Situation Analysis Beehive Credit Union

1. Situation AnalysisBeehive Credit Union Jason Andrus, David Gailey, Paul Hartley, Ryan Nicholas, Meredith Paulson

2. Industry Size &Growth Dynamics

3. Industry Size • Industry Size- Key Factors • Industry Revenue: Is the total sales revenue across the industry • Industry Assets: Total asset value of all enterprises in an industry • Industry Value Added (IVA): A measure of output = revenue - non-labor costs of inputs • Number of Enterprises: aka business or firms in an industry • Perspective • To gain a perspective on the size of the credit union industry these key factors will be compared across the credit union and commercial banking industries. Definitions from Dale Schmidt. “IBIS World Industry Report 52213, Credit Unions in the US.” 2001. Pgs (30)

4. Industry Size Comparison The credit union industry is dwarfed in comparison to the size of the commercial banking industry for three out of the four key factors. Numbers from Dale Schmidt. “IBIS World Industry Report 52213, Credit Unions in the US.” 2011. Pgs 29 and Doug Kelly. “IBIS World Industry Report 52211, Commercial Banking in the US.” 2011. Pgs 35

5. Growth Dynamics So what drives the growth or decline of the credit union industry? • Interest Rates • Lower interest rates on loans drive more people from commercial banks to credit unions • Unemployment • Lower unemployment leads to more spending and more lending. • Per Capita Disposable Income • Higher disposable income means more spending and greater capability to repay loans. Other factors that affect growth or decline are: housing prices, prime rates (interest rates charged on mortgages), and motor vehicle registrations (or the need of motor vehicle financing by consumers). Dale Schmidt. “IBIS World Industry Report 52213, Credit Unions in the US.” 2011. Pgs 5-6

6. Growth Dynamics How are these factors relevant to Beehive Federal Credit Union ? • The credit union industry is at a mature stage in it’s life cycle. This means that it “[grows] roughly in line with the general economy.” So as the economy expands or declines so does the growth or decline of the credit union industry. • These main macroeconomic factors (listed previously) affect credit union revenue. To gain a further understanding of how these factors may impact Beehive Federal Credit Union’s loan revenue it’s needful to look at these economic factors . It is especially important to look at these factors in the context of Beehive’s geographical market reach – within the state of Idaho. Dale Schmidt. “IBIS World Industry Report 52213, Credit Unions in the US.” 2011. Pgs 10

7. Idaho Macroeconomic Factors Unemployment has risen over the past few years. This has had a negative effect on credit unions. National Annual interest rates have dropped significantly over the past few years. This has had a positive effect on credit unions. Per capita disposable income has increased slowly in recent years. This has had positive effect on credit unions. Unemployment Info: Idaho Dept of Labor, Interest Rate Info: Idaho State Tax Commission, Disposable Income Info: Bureau of Economic Analysis

8. Categories within Industry

9. Credit Unions Credit Unions are owned by the members and they usually share a common characteristic such as where they work, go to school, or religion. Since it is member owned members pool their deposits together to lend out to borrowers. They perform many of the same functions that a bank does such as accepting deposits, issuing loans. According to IBIS World will show a 16% increase. This is due to a stabilizing economy and credit unions loosening their membership requirements. Possibly their greatest strength is they are non-profit which results in them being tax exempt. This results in better interest rates and lower fees. Another key benefit of being a member of a credit union is each member has equal voting power in who is on the board of directors. Members get one vote regardless of how much money they have deposited. IBIS World Industry Report 52213, Credit Unions in the US.

