<ul> <li data-leveltext="" data-font="Symbol" data-listid="11" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1"><span data-contrast="none">Disciplined underwriting in the face of rising interest rate</span><span data-ccp-props="{"134233117":true,"134233118":true,"201341983":2,"335559739":160,"335559740":336}"> </span></li> </ul> <ul> <li data-leveltext="" data-font="Symbol" data-listid="11" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1"><span data-contrast="none">The path to true operational efficiency</span><span data-ccp-props="{"134233117":true,"134233118":true,"201341983":2,"335559739":160,"335559740":336}"> </span></li> <li data-leveltext="" data-font="Symbol" data-listid="11" aria-setsize="-1" data-aria-posinset="2" data-aria-level="1"><span data-contrast="none">Navigating current origination trends</span><span data-ccp-props="{"134233117":true,"134233118":true,"201341983":2,"335559739":160,"335559740":336}"> </span></li> </ul> [toggle title="TRANSCRIPT"] <div class="transcript-scroll-box">JJ Hornblass 00:00So, before we go to the next session, I wanted to share the results of poll two. And and so to remind you the question was for which digital technology? Will you increase your investment spending most in 2018? And the answer was direct lending followed by a tie between mobile applications and E contracting. So thank you for voting everyone. And we actually have another poll that we're going to be doing right now. So how have your loan approval rates changed in the past 12 months, and so the options are declined, considerably, declined somewhat, remained basically unchanged, improved somewhat, and improved considerably. So please go into the app. Go to the agenda. This is live poll three. Live poll three and we'll share the results with you after this session. So now it's my pleasure to introduce Natalie madula, who will moderate this next session entitled practical strategies for a post peak market which is sponsored by Oracle Financial Services. I should also make sure to thank Pfizer for sponsoring the previous session we greatly appreciate their support, and this session is sponsored by Oracle Financial Services. Natalie is the deputy editor of auto finance news. She joined royal in 2016 and has quickly made her mark on our vehicle finance editorial content, and she was promoted to deputy editor in in August of that same year. She was previously with the daily Sentinel in East Texas And it's my pleasure to introduce you to her today, Natalie. 02:04 Thank you JD. Good afternoon, everyone. As he mentioned, I'm Natalie madula, deputy editor of auto finance news. And I'm really excited to be here with you all this afternoon. Thank you again for joining us for our next panel discussion entitled practical strategies for a post peak market. And thank you Oracle Financial Services for sponsoring. As a reminder to everyone, we encourage you to submit questions through the mobile app. So this year, I think it's safe to say we all expected there to be some sort of downturn, at least I know I did. And looking into the crowd, and seeing everyone here and enthusiasm from everyone here. That slump hasn't quite occurred or at least not to the impact or scope that we thought it would. That being said many lenders have been strategically cutting back on originations and tightening credit criteria. So the question remains, you know, how should you be preparing in the meantime? What are some strategies for discipline underwriting to maintain the path to true operational efficiency. So joining us on the panel today to discuss practical strategies for post peak market are Chuck Biswas, Senior Vice President and auto finance regional area director of Huntington bank. JOHN Hiatt, Executive Vice President of dealer services at US Bank, Tom Lazenby, Senior Vice President and head of dealer financial services and direct automotive lending and regions dealer financial services, and Scott strand, Senior Vice President and Chief lending Officer of ECU so please join me in welcoming to the stage. 03:38 So before we jump into our discussion, I want to start like we do with any panel with some brief introductions. So maybe we can go down the line starting with you, Chuck, you want us to know a little bit more about you. 03:47 Good afternoon, Chuck voussoirs. regional area director for Huntington bank, we're we're a regional bank. We operate in 23 states that the prime super prime range a little bit about myself. I started. This is my 30th year in automotive finance. I started out with captive at Chrysler financial for over 20 years, spent a couple years at route one as Vice President of Business Development, and then joined Huntington about five years ago, started in product and strategy, then went out into the market and ran one of the regional offices for a couple years in the Kentucky Tennessee market. And then about a year and a half ago, I moved back to Columbus, to take on the role of the Regional Director about 40% or mainly the expansion states that we've gone into non footprint states. The acquisition activities report through me. 04:41 Sure, i'm john Hiatt I work for us bank and we're a national lender. I've been in the business 36 years mostly in dealer. We have both lease loan RV marine and we we are in the 48 lower states 05:01 Tom Lazenby with regions bank in Birmingham and run the dealer group and also run direct auto lending. We operate in 15 states we're regional by my dealer group operates in our 15 states and then seven out of footprint markets. I'm kind of like john, I've been doing this for over 30 years. 