CEO Workshop Report. Dominion Credit Union. March 2016 (Data as-of 12/31/2015) 2016 Fiserv, Inc. or its affiliates.

Transcription

1 CEO Workshop Report Dominion Credit Union March 2016 (Data as-of 12/31/2015)

2 CEO Workshop Agenda March 2016 Morning (9:00 12:00) Introduction Methodology The State of the Economy & Industry Institution Overview Performance, Earnings & Growth Segmentation Deposits & Payments High-Deposit Balance Households Mobile, Checking & Credit Cards 12:00 1:00 LUNCH Afternoon (1:00 3:00) Loans & Business Households Auto Lending & Real Estate Small Business vs. the Consumer 2

3 Methodology in Brief

4 Methodology in Brief Comparisons & Percentiles March 2016 CEO Strategies Group Workshops: Data as-of 12/31/2015 Comparisons & Percentiles - in this report your credit union is compared with and ranked against the following average groups: CEO Average: the average ratios of all participating credit unions in the CEO Strategies Group program. Percentile: typically shown in blue, reflects the ranking - from 1 to of your ratio relative to all other participants' ratio. (e.g. 100th percentile = highest or best ratio, 50th = median ratio, 1st = lowest or worst ratio.) High Performers: the average ratios of the institutions that score in the top 10% on the RFG Performance Index. (see page 5 of the CEO Strategies Group analysis and page 28 of this CEO Workshop Report) 90th Percentile: the average of the ratios at the 90th percentile for a given metric - demonstrates top performance for the particular ratio. 4

5 Methodology in Brief - Growth & Active Households March 2016 CEO Strategies Group Workshops: Data As-Of 12/31/2015 Growth Ratios: default growth rates are year-over-year 12-month growth. Depending on your CEO Strategies Group processing cycles, your growth may be computed over a different period and annualized for comparability to the averages. The following growth rates are shown in this report: Dominion Credit Union: 12-month growth Comparison Groups: 12-month growth (Annual view eliminates seasonality influence.) Active Households: households with any new account openings in the previous 6-month period. Measuring new account activity is another key way to assess growth and member engagement. New Households: households where all accounts have been opened in the previous six months. Cross-Sold Households: existing households that opened a new account(s) in the previous six months. 5

6 Methodology in Brief - Computing Profitability Profit is computed at the account level and rolled up to various levels (households, products, segments, business lines, etc.) All profit figures (e.g. aggregate profit, per HH profit) reflect the annual contribution to the organization. Net Interest Income + Non Interest Income Operating Expense Loan Loss = Profit Net Interest Income Non-Interest Income Operating Expenses Loan Losses A transfer price a blend of Treasury and FHLBB rates is assigned based on product type and open date. The transfer price represents the opportunity cost: At the time you made a loan or took in deposits, what was your alternative investment or borrowing opportunity for funds of a similar duration? The difference between your interest rate and the transfer price represents the account s margin. This is multiplied by the account balance to arrive at nominal net interest income for the account. Using GL data, the credit union completes an audited survey to supply non-interest income at the product level. Each product s total noninterest income is divided by the number of accounts in the respective portfolio to arrive at a per account amount. For NSF and Minimum Balance fees, a weighting factor is applied to allocate more of these fees to lower balance checking accounts which are more likely to incur these types of fees than higher balance accounts. Operating expenses are applied at the account level for each product type. The per account operating expenses are multiplied by the number of accounts in the respective product portfolio and totaled to arrive at an initial deposit and loan opex estimate. This estimate is compared to total deposit and loan opex reported by the CU. A straight line adjustment (up or down) is made to the per account expense figures so, in aggregate, they tie back to actual deposit and loan opex. The credit union supplies loss rates for each loan type. These rates are multiplied by the balances in the respective loan portfolio and totaled to arrive at an initial loan loss estimate. This estimate is compared to the Provision for Loan Loss and a straight line adjustment (up or down) is made to the product loss rates so, in aggregate, they tie back to the PLL. 6

