SNC Spotlight

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Bringing Partnership to Life

How State National’s Client Advisory Council Creates a Virtuous Circle At State National, client experience is the foundation of everything we do. We don’t see our client relationships as static; each one is dynamic and evolving as a living, breathing entity. And it’s vital that we prioritize and nurture our client partnerships as we do with the other foundational pillars of our company. One of the most effective ways we do this is to collaborate with our clients. We talk to our clients, we ask them what they want, and we include them when crafting our business strategies. We have always considered actively getting feedback from our clients as an integral and critical part of our strategic planning. It’s why we conduct our Annual Survey of Service Quality as well as other surveys measuring other aspects of our service delivery. Our #1 goal is to help our business partners succeed, so finding out what they want and need, and how we can better provide it to them, is always top of mind. Taking the Quest for Feedback to the Next Level In 2018, we went a step further and created the State National Client Advisory Council (CAC) to convene a group of some of our top clients to discuss issues that are critically important to them and to us. It’s a forum to share information, gain consensus on key topics, and collaborate with peers and partners to creatively pursue problem-solving strategies and growth opportunities for their institutions As I said in my last CAC blog, our intention in establishing the State National CAC was, and still is, to listen carefully to the voices and concerns of our clients, foster an atmosphere where collaborative insights can emerge, and allow our strategy and product development to be guided by those who will actually be using it every day. Specifically Designed to Add Value — For All Yes, the CAC is of great benefit to State National, because it gives us opportunities to deepen relationships with some of our closest partners, and align our organization more precisely with our clients’ perspectives. We get to hear both what’s working well as well as challenges they’re facing, not only in our area of expertise, but in all areas of their institution. As we’ve been known to say a time or two, we’re successful when our clients are successful — so anything we can contribute to help them grow and succeed ultimately contributes to our own success as a company. But it’s definitely not all about us! Our council was created with a true desire to provide members with tangible, real-world benefits that not only make it more than worth their time but also add tremendous value they don’t get from any other partner. But don’t take it from us — here’s what some of our current CAC members have to say: “By having open conversations about what’s going on in the marketplace with other credit unions who are going through the same things, I’m able to learn how others are attacking certain problems and I’ve absolutely taken some things back to my credit union and implemented them.” ~ Mike Shockley, VP of Lending, True Sky Credit Union, Oklahoma City, OK “It’s great to talk about emerging technologies or other ideas we can bring back to our specific credit unions and share with our leadership team — ideas we might otherwise not have been exposed to. The volume of information at a very high level that someone can obtain by joining the CAC is wonderful." ~ John Cotner, VP Lending, Horizon Credit Union, Boise, ID “When it comes to topics like innovation and technology and AI, I think I've learned more from the CAC than I have by going to conferences and things like that, because you can really have more intimate conversations with your peers at the council, and State National does a great job of bringing in great presenters that really position the topics well, so it's easily understood as we're reviewing certain new innovations.” ~ James Bolin, SVP & CMEO, Silver State Schools Credit Union, Las Vegas, NV “One of the benefits of being on the CAC is not only meeting some of the participants from different parts of the country and having discussions, but I have also been able to take away two specific strategic business initiatives that directly impact the credit union that came about through my participation on the CAC, including one that is a multi-year strategic initiative.” ~ Steve McIntire, SVP, Enterprise Risk & General Counsel, SELCO Community Credit Union, Eugene, OR State National is a great partner. I'm glad they asked me to join the CAC because it gives me an opportunity to keep that partnership active and very vibrant. And I enjoy the fact that I get to see what State National is doing and what’s on their horizon and how it’s going to benefit not only my credit union, but the credit union industry. So it’s been really awesome.” ~ Karen Hoeppner, Chief Lending Officer, My Credit Union, Minneapolis, MN A Real-World Example of CAC Value The council’s 3rd quarter 2021 meeting provides an illustration of the tangible benefits of this ongoing collaborative sharing of ideas and insights. The council met in August in Irvine, California, headquarters of Filene Research Institute. Filene is an integral thought leadership partner for State National, and that partnership further extends directly to our CAC members. The business portion of the event was held at Filene’s innovative West Coast outpost. Dr. Bill Maurer, professor at UC Irvine, Director at the Institute for Money, Technology, and Financial Inclusion, and research fellow at Filene’s Center of Excellence in Emerging Technology, conducted a working session called “The Pandemic as Practice for a Less-Predictable Future.” Group discussion led to shared best practices on how credit unions can automate communication regarding the notice cycle, which improves their member perception of CPI. Participants also explored other risk mitigation strategies credit union peers are using and how they are approaching risk mitigation overall in light of the uncertainty and turbulence caused by the pandemic and other economic shifts. Relevant, Actionable Insights Following Dr. Maurer’s presentation and discussion, CAC members and SNC directors formed working groups to discuss business challenges related to highly relevant credit union hot topics, including data governance, AI implementation, and digital automation, including mobile. After a lively conversation and sharing of experiences, each working group was tasked with conducting further collaborative research into their group’s subject area. With their curiosity sparked, CAC members made plans to dive in together to produce real-world insights they can share with other decision-makers in their credit union. The groups will also present their findings at the Q4 CAC meeting in November. Personal Connections When the day’s work was over, members joined State National representatives for an enjoyable and relaxing evening outing. After the mental stimulation provided by the day’s deep dive into important credit union topics, it was nice to move to a casual setting on the water and interact on a more personal level, while enjoying excellent conversation and lots of laughter. Then, the next day, it was time to head back to their credit union homes, bringing knowledge, insights, advice, and inspiration with them as they work on their findings and look for openings within their institutions to leverage what they’ve learned. Discover More Are you a curious credit union professional, always looking to grow and give back to your organization? Do you enjoy bouncing ideas off like-minded people in your industry and get a little thrill when you see these synergies expand what’s possible for you and for them? Are you a believer in true connection with those you work with and mutually beneficial partnerships with your service providers? Contact Heather Clyde, State National’s Client Advisory Council Program Manager, at HClyde@StateNational.com to explore the possibility of council membership. “The CAC has exceeded my expectations. On a fun note, the group is great. My colleagues on the CAC and the staff at State National are all very enjoyable and very professional. State National does a wonderful job of putting the events together. They’re well thought out, well organized. I think it’s a great two-way relationship, the CAC. I think we’re benefiting State National, and they are certainly benefiting us.” ~ John Cotner, Horizon CU   “State National has always considered our clients as more than just clients — we truly do see each and every one of these connections as an authentic partnership. Our goal for client relationships is always more than transactional; we’re always going for a win-win situation and strive to evolve all of these partnerships to serve the long-term strategic business goals for both parties. Our CAC is growing to be a vital component of State National’s overall corporate strategy, and it’s very gratifying to see that it is already helping to serve the long-term strategic interests of our CAC members and their credit unions.” ~ Heather Clyde, Client Advisory Council Program Manager