10. Banks Traditional Commercial banks are typically owned by the shareholders, either public or private. Banks are also subject to much stricter guidelines the Comptroller of the Currency, the Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC) governs them. Larger banks also have a much longer reach and are therefore able to lend to larger clients. IBIS World has cited the recent subprime lending crises to having a vastly negative effect on the market. A large portion of their income comes from lending to business especially corporations. Online-Only 25% of respondents surveyed by Mintel had an account with an online only bank. These banks such as ING Direct or Capital One are able to offer products such as credit cards, checking, savings, and loans. The main thing that sets these apart from traditional brick-and-mortar is these banks are all done online. These main differences allow them to keep their interest rates lower. IBIS World Industry Report 52213, Credit Unions in the US. www.mintel.com

11. The Client

12. Capital Net Worth(General) • Beehive Credit Union is in a position where they have a sufficient amount of capital to be able to possible make changes to their marketing approach and survive through initial negative affects that come before they see benefits. Beehive Credit Union

13. Loan Rates Beehive offers lower rates on a wide variety of loans for its members such as auto, construction, home equity, and conventional real estate loans. Some of the lowest confirmed fees and loan rates as well as highest deposit rates. www.bhive.org

14. Advocate to Member The Dave Ramsey Financial Peace University • The Dave Ramsey Financial Peace Universityprogram is a 9 week course that focuses on debt management, increasing savings potential and provides helpful insights into planning for future events.  Beehive opens our doors at two of our locations for you to enjoy this program.  The only cost incurred is the Financial Peace University packet which is currently $98.95.  This packet includes audio CD’s of all the lessons, the Financial Peace University workbook in addition to Dave’s book Financial Peace Revisited.   Education and protection from scams. • At Beehive, the security of your funds and your personal information always comes first. We do everything we can to protect your privacy and security. Listed below are several tools and resources you can use to protect yourself from identity theft and fraud.  Find best deal, even if the deal is not through them High Satisfaction www.bhive.org

15. Electronic Services I-Pay (Bill Pay) Mobil Bank Compatibility Money Desktop • Financial Management Software that allows you to easily and accurately follow you money as see where it is going. With this free program you expenses are divided up into categories and organized into charts. With this program you can set budgets, make plans to get out of debt, and view scenarios and the effect they will have on you finances. Web Statements eALERTS • Text or Email alerts that notify customer when there is predetermined activity happening with account. The Customer can set which activities they want alerts for and which they do not want alerts for. www.bhive.org All other info gleaned from each company’s respective website

16. Facebook • More than 800 million active users • Over 700 Billion minutes a month are spent on Facebook www.kenburbary.com www.facebook.com

17. SEO Currently not found on first 10 pages when using strong popular key wards regarding loans and banking. • Student Loans (Medium Competition) 2740000 Global Search 1830000 Local Search • How to Refinance (High Competition 1220000 Global Search 1000000 Local Search • Personal Loans (High Competition) 1220000 Global Search 1000000 Local Search No Keyword in Title or Meta Tags Using popular loan keywords, couldn’t find BFCU on Google Title www.bhive.com

18. Competitive Environment

19. National Trends Banks’ Business Lending is down, Credit Union Lending is on the rise “Credit unions are expanding to fill a void in business lending left by banks since the financial crisis. As banks have been slow to start lending again, credit unions have gotten a head start. Banks still carry about 12 times as much in loans as credit unions in America, according to Federal Deposit Insurance Corp. statistics. But over the past two years those numbers have trended in opposite directions, and officials at major credit unions say they are more interested than ever in commercial lending, not traditionally the core function of a credit union. From March 2009 to March 2011, total loans by banks declined by more than $500 billion, according to FDIC data. Over the past year, credit union business lending is up 5%, while bank business lending is down 3% a decline of about $95 billion, according to the Credit Union National Association. Pat Keefe, a spokesman for the association, said credit unions are pushing into business lending in part because of slow demand for consumer credit auto and home loans, for instance.” Adam Belz. USA TODAY. July 11, 2011. “MONEY” (pg 5B)

20. National Trends Economic Downturn causes issues for Credit Unions “The Credit Unions industry has been on a roller-coaster ride over the five years to 2011. Revenue is expected to fall an average of 3.4% annually over the period. However, this drop masks three distinct stages, beginning with strong revenue increases in 2006 and 2007 due to high demand for real estate loans. Following the subsequent housing market crash and financial crisis, revenue plummeted by more than 20.0% in each 2008 and 2009 as demand for loans plunged. However, the industry returned to growth in 2010 on the back of a stabilized economy and a larger customer base due to a loosening of member requirements. These growth trends will continue over 2011, when revenue will grow an estimated 16.0% to $43.7 billion.” To help recover from the downturn, the credit union industry is consolidating to cut costs and enjoy better economies of scale. As the industry consolidates, it will be better able to fiercely compete in the lending market. IBIS World Industry Report 52213, Credit Unions in the US.