7 Methodology in Brief Profitability Examples New Auto Loan Account Info Open Date: Oct. 2015, Int. Rate: 3.85% Current Balance: $10,000 Transfer Price RFG Duration Estimate: 2 Years 2-yr Treasury Rate, Oct. 2014: 0.35% Margin & Interest Income Interest Rate Transfer Price: 3.50% Interest Income =.0350 * $10,000 = $350 Non-Interest Income Total Auto Fee Income = $100; # Auto Accounts = 10 Non-interest income per auto acct: $10 Operating Expense & Loan Loss Expense per Auto Account: $250 Loan Loss Rate: 0.50%; Account LL: 0.005* 10,000 = $50 Interest Income + Fee Income Opex Loan Loss = Net Income $350 + $10 - $250 - $50 = $60 6-month CD Account Info Open Date: Dec. 2015, Int. Rate: 0.35% Current Balance: $1,000 Transfer Price Duration: 6 Months 6-mo Treasury Rate, June 2015: 0.15% Margin & Interest Income Transfer Price Interest Rate: -0.20% Interest Income = * $1,000 = ($2) Non-Interest Income Total CD Fee Income = $10; # CD Accounts = 10 Non-interest income per CD acct: $1 Operating Expense Expense per CD Account: $150 Interest Income + Fee Income Opex = Net Income ($2) + $1 - $150 = ($151) 7

8 Methodology in Brief - Reports & Deliverables CEO Strategies Group analysis 400+ page report provides complete diagnostic review of credit union performance Growth, earnings, efficiency & delivery Opportunities Assessment Report Utilizes CEO Strategies Group data for 20 key metrics to estimate the potential earnings uplift to the organization by improving performance on the respective ratio CEO Workshop Report 100+ page presentation deck that intermingles credit union data from the full analysis along with ancillary economic, industry, competitive and consumer data & research All reports delivered electronically in PDF format Searchable; bookmarks for easy navigation CEO Strategies Group workshop 5 hour session (+1 hour lunch provided) Presentation and group discussion of most recent quarterly CSG data and the key topics affecting the industry 8

9 The State of the Economy & Industry

10 Economic Growth Continues to Be Modest GDP Change 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 3.3% Cumulative GDP impact of subpar growth since 2009: $1.3 Trillion (8% of GDP) 2.4% 2.4% 2.4% 0.0% Avg: Present Avg: Jun Present Source: Bureau of Economic Analysis 10

11 The Economic Dashboard Amount Change (previous year) Prognosis for 2016 GDP Change (2015) $16.35 trillion +2.4% Expect full year growth to slightly exceed 2% Unemployment (average for 2015) 5.3% -0.9% Unemployment likely to hover in 5% range Home Sales (new and existing) 5.7 million +7.0% Rising interest rates could slow home sales Housing Starts (full year 2015) 1.1 million +9.8% Likely to stay at current levels to replace depleted housing stock Auto Sales (full year 2015) 17.8 million +5.8% Strong but likely to slow Sources: Bureau of Economic Analysis, Bureau of Labor Statistics, Census Bureau, National Association of Realtors, New York Federal Reserve Bank 11

12 Key Economic Concerns Economic growth continues to be modest following one of the steepest recessions since the Great Depression. Housing s recovery has been modest but could be poised for stronger growth with generational shifts. Unemployment and underemployment remain a major concern, especially for the Millennials. Auto sales continue to be one significant bright spot in the economy. Global concerns will weigh heavily on Fed actions on interest rates. 12

13 The State of the Industry The industry is Vibrant The industry is Heavily Regulated The industry is in Technological Upheaval The industry is Metamorphosing Consumer expectations are part of the reason for this change 13

14 What Do Consumers Expect From Financial Service Providers? What Consumers Are Telling Us What It Means For Financial Institutions Increasingly Concerned About Debt Competencies Must Center Around Sustainable Growth Financial Wellness New Players & Channels Want to Make Better Financial Choices Greater Willingness to Use Alternative Providers Declining Spread Income Non-Interest Income Challenges Who Will Control Payments? Revenue is Changing Changing Expectations Increasingly Omni-Channel Prefer Self-Service for Basic Transactions The Evolution of Branches Gen Y (Millennials) Industry is Changing High-Touch as well as High-Tech Relevancy 14