05:24 And Scott strand from BCU. At formerly the Boeing employees credit union, we're based in Seattle, we're a 17 and a half billion dollar credit union, we have about a $2 billion indirect auto loan and RV portfolio, mostly concentrated in the state of Washington. I've been with bc about nine years and came from the banking industry prior to that with wamu for several years and bank of america actually see first in the northwest for many years prior to that. 05:53 Great, thank you. So as senior executive CFO seemed to have been through quite a few credit cycles, so what's your view? On the current market, and where do you think the industry is going and how fast and maybe, Tom, we can start with you. Just remember to hold it close. It's kind 06:08 of interesting because one of our senior leadership meetings about a year and a half ago, our executive management asked me that, and I break everything down being in 30 years. I broke it in thirds. So I think we're somewhat in the mid to latter third of the where I see us peaking. I think that we have already started and I'm sure everybody else making adjustments to where we see the industry going. I was also asked for the definitive source and being in this business for 30 years. I'm not sure they appreciate it. But I said the Farmers Almanac told me we were headed this way. 06:50 Generally speaking, I would say you know, from a market standpoint, we've seen new car sales softened a little bit this year, US cars have remained pretty steady for us. The fundamentals seem to be sound. So from that side where we're obviously happy about how the 2017 came out, we're a little bit different being the regional bank and we still are in some expansion states. So that expansion affords us the ability to get loan growth just in and of itself. I'd probably agree with Tom on a lot of that, as far as we're, you know, when when you have nine, nine year run, at some point in time, you got to start looking over your shoulder. And we you know, we all do that on a regular basis, I think, but, so I'd kind of land a little bit with time on that one. 07:34 And not much different. I'd say if you look, we've been through one of the longest expansions we've ever been through. So a recession is likely coming when we don't know. We're seeing some signs of it and 16 and 17 with some of the vintages in the industry, starting to heat up, which is usually a red flag for session coming. We saw car sales, slow and 17. And we anticipate that happening again and at what we're not anticipating is a is a another event like we had in Oh, 60708. What we're what we believe is we're going to have a normal cycle. 08:13 Our view is very similar. You know, we're in the late innings of the cycle here. And I just don't know how long the game is going to be extra innings like last night's game. I don't know. I mean, I think it's really been a good good 2017 strong market and definitely some softening. We're starting to see some pressure somewhere in play in places, but it's it's really a good market overall. And we expect that to continue in the near term. 08:39 predict some Sorry, I think I might 08:43 say you were mentioned that you don't predict there to be as much of an impact as what we've seen in the past. But so I know each of you are more focused on the prime market, but there's been a sense out there that subprime is going to be the next bubble burst. So I wanted to see like your take on that. Each of you if you know what to what Is there any validity to this? Maybe Chuck we can start with? 09:04 Well, let's start out with them in prime super prime. So subprime is clearly not my area of expertise. 09:11 You know, the the major players in that space, have time and crisis tested models. Generally speaking, do I believe that subprime is going to cause a crisis that we saw earlier? No, I really don't I think the metrics, the metrics don't really indicate that to the same extent. The only caveat I may try to throw at something like that would say, there, there have been some entrants to the market to this market, post crisis that don't have that. That timed and battle tested strategy. So it'll be interesting to see their performance through a cycle. But as a general statement, I would say I don't agree that there's validity to it. 09:51 I'd say that we're probably heading into a pretty rough time for subprime, but subprime has been through that before and if you talk to a lot Have a very experienced subprime lenders, they'll tell you that their customers constantly live through recession. Right? So I think the the pools as we see them will start to increase. But there's a significant difference between a subprime auto and what we experience with real estate. tenors different, you know, there's just so many differences that now it makes sense that anytime we see a downturn, people are screaming, you know blow up but I just don't see that happening in the subprime what I see is just a normal cycle. And it's going to be Darwinian some will fall but I think overall, I don't think subprime is is performed that differently than it ever has in the past cyclical and I think we're heading into that cycle. 10:47 Yeah, I'm in agreement with them. I think one thing that we've learned from this is 30 years is that our industry is resilient, and that we adapt to the markets that we're in. We're always asked a parrot because we We went through it as a financial institution with the real estate market. Number one, you've got a shorter cycle, you've got a lower balance, you also have lower outstandings, you've got about 200 billion in subprime lending compared to where the mortgage industry was, it's a little bit more difficult to repossess, and to sell a mortgage than it is to repossess sell a car. So, you know, we're looking at the same again, we're a super prime prime lender. We don't see that but it does have an impact on the overall market. So certainly, you know, we keep reviewing and looking at what's happening that as part of the overall industry 11:38 Yeah, it really again, similar views. I think that as a prime and super prime player, we only kind of track subprime so closely, but you did see some of the, you know, subprime originators start to dial back earlier in this year and later in last year, and I think that's a that's a good sign. I think, you know, to John's point, there's going to be rougher seas ahead for this segment, for Sure, but really not so much beyond normal cyclicality of the business. And with a trillion dollars in auto debt and subprime being maybe 20% of that it just doesn't have the power to be a systemic risk. And so the segment will have trouble, but it's not going to turn into a credit crisis. 