Safety Through Security

Safety Through Security: Because Cybersecurity Awareness Isn't Just for October   In October, security organizations around the world have focused extra efforts on cybersecurity awareness, urging individuals and businesses of all types and sizes to pay attention to and examine their systems and their daily habits in every area of online life. Cybersecurity Awareness Month (CSAM) was launched by the National Cyber Security Alliance and the U.S. Department of Homeland Security (DHS) in October 2004 as a broad effort to help all Americans stay safer and more secure online. While this year’s observance may be coming to a close, it’s important to remember to keep the ideas emphasized this October top of mind all year long.    Did You Know:  The average total cost of a data breach in 2020 was $3.86 million and took an average of 280 days to identify and contain. (IBM) The use of new breach techniques has boomed as a result of the COVID-19 pandemic, with 35% of breaches having leveraged new techniques in 2020. (Cynet) 88% of data breaches are caused by human error. (Tessian) 61% of data breaches used compromised credentials, and phishing attacks account for more than 80% of reported security incidents. (Verizon Data Breach Investigations Report) The situation especially impacts the financial industry: Although only 6.5% of breaches were suffered by financial services firms, those incidents comprised 61.7% of affected information. (Bitglass) The NCUA further warns that smaller financial institutions with less than $35M in annual revenue are especially vulnerable to hacking, malware, and ransomware attacks.   Because financial institutions are disproportionately impacted — and the consequences of breaches in this area are so consequential — carefully vetting business partners and partnering with other businesses that share your vigilance is critical. Here at State National, the security of our customer data is incredibly important — it’s a critical factor in our business and the service we provide to our clients. Our security team is on a mission to not only meet but exceed all security standards — often well past what others think is strict enough.   “Security threats don’t stop when the whistle blows at 5 p.m. and hackers don’t take vacations,” says Michael Weiskircher, State National’s CIO, “so protecting against attacks has to be an ongoing, real-time process of fixing vulnerabilities immediately.”   Our security team is constantly monitoring every variable and system to stay on top of all new vulnerabilities as soon as they are identified. There’s no waiting for patch day or weekly updating — we’re monitoring and assessing security 24 hours a day. Another thing that makes State National a leader in terms of network and data security is our status as part of the Markel family of companies. The strength of Markel and their security teams coupled with access to the security tools and resources of a multi-billion dollar, multinational insurance holding company adds yet another layer of protection when it comes to keeping sensitive client data securely locked down. So, while the threat of cybercrime in our world is certainly real, it’s nice to know that you can focus your efforts on other actions, like practicing good password hygiene, being savvy about not clicking on “phishy” links, and keeping cybersecurity at the forefront of your mind as you connect daily — and rest easy knowing that when it comes to your portfolio protection program, State National has you covered. For ways on how organizations and individuals can incorporate cybersecurity best practices into their decision-making processes, visit www.cisa.gov/cybersecurity-awareness-month. Do Your Part. #BeCyberSmart    

