benchmarking credit union performance using market data benchmarking...collection and forecasting...

Benchmarking Credit Union Performance Using Market Data

cunastrategicservices.com

October 13, 09 |

Agenda • Company Introductions • Automobile Market Update • Understanding Changes in your Portfolio by

Comparing Apples to Apples • Balancing Competitive Interest Rates and a

Sustainable Portfolio • Understanding the Effects of Credit and Collateral

Risk to: • Grow your Portfolio, and; • Protect your Net Worth

October 13, 09 |

Certified Public Accountants with Over 60 Years

Collective Experience

Well Over $100 Billion in Loans Evaluated

Work Exclusively with Credit Unions

October 13, 09 |

• Loan Level Risk Analysis – Provides a "Credit Quality Grade" to each loan based on current

characteristics of the borrower and their collateral. This risk-based approach is widely accepted by the NCUA and has been proven to pinpoint a high percentage of charge offs (70%-90%) in a small percentage of loans (8%-12%)

• Portfolio Stress Analysis • Collateral Confirmation for Consumer Loans (Black Book) • Collateral Confirmation for Real Estate (AVM) • Loan Allowance Validation

October 13, 09 |

October 13, 09 |

Founded in 1955 in Gainesville, GA

Owned by The Hearst Corporation since 1981

Independent source with the most timely updates and most accurate values

Over 3K lenders and 1K Credit Unions use Black Book as their Trusted Values

Originate loans at more accurate LTVs

Lost Business Analysis

Collection and Forecasting Models

Remarketing with the most accurate floors

41 of the top 50 auto finance providers use Black Book

Over 18,000 dealers in the US and Canada use Black Book values

Timely, Independent and Accurate™

October 13, 09 |

Our Markets

» Cars, Trucks, Vans, SUVs » PowerSports - Motorcycles, Personal Watercraft, Snowmobiles » CPI – Collectibles and Exotics » MD & HD Trucks & Commercial Trailers » New Car Pricing and Specifications » Residual Value Projections » US & Canada

October 13, 09 |


October 13, 09 |


Where have we been and what does that mean?

Some explanation behind the numbers.

Stronger Than Normal: November 23 – December 28, 2012 Date % of Increases

Nov 9 25

Nov 16 23

Nov 23 40

Nov 30 31

Dec 7 36

Dec 14 37

Dec 21 43

Dec 28 50

Jan 11 36

Jan 18 33

Jan 25 41

Feb 1 36

Feb 8 41+

Feb 15 46+

Date $ Adjustment

Jan 11 -$62

Jan 18 -$64

Jan 25 -$49

Feb 1 -$46

Feb 8 -$24

Feb 15 -$18*

Cars – Overall adjustment was less each week

One year ago: $-54 Most consistent segment is SCC (Compact Car) Wk of 2/1/13 Jan. 2013 Avg One year ago

-$26 -$28 -$8

Wk of 2/15/13 One year ago

-$4 +$7

January & February 2013 - Cars

*smallest segment average since May 11, 2012

Date $ Adjustment

Jan 4 -$23

Jan 11 -$36

Jan 18 -$28

Jan 25 -$22

Feb 1 -$27

Feb 8 -$33 (cars -$24)

Feb 15 -$19 (cars -$18)

Better than cars until early February

Average since January 1, 2013: -$27 One year ago: $-21 All three pickup segments are good (CPT, MPT, & FPT) FV segments (Full-size Vans Cargo and Wagon) were strong but now have

backed off. Dec 1 to Jan 18 increased every week!