12:17 So before this event, so check, you know, we're talking about some of the bullet points listed for this session. And you're pretty quick to note that these are strategies that you do on a daily basis. So I wanted to see what's your take on how that would shift when the market does move? 12:36 Well, I promise you, I wasn't trying to be argumentative. I know I was just when you when you're in the prime super prime space, your margins are compressed at the gross. So if you're not constantly focused on your efficiencies, that impacts your bottom line very rapidly. So but you know, the second the other part of the question was, you know, we have two fundamental strategies at Huntington. One is to be local and the As data driven sales calls, so we try to leverage both of those things. We have a scorecard that we feel will help us migrate through any any changes to the market, and keep us in the comfort zone that we're in. 13:15 So I guess that would be it from from a large standpoint. 13:19 And so I had a question for all of you, too. So what advice can you offer lenders on how to maintain operational efficiency amid heightened competition? Maybe, john, we can start with you this time? 13:30 Well, I think if you look at where we've been in the past 15 years, we've seen a tremendous improvement, and not only efficiencies but effectiveness. And it's it's based on what the the, you know, technology now that's available to us. I, I think that if you're coming into this business, now you're a smaller lender. I think you have the advantage of not dragging with you some older systems, and you you have the ability to just go in and invest in what is more cutting edge. That'll get you efficiencies you need to survive in the prime business. And if you don't have them, you won't survive in the prime business. The margins are too thin. 14:08 Tom, what's your take? 14:10 Well, we, we spent a lot of time the past two or three years, managing our dealer base, because that's where a lot of the efficiencies start. In fact, we've actually deactivated about third of our total dealers that we had, is created great efficiencies, we had the old 9% of our production 18% of our outstandings, we're creating 45% of our losses. So we've executed on that strategy. We very much managed from an efficiency ratio. We been able to cut out about 27% of our applications, but still do the same production we're doing. And of course, there's a cost savings associated with that. And so that's, you know, that's one of our primary strategies and then you know, we keep reviewing our margins. Because our funding costs continue to outpace what we're able to get to the market and still say in the space that we're in. 15:09 And when did you start doing that? 15:12 We actually started about three years ago, we've we've only been back in the business about seven years. So you spend the first you know, we called it drive inside and go up and sign everybody that you had before you got out of the business. We were also trying to decide who we wanted to be when we grew up. And it took about three years to get that so we then were able to look at the market, you know, how we price where our space was, and kind of develop a strategy which we've executed own. And part of that, again, because of some of the core states we're in, you know, our banking, Georgia, Alabama, Mississippi, Louisiana, not the best performing states historically. We've had to manage the lat diversify. That's Well, we're also outside of our footprint to help the world For that risk. 16:02 Scott, what's your take on maintaining operational efficiency? 16:05 Yeah, I think there's really two things that we tend to focus on. The first one is, is around technology and automation first, certainly around, you know, credit decision automation, using third party vendors for integration, you know, integrated vendors for verification and things like that. You know, I think certainly there's a risk optimization effect there too. But that's certainly something from an efficiency standpoint that we're that we're focused on, also within just other you know, kind of process automation. But like Tom said, the second major focus is just simple blocking and tackling around dealer relationship management, and managing our dealers closely to make sure that we have quality relationships, of course, but certainly aren't, don't have inefficient ones that margins are just too thin to be able to spend time and money on things that aren't going to turn into earning assets. And so, that's not rocket science, but you have to be disciplined around it. 17:00 Tom, I want to follow up with you again, because you mentioned your worst performing state. So how are you trying to geographically mitigate risk? 17:08 Well, in the bank, where we've diversified in two states first was with our preferred dealers. That would be the publicly held dealer groups, the top 10 dealer groups in the country. And if they ask us to move into a new market, that we were able to move into that market, we can have moved into more than select dealers, which would be mid size dealer groups, because we found that's where we get the best efficiencies, the best performance. So we've been able to do that in states and within the next two months, we'll actually be adding four new states. 