5 Factors Contributing to Increased Risk for Auto Lenders

Rising Auto Delinquencies, Higher Charge-Off Risk, and What You Can Do to Protect Your Loan Portfolio

Unique Partners & Customized Solutions Require Specialization Learning Is an Ongoing Experience In many industries, learning has a core skill set that is needed for a certain position. Take the fast food industry, for example — teaching an employee to cook and build a consistent burger each time is a skill that can be consistently trained across a multi-store operation. Of course, there will always be new processes and changes that will need to be learned as well, but that core learning is pretty much consistent across the board. However, at State National each of our hundreds of clients has a unique business and requires a unique solution customized to meet their specific situation. This creates the need for information to be readily available and for learning to become an ongoing daily experience. We instill this during our employee onboarding process by teaching each new hire not only about the core learning needed to understand a complex product like portfolio protection, but also about the many variations and customizations that can occur. Constant Improvement at Every Level Employees, both while in training and throughout their time at State National, are also encouraged to ask questions about and discuss new processes and features with each other to facilitate the spread of that new information across the organization. As their knowledge grows, so does their ability to share more and do more both internally and externally with our clients. This community spread of knowledge and skills across the organization results in a strong learning culture and in retention of a high-quality, well-informed workforce. Each employee plays their own part in our one-of-a-kind dedicated service model, offering the best, most personalized service in our industry. The comprehensive, specialized training plus long-term constant growth of our associates is one of State National's biggest market strengths and one of the big reasons so many organizations choose to partner with State National. State National Site Visit: Be Our Guest

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Despite Inflation, You Can Still Maintain a Competitive Advantage and Protect Your Auto Loan Portfolio Spotlight Soundbite: The Value of Customized Portfolio Protection in the Subprime Auto Loan Market Borrowers Are Facing Financial Stress The government’s stimulus checks have long run out, as have the grace periods many financial institutions implemented during the pandemic. Interest rates have soared and prices have inflated. Individuals have returned to work and are again bearing the costs of gas, transportation, and childcare. While buy now and pay later programs may offer temporary relief, borrowers will ultimately not be able to put off making tough decisions about where to spend and save. Unfortunately, a growing number of auto loan borrowers, and especially subprime borrowers, are choosing to drop or reduce their auto insurance coverage as a result of having to decide which bills to pay with their increasingly stretched paychecks. And these uninsured or underinsured borrowers pose a threat to your institution’s loan portfolio and profitability. The news isn’t all grim, however — State National can help protect your financial institution from the risks posed by this group. How to Minimize Charge-offs Caused by Uninsured Borrowers Do you currently use an insurance tracking system to keep track of your borrowers’ coverage status in an attempt to prevent charge-offs? It’s a good start — tracking is a critical part of monitoring your institution’s risk exposure. However, having your staff track insurance in-house is a time-consuming and inefficient solution. More concerning, even if you employ an outside vendor to track coverage for you, studies show that tracking alone is not enough to encourage borrowers to keep their insurance in force. Without a consequence for remaining uninsured or underinsured, it’s been shown time and time again that a significant portion of borrowers, particularly in the non-prime and subprime space, simply will not heed warnings to bring their loans into compliance no matter how many letters or phone calls they get reminding them to do so. Without a mechanism that will actually change borrower behavior, tracking alone still leaves too much risk in your portfolio. A Persistent Problem — With an InsurTech Solution The good news is, you can more thoroughly protect your portfolio while also saving labor costs and freeing up your staff to perform other tasks to grow your business. And you can do it all easily, seamlessly, and with total peace of mind when it comes to compliance. Protecting collateral from loss is most definitely not the same as it was “in the old days” — or even just a few years ago. Advances in artificial intelligence, machine learning, and other leading-edge technology solutions have changed the game when it comes to mitigating the risk from uninsured borrowers. From software bots that can log in to insurer websites and update thousands of insurance statuses in seconds to nearly effortless multichannel borrower submission options including QR codes, email, text, web, and more, collateral protection problems of the past are simply not an issue today, especially with State National as your provider. As I like to say, “This isn’t your grandpa's CPI!” Save Time, Money, and Aggravation — What’s Not to Like? State National’s solutions provide tracking AND protect your portfolio. We also save your financial institution time with seamless implementation and multi-option borrower insurance submission solutions. Even better, there’s InsurTrak – our custom-designed proprietary technology platform where you can view all program details in real-time with just a few clicks. Additionally, you can personalize your coverage around exactly what works best for your business. Whether you need a full-featured, comprehensive program, one that keeps costs at a minimum for borrowers, or something in between, State National can customize a program that best fits your needs. A Simple Solution for Reduced Risk and Increased Profitability We have heard from some financial institutions that they “have no charge-offs” because they planned and allotted for a certain amount of loss. But money lost is still money lost even if you budgeted for it! What if you could save your company hundreds of thousands of dollars this year? Well, you can! Let me show you how you can leverage State National’s advanced technology and more than 50 years of experience mitigating loss from uninsured borrowers to proactively protect your business against today’s unpredictable economy and the wave of charge-offs your financial institution may be facing soon. It’s not too late to protect your portfolio from what’s coming our way.

