial education is where credit unions shine — and it’s one of the most effective tools to prevent delinquency before it starts. Equipping members with knowledge, tools, and flexible repayment options empowers them to stay ahead. Educated members are more likely to make timely payments and proactively seek help when needed. Taking a proactive, collaborative approach, offering payment plans and outreach before delinquency hits, doesn't just reduce risk; it strengthens both loss provisions and long-term trust.
- Put up fraud guardrails. Fraud is the anvil hanging over every credit union’s head — and the losses are getting heavier. The best defense is proactive, data-driven safeguards.
To reduce exposure and protect portfolio health:
- Segment portfolios based on risk profile to identify vulnerable pockets
- Deploy targeted interventions for high-risk accounts
- Monitor for first-party fraud during the loan origination process
- Reevaluate underwriting standards, especially for elevated-risk categories (like auto and credit card loans)
- Segment portfolios based on risk profile to identify vulnerable pockets
Fraud risk may never fully disappear — but it can be contained with smart, preemptive moves.
- Use data to drive smarter credit decisions. Strategic growth demands more than instinct — it requires the right data, in the right context.
Macroeconomic indicators and consumer behavior trends offer important signals, but they’re only part of the story. Most credit unions already sit on a goldmine of internal data: transaction histories, credit scores, inquiry patterns, and demographic profiles.
Much of this data is siloed — living in separate systems or teams. De-siloing and aligning these insights unlocks a clearer view of your members and their likely behavior, allowing for more confident decision-making and risk management. - Fuel member self-service beyond the branch. Younger generations conduct financial activity across dozens of institutions daily. To maintain a strong share of wallet, credit unions must expand digital self-service — especially for lending.
Automating and accelerating credit approvals brings the branch experience to members’ phones, driving self-service deposits.
Alternatively, consider onboarding non-member deposits with high-quality, low-risk secondary capital to boost liquidity.
When it comes to adopting new tech, you don’t have to be the first — aim to be the best.
You're More Resilient Than You Think
Think of all your shop has weathered in the five years since the pandemic blindsided balance sheets! That mission-first mindset is what gives credit unions staying power through every peak and valley of the credit cycle.
While optimism about the outlook for credit and lending is warranted, optimism alone isn’t enough. Sustainable portfolio growth comes from consistently meeting members’ needs with evolving, digital-first tools.