January & February 2013 - Trucks

20334 20207 [-0.6%]

19548 [-3.3%]

18543 [-5.1%]

17749 [-4.3%]

16000

16500

17000

17500

18000

18500

19000

19500

20000

20500

21000

2/1/12 5/1/12 8/1/12 11/1/12 2/1/13

Aver

age

Valu

es ($

)

Prior Year, By 3 Month Intervals (2007-2011 models)

Price Feb. 1, 2012 (2006-2010 models) was $16942

$807 increase in average price

Remarketing Industry Performance (as of 2/1/13)

17237 [-1.6%]

18232 [-0.8%]

17513

18373

16600 16800 17000 17200 17400 17600 17800 18000 18200 18400 18600

Car

Truck

Average Values ($)

1 Month Comparison

1/1/13 2/1/13

(2007-2011 models)

Car and Truck Performance (as of 2/1/13)

17237 [-5.1%]

18232 [-3.5%]

18172

18892

16000 16500 17000 17500 18000 18500 19000 19500

Car

Truck

Average Values ($)

3 Month Comparison

11/1/12 2/1/13

(2007-2011 models)


17237 [-14.5%]

18232 [-11.1%]

20158

20501

15000 16000 17000 18000 19000 20000 21000

Car

Truck

Average Values ($)

12 Month Comparison

2/1/12 2/1/13

(2007-2011 models)

-9.2% year ago

-6.7% year ago


2/1/12 to 5/1/12: 1 year ago Overall: -.6% 12 of 24 segments up Segments with strongest retention

SCC (Compact Cars) ELC (Entry Level Car) EMC (Entry Mid-size Car)

2/1/11 to 5/1/11: 2 years ago

Overall: -1.1% 14 of 24 segments up Segments with strongest retention

SCC (Compact Cars) ELC (Entry Level Car) EMC (Entry Mid-size Car

Next three months of 2013 – expect less strength than 2012 trend Supplies will steadily increase

First Quarter Trending & Forecast

All Cars Not the Same

-2.6%

-6.7%

-17.6%

-1.1%

-4.9%

-12.6%

-20.0%-18.0%-16.0%-14.0%-12.0%-10.0%

-8.0%-6.0%-4.0%-2.0%0.0%

1M 3M 1Y

% Change for PLC and SCC as of Feb. 1, 2013

PLC

SCC

-1.8%

-4.9%

-10.9%

-1.3%

-8.1%

-2.9%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

1M 3M 1Y

% Change for PLC and SCC as of Feb. 1, 2012

PLC

SCC

Model years 2007-2011 Model years 2006-2010

PLC – Prestige Luxury Cars SCC – Compact Cars

Where’s the Better Opportunity?

$21,400

-$5,900

$4,850

-$400

-$10,000

-$5,000

$0

$5,000

$10,000

$15,000

$20,000

$25,000

Today's value 12M $ Change

PLC vs SCC (2007 models) as of 2/1/13

2007 BMW 328i - PLC 2007 Ford Focus ZX4 SE - SCC

-21.6% -7.6%


$46,600

-$17,000

$9,400

-$700

-$30,000

-$20,000

-$10,000

$0

$10,000

$20,000

$30,000

$40,000

$50,000


PLC vs SCC (2010 models) as of 2/1/13

2010 BMW 750Li - PLC 2010 Ford Focus SE - SCC

-26.7% -6.9%


$46,600

-$17,000

$4,850

-$400

-$30,000

-$20,000

-$10,000

$0

$10,000

$20,000

$30,000

$40,000

$50,000


PLC vs SCC (2010 and 2007 models) as of 2/1/13

2010 BMW 750Li - PLC 2007 Ford Focus ZX4 SE - SCC

-26.7% -7.6%

October 13, 09 |

October 13, 09 |

Why Does Evaluation Matter? • Estimating the Effect from Policy Changes or New

Relationships • New Loan Products • Indirect Lending / New Dealer Relationships

• Uncovering Opportunities for Growth • Developing Concentration Risk Policies

• Not Required to Prophesize Market Deterioration • Required to be Capitalized Well Enough to Maintain Core

Operations Given Market Deterioration

October 13, 09 |

Adjusting for External Factors • Eliminate/Reduce - Looking at LTVs at Origination

• Requires Reliable Values • Think About Valuation in Terms of Losses. If you Repo the

Car, do you Expect to get Retail Value? • 5 New Autos - Average LTV Retail Value = 95.6% • Same 5 Autos – Average LTV Wholesale Value = 118.2%

