MCU – moving to a new business model MCU Board Maleny Community Centre Thursday 15 September 2016 This template can be used as a starter file to give updates for project milestones. Sections Sections can help to organize your slides or facilitate collaboration between multiple authors. On the Home tab, under Slides, click Section, and then click Add Section. Notes Use the Notes pane for delivery notes or to provide additional details for the audience. You can see these notes in Presenter View during your presentation. Keep in mind the font size (important for accessibility, visibility, videotaping, and online production) Coordinated colors Pay particular attention to the graphs, charts, and text boxes. Consider that attendees will print in black and white or grayscale. Run a test print to make sure your colors work when printed in pure black and white and grayscale. Graphics, tables, and graphs Keep it simple: If possible, use consistent, non-distracting styles and colors. Label all graphs and tables.

MCU Maleny Credit Union Strategic Questions Where have we come from? Where do we want to go? What are we proposing? What is the project about? Define the goal of this project Is it similar to projects in the past or is it a new effort? Define the scope of this project Is it an independent project or is it related to other projects? * Note that this slide is not necessary for weekly status meetings

Where have we come from? When MCU started in 1984: MCU in 2001? A small credit union doing personal loans, financial inclusion MCU in 2001? A tiny ‘ADI’ doing green loans, microfinance, a few home loans. MCU slowly becoming a small community bank like most ADIs. What happened in 2011? A merger with CUA was proposed and rejected by members Since then the board and management have stabilised, nevertheless profitability is still under pressure Where is MCU in 2016? As Maleny continues to evolve as a community, demographics necessitated a strategic review * If any of these issues caused a schedule delay or need to be discussed further, include details in next slide.

What’s happening in the mutual ADI sector? APRA regulation and increased competition are changing the playing field The number of mutual ADIs is now less than 80 (down from over 600 in the early 90s) Merger is the most common response to falling profitability but not always the most appropriate Alternatives are limited If there was an EASY solution, everyone would be flocking to it Margin pressure, IT costs and compliance are REAL challenges Changing a business model takes lots of time and money. Duplicate this slide as necessary if there is more than one issue. This and related slides can be moved to the appendix or hidden if necessary.

What do we need in 2016 and beyond? Real community banking – based on relationships and service Flexible services – meeting community and small business needs Contemporary internet and online banking Bigger and better loans, a wider range of products, at a good price Community projects that make Maleny a better place to live Retaining jobs and investment in the community Duplicate this slide as necessary if there is more than one issue. This and related slides can be moved to the appendix or hidden if necessary.

What’s happening for MCU? Profits are flat-lining with a loss recorded this year. Margin pressure, falling rates and competition are key factors. We need to invest in a new IT system and key staff. MCU remains small and our capital position restricts growth. Maintaining the status quo (business as usual) is not a long term option Duplicate this slide as necessary if there is more than one issue. This and related slides can be moved to the appendix or hidden if necessary.

Other options considered Business as usual – not viable long term Wind up – carries significant costs (wind up and redundancies) and leaves us with no financial services provider Heritage alternative partnership – they are not ready to do business Merger – after 2011 experience, not under active consideration

What are we proposing? Joining the Alliance Bank model – with Bendigo and 4 ex-credit unions Enhanced member value proposition Consistent with Objects of company Retains MCU identity Continuity of financial services for our local community Member investment shares repaid to supportive members Building (Maple Street) retained under member ownership Capital invested in Charitable Trust for other community projects.

What happens next? Constitutional change required – AGM Nov 2016 Approval of transaction by APRA and members – early 2017 Transfer of business – later in 2017 New IT System – later in 2017 The changes will take time … Let’s make this happen. Together.