PUTTING THE CREDIT BACK IN CREDIT UNION

Transcription

1 PUTTING THE CREDIT BACK IN CREDIT UNION Tim Harrington, CPA T.E.A.M. Resources 7049 E. Tanque Verde Road, PMB 136 Tucson, AZ

2 ARE WE A CREDIT UNION? For the last 7 years, credit unions have been: Deposit unions Compliance unions You name it unions 2

3 SO LETS PUT THE CREDIT BACK IN CREDIT UNIONS How? "We can't solve problems by using the same kind of thinking we used when we created them." "The secret to creativity is knowing how to hide your sources. Both quotes by Albert Einstein 3

4 SO LETS PUT THE CREDIT BACK IN CREDIT UNIONS How? Find out why people borrow? Meet them where their needs are And do it intelligently 4

5 Loans Are Picking Up Steam 5

6 Auto Loans by Type 250,000,000, ,000,000,000 Total 150,000,000,000 Used 100,000,000,000 New 50,000,000,000 - Leases New Auto Used Auto Leased Auto Total Auto

7 Real Estate Loans 400,000,000, ,000,000, ,000,000, ,000,000, ,000,000, ,000,000, ,000,000,000 50,000,000, Real Estate Loans 7

8 Business Loans 400,000,000, ,000,000, ,000,000, ,000,000, ,000,000, ,000,000, ,000,000,000 50,000,000, Business Loans 8

9 Total Loans 400,000,000, ,000,000,000 Real Estate 300,000,000, ,000,000, ,000,000,000 Autos 150,000,000, ,000,000,000 CC and Unsecured 50,000,000,000 - Business Auto Real Estate Business Loans Unsecured 9

10 WHY LOANS MATTER Deposits come in, and the money has to go somewhere Yield on Loans 5.01 Yield on Investments 1.14 Less Less Provision for LL 0.26 Cost of Funds 0.59 Cost of Funds 0.59 Operating Costs 3.16 Operating Costs 3.16 Net Yield 1.00 Net Yield National averages as of December 31, 2013 Source: NCUA Aggregate Call Reports 10

11 FOCUS ON LENDING MORE THAN EVER BEFORE!!! What do you advertise? What does your branding promote? What do you talk to the staff about? What do you incent staff for? 11

12 It s Time to Spend Some Money on Marketing/Advertising It s a bad time to allow your loan products to be a well kept Secret 12

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14 LENDING ISN T A LOAN DEPARTMENT ISSUE IT S A CREDIT UNION ISSUE AVOID THE SILO EFFECT 14

15 GET THE ENTIRE CREDIT UNION TO BE PART OF LENDING Accounting isn t there to produce reports: They are there to assist in making loans IT isn t there to keep the internet humming: They are there to assist in making loans 15

16 BE MEANINGFUL TO YOUR STAFF SERVE A HIGHER PURPOSE Our customer service quality is so high because all our staff know we serve a higher purpose. We take care of the men and women who take care of this country. Gen. Joe Robles, CEO USAA 16

17 WHAT IS THE HIGHER PURPOSE YOU SERVE? The CEO is the Cheerleading Executive Officer CEO s who understand what motivates staff are CEOs that make lots of loans 17

18 1. Establish Credit Union Lending goals 2. Tell people why best in story form The human brains love stories 3. Hold individuals accountable 18

19 AND THEN PAY THEM! If any employee sees a member in a new car, teach them to ask, Did you finance your new car at the Credit Union? If not, take member s name and give it to a FSR Then You pay that employee $5 for referral or $25 for booked loan 19

20 AND INSTEAD OF JUST OFFERING LOANS, FIND OUT WHY MEMBERS BORROW 20

21 MEMBERS BORROW TO: 1. Make ends meet 2. Obtain something they don t have money for 3. Pay for Life Events 21

22 MAKING ENDS MEET 1. Personal/Signature loans 2. Credit cards 3. Home equity lines of credit 4. Business lines of credit 5. Short-term, micro loans =Pay day or other options 22

23 OBTAINING SOMETHING THEY DON T HAVE MONEY FOR 1. Home loans 1. First time home buyers 2. Mortgage Accelerator or Retire Your Mortgage 2. Auto loans 1. First time auto buyer 2. Recovering credit auto buyer 3. Education loans 4. Appliance/Furniture/Computer loans 5. Business loans and Business Micro-loans 23

24 PAYING FOR LIFE EVENTS Repackage Signature loans Members don t need loans on their signatures. They already have a signature! But there is a growing demand for closed-end, fixed rate special purpose loans. 24

25 PARTNERS IN THE LENDING WORLD 1. New car dealers 2. Used car dealers 3. Boat and Powersport dealers 4. Dental offices 5. Cosmetic Medicine offices 6. Veterinary offices 7. Other Merchants 1. Heating and air conditioning 2. Home remodelers 3. Auto repairs 25

26 PAYING FOR LIFE EVENTS 1. Wedding loans/wedding ring loans 2. Honeymoon loans 3. New baby loans 4. Quinceanera/Bar-Bat Mitzvah loans 5. Cosmetic surgery loans 6. Funeral/emergency loans 7. Holiday loan 8. Holiday credit card pay off loan 26

