NEW YORK — While credit unions might turn up their noses at the prospect of unloading nonperforming loans for pennies on the dollar, financial consultant Peter Duffy said that for those who can spare the capital, a weak market beats no market at all.

Though he declined to name names, the associate director at Sandler O'Neill & Partners said he's currently working with 10 large credit unions to restructure their balance sheets, according to his financial “state of readiness” plan. He warns that tougher times are ahead for all financial institutions, thanks to an oversupply of lending institutions.

“It's been common, and still is, to hear a credit union or bank CEOs say 'we have seven lenders competing for the same piece of A paper',” Duffy said, “and while that was good for the consumer, it was awful for the lending community, because it wrung out the margin on quality loans.”

Survival in an oversupplied market will require not just a healthy balance sheet, but also the “will to win”, he said, which will include innovative and effective marketing and business development, a clear, focused message about the institution's unique culture, and the ability to adapt to new regulations. Credit unions must act now to unload poorly and non-performing assets, and prepare for lower loan to share ratios, which will require more savvy investing.

“We are truly experiencing a fundamental tectonic shift in the way we do community lending,” he said.