21. National Trends To be competitive Credit Unions must have a strong online presence. “The adoption of modern technology has become, and will continue to be, very important for credit unions in order to compete with other depository intermediaries. According to the National Association of Federal Credit Unions, 20% to 43% of credit unions indicate that they currently offer online account balance inquiries, account transfers, share draft orders, and loan application. Of those credit unions not currently using the internet to serve their members, about 35% indicated they intend to provide such services in the future. Because most lending institutions outside of the industry, such as commercial banks, offer internet services, any credit union that does not offer credit unions will experience a major impediment of customer growth moving forward.” IBIS World Industry Report 52213, Credit Unions in the US.

22. The Consumer

23. Demographics Within the 3 counties that Beehive Credit Union serves, there are over 150,00 people within their target age range. Census 2010

24. Demographics Within the 3 counties that Beehive Credit Union serves, most within their target age range are Caucasian. Census 2010

25. Demographics Every Semester BYU-Idaho has about 15,000 students. 99% of those students are LDS and fit within the target market Beehive is attempting to reach. BYU-Idaho has a consistent ratio of single to married students. Every semester nearly 1/3 of the student population is married. These are the best candidates for advertisements regarding home and auto loans. Department of Institutional Research, BYU-Idaho

26. Demographics The BYU-Idaho student population comes from all over the United States. Because of this fact, looking to national or west coast trends in advertising will prove to be effective. Also, do to the economy and job market, these states are the most likely places that graduates will move back to when they are unable to secure employment. Department of Institutional Research, BYU-Idaho

27. General Consumer Insights • Millennials, Gen X • 18 to 34 • Tech Savvy, Media Driven • Making life-altering decision • Education/Career – Top Priority • Starting a Family – Lower Priority Lifestage Marketing and Financial Services - US - September 2010, www.mintel.com

28. General Consumer Insights • Optimistic about future • This age group has the most hope for the future and are more willing to take risks because of their feelings that things will get better. This attitude is a great one when advertising about purchasing a home or vehicle. • Short-term Goals • Pay down credit cards • Buy a car • Buy a home • Continue Education • Low Job Market, Moving Home • This means that the largest part of the BYU-Idaho student population will remain in Idaho if they are unable to secure employment. These will be the best candidates to focus on for home and auto loans from Beehive. www.mintel.com www.huffingtonpost.com

29. General Consumer Insights

30. Consumer Media Insights • Social Media Gurus • 57% of consumers have a profile • 68% are daily users • 22% use to make purchase decisions • Support Causes • Bank of America Chicago Marathon has 3,873 fans, compared with 1,038BoA fans. Social Networking and Media and Financial Services - US - April 2010, www.mintel.com

31. Consumer Media Insights

32. Consumer Financial Insights 75% Don’t like the idea debt 35% Don’t trust the industry Teens, Students and Finance - US - March 2005, www.mintel.com

33. Consumer Financial Insights When seeking financial advice “Similar to general population sentiments, college students in particular have little trust in advertising as a source of financial information. According to the Northwestern Mutual Millennium Generation study, less than 1% of Class of 2004 seniors would trust advertising to help them select an expert on financial planning. Instead, college students are most likely to trust their parents first (39%), followed by friends (11%), and financial magazines (11%).” Teens, Students and Finance - US - March 2005, www.mintel.com

34. Consumer Financial Insights 20% of the target market has a Primary relationship with Credit Union Teens, Students and Finance - US - March 2005, www.mintel.com

35. Situation AnalysisBeehive Credit Union Jason Andrus, David Gailey, Paul Hartley, Ryan Nicholas, Meredith Paulson