Growing Loans in a Competitive Environment Utahs Credit

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Growing Loans in a Competitive Environment Utah’s Credit Unions Sam Crane, CEO Grand County

Growing Loans in a Competitive Environment Utah’s Credit Unions Sam Crane, CEO Grand County Credit Union September 14, 2012

Marketing for Loan Success We have to get up every day and put on

Marketing for Loan Success We have to get up every day and put on our armor. Battle for loans against fierce competitors. Battle against the odds of high delinquencies and charge offs. Battle against examiners and ever changing regulations. Battle for your members!

Specific Marketing Plan Define your budget. 8 -10 different promotions throughout the year. What

Specific Marketing Plan Define your budget. 8 -10 different promotions throughout the year. What return do you expect on each promotion? Clearly define the ways you will promote. Execute, Execute!!!!!!

Loan Promotion Ideas What do my members want? Being small can be better. Strategic

Loan Promotion Ideas What do my members want? Being small can be better. Strategic Alliances – Dealerships Re-Built Stop paying reserves – pay members instead. Loan Recapture – Do it yourself! – Experian Loan Sale during high buying times.

“ It is the obligation of any banker to turn a profit in order

“ It is the obligation of any banker to turn a profit in order to protect our depositors money. ” -Mariner Eccles, CEO First Security Corporation 1933

Effective Pricing Accurate, Effective Pricing Requires: Identification of core costs Identification of risk pools

Effective Pricing Accurate, Effective Pricing Requires: Identification of core costs Identification of risk pools Application of costs to pricing Strategies to balance loan and share rates Ongoing validation of the model

Identifying and Applying Costs with Loans Perform regular and complete cost analysis Cost of

Identifying and Applying Costs with Loans Perform regular and complete cost analysis Cost of Funds Processing/Maintenance Collections Charge-offs Assure all loan grades and types are contributing equitably Eliminate Cross-Grade Subsidies

Risk Based Cost Breakout Cost Factors Fixed 2% Mark-up Costs A+ A B C

Risk Based Cost Breakout Cost Factors Fixed 2% Mark-up Costs A+ A B C D E Booking 1. 02% Collections 0. 19% 0. 31% 0. 63% 0. 72% 0. 97% 1. 13% Charge-Off (Risk) 0. 80% 4. 89% 1. 32% 2. 70% 3. 09% 4. 17% Sub-Total 2. 01% 2. 66% 4. 35% 4. 83% 6. 17% 7. 05% Spread Margin 2. 00% Total Mark-Up 4. 01% 4. 66% 6. 35% 6. 83% 8. 17% 9. 05% Cost of Funds 0. 76% Rate 4. 77% 5. 42% 7. 11% 7. 59% 8. 93% 9. 81%

Risk Based Margin above Total costs is the Actual Return 100% 90% 80% 70%

Risk Based Margin above Total costs is the Actual Return 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Margin Charge Offs Collections Processing Cost of Funds

Credit Union Case Study Initial Rates 14. 00% 2. 50% 12. 00% 2. 38%

Credit Union Case Study Initial Rates 14. 00% 2. 50% 12. 00% 2. 38% 10. 00% 8. 00% 6. 00% 0. 78% 1. 98% 1. 64% 11. 50% 1. 87% 10. 21% 4. 00% 2. 00% 4. 51% 7. 21% 7. 35% B C 5. 12% 0. 00% A+ A Cost Initial Spread D E

Credit Union Case Study New Rates 16. 00% 14. 00% 3. 00% 12. 00%

Credit Union Case Study New Rates 16. 00% 14. 00% 3. 00% 12. 00% 2. 29% 10. 00% 1. 78% 8. 00% 6. 00% 1. 68% 1. 77% 10. 21% 4. 00% 2. 00% 4. 51% 2. 15% 7. 21% 7. 35% B C 11. 50% 5. 12% 0. 00% A+ A Cost New Spread D E

Re-pricing Impacts Yield Adjustment Incremental Revenue $10 Mil Loans $20 Mil Loans $40 Mil

Re-pricing Impacts Yield Adjustment Incremental Revenue $10 Mil Loans $20 Mil Loans $40 Mil Loans 0. 25% $ 25, 000. 00 $ 50, 000. 00 $ 100, 000. 00 0. 50% $ 50, 000. 00 $ 100, 000. 00 $ 200, 000. 00 0. 75% $ 75, 000. 00 $ 150, 000. 00 $ 300, 000. 00

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