The document summarizes 5 dangerous trends facing credit unions: 1) Increased competition, 2) Declining growth and weak loan demand, 3) High employee turnover and depleting skill sets, 4) Weak marketing and diminishing member loyalty, and 5) Falling behind in technology and not attracting younger members. It provides details and statistics for each trend, noting issues like slowing credit union growth, increased bank competition, declining loan demand, high staff turnover costs, and low member loyalty. Strategies are suggested for overcoming each trend, such as innovative programs, connecting with members, improving sales skills, marketing initiatives, and focusing on technology.

1. The 5 Most DANGEROUS Trends Facing CREDIT UNIONS A comprehensive research study by Empire Research Team Presentation Rights Granted to J. Mark Walker Integrity Solutions, LLC © 2008 Empire Research Team

7. © 2008 Empire Research Team DANGEROUS Trend #1 Competition, Competition & Competition

10. © 2008 Empire Research Team At $232 billion, consumer installment credit outstanding at Credit Unions (CUCIC) is down 1.7% YTD. BANKS are posting the strongest annual growth at 10.8% FINANCE COMPANIES at 9.2% SAVINGS INSTITUTIONS & Non-Financial Businesses at 2.8% CREDIT UNIONS at a -0.8% CUNA Mutual – Economics ● June 2008 (April 2008 data) DANGEROUS Trend #1 – Competition, Competition & Competition

11. © 2008 Empire Research Team The World Council’s surveys of Credit Union movements and their regulators, made it abundantly clear that competition INCLUDES Credit Union vs Credit Union . DANGEROUS Trend #1 – Competition, Competition & Competition

12. © 2008 Empire Research Team “ They simply don't have the scale to offer all the products and services that members demand. They also have to fight harder for members since deregulation of membership rules in the last decade spurred competition for clients.” www.BizJournals.com Some large Credit Unions are opening local branches at a faster pace, but many Credit Unions that have served the area since the 1930s are shrinking. DANGEROUS Trend #1 – Competition, Competition & Competition

14. © 2008 Empire Research Team DANGEROUS Trend #2 Declining Growth, Coupled with Weak Loan Demand

15. © 2008 Empire Research Team DANGEROUS Trend #2 – Declining Growth, Coupled with Weak Loan Demand CUNA Mutual – Economics ● June 2008 (April 2008 data) At the end of April 2008, CUNA Economics & Statistics reported 8,297 credit unions for a net year-to-date decline of 99 institutions and 307 over the past twelve months .

16. © 2008 Empire Research Team This is consistent with the merger trends reported by the NCUA in their Insurance Report of Activity . The current marketplace forecast indicates 8,075 CUs by year-end for a net decline of 321 CUs in 2008 versus the 266 decline experienced in 2007 . CUNA Mutual – Economics ● June 2008 (April 2008 data) DANGEROUS Trend #2 – Declining Growth, Coupled with Weak Loan Demand

17. © 2008 Empire Research Team Typical Example: Of the 22 Credit Unions based in Sacremento, CA: 12 branches lost members from 2003 to 2004… even as the area's population GREW by about 1.7 percent . Sacramento Business Journal - by Mark Anderson DANGEROUS Trend #2 – Declining Growth, Coupled with Weak Loan Demand

18. © 2008 Empire Research Team CUNA Mutual – Economics ● June 2008 (April 2008 data) Current Credit Union loan growth is currently 1.1 percentage points BELOW its long-term trend rate of increase. What has been supporting the majority of the growth so far…? DANGEROUS Trend #2 – Declining Growth, Coupled with Weak Loan Demand

19. © 2008 Empire Research Team CUNA Mutual – Economics ● June 2008 (April 2008 data) Real Estate Secured Loans are the current primary source of growth. Over the past year, real estate secured loans have accounted for 93% of all loan growth. DANGEROUS Trend #2 – Declining Growth, Coupled with Weak Loan Demand

20. © 2008 Empire Research Team CUNA Mutual – Economics ● June 2008 (April 2008 data) “ Given the unfolding events in the U.S. housing and credit markets and further price erosion (declining collateral valuations) predicted by almost all forecasters, we are concerned about the risks and sustainability of this loan growth source . The alternative would be to put a hold on real estate and business lending and thus lose relevance with members.” DANGEROUS Trend #2 – Declining Growth, Coupled with Weak Loan Demand