State National's Retreat Where Female Finance Executives Go to Network and Learn A 2021 report from CUNA indicated that 51% of CEOs at credit unions and 33% of credit union board members are female. Many organizations speak at length about the value of empowering and providing opportunities to women — yet this recognition must be met with action. For example, Kim Sponem, CEO of Summit Credit Union, took action by starting The Red Shoes initiative. Filene Research Institute actively creates research reports about women in credit union leadership. These are just two of many examples across the credit union industry. Missions like these are an important part of transforming the narrative of women and finance. State National Companies also recognizes the unique leadership traits and skillsets that female leaders bring to the financial services industry. To celebrate those traits and provide women leaders from across the country the opportunity to build relationships with their peers, we created our own initiative — an annual event called the Female Executive Networking (FEN) Retreat. Why a Retreat Specifically for Female Executives? The goal of this annual retreat is multifold: Provide valuable, meaningful, and actionable education, information, and resources to senior credit unions and financial institutions executives that they can use to move their organizations forward. Create a forum for financial institution leaders from across the country to share best practices regarding leadership, retention, business growth, and operational excellence. Provide a rich and rewarding experience that organically allows connections and relationships to grow. Empower and inspire attendees to return to their financial institutions re-energized, with new ideas for accelerating the growth of their organizations. With these goals in mind, we launched our first FEN retreat in early 2020. And, oh, how critical it was for the female leaders who participated in this first event to achieve these goals — because at the time we didn’t realize were heading home to nearly two years of quarantine and isolation! A Most Welcome Return In 2021, after waiting 18 months from our launch date, we were more than eager to resume some sense of normalcy and held our second FEN Retreat. That year’s event featured Terri Trespicio, speaker, coach, and best-selling author of Unfollow Your Passion, as our keynote speaker and workshop leader. This year, our 2022 keynote workshop, titled How Macroeconomic Conditions Will Affect Your Financial Institution, Your Customers, and Your Household, was led by Marlena Lee, Ph.D., Global Head of Investment Solutions at Dimensional Fund Advisors, and Mary Ellen Krueger, Director, Wealth Management and Partner at Aspiriant. Not only are these FEN retreats educational, inspirational, and just plain fun, we at State National are also proud of being a part of the movement to empower even more women to lead in moving the credit union mission forward. After all, studies show that more female executives in a C-suite role can improve both customer orientation and financial performance. That’s a win-win-win — for credit unions, for their members, and for women in financial leadership. If you are interested in learning more about State National’s Female Executive Networking retreat, please contact your State National Client Executive or Regional Vice President. Comments from FEN attendees: