1. CU Conferences – Business Lending and Other Services Gary Hess, President RTE Financial Services, LLC

2. Weather the Tough Times… or Summer in Minnesota!

3. July 27, 2011 Walking back from lunch at the Lake Calhoun Beach Club

4. Target FieldThe summer we do not tell anyone about.

5. Agenda The Economic Climate – 2007 to 2010 Business Lending Survey Conclusions

6. Common Assumptions Banks quit making commercial loans. Did they? MBL delinquencies sky rocketed. Did they? Commercial Real Estate Loans crushed the MBL CUSO providers. Did it? MBL has not recovered due to the economy. Has it?

7. Credit Market - NFIB 2011 – 92% are having needs met or do not need to borrow (only a 2 percentage point variation since 2007) 2011 – Only 3% list credit as #1 business problem Loan availability – worst in 2009 and 2010. About half way back to 2007 levels Source: National Federation of Independent Businesses’ Small Business Economic Trends Report 6/11

8. NFIB Loan Availability

9. What does the Federal Reserve have to say about this??

10. Bank Commercial Lending2007 to May 2011

11. Bank Performance 2007 to Present October 2008 - peaked at 1.6 trillion dollars January 2011 - lowest at 1.2 trillion dollars October 2010 - 1.211 trillion dollars Current - 1.263 trillion dollars Source: Federal Reserve Bank of St. Louis research

12. Member Business Lending2007 to 2011

14. 2008 – 27.2%

15. 2009 – 28.6%

17. How did MBL CUSOs Handle the Recession?

18. Survey Purpose What has been the MBL CUSO experience from 2007 to 2011? What did they do to counter the economic reality? Are MBL CUSOs still a viable alternative for MBL Lending?

19. Survey Questions Primary types of loans in 2007 Performance issues: 2007 to 2010 Reaction to the issues: What worked? Loan performance variation? Underwriting adjustments? MBL CUSOs vs. Banks The Recessions Financial Impact? Permanent changes to minimize future issues?

20. Loan Portfolio Type – 2007 “Consensus”: Commercial Real Estate Term Lines of Credit SBA – 40% 1 – business acquisition, construction, commercial investment/owner occupied

21. Commercial Loan Volume 2007 to 2008 – half up; ¼ down; ¼ even 2008 to 2010 – up, down but by 2010 even or up One participant example 4 to 5 years to lend its first $1 Billion 18 months (09-10) to loan its next $1 Billion

22. Loan Performance Issues 2007 to 2010 General Recession issues Weakening of business financials Unexpected Issues Lack of credit union understanding of SBA benefits Lack of understanding by examiners Easy credit from competition (banks) looking for loans

24. Banks < 1B in assets – 1.59

25. All Credit Unions - .65

27. Banks < 1B in assets – 1.51

28. All Credit Unions - .82

30. Loan Performance Variations2007 - 2010 40% saw it equally across all loan types Other Small unsecured Commercial Real Estate (CRE) SBA???

32. Closer review of tenant finances

33. Use more SBA

35. Financial Impact CUSO – majority saw it as positive for the CUSO Better financial performance Credit Unions need CUSOs CUSO – unexpected negative for the CUSO Given negative economy CUSO owners leery of investing Members – generally good Lower fees More owners

36. So, what have we learned and what should we do about MBLs? Turn off Fox Business Channel Turn off CNBC Embrace the MBL product; research the MBL CUSO; trust the basics.

37. Looking to the Future Tweaking of the underwriting Repayment sources Monitor and focus Change loan terms: reduce amortization Lower LTV Diversification Some had already done so

38. Conclusions MBL CUSOs were well positioned No major changes Many minor changes MBL CUSOs continue to bring value to owners and associate members

39. Thank you and have a great summer. Come visit me in Minnesota anytime!

40. Questions? Gary Hess 320-281-9765 gary.hess@rtefs.com