Cash Back Dividends A Market Differentiator August 2015

Cash Back Dividends Paid Millions

What It Is Not  Annual return of “above market” loan interest and “below market” share rates  A periodic one-time payment when the Credit Union has a good year

What It Is  Incremental annual financial reward for choosing us as their Primary Financial Institution  Target Cash Back dividend to mirror publicly held bank average of 40% - 50% of average annual net income

Cash Back Dividend Objectives  Key brand element  True market differentiator  Brings concept of member-ownership to life

Ingredients to Success  Defined capital management strategy  Competitive or better interest rates and fees  Operational excellence  Outstanding service

Capital Management Strategy  Level I – Regulatory Capital  Level II – Strategic Capital  Level III - Residual Capital

Capital Management Strategy

DFCU Financial Story “Achieving Operational Excellence”

Michigan Marketplace % Change Population count 9,938,492 9,938,4929,883,640(0.56) Population state ranking 88 Population change ranking 1351 Household median income 45,51246, Household income state ranking 1633 Population ranking includes the District of Columbia

DFCU 9 Year Compounded Annual Growth Rate Net Income 7.0% Operating Revenue 5.3% Non-Interest Expense 4.1% Average Assets 8.7% Average Capital 6.9% Excludes Cash Back dividend Compounded growth for years 2006 to 2014

DFCU Financial Story Millions $30 $34 $31 $34 $41 $49 $56 $54

DFCU Financial Story Core Net Operating Revenue 1.9 Times 2000 Level

DFCU Financial Story Core Non-Interest Income 2.6 Times 2000 Level

DFCU Financial Story In 2009 CapCom merger and in 2010 MidWest merger Millions Non-Interest Expense (excluding Cash Back dividend) 1.4 Time 2000 Level

DFCU Financial Story Note: Efficiency improvement of 23% at Net Operating Revenue of $120 million = $28 million in annual savings

DFCU Financial Story Average Assets 3.7 Times 2000 Level

DFCU Financial Story 1.69 % 1.66 % 1.69% 1.25 % 1.23 % 1.38 % 1.54% 1.62% 1.47%

DFCU Share of Wallet % Change Number of members 166,865215, % Loans outstanding per member $7,737$7, % Deposits outstanding per member $8,013$14, % Investments outstanding per member $2,699$5, % Note: Loan outstandings per member include sold loans that DFCU services

Key Ingredients  Commit to a brand strategy  Agree with board of directors on capital management strategy  Tenaciously seek operational excellence

Benefits and Risks  Benefits  Key brand element  True market differentiator  Brings member ownership to life  Annual dividend is discretionary  Risks  Members come to expect  Credit union must be consistently high performing

Cash Back Dividend vs. Better Rates and Fees  Variable vs. fixed costs  Maintaining performance measurement  Institutional vs. product level incentive

Member Stories

Dividend Calculator

Dividend Estimator

Dividend Qualification Criteria CategoryAgeAmount Minor< 18$100In Average Loan and Deposit Balances Youth $1,000In Average Loan and Deposit Balances Adult> 25$5,000In Average Loan and Deposit Balances

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