17:45 So john, want to turn to you. So you think it's been growing? It's outstanding, without increasing without increasing risk and staying consistent and prime and super prime? So how are you finding this growth? Maybe you can give us a bit more color into that and in what way is US Bank market position and dealer relationships contributing to that growth specifically? 18:03 Sure. So if you look back over the last three years, I think we focused on probably three major things. One was the product itself, we improved the ease of doing business with us, we removed some barriers, we improve the technology that allowed us get back faster. So better service. The second thing is we, we were in 48 states, but we really didn't penetrate the coastal pressive very well from all you know, all the way around the United States. And that's where the population really is. So we were a, we're in 48 states, but we were primarily a Midwestern bank, we change that. And one of the ways we changed that was, you know, really focusing on the top 10 dealers, in penetrating our relationships with those dealers and getting in into places where in dealers where we hadn't been before. So we improved our arm. market penetration if you would. The third thing is our wallet penetration we, we introduced our lease product in places where it had never been introduced before, which really requires in many instances, training your dealers right on the lease product because not all of them really know how to sell the lease they get in a comfort zone quoting a loan and they know how to do that in their, you know, their their time in the boxes is important to them. So, but we've been able to go out and show some dealers how they can make more money with the least product. So that's really helped our growth. 19:32 And where did you introduce that lease by you said you introduced it and you said you introduced to the release product in places you hadn't before. So can you specify where and when you started? Yeah. So 19:40 that you to think of all the states along the ocean, the coastal Crescent, right, so you've got California, Texas, Florida, three largest states for auto sales. We were really not penetrating those states. And then all that up and down the coast, the East Coast now. We're doing great where we really hadn't Much of the market share that was going to the other cap to the other lenders in the captive. So we started to penetrate in those markets. 20:09 Check I want to turn to you now. So I know Huntington has remained consistent with its underwriting strategy as well. So how are you finding loan growth? And in what ways are you increasing dealer penetration? 20:20 Well, as I mentioned earlier, we we do have some expansion states that offer just naturally loan growth, but I'll separate them just a little bit. So, so obviously, there's the expansion and we we look for certain conditions. Before we we make that step does does our model fit the population? Do we feel it can have an impact there. So we keep an eye on those particular things and a few other aspects. And we try to set ourselves up to move quickly once we see those conditions, so that that's kind of a larger loan growth from the from the dealer penetration side and I know they're tied, but I just wanted to separate them just a little bit in this response. from a dealer penetration, our program is a little bit counterintuitive. So we push out a sell rate versus a buy rate. So there's a learning curve associated with with Huntington. And we have the reason we focus on a data driven sales call is we have to come back out to the store, we have our reps go in there at a higher frequency, especially in the beginning. And as we matriculate through the process with them, we have to do the reps go back in and work through the deals that are out there. I mean, we, we love to be in a situation where we book every loan we approve, but in many cases, we either get some intelligence as to how our pricing model looks. Or we have the ability to determine where our model best fits the dealer strategy. And that's the trick. When when you're not trying to be all things to all to all customers inside of a dealership. You have to make sure that people inside the dealership understand what is a Huntington deal. What is not a heighington deal, and to be able to leverage that rapidly once they get there so, so below dealer penetration, especially in the training is more critical in the expansion states so we can expand and get loan growth in and of itself, but we can also improve market share just through through sales calls and training. 22:18 And I want to shift gears for a minute and talk about us car values. So, I wanted to see, get your thoughts on when do you predict us car buyers will stop depreciating? And how do you think this used car value trend will impact us financing business in the meantime? And maybe Scott, we can start with you this time? Well, 22:35 we certainly think a lot about what's going to happen with use car prices and and you know, I'm certainly not going to make a prediction. Rather we kind of think about how how we're sensitive to changes in use car prices, certainly from a loss severity standpoint, you know, to date in our in our market, which has been pretty strong. We really haven't observed you know, any softening yet on used car prices and And so we really think that the rate of growth in prices has to normalize that at some point, whether it's going to be some big correction. You know, we don't know, I think we're just really focused on what the impact of that could could be in terms of how we