ACUMA FALL LEADERSHIP CONFERENCE

1. ACUMA FALL LEADERSHIP CONFERENCE ROUNDTABLE SOLUTIONS – RESULTS AND CONCLUSIONS October 8, 2004 Caesar’s Palace Las Vegas, Nevada

2. CUSO MORTGAGE LENDING • ADVANTAGES • Serving Nonmembers • CUSO as an indirect lender • More product lines • Compensation • Staff and Executives • Staffing Flexibility • Enable more CUs to offer mortgage products

3. CUSO MORTGAGE LENDING • ADVANTAGES (cont) • Approaching CUs not in the business • Reverse Participation (A new term invented by this group) (Def - Obtaining a commitment for the participation of loans on a forward basis)

4. CUSO MORTGAGE LENDING • CUSO Organizations designed for Real Estate Lending • 13 CUs purchased an existing operation • 6 CUs formed a single CUSO • 1 formed a wholly-owned CUSO • Purchasing an existing mortgage business

5. CUSO MORTGAGE LENDING • CUSO Organizations designed for Real Estate Lending • Transfer CU employees to a CUSO to begin operations • 2 Large CUs forming a single CUSO for economies of scale • Develop a Construction Lending CUSO to focus on a single loan product

6. CUSO MORTGAGE LENDING • Best Practices approaching correspondent CUs • Gets the CU in the mortgage business • Lead with Loan Servicing • Offer marketing support/advice • Cross selling their products at loan closing • Keep members from competition

7. CUSO MORTGAGE LENDING • Objections from CUs joining a CUSO • They just don’t get it! • CEOs and volunteer • CEO not willing to take responsibility for expanding products for their members • Existing relationships

8. CUSO MORTGAGE LENDING • Objections from CUs joining a CUSO (cont) • Staff and management conflict • Job security (CU employees concerned about outsourcing) • CUSO will not provide the same level of service as the correspondent CU

9. CUSO MORTGAGE LENDING • Ancillary products and services that may be offered by a CUSO • Real Estate Brokerage • Title Insurance and Settlement Services • Consumer loans • P/C Property & Casualty Insurance (Be careful) • Home warranties

10. CUSO MORTGAGE LENDING • Ancillary products and services that may be offered by a CUSO • Life Insurance • Financial Services (Securities cross sell) • Reverse Mortgages • Fee Services (training, outsourced processing etc)

11. EMERGING MARKETS • WHAT TO LOOK FOR & BEST PRACTICES • CUs as “out of the box thinkers” • Financial Partners and their billboards in Spanish. Take advantage of ethnic diversity • Aging members and reverse mortgages • Land trust activities in CO.

12. EMERGING MARKETS • WHAT TO LOOK FOR & BEST PRACTICES • Affordable lending in Texas diverse markets (customizing GSE programs) • Nonconforming loans criteria in Nevada to conforming loans

13. EMERGING MARKETS • WHAT TO LOOK FOR & BEST PRACTICES • Teaching auditors and examiners to understand nonconforming loans • Partnering with Realtors • Look to the CU’s roots of CU service mentality • Get the word out CUs make mortgage loans

14. EMERGING MARKETS • WHAT TO LOOK FOR & BEST PRACTICES • Don’t reinvent the wheel • Talk with suppliers • Address unique member recordkeeping (documentation) and work to help them • Investigate how to help and educate members improve their loan quality

15. EMERGING MARKETS • WHAT TO LOOK FOR & BEST PRACTICES • Check out www.Payrentbuildcredit.com • Learn what others (the competition) is doing

16. CROSS-SELLING STRATEGIES • The “1003” has a great deal of information – Use it! • Staff needs to know the full scope of CU’s products • Look to sell relationships • Training is needed and necessary • Develop strategies for cross selling specific products

17. CROSS-SELLING STRATEGIES • Monitor results from all activities • Don’t make the process harder than it has to be. Use of a single app? • Listen to what the members want. Improve listening skills • Evaluate audit skills. (Noted in incentive programs) • Incentives are helpful to achieve cross selling objectives • How effective is the tracking?

18. CROSS-SELLING STRATEGIES • Specific department chartered to take the “1003” and begin the cross-selling process • Look for opportunities and efficiencies in approving credit • Make sure policies and strategies are in sync

19. ALM ISSUES • Is this the time to retain or sell loans? • Make sure you clearly assess the opportunities versus your objectives • Make sure your board policies and ALM polices are in sync • Securitization strategies? When they are helpful and why? • Hedging strategies – Pipeline management

20. ALM ISSUES • Investigate alternatives for hedging with other investors including secondary marketing entities and CUs through loan participations • What do you do with the funds you receive from loan sales? • Need more communication on lending and hedging strategies.

21. ALM ISSUES • CU culture is still a bit of a disadvantage both inside CU industry and the market in general. • Is mortgage lending “CORE” to the CU’s business model? • If not, why not? • Priority level of mortgage lending needs to be raised in the CU community.

22. ALM ISSUES • Should the mortgage lending executive sit on the ALCO committee (75% - Yes) (Slight bias noted)

23. COMPENSATION STRATEGIES FOR RESULTS • Most popular group. Highest level of interest. • Comp is all over the map • Base Only – • Pro – Job security for CU employees • NEG – Lack of motivation

24. COMPENSATION STRATEGIES FOR RESULTS • Base plus commission – Small base with commission $$ per units in excess of achieved goal • PRO – Additional incentive • CON – Only select people can earn incentives vs others • Sales people can make more money that senior CU staff

25. COMPENSATION STRATEGIES FOR RESULTS • All Commission – • PRO – Motivation driven • CON – Works well in good markets not so well in soft markets • Cross sales and incentives – • Most were paying for cross sales using the 1003

26. COMPENSATION STRATEGIES FOR RESULTS • Cross sell other CU financial products • Cross sell incentive on insurance products were about $50 • Originators pay processors to increase productivity

27. COMPENSATION STRATEGIES FOR RESULTS • Paying overages – • PRO - Paying an originator on excess yield • NEG – Taking advantage of members perhaps instead of giving them a lower rate • Increasing source of business • Advertising, communication, and direct mail

28. COMPENSATION STRATEGIES FOR RESULTS • Product Profitability – The mortgage is one of the most profitable products the CU offers • Employee retention • Career path for staff to work their way into higher paying positions

29. COMPENSATION STRATEGIES FOR RESULTS • Use the better working conditions at the CU to attract qualified staff. • Are you aggressive enough on compensation strategies?