21. © 2008 Empire Research Team “ The automotive sector of the economy continues to be battered by rapidly rising gas prices, declining employment and unprecedented levels of consumer uncertainty . All of this translates into extremely weak new vehicle sales now and into the foreseeable future .” On a year-over-year basis, Total Vehicle Loans are down 0.4% The New Vehicle Portfolio segment is down 4.0% YTD and 5.1% over the past year (’07) . Expect the total vehicle loan portfolio (New & Used) to decline by almost 1% in 2008 . DANGEROUS Trend #2 – Declining Growth, Coupled with Weak Loan Demand

24. © 2008 Empire Research Team DANGEROUS Trend #3 High Staff Turnover, Coupled with Depleting Skill Sets

25. © 2008 Empire Research Team DANGEROUS Trend #3 – High Staff Turnover, Coupled with Depleting Skill Sets How to Break the Negative Staff Retention Cycle - October 1, 2006, By Colin Piper Credit union employee turnover is on the RISE! According to the Credit Union National Association's (CUNA) 2006 Complete Credit Union Staff Salary Survey Report. Credit Union employee retention dropped from 84% in 2005 to 78% in 2006

26. © 2008 Empire Research Team How to Break the Negative Staff Retention Cycle - October 1, 2006, By Colin Piper Not only does this spell trouble for Credit Union management who must 1) Interview 2) Replace and 3) Train new employees… it also greatly--and negatively--affects member relationships. DANGEROUS Trend #3 – High Staff Turnover, Coupled with Depleting Skill Sets

27. © 2008 Empire Research Team How to Break the Negative Staff Retention Cycle - October 1, 2006, By Colin Piper The teller lifespan has averaged one year , while the average member service representative tenure is limited to just three years . “ This means credit unions constantly are hiring new people who deal directly with members--the frontline staff--and your members have to reacquaint and familiarize themselves with new employees .” DANGEROUS Trend #3 – High Staff Turnover, Coupled with Depleting Skill Sets

29. © 2008 Empire Research Team 'Credit unions are getting serious about succession planning because more than 50% of Credit Union CEOs will retire over the next 10 years ,' says Greg Fouks, managing director of executive search at HRValue Group, Middleton, Wis. Scope Out CEO Search Services - August 1, 2006 – Patrick Totty DANGEROUS Trend #3 – High Staff Turnover, Coupled with Depleting Skill Sets

30. © 2008 Empire Research Team The Credit Union Executive CUNA's Credit Union Executive Newsletter estimates it costs $50,000 to replace just one employee, taking into account only tangible expenses. DANGEROUS Trend #3 – High Staff Turnover, Coupled with Depleting Skill Sets

34. © 2008 Empire Research Team www.CreditUnionMagazine.com/story.php?doc_id=434 The Harvard Business Review found 'the opportunity to do important work that gives a feeling of accomplishment' is a bigger motivator for employees than pay . This, again, points to the need to have the right tools and processes in place on the front line . DANGEROUS Trend #3 – High Staff Turnover, Coupled with Depleting Skill Sets

35. © 2008 Empire Research Team www.CreditUnionMagazine.com/story.php?doc_id=434 Sales effectiveness tools can prompt the front-line staff to, for example… discuss mortgage options to members looking for a home… savings accounts to members who are expecting a child… Giving staff the tools that enable them to be successful is the first step to breaking the negative retention cycle. DANGEROUS Trend #3 – High Staff Turnover, Coupled with Depleting Skill Sets

37. © 2008 Empire Research Team DANGEROUS Trend #4 Weak Marketing & Diminishing Loyalty

38. © 2008 Empire Research Team DANGEROUS Trend #4 – Weak Marketing & Diminishing Loyalty The National Member Survey report reveals that members, prefer choosing a bank over their Credit Union as their Primary Financial Institution (PFI) by nearly a 3-to-2 margin http://advice.cuna.org/research_review/research_review_21.html

39. © 2008 Empire Research Team DANGEROUS Trend #4 – Weak Marketing & Diminishing Loyalty

40. © 2008 Empire Research Team A FULL 76% of members in this Trends Report survey identified themselves between ‘Moderately Loyal’ to ‘Not At All Loyal’ to their Credit Union 2007 Credit Union Trend Report DANGEROUS Trend #4 – Weak Marketing & Diminishing Loyalty

41. © 2008 Empire Research Team Diverging trends in Credit Unions… Sacramento Business Journal - by Mark Anderson Staff Writer – Friday, March 11 th 2005 Credit Unions naturally lose members when people move, die or simply close accounts. If the credit union doesn't attract new members, it starts shrinking… DANGEROUS Trend #4 – Weak Marketing & Diminishing Loyalty

42. © 2008 Empire Research Team Diverging trends in Credit Unions… Sacramento Business Journal - by Mark Anderson Staff Writer – Friday, March 11 th 2005 "It is very difficult to pick up new members when you are small. You don't have the marketing presence or the branch presence to attract new members ," said Henry Wirz, Chief Executive of SAFE Credit Union . DANGEROUS Trend #4 – Weak Marketing & Diminishing Loyalty