stress our portfolio and things like that a bit more specifically, you know, we're just trying to minimize the severity risk within our portfolio, knowing that we're sensitive to, to use car prices. So just something that we spend a lot of time on and think about, but really try not to predict when that's going to happen. Tom, 23:39 internally next year, they're projecting four to 5%. But decrease in US car values. We kind of focus on us cars, maybe a little differently than most about 45% of our used car portfolio cpos. We found that they've actually performed quite a bit Better than the normal us portfolio, very low losses good, you know, risk profile, we'll continue to do that. And then again, I think we've been the beneficiary this year, it may turn but because of the states, we're in southeast Southwest, there's a lot of trucks, a lot of issue these. And so that's predominant of what our used car inventory is, again, we've been the beneficiary of strong prices in those markets in our region. So when we're looking towards next year, I mean, we're already getting an asset buyer credit risk partners. You know, where do we see the industry going? Do we need to look at adjusting ltvs but even they have to admit because every quarter they say, US car prices are going down and they have a chat. So we'll probably almost have to wait till we get there before we make any real adjustments. 24:52 JOHN, what's your take? Well, 24:55 so use cars prices is very important when you have 65,000 leads cars coming back every year. So we're we're in the market selling us cars at a, at a rate greater than some of the manufacturers really. So we have a lot of models. They're never accurate, they're directionally correct. And what we found is a significant correction in 16 in a rebound and 17. So if you think back to the recession, eight, 8 million cars dropped, you know, dropped down to 8 million SAR. And that created a demand for us, right, there wasn't as many supply for us because the downward there went down, and as a result, use prices shot up. What I think we're seeing is a historical correction and it's taken years to get there. But when new car SARS dropped, it actually helped us values this year. And we see it in our returns and we see it in the in the block the auction lanes. What we're, what we're seeing in the models is that next year, we'll drop back from 17 and continue to correct. If you look at a used car average price it was at climbed up to about 60% of new which is historically very high. 26:15 You know that the funnel, I will switch it a little bit I'll say that, you know, the fundamental we see some things in the market that still that we like. So we still like the US car business. Again, with the with the credit quality of the customer that we we employ the US vehicle depreciation really impacts LGD, not PD. So we're looking at the same issues that everyone else is on severity. But you know, theoretically if you don't repose review, don't repo the car, you don't have to worry about what it what it's going to cost over the board what it's going to take over the block. So you kind of focus on both ends of the spectrum, but see the same metrics everyone else? Yeah. 26:49 So I want to talk about the technology atmosphere next. So as you navigate originations, what opportunities do you see in the technology atmosphere as more and more FinTech players in this space How do you choose who is best for you to partner with? And, you know, what are your thoughts in the technology atmosphere in general, and maybe Tommy can start with you this time. 27:09 I think from a strategy standpoint, we're very dependent on our middleware providers dealer track and route one to be our intermediary to the FinTech industry. We also then secondly, would be looking at someone who could add value to the, to our customers overall experience be at the dealer, or the consumers that's I have direct and indirect. And I think third, then we'd be looking for that FinTech provider that would either open a new distribution channel for us, or maybe even a new vertical that we could go in that would be beneficial for the dealers. The reason I say, the dealer track and route one in their partnering is because we as a financial institution, we have a lot of vetting we have to do for new vendors. With that we have partnerships with Yvonne in green sky in the FinTech space. We have, you know, vendor management TPR M's, Nara and Iraq and P DAC and for the committee's, so typically you're talking about a 12 month vetting process within the bike. we affectionately call it the Wipeout course. And that's our Vice Chairman. That's not me. But nevertheless, that's something that we have to do. But it's also been something that's been very, very beneficial for us, not only from a risk, but from a vendor management standpoint. So we've embraced it and you know, but we still have to measure that. We will be adding new partners. It is a little bit of vetting process. But you know, from our standpoint, we're certainly looking to partner because of size. It's to show we are it's beneficial that we do that. 28:54 Check. 28:57 Well, certainly humbling whenever you can come to conferences like this And you see the speed and the direction that these that these are going. So from from our perspective, we obviously want people who help us improve our efficiencies as best we can, but also fit or become a strategic match. We still believe that the dealer has a place in the process regardless of the, the approach, the customer's needs are clearly involved are evolving and are evolving at a faster and faster pace. But we tend to look for more hybrids to the indirect so not direct, not indirect, but a little bit of a hybrid where we can engage the customer, the dealer can engage the customer in whatever fashion that that customers comfortable with, or the dealer fits fits the dealer strategy. And then we try to employ the strategic partners that help us further those goals and maintain our position in the space. 