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The Regional MBL CUSO

. . Partners:Dan Kampen

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The Regional MBL CUSO

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    1. 1 The Regional MBL CUSO Executive Briefing May 27, 2009

    4. Agenda The case for Member Business Services How Credit Unions Get in the Game The Regional MBL CUSO Model Opportunities in the Local Market

    5. Recent Financial Industry History 1988 -- 1994: S&L Crisis, Bank Failures 1994 -- 1998: Automation / Centralization 1998 -- 2004: Redefining and Refocusing 2004 -- 2008: Lending Rollercoaster 2008 -- The Meltdown 2009 - -The Opportunity

    6. The Rochdale Group

    7. The Banking Problem: Too few loan officers chasing bigger accounts No service or relationship for micro business Sole proprietors, small entities and many self employed professionals left underserved Banks looking for deposits MBOs are at risk Recently, many have closed doors to small business

    8. Credit Union Challenges CUNA/CUEG forecast is flat Auto lending will continue to be slow Mortgage lending will continue to be slow Delinquency will increase Occupancy and Compliance costs rising Industry continues to consolidate Need member growth and income sources

    9. The Opportunity in Business Services: Make larger, variable rate loans Acquire larger deposit balances Open more accounts Increase Interest and non-Interest income Improve ROA Channel market to employees and families Compatible with all core systems

    10. The Anatomy of Small Business Structure and life cycle Distribution how big is the market? Opportunities in the local market

    16. Distribution of Small Businesses # Small Businesses 177,000 270,000 800,000 4.8 Million 20.6 Million

    17. Distribution of Small Businesses # Small Businesses 177,000 270,000 800,000 4.8 Million 20.6 Million

    18. Distribution of Small Businesses # Small Businesses 177,000 270,000 800,000 4.8 Million 20.6 Million

    19. Distribution of Small Business The Opportunity: small businesses in key markets: Rapid City 7,864 Bismarck 4,823 Minot 2,890 Omaha 24,941 40,518

    20. Distribution of Small Business The Rapid City Business Services Market: Select Industries: Automotive Services 299 Healthcare 576 Agricultural 386 Professional Services 346 Business Services 373 Printing Publishing 159

    21. Distribution of Small Business The Rapid City Healthcare Services Market: Offices of MDs 241 Dental offices 70 Offices of health practitioners 68 Offices of Chiropractors 41 Health services 35 Specialty outpatient facilities 23 Skilled Nursing Facilities 18 Optometrists 17

    22. The Opportunity Small Business has quickly gone from underserved to THE UNDERSERVED

    24. How Credit Unions Get in the Game

    25. Regional MBL CUSO, LLC A multi-credit union owned centralized credit underwriting, documentation, participation, servicing and training / internship facility that enables its owners and subscribers to compete effectively for highly profitable member business loan, deposit and business services relationships.

    26. Business Services CUSOs

    28. Example: MBL CUSOs in Texas

    29. Chicago: Spectrum Business Resources, LLC

    32. Cooperative Business Services, LLC

    33. Cooperative Business Services, LLC

    34. Regional MBL CUSO Advantages: LOCAL ownership / control benefits credit unions LOCAL underwriting benefits members LOCAL internship facility benefits employees LOCAL /standardized underwriting benefits Regulator & examiners LOCAL independent participation network mitigates credit risk, enhances earnings

    35. Each Credit Union Owner offers Competitive Member Business Solutions Credit TBL STN CRE LOC VISA Deposit Checking Savings Money Market CD

    36. The Rochdale Solution CUSO Organizational Mtgs Business Plan Financial Projections Operating Agreement Participation Policy Vendor Presentations Technology CEO Interviews Formation Facilitation Credit Union Market Evaluation Competition Analysis Product Plan Loans Deposits Business Services MBL Policy Participation Policy Staff Evaluation

    37. Average CU Investment and Return $15,000 - $20,000 per CU direct expense (NOT $250,000 - $400,000) $100,000 - 150,000 returnable investment Like a 36 month CD ROI components: Share of profit distribution from LLC Loan interest income Deposit income Fee income Member growth and retention

    38. Summary Mortgage and Auto lending flat Operating & Compliance costs rising Business Services Offers Variable rate, larger loans Multiple deposits and fees Channel marketing MBL CUSO = economies of scale/scope everybody wins.

    39. Where do we go from here? Agree you need to offer Business Services Agree that regional CUSO is best approach Identify like-minded Credit Unions Find a good consultant to guide process Commit to concept (pre-organization) Commit to the collaboration Commit to growth and enhancing member value

    40. MBL CUSO Launch Timeline

    41. The Rochdale Group

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