How Guaranteed Asset Protection (GAP) Mitigates the Risk Caused by Record High Auto Prices

Now, more than ever, it is critical to protect your auto loan portfolio with GAP Vehicle values have been at historic highs for the past year If you considered purchasing a vehicle this summer, you likely experienced some degree of sticker shock. New and used vehicle prices skyrocketed earlier in 2021 and are only now showing signs of a slight slowdown. How did we get to the point where Edmunds.com reported the average trade-in value of used vehicles was up 75.6% Year-Over-Year (YOY) in June? Simply stated, it all began last year. The manufacturing shutdowns of early 2020 left dealers with low inventory levels as shelter-in-place orders lifted and consumers, armed with stimulus funds and a desire to spend, went auto shopping in droves. The resulting low dealer inventories meant that would-be new car buyers were often forced to consider used vehicle options instead. Both new and used vehicles prices started rising in response to this unusual surge in demand. Despite seeing some stabilization of vehicle pricing in late 2020, things took a turn for the worse this year due to the global shortage of microchips. According to TrueCar, a Consumer Reports partner, there still remains an inadequate allocation of microchips for automobile manufacturers, exacerbating the inventory shortages that began in 2020. With inventory down as much as 50% in some areas, willing and able consumers are paying significantly more, with 20% of all new car purchases in May 2021 transacting at amounts above MSRP. This phenomenon has not been limited to new car purchases only — CNBC shared earlier this month that the average price of a used vehicle was up 21% YOY with a 10% increase from Q1 2021 to Q2 2021. What does the future hold for car values? July witnessed a slight reduction in the rate at which vehicle prices were increasing YOY. However, Carvana’s CEO, Ernie Garcia, warns that the cost of used cars will not normalize until manufacturers can produce inventory at pre-2020 levels. Supply chain challenges are likely to cause “some lasting” impact on used car prices, said Garcia on an August 6th CNBC’s Squawk Box. Black Book, in their 2021 Vehicle Depreciation Report, paints a slightly less optimistic picture, projecting “residual forecasts to return to pre-COVID 19 valuation levels in 3 years.” How will this valuation normalization impact lending portfolios? For a variety of reasons, many consumers found themselves paying in excess of MSRP or NADA for a vehicle over the past 18 months. This reality will not change overnight — it will take the automobile manufacturers replenishing and maintaining inventory levels on a consistent basis for prices to normalize. Whether that be in 2022, or in 3 years as predicted by Black Book, the reset of vehicle valuations has the potential to negatively impact your auto loan portfolio. Black Book’s annual vehicle depreciation rates averaged approximately 13% for each of the 9 years prior to 2020, when it dropped to just 2%. As vehicle valuations fall back in line with more historic depreciation models, loans already on the books as well as loans written through the remainder of 2021 will reflect inflated sales prices. In the event of a future theft or total loss at a time when vehicle values are back to pre-COVID-19 levels, primary carrier Actual Cash Value (ACV) settlements will result in unprecedented deficiency balances. And that is where GAP can help. Essential protection for you and your borrowers GAP has always been an important risk management tool. However, in today’s economy when vehicles are still selling above MSRP or NADA, it is especially important to lenders and borrowers alike for collateral to be protected against the changes in valuation expected over the next several years. Private Passenger Auto carriers settle total loss claims based on the ACV of the vehicle immediately prior to the loss, regardless of the original sales price. Inflated sales prices mean inflated loan balances on the date of loss, resulting in increased deficiency balances — the exact thing GAP is designed to protect. Not only will your potential charge-offs be reduced with GAP protecting your collateral, but your borrowers will also be better positioned to finance their replacement vehicle without the burden of having to satisfy a large deficiency balance on their original loan. How State National's GAP is different The State National GAP product provides unparalleled flexibility in the marketplace, primarily given our unique position as the direct sales force, underwriter, and program administrator. With options to protect amounts up to 150% of MSRP or NADA, you won’t need to worry about future deficiency balances resulting from today’s extraordinary market conditions. Additionally, you can rest easy knowing your pricing is not inflated to cover agent costs or, worse yet, that you will be part of an across-the-board rate adjustment because another lender’s program is not performing as expected. If you’re looking for the most efficient GAP claim submission process (it’s true — we really do not require any supporting documentation to initiate a GAP deficiency balance claim) and fastest claim settlement time (2 to 3 days, on average), isn’t it time you consider State National for your GAP Program? Contact us today to start protecting your consumer loan portfolio from the effects of inflated auto prices — driving a more positive experience for you and your borrowers.     Contact us today to receive more information about GAP from State National. Francine Gagliano, State National Director of Client Services 817-265-2000 x1247 or fgagliano@statenational.com

The CAC Goes to Texas, Virtually!

When You Can’t Bring Your Client Advisory Council to Texas, Bring Texas to Your Client Advisory Council

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