29:55 JOHN, what's your take on the FinTech atmosphere? 29:58 If you look at technology, you Located between internal and external, we're always looking for internal partners that can bring us better, faster, cheaper solutions. So that's easy, right? The tougher part is what's happening in the market as it relates to the sale itself. And you have a lot of companies out there that aren't necessarily dealer centric that the dealer see as a threat. So we're very focused, and we recognize that our living comes from our dealer base. So we're very focused on dealer centric platforms that help bring the customer to the dealer and the deal to us auto gravity and others in the market that have a specific model that helps facilitate the sale doesn't dictate to the dealer their profit. So we're very sensitive around not getting into relationships, that would create tension between us in our in our customer. Sky. 30:56 Yeah, a couple thoughts and fairly similar, really, not unlike Tommy mentioned dealertrack we have a partner with cu direct as a credit union, we utilize them most of you know him as kudle. Probably, they're a very progressive technology company and and is there a great strategic partner? For us? That's pretty specific to the indirect business, you know, on the FinTech side in lending in general, we've spent a lot of time, you know, talking with different fintax. And I think, you know, one of their huge advantages is kind of the digital delivery and their ability to to develop and get to market quickly since they're unencumbered, you know, by legacy systems like we are. You know, I think on the lending side, probably the other thing that is talked about is their ability to better discriminate risk, right with all the different algorithms they have. I'd like to see that proven over the cycle. You know, but for sure, I think an advantage the fintechs bring is this is the service delivery, particularly through digital, where we'd like to do more around that is, just like john mentioned on the direct and indirect side and making that seamless. As a credit union, we're very focused on direct auto loans to our members. But we work very, very hard to resolve any kind of channel conflict. And actually, we want to pre approve our members through the direct side and send them and let them fulfill to the indirect side. And that works really well for us. But it's still a clunky process, not only for our member, but also for the dealer. So that's a particular area that we'd like to focus on. And we think there are some FinTech partners that can help us do that. 32:30 Then turn to audience questions for a minute. Do you see platforms in which financial institutions auction alone taking over in the short or medium term? Maybe Johnny can start with you this time? 32:44 Well, I don't know that that would end up being any more efficient than what we already have. So the auction, I think takes place more at the f&i office, adding another layer, I think it's going to add complexity and costs. So no, I don't I don't see ultimately, that bringing value beyond the additional, the additional calories it'll take to auction them off. 33:08 Maybe Tom, do you have a take on this 33:10 in agreement with john all that? Well, I don't have anything to add to it. 33:16 And so I have a question for Scott, would you not want to do an analysis on the used car portfolio? Would this not assist the credit union to set aside funds for anticipated loan losses? 33:26 Yeah, and I think the point I was making earlier as we do a lot of analysis, you know, on our use car portfolio, we do a lot of stress testing on the impact of used car prices on potential. Well, LGD really, in what our last severities could do. What what we know will happen is that we, at some point, we expect us car prices to soften. And we've actually started to kind of dial back, you know, to try to mitigate potential, you know, severity risk, but just saying we're not Sure when that's going to occur and so we do extensive analysis on our on our total auto portfolio, including used 34:08 in question for Chuck, being in a super prime space, when do you think the market will tolerate higher rates on autos? 34:16 Hopefully really soon. 34:20 Pricing and pricing optimization is an exercise that, that we have to go through on a daily basis. We use we try to pull in as much data as we possibly can. We're seeing that move in that direction, but it's it's moved forward and then it's contracted and we can see that in our originations and see it rather rapidly. Obviously, with if the Fed continues to do the moves in the press continues to talk about those things. We hope that loosens it up to a certain extent. But you know, this is a fight we work on every day. 34:58 And which of you will add directly Tear banks main retail mobile app, for anyone that wants to take that one. Which of you will add direct to your banks made retail mobile app? 35:16 I think we're all looking for ways to make the direct process more efficient. So we're looking at ways where we can automate that put it online and put it on our banks web. And we're also looking for ways to link it into some better delivery mechanisms back to the dealer, as Scott said, so yeah, we're looking at that. I think everybody's trying to struggle with that. 35:40 Said another question for you guys. So what are your thoughts on longer term loans? So the industry industry wide terms have been extending more and more so I wanted to get each of your take on that from your perspective? At what point should the line be drawn and maybe check we