27 CREDIT CARDS A Very Good Unsecured Product Can you approve an on-line Credit Card Application in 15 seconds? Your competitors can!! Automation more important than ever 27

28 CREDIT CARDS ARE NOT A SINGLE PRODUCT Borrowing: Consumer carries a balance from month to month needs good Interest Rate Rewards: Consumer buys things to earn rewards Needs good Rewards Program On-line: Consumer uses it for convenience Needs good security protection maybe PrePaid cards Travel/Business: Consumer uses it to pay for business stuff Needs adequate LOC to pay for things 28

29 BALANCE TRANSFER? AIM IT PROPERLY Great Campaign: 0% first 6 months, no fees But aimed at members with high FICO scores Didn t do much! Why? They tend not to be Credit Card Borrowers! Aim a Balance Transfer promotion to people with balances, perhaps more marginal FICO scores 29

30 RETIRE YOUR MORTGAGE WITH A MORTGAGE ACCELERATOR LOAN Term: You name the term. From 5 to 8 years Rate: somewhere around 4% APR (a little shorter for less than 6 years, a little higher for more than 6 years) Fees?: Maybe none, zero, zilch, nada Loan to value: around 75% Market this to members getting close to retirement (or retirement age) Functions like a car loan for ALM 30

31 AUTO LENDING Members want convenience in lending Either: Indirect Lending CUDL or third party Develop your own relationships Used car lots or New, it doesn t matter Hit em where they ain t In your face Direct Lending Refinances on each contact opportunity Use data showing payments out on auto loans Attract applications via easy seasonal loans 31

32 AUTO LENDING Members want convenience in lending Automate as much as possible to give: Immediate approvals to slam dunks Quick approvals to slightly more difficult cases 30 minute approval to the tough ones Fund dealers the same day, especially at month ends 32

33 AUTO LENDING Members want convenience in lending If you participate in Indirect Lending Your dealer becomes a very important customer LEASING IS MAKING A COMEBACK Grew 43% from 2012 to % of cars sold in 4Q 2013 were leases In some markets, Leasing is very large percentage of new car financing Little competition from other FIs in leasing Find the Right Partner 33

34 THE NEWLY POOR What products do you have for this Fastest Growing Market? These may be Service Charge producers as opposed to interest Income Producers: Consolidation loans a hot item right now Auto Repair loans paid directly to the mechanic Quick loans Prepaid Visa or MasterCard Member friendly Title Loans (collateralized personal loan) 34

35 NON-PRIME C PAPER LOANS CAN BE HIGHEST PROFIT Yield on A Loan 2.49% Yield on C 5.99% Less Less Charge offs 0.25% Charge offs 1.00% Admin costs 0.25% Admin costs 1.00% Cost of Funds 0.59% Cost of Funds 0.59% Net Yield 1.40% Net Yield 3.40% 35

36 Don t be afraid of good Non-Prime Done right: Non-Prime members can be very profitable You are serving people who can t get your rates or service quality anywhere else Done wrong, and you can take a bath 36

37 NON-PRIME: SELL THE PAYMENT Non-prime borrowers tend to be less rate conscious: More Payment conscious. Make the payment work for them. RealSolutions.coop Non-Prime Auto Loan Tool Kit 37

38 Friendly but Firm close Courtesy of Summit Credit Union via Real Solutions

39 GEEK SQUAD OR GO TEAM Courier loans to borrowers Do whatever is needed to capture a loan. If a courier costs $35 to deliver loan papers for signature, is it worth it? Possibly, if the alternative is not getting that loan and instead putting those dollars into investments 39

40 PRODUCTS FOR THE FASTEST GROWING DEMOGRAPHIC THE NEWLY POOR! Pay Day Helper Loan nearly 600 CUs offer these -Interest and Fee Income Insurance Premium Loan Charge 18% and secure with car Pay directly to the insurance company Car Repair Loan Charge 18% and secure with car Pay directly to the repair shop 40

41 @ Federally Chartered CUs Loan amount For-Profit Payday Lender CU Payday Lender 1 CU Payday Lender 2 CU Quick Loan Lender $500 $500 $500 $500 Interest 0 $12 at 28% $12 at 28% $8 at 18% Total/Year On $500 loaned for 12 months Fee $75 $20 Process Fee $70 Annual Fee $50 Process Fee $900 $224 $210 $290 RealSolutions.coop Payday Loan Tool Kit 41

42 MORTGAGES: REFI CRAZE IS OVER Get Prepared to make Purchase Money Mortgages Keep short term and sell the rest earn Income Find partners who can offer a decent variety of mortgage products If you say to a member, We don t offer that kind of mortgage, Why don t you just give them Wells Fargo s phone number Develop a First Time Home buyers program. There is pent up demand for the younger age group Make loans fast 7 minute approvals 42

43 It is not necessary to change. Survival is not mandatory. W. Edward Deming, Statistician 43

44 PUTTING THE CREDIT BACK IN CREDIT UNION Tim Harrington, CPA T.E.A.M. Resources 7049 E. Tanque Verde Road, PMB 136 Tucson, AZ