43. © 2008 Empire Research Team 'Credit Unions are placing more emphasis on marketing and developing a sales culture ,' says Yvonne Evers, President/CEO of HRValue Group. 'It took them awhile to realize they need marketing skills. While a lot of [Credit Unions] did promote from within, sometimes even taking managers from their sponsor group, they now realize they need financial expertise, not just good management skills.' DANGEROUS Trend #4 – Weak Marketing & Diminishing Loyalty

45. © 2008 Empire Research Team DANGEROUS Trend #5 Falling Behind Technology & Not Attracting Younger Members

46. © 2008 Empire Research Team DANGEROUS Trend #5 – Falling Behind Technology & Not Attracting Younger Members CEOs Need to be In Tune with Technology The specific qualities Credit Unions seek in new CEOs, regardless of their origin, include: ‘ the need to be in tune with technology , which has become more important over the years because of the need to compete on economies of scale with larger financial institutions’ says Steve Swanston, executive vice president of sales at John M. Floyd & Associates, Baytown, Texas. Components of a Competitive CEO Compensation Package By Kristina Grebener / Senior Research Analyst · Credit Union National Association

47. © 2008 Empire Research Team CEOs Need to be In Tune with Technology “ Attracting and retaining younger members is very important to the Credit Union for sustaining our growth.” said Richard Roark, Travis Credit Union’s Vice President of Information Technology. Friday, May 9, 2008 - East Bay Business Times, by Michael Fitzhugh DANGEROUS Trend #5 – Falling Behind Technology & Not Attracting Younger Members

48. © 2008 Empire Research Team CEOs Need to be In Tune with Technology Friday, May 9, 2008 - East Bay Business Times, by Michael Fitzhugh Travis Credit Union’s members are becoming more dependent on electronic delivery channels , and many of its most technically savvy members are frequently using Apple Inc.'s iPhone to access the Credit Union's web site, he said. DANGEROUS Trend #5 – Falling Behind Technology & Not Attracting Younger Members

51. © 2008 Empire Research Team Friday, May 9, 2008 - East Bay Business Times, by Michael Fitzhugh In two separate member surveys from Travis Credit Union in Northern California, the Credit Union found that 27% of its members were either interested or very interested in mobile banking . DANGEROUS Trend #5 – Falling Behind Technology & Not Attracting Younger Members

52. © 2008 Empire Research Team Friday, May 9, 2008 - East Bay Business Times, by Michael Fitzhugh “ Credit Unions don't always offer the variety of ways to access online banking that BIGGER BANKS can.” For Example: Wells Fargo offers its customers mobile Web browser-based access to their accounts , and lets customers send short text messages to the bank in order to access account balances and review their most recent account activity – something many Credit Unions do not .” DANGEROUS Trend #5 – Falling Behind Technology & Not Attracting Younger Members

53. © 2008 Empire Research Team http://www.creditunions.com/events/webinars/ DANGEROUS Trend #5 – Falling Behind Technology & Not Attracting Younger Members The Gen Y Market By 2017, Gen Y is expected to control a $3.48 trillion income (Passing baby boomers by $500B) 18-24 year olds represent 17% of the US population, but only 6% of CU Membership

54. © 2008 Empire Research Team http://www.creditunions.com/events/webinars/ The aging of Credit Union membership is a growing trend, since 69% are 55+. Now, many Credit Unions are asking: “ How can we train our staff, and implement systems to be more relevant to younger generations?” DANGEROUS Trend #5 – Falling Behind Technology & Not Attracting Younger Members

56. © 2008 Empire Research Team Determine YOUR Trend Now that you’re aware, You MUST establish a trend towards…

57. © 2008 Empire Research Team Determine YOUR Trend The successful transformation from a service culture to a service-selling culture is challenging. Many Credit Unions have shunned the notion that embracing a sales philosophy is in the best interest of members. A service-selling process that reinforces your values.

61. © 2008 Empire Research Team Why Training Events Don’t Improve Performance Ebbinghaus & Goddard The Forgetting Curve

64. © 2008 Empire Research Team The Behavior Change Process P E F O R M A N C E I M P R O V E M E N T SEMINAR WEEK 2 WEEK 4 WEEK 6 WEEK 8 WEEK 9 - MONTH 9 MONTH 10 - 12

74. © 2008 Empire Research Team Thank You For being with us Today J. Mark Walker www.IntegritySolutions.com [email_address] Direct: 770.578.1345