15 What Consumers Are Telling Us Financial Wellness 41% 38% U.S. Consumer Loan Demand 35% 18% Extremely or Very Likely to Bank With These Entities New Players & Channels Fall % 21% 14% 16% PayPal Amazon Apple Google Changing Expectations Importance in Selecting a Primary Financial Institution 94% 82% 90% 74% 71% 78% 66% 54% 47% 35% 40% Branch Locations Branch Hours ATM Locations Online Banking Online Bill-Pay Mobile Banking Source: Raddon National Consumer Research 15

16 Industry Per Account NSF Income Down 30% Since 2008 Dominion Credit Union - All Households NSF/OD Income per Checking Account 47th PERCENTILE $120 Dominion CU CEO Average $100 $101 $80 $71 $60 $40 $20 $0 $65 CEO Strategies Book Pages:

17 Credit Union Consolidation Will Continue Number of Banks and Credit Unions Banks Credit Unions 11,97111,886 9,904 10,439 8,833 8,801 48% decline in 20 years Number of U.S. households grew 28% in same period 7,658 7,491 6,182 6,

18 The Advantage of Scale: Growth Is Paramount CEO Average Data - All Households - 06/30/2015 ¹From 2005 to 2015, the number of $3 billion asset credit unions in the industry increased from 17 to 47. ²In the CEO Strategies Group program, there were thirteen $3 billion credit unions in Today, there are 25. The table below shows institution statistics by the asset comparison groups, with data for these largest institutions separated from the usual $1B+ asset group. How do you compare to other similar-sized credit unions? ASSET GROUP² Less Than $100M to $200M to $500M to $1B to Dominion CU Asset Group $100M $200M $500M $1B $3B $3B+ $266M % of CUs 5% 13% 31% 19% 25% 8% Raddon Performance Index Loans to Deposits 73.3% 80.4% 80.3% 82.1% 79.0% 75.1% 50.9% Services per HH* Efficiency Ratio 84.6% 82.8% 79.7% 76.5% 72.0% 67.8% 76.0% Loan Growth +4.6% +12.7% +10.6% +11.0% +12.9% +10.7% +11.9% Deposit Growth +5.9% +5.1% +7.0% +6.8% +8.1% +7.7% +2.0% HH Growth +2.1% +3.4% +4.4% +5.0% +6.1% +6.3% +1.1% Loan SOW* 29.6% 27.8% 28.5% 27.6% 28.1% 28.3% 21.8% Deposit SOW* 26.5% 27.6% 30.7% 32.0% 34.3% 39.1% 26.0% % w/ Checking 53.9% 56.9% 58.8% 57.8% 60.4% 64.8% 40.8% % w/ CC 20.6% 22.6% 23.7% 22.5% 25.4% 30.0% 29.4% Monthly Tx per HH Loan Profit / HH $125 $149 $163 $178 $216 $278 $153 Deposit Profit / HH ($104) ($110) ($111) ($124) ($97) ($86) ($82) Total Profit / HH $22 $40 $52 $54 $119 $192 $71 *Retail HHs only Source: ¹NCUA, ²CEO Strategies Group average data 18

19 21 Technology Tipping Points How Might These Technology Trends Alter Financial Services In the Next Decade? Technology Shift Tipping Point Expected Date¹ By 2025 Storage for All 90% of people having unlimited and free (ad-supported) storage % Robotics and Services The first robotic pharmacist in the US % Wearable Internet 10% of people wearing clothes connected to the internet % The Internet of and for Things 1 trillion sensors connected to the internet % 3D Printing and Manufacturing The first 3D-printed car in production % Vision as the New Interface 10% of reading glasses connected to the internet % Our Digital Presence 80% of people with a digital presence on the internet % Implantable Technologies The first implantable mobile phone available commercially % A Supercomputer in Your Pocket 90% of the population using smartphones % Big Data for Decisions The first government to replace its census with big-data sources % Source: World Economic Forum s Global Agenda Council on the Future of Software and Society, March 2015, Panel of 800+ experts from the information and communications technology sector ¹ Average year tipping point is expected to have occurred ² Percent of respondents expecting tipping point to occur by 2025; 19