• Adjust For - Comparing Depreciation on Similar Loans Period Over Period

October 13, 09 |

Benchmarking Performance Apples to Apples

• Important to Understand the Life Cycle of an

Automobile • Generally, Loan-to-Values (LTV) Start High and

Migrate Downward Over Time • Depending on Duration, LTV May Continue to

Increase Over the Short Term • Challenge: Finding Relevant Comparisons

October 13, 09 |

Loan-to-Value Analysis

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

2005 2006 2007 2008 2009 2010 2011

Don Ready Ford Gibby Newsome Dodge Ben Selleck Chevrolet

Brent Gage Honda Babs Merrick Toyota Paxton Harding BMW

October 13, 09 |

Loans Originating in Q3 and Q4 2012 (As of

12.31.12)


12.31.12) Change % ChangeNumber of Loans 5,642 5,858 -216 -3.7%Current Balance 117,897,515 109,151,567 8,745,948 8.0%Risk of Loss High Balance 462,788 614,691 -151,903 -24.7%Weighted Average Rate 3.2% 3.3% -0.1% -4.2%Weighted Average Orig FICO 771 770 1 0.2%Weighted Average Curr FICO 776 775 1 0.2%Weighted Average LTV 99.3% 88.9% 10.4% 11.8%Weighted Average Default Risk 6.6 6.4 0.2 3.0%

Problem: Auto Life Cycle Makes Information Hard to Compare

October 13, 09 |

Solution: Benchmark Using Loans in Similar Life Cycle Stage


12.31.12)


6.30.12) Change % ChangeNumber of Loans 5,642 5,896 -254 -4.3%Current Balance 117,897,515 120,984,888 -3,087,373 -2.6%Risk of Loss High Balance 462,788 434,399 28,389 6.5%Weighted Average Rate 3.2% 3.3% -0.1% -4.3%Weighted Average Orig FICO 771 764 7 0.9%Weighted Average Curr FICO 776 768 8 1.0%Weighted Average LTV 99.3% 98.1% 1.2% 1.3%

October 13, 09 |

How Loan Duration Affects LTV’s and Risk - Short Duration

October 13, 09 |

How Loan Duration Affects LTV’s and Risk – Long Duration

October 13, 09 |

Interest Rate Trends

October 13, 09 |

Current Interest Rate Environment

October 13, 09 |

Challenges to Interest Rate Competition

• Rates at Historical Lows • Everyone Seems to Be Going Lower • Direct Dealer Financing Doesn’t Fight Fire With Fire

• Discounted Interest Rates Priced Into Vehicle

• “How Low Can You Go” While Still Accounting for: • Charge Offs • Dealer Incentives / Other Administrative Expenses • Profit Margin (Cost of Shares)

October 13, 09 |

Pricing Analysis

Average

Rate

Earned

Average

Yie ld After

Charge Offs

Average

Rate

Earned

Average

Yie ld After

Charge Offs

Auto - New Direct Auto - New Ind irect

A Paper 5.16% 0.10% A Paper 5.34% 2.08%

B Paper 5.06% 2.31% B Paper 5.24% -8.04%

C Paper 6.75% -14.60% C Paper 6.98% 5.52%

D Paper 7.79% 5.01% D Paper N/A N/A

E Paper 6.78% 6.43% E Paper N/A N/A

Auto - Used Direct Auto - Used Ind irect

A Paper 5.31% 5.31% A Paper 5.58% 5.58%

B Paper 0.48% 0.46% B Paper 5.47% 5.11%

C Paper 6.87% 6.81% C Paper 7.30% 6.98%

D Paper 7.75% 7.04% D Paper N/A N/A

E Paper 10.18% 9.09% E Paper N/A N/A

October 13, 09 |

Pricing Analysis

October 13, 09 |

Pricing Analysis (Net of Charge-Offs)

October 13, 09 |

THANK YOU!

Dan Price Manager

877.392.2021 [email protected]

Ricky Beggs VP, Managing Editor


Brett Collett Lender Solutions Manager


Steve Miller Director of Operations


benchmarking credit union performance using market data benchmarking...collection and forecasting...

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