can start with you. 35:55 20 plus years of the captive I hate long term loans. We've been pretty Be consistent for the past almost a decade. Now as far as far as our loan terms, we're not looking in any way shape or fashion to increase those at those at this time. JOHN, 36:10 yeah, I'd say the downside if you talk to the owners of the stores they hate long term because it just takes customers out of cycle. You talked to f&i, they really love it because it gives them a lower payment, they can upsell. But if you think of the health of the industry going longer term only puts the customer upside down longer and increases the cycle. So I don't think it's morally reprehensible but I don't think it's good for the industry. So where we're feeling is where we are now is is the place we should stick for a while. Having said that, that's the exact same conversation all of us had as bankers, we were at 60 months so we'll have to see what happens in the future. 36:54 We do offer updating for months but it's we have a cap at 5% of our outstandings that we produce on a monthly basis, we do a little bit different though we kept the LTV, we have a minimum FICO score 760. So what we found is that our average Bureau's running at about 898% LTV, that portfolio has actually had a shorter duration than are 70 to 75 months. And it's actually performed very well. Year to date, we're running about 3% of what we find is that 50% of what we're seeing is SUV 50% truck pretty much and it's typically that person that was making the decision between the lease it alone, and those particular dealers, especially in the far west seem to gravitate towards that as a lease alternative. 37:51 Yeah, we also offer up to 84 months and I think from a credit risk perspective, long term in and of itself is something that we think we can manage, we cap it As well, we have a concentration limit on the amount that we'll do up to a longer term. Where we really focus, however, is his long term and higher relative LTV. So we have LTV caps, you know, higher minimum FIFO. So we really try to manage that layered risk that comes with long term and higher LTV. So, so with a certain mix of our business, we can get comfortable with it. We certainly don't like to, you know, enable negative equity, right? We'd rather not do that. But you know, there's demand for it. And we need to offer that to our members, because I think that that is central the payment pieces is pretty important to them. But similarly, we have kind of observe little difference in the average, you know, life of a 60 month versus an 84 month when we do it. 38:49 I think we touched on this a little bit earlier, but what's your take on online credit tools like dealer track, and maybe Tommy check this one? 38:59 Well, I guess You know why we look the I mean, the industry is evolving. You know, and we personally like online credit tools, both from direct and indirect basis. We, I guess one of our goals and we hope the dealers are headed down this path is to empower the consumer to make those decisions. In certainly anytime we have the ability to prequalify someone that's a positive. I know dealertrack and route one are working on, you know, a number of products to allow that to happen within the dealerships, but we're also looking externally In fact, we have a customer experience project going on the bank, you know, to do that on the right basis to 39:45 John's and anything you want to add about what's your take on dealer track and online tools? Yeah, I think 39:50 I'm not sure whether those tools are going to increase or create market or if they just going to make it more efficient, certain omega more efficient, but at the end of the day, I don't Know that those tools will do more than expedite the existing book of transactions. It's in the market, which is great thing. Don't get me wrong, but I don't know that it's going to create market. I doubt that it will 40:16 add a little bit more of forward looking question for you guys. So looking into 2018 how bullish will each of you be with financing and auto financing and maybe Scott, we can start with you? 40:27 Yeah, I think I guess that's a matter of perspective, I think not super bullish what we really sort of expect we're just kind of wrapping up our, our we, we do an annual plan but also have a three year planning cycle and and our you know, kind of the way it's looking is pretty low growth. You know, for next year for us on the indirect side, we'll get growth by market expansion and ideally, you know, if the competitive situation, but overall, not super bullish in terms of growth, more of the same from 17 but 17 was a strong year. So that's kind of the perspective, I think that that it's not going to get much better than 17. But if we could repeat what we do this year, we take it into 41:12 I'm in total agreement with Scott, we call it holding serve. Next year, we would just like to basically we don't have any real production growth built in. It's more a matter of us about, you know, profitability, maintaining our margins and maintaining a risk profile. 41:32 Yeah, we're, we're very excited about next year and environmentalists were thinking that we're going to end up with similar growth that we had in percentages over over this year. So we expect to take some market share, we expect to see some shift in and take advantage of the shift to lease and create some shift to lease so yeah, we're, we're planning on taking market share. We're very bullish. 