20 21 Technology Tipping Points And the Amazon Dash Button (VIDEO) How Might These Technology Trends Alter Financial Services In the Next Decade? Technology Shift Tipping Point Expected Date By 2025¹ Governments and the Blockchain Tax collected for the first time by a government via a blockchain % Ubiquitous Computing 90% of the population with regular access to the internet % 3D Printing and Human Health The first transplant of a 3D-printed liver % The Connected Home Over 50% of internet traffic delivered to homes for appliances and devices (not for entertainment or communication) % The Sharing Economy Globally more trips/journeys via car sharing than in private cars % 3D Printing and Consumer Products 5% of consumer products printed in 3D % Driverless Cars Driverless cars equaling 10% of all cars on US roads % Smart Cities The first city with more than 50k inhabitants and no traffic lights % AI and Decision-Making The first Artificial Intelligence (AI) machine on a corporate board of directors % Bitcoin and the Blockchain 10% of global gross domestic product (GDP) stored on blockchain technology Source: World Economic Forum s Global Agenda Council on the Future of Software and Society, March 2015, Panel of 800+ experts from the information and communications technology sector ¹ Average year tipping point is expected to have occurred ² Percent of respondents expecting tipping point to occur by 2025 Video Source: % 20

21 How Do Credit Unions Respond to These Forces of Change? As technology and consumer expectations continue to re-shape the industry, organizational success will be defined by its effectiveness in these areas. Branches Staffing Technology Member Experience Profitability Risk Management How Many Branches Capabilities Customer Facing Process Improvement Subsidization Business Risk Technology Profile of Branches How Many Employees Back Office Automation Relationship Development Pricing Models Fraud 21

22 Institution Overview Performance, Earnings & Growth

23 The Raddon Performance Index - What Are Your Strengths? Dominion Credit Union - All Households - 12/31/2015 Institutions with a percentile of 90 or above on the Raddon Performance Index are part of the High Performer comparison group. Raddon Performance Index - Dominion CU Percentile CEO Average Dep. & Loan Profit / HH - 15% $71 49 $81 ROA or Adj. ROA - 10% 0.74% % New HH Index - 7.5% Cross-Sold HH Index - 7.5% Operational Efficiency - 15% 76.0% % Deposit Margin - 7.5% 0.30% % Loan Margin - 7.5% 3.98% % Chk Non-Int Inc. / HH - 15% $70 9 $122 Deposit Balances / HH - 7.5% $13, $14,764 Loan Balances / HH - 7.5% $14, $22,308 RADDON PERFORMANCE INDEX - 100% Below Average < Percentile > Above Average CEO Strategies Book Pages: 5 23

24 Percentile Is Your Institution's Raddon Performance Index Improving? Dominion Credit Union - All Households The chart below shows your institution's trend in the Raddon Performance Index. The columns plot your percentile rank (above or below the median), while the labels indicate your actual score on the Performance Index. Note that the average Raddon Performance Index for High Performers is in the mid-70s. That is, an index near 70 or above typically associates with a ranking in the 90th percentile or better, which defines High Performer status Raddon Performance Index Dominion CU High Performers CEO Strategies Book Pages: 5 24

25 How Do Your Earnings Compare? Dominion Credit Union - All Households - 12/31/2015 Net Income per Household Non-Interest Income per Household $127 $224 $187 $86 $71 $81 $126 $117 Total Deposits & Loans Total Deposits & Loans 39th 49th 6th 10th Efficiency Dominion CU CEO Average Margins $ % 0.45% 0.45% $ % 76.3% 79.6% $348 $ % 50.9% Expense per HH Revenue per HH Efficiency Ratio Net Interest Margin Loans to Deposits 96th 5th 57th 7th 6th Cost of Funds 46th CEO Strategies Book Pages: 25, 62, 63, 64, 71, 73, 74, 89, 105,

