1. Larry Middleman, CEO of CUBG CONNECTING TO YOUR BUSINESS MEMBERS

2. Connecting With Your Business Members Larry Middleman, President/CEO May 2016 www.cubg.org

3. CU Business Group, 2002-Present

4. CU Business Group Profile  Largest business services CUSO in the industry  Working with 525 credit unions in 46 states  Staff of 40  Offices in Portland, New York, Houston, Phoenix, and San Diego  Industry leader with credit unions and regulators

5. On Average, Every Month We… Underwrite 60 loans Complete 75 annual reviews Prepare 150 sets of loan documents Review 50 appraisals Do 5 independent MBL portfolio reviews Sign on 3 new credit unions

6. State of the Industry

7. Credit Unions That Offer Business Lending Source: NCUA Assets

8. Source: NCUA 5300 reports Ouch - tough times ahead Dot.com bust Real estate boom begins What could EVER go wrong with real estate? Lots of money to lend MBL cap coming into play $20B in net MBL growth in last 5 years…that’s 40%

9. Bank and Credit Union Commercial Loan Growth 20082009201020112012201320142015 7 Year Change Credit Unions $32B$35$37$39$42$46$52$58 +82% Community Banks $531B$495$467$416$401$403$402$394 All Banks$3.0T$2.7$2.6 $2.7$3.0$3.1$3.5 13% 6% 15% of Community Banks

10. Credit Unions vs. Banks – December 31, 2015 Business Loan Delinquencies as a % of Outstandings Source: FDIC call report and NCUA 5300 reports *Delinquencies are defined as 30+ days past due

11. Credit Unions vs. Banks – December 31, 2015 Business Loan Charge-Offs as a % of Outstandings Source: FDIC call report and NCUA 5300 reports

12. Connecting with Businesses… Via Regulations???

13. NCUA MBL Regulations The Final Rule… -Gives credit unions ability to waive personal guarantees -Removes explicit loan-to-value limits -Lifts limits on construction and development loans -Clarifies that non-member business loan participations will not count against the MBL cap -Eliminates the need for a waiver process “It will be up to each credit union to manage MBL risks through their own policies and procedures”

14. “Yeah, yeah, but your scientists were so preoccupied with whether or not they could that they didn't stop to think if they should.” Dr. Ian Malcom – Jurassic Park

15. The Final MBL Rule Making it easier to serve your members… Don’t just cave in to member demands “Competition” is not a reason to lessen credit standards Appropriate personal guarantees are the biggest opportunity to really connect with your business members

16. Connecting With Business Members… * Relationships *

17. CUs Rank #1 in Trust Credit Unions80% H-E-B Grocery80% Trader Joe’s75% Amazon73% Banks, fast food, computers60% Cable TV/Internet20%

18. Distribution of Small Businesses Annual Sales < $100,000 Sales $1 - $2.5 Million Sales $100K - $1 Million $2.5 - $5 Million $5 - $10 Million Note: Total Number of U.S. Small Businesses 26,647,000 177,000 270,000 800,000 4.8 Million 20.6 Million Opportunity for Next Level Business Services # Small Businesses

19. “My perception is that credit unions are for personal stuff and banks are for business.” Source: CUBG Focus Group Study – August 2013 What Sophisticated Small Businesses Said… CUBG Focus Group

20. “I don’t think credit unions are equipped to handle my business needs.” Source: CUBG Focus Group Study – August 2013 What Sophisticated Small Businesses Said… CUBG Focus Group

21. Connecting With Business Members… * Lending *

22. Loan Products Used By Small Businesses Source: Small Business National Research - Raddon Financial Group, Fall 2013 Annual sales of...

23. All Credit Unions – Loan Product Mix

24. Niche Lending Products and Targeting Niches to consider… C&I lending $50,000 – $250,000 SBA and government guaranteed loan programs Packaged products for target industries Efficient handling of small loan requests (less than $50,000) Strategic use of alternative lenders

25. Alternative Lending Sources Today

26. Alternative Lending Make them your ally, not your competition!

27. Connecting With Business Members… * Deposits *

28. Deposit Products Used By Small Businesses Source: Small Business National Research - Raddon Financial Group, Fall 2013 Annual sales of...

29. How NOT to Increase Deposit Profitability Today’s Business Deposits Package Perfect for micro or small businesses that keep smaller balances and generate minimal fee income Two Types of Business Checking Savings and Money Market Consumer Online Banking Consumer Bill Pay Merchant Visa/MC

30. How to Increase Deposit Profitability Next Level Business Deposits Package Required for sophisticated businesses that keep six-figure balances and generate significant fee income Remote Deposit Capture ACH Origination Business Online Banking Analyzed Business Checking Cash Management Officer / Dedicated Deposit Expertise

31. The Relationship Sales Process… Establish Rapport Ask to do a ‘Check-Up’ Present to Decision-Makers Show a Clear Plan to Change Prepare a Professional Proposal Follow Up Regularly

32. Are credit unions EVER going to use deposit accounts as a loan risk management tool? One More Point …

33. And Now… One Credit Union’s Success Story Success Story

34. A Successful Case Study The CEO had an ‘in’ with the business

35. Refinanced the $5 million loan

36. B of A increased the deposit pricing when the loan went away

37. The business needed checking, online banking, remote deposit capture, ACH origination…and quality service

38. Financial impact to the business Bank of AmericaCredit UnionDifference Lower Service Charges $630$319$311 Higher Earnings on Available Balance $97$125$28 Total Monthly Benefit$339 Annual Benefit of Banking with CU$4,068

39. Thank you! For more information on CU Business Group, please visit us online at www.cubg.org lmiddleman@cubg.org | 866-484-2876

40. Questions? Larry Middleman President/CEO Credit Union Business Group larry.middleman@cubg.org 40 2016Accelerating Success Conference – Connect to the Future