41:57 Chuck, do you have any take on it 42:02 Again, we we have some inherent long growth through expansion we just recently opened up Missouri. So we've got a whole, a whole wonderful state to start getting a mature and hopefully block john john from, from a little bit of that now cuz we compete, we compete in a lot of markets together. So we have we have some built in organic growth because of our expansion. That said, in the markets where we are mature, we're looking at at that being relatively static, but again, our pool is we've got enough we've got three buckets, mature markets, markets, we've been in there five, six years, and we still have market share to grab. And then of course, our expansion states. So that allows us a little bit of room to maneuver. 42:48 And it was Missouri, was it they just opened. Yes. When When did you open investing? 42:54 Well, there's two answers to that. We went into Kansas first and if you go into Kansas City, you're going into a little bit of money. So that that was about a year and a half ago, St. We put a rep to install the rep in St. Louis and open up the rest of the state. I think in the last 90 to 120 days, 43:11 how many states are in total 23 now? 43:15 Um, so there's a question in here about fraud. So that's obviously a big issue in industry right now. So what are you doing to prevent fraud and ID theft? Maybe Tom, we can start with you this time. 43:28 We're actually working with our credit risk partners and we've been installing some identity theft tools. We're also looking back at past historical with our dealers. We're being very proactive on what we have any indication there may be a straw purchase involved in trying to to correct that up front. And I think the biggest thing we've been able to do is partner with our collections or recovery group. We have meetings twice a month to kind of update where we are And I think that open dialogue and that relationship in the credit risk people are in there, we've been able to identify pockets where that seems to be happening. And I think we're more dissecting what we're doing and how we're doing it. And we've already seen a significant drop in that full balance charge off. Rarity, do we have now an identity theft situation, ours is more of a straw purchase that goes on. But again, any hint of that we contact the consumer, we contact the dealer and we get it resolved. Before that first payment ever comes to? 44:37 Why do you think it's straw purchases that are the problem? 44:43 That would be very difficult to say and I think every situation, a lot of times what you will find, at least we find is we have someone that is purchasing the vehicle on behalf of somebody that they don't know is credit worthy, 99 and nine tenths percent of the time that day dealer doesn't know that, at least we found that that's something that consumers doing the problem is, then it's not the person that purchased the vehicle that expects or anticipates making the payment. They're relying on that other party to make that payment. You know, I think the other area that we've seen is it's pretty much in certain pockets we found, and I think we do extra due diligence in those pockets to try to identify that. We also will talk and counsel the dealers about, you know, when that does occur, and what we've seen, and certainly I think people know, we're very vigilant in that respect. So, you know, we try to work with consumers when that happens. And, you know, it's again, we've made great strides in that over the last two or three years. 45:53 Chuck, how are you preventing fraud 45:56 or mitigating it? 45:58 So you we care Right so you get the synthetic fraud, you've got the straw purchases, utilizing every potential aspect that we have and a lot of it's also educating our dealers and talking candidly to them about the impacts of that what what occurs when that in from a numbers standpoint, in a lot of cases the dealer takes a bigger hit than we do. So you want to try to protect your partner as best you can. I believe we have some people that have credit risk conference in Dallas this that's going on this week that that's been focused on fraud. We employ basically everything that Tom said and try to utilize every asset our disposal, but sometimes you feel like the the the fraudsters, if that's even a word. The fraudsters are getting better at it faster than we can cover it. So it's it's not just the known fraud, it's looking for those other things. We have a very tenured credit staff. And a lot of times it's start it's still kind of starts with a person looking at it and saying something just doesn't look right here and investigating a little bit more. And that's where your dealer partnership really kind of comes into play. So every tool that we can throw at it, including some of the technologies that are coming out we're trying to employ. 47:14 Gotcha. Well, that's all the time we have for this session. So thank you again, gentlemen, for joining us. And I want to thank Oracle Financial Services again for sponsoring this session. JJ Hornblass 47:28 Okay, thank you guys so much. We've got the last results of the or the results of the last poll. This so this is the third poll of the day, again, sponsored by white Clark group, How have your loan approval rates changed in the past 12 months and by pretty significant margin remain basically unchanged. So kind of consistent approval rates is is the feedback from this poll. I also did before we get into this next session, I did want to share with you just bring your attention to big wheels. So that's in case you don't know what that is. That's our ranking of the top 100 lenders in the nation. It also includes analysis on the market and a forecast for originations. And you could check that out at big wheels data.com. Now we turn we turn our attention to the regulators 48:33 Roundtable. JJ Hornblass 48:34 we're privileged to have not one but two moderators for this panel, Mark Edelman, and William Hoffman. Mark Edelman serves as chair of McGlinchey Stafford's National Financial Services compliance practice. He's been with McGlinchey </div> [/toggle]