26 74.0% 76.8% 76.6% 71.5% 78.4% 67.3% 68.8% 57.6% 62.4% 62.8% 70.9% 69.5% 75.1% 70.6% 77.3% 74.4% Industry Has Not Sustained Efficiency Improvements - Have You? Dominion Credit Union Call Report 85.0% 75.0% 79.0% 70.2% Efficiency Ratio Dominion CU CEO Average High Performers 57th PERCENTILE 76.3% 65.0% 55.0% 67.1% 58.8% 63.7% 45.0% 35.0% 25.0% 76.0% CEO Strategies Book Pages: 71, 73, 74 26

27 $78 $82 $86 $88 $87 $89 $90 $91 $96 $100 $101 $101 $101 $99 $103 $108 $111 Industry Growth of Non-Interest Income Has Stalled - Has Yours? Dominion Credit Union - All Households Deposit & Loan Non-Interest Income per HH Dominion CU CEO Average High Performers 10th PERCENTILE $300 $250 $241 $200 $190 $187 $150 $143 $100 $50 $0 $117 CEO Strategies Book Pages:

28 3.48% 3.34% 2.56% 2.73% 2.69% 2.91% 2.89% 2.94% 2.77% 2.75% 2.51% 2.46% 2.25% 2.28% 2.14% 2.20% 2.16% How Will You Preserve Margin As Rates Rise? Dominion CU Call Report Net Interest Margin Dominion CU CEO Average High Performers 7th PERCENTILE 4.00% 3.58% 3.50% 3.32% 3.37% 3.00% 3.13% 2.50% 2.00% 1.50% 1.00% 2.26% CEO Strategies Book Pages: 89 28

29 $261 $261 $261 $270 $291 $306 $310 $313 $287 $297 $303 $323 $306 $306 $295 $323 $307 How Well Are You Managing Rising Expense Pressures? Dominion Credit Union - All Households Operating Expense per Household Dominion CU CEO Average High Performers 98th PERCENTILE $600 $562 $550 $500 $465 $518 $450 $400 $432 $350 $300 $250 $200 $150 $100 $50 $0 $326 CEO Strategies Book Pages:

30 38.3% 34.3% 30.2% 30.4% 27.4% 31.7% 28.1% 31.5% 31.2% 25.6% 24.3% 26.1% 28.4% 30.3% 29.9% 30.8% Have You Improved Your Percentage of Profitable Households? Dominion Credit Union - Retail Households % of Retail Households That Are Profitable Dominion CU CEO Average High Performers 58th PERCENTILE 50.0% 45.0% 43.7% 41.0% 40.0% 35.0% 30.0% 34.4% 25.0% 28.9% 20.0% 15.0% 10.0% 5.0% 0.0% 29.4% CEO Strategies Book Pages:

31 How Does Your Growth Compare? Dominion Credit Union - All Households - 12/31/ % 12-Month Growth Dominion CU CEO Average +12.0% +11.9% +11.2% +10.0% +8.0% 7.1% +6.0% +4.0% +5.0% 5.3% +2.0% +1.1% +0.7% +2.0% +0.0% Member Households Deposit and Loan Services Total Deposit Balances Total Loan Balances 20th 15th 11th 58th CEO Strategies Book Pages: 55, 57 31

32 Percent of Total Households How Many of Your Households Are Active? Dominion Credit Union - All Households - 12/31/2015 Any household with a new account opening in the last six months is considered an active household. New households have opened their entire relationship in the previous six months. Cross-sold households had an existing relationship at the credit union but opened at least one additional account in the most recent six month period. To factor for renewals, this ratio is also shown with CDs excluded. Active HH in the Last Six Months Dominion CU CEO Average High Performers 90th Percentile 18% 16.8% 16% 14% 12% 10% 8% 6% 5.6% 6.0% 7.9% 7.9% 9.7% 12.0% 13.4% 10.4% 12.1% 14.6% 4% 2% 1.7% 0% Percentile New HH Cross-Sold HH (excl. CD) Cross-Sold HH (w/ CD) # of Households 307 1,392 1,836 CEO Strategies Book Pages: 13 32

33 Have You Increased Your Services per Household? Dominion Credit Union - All Households Services per Household Dominion CU CEO Average High