Pub. 10 2019 Issue 1

www.wvbankers.org 20 West Virginia Banker Rachel Messick is the Director of Analytics at Visible Equity, overseeing all analytical components of the software. She received her M.S. in Statistics from BYU and has since been appointed the Second Vice President of the Utah Chapter of the American Statistical Association. She can be reached via email at rachel.messick@visibleequity.com or by calling 888-409-1560. From a lending perspective, it’s important to understand which loan types are currently profitable and which are not. Too often we see lenders who have outdated policies in place which are costing them money by either not taking into account an increase in costs with certain loan types or by preventing them from buying more D or E paper loans out of fear of higher charge-offs or delinquency rates. Having a cur- rent analysis always at your fingertips helps you make optimal decisions on which loan types perform best and ultimately what the ROI is on each loan type. 5. Perform Efficient and Cost-Effective Analysis Comprehensive, deep-dive studies provide a brilliant picture of your financial institution’s practices and market presence, but aren’t cheap. Some industry experts posit that profitability analysis simply isn’t cost-effective for the smallest of credit unions, but they almost universally agree that mid-size and large institutions will benefit considerably. This is a common misconception and an outdated philosophy that technology has solved. Because profitability analysis accuracy depends on collecting data into a central location and confirming its integ- rity many credit unions struggle to accurately merge various spreadsheets and databases together from their Core, L.O.S., Credit Bureau, and other third-party vendors. This does not have to be the case, using an analytics software company that also acts as a data warehouse such as Visible Equity, provides all sizes of financial institutions the ability to efficiently and accurately perform a thorough profitability analysis. The required data includes information such as loan bal- ances, loan type, application approval & denials, delin- quency history, unpaid balance, charge-offs, interest rates, fees and costs, recovery rates, unique identifiers for loans, applications, members, etc., and non-interest income. These fields are then analyzed using various statistical methods such as cluster analysis and regression. Through this process, a financial institution can determine facts such as total direct cost per loan, per application, per member, per auto dealer, etc. The mere process of collecting this modeling data often sparks productive conversations and epiphanies about how to streamline a particular product or service to become more efficient. Through the profitability analysis process a financial institu- tion can set the appropriate rates and fees for products and services, determine the merits of strategies such as risk- based pricing, evaluate the return on capital investments, and set a course for growth.   Profitability Analysis Continued from Page 19 KRIS MONTIONE Advertising Sales 727. 475.9827 or 855.747. 4003 kris@thenewsl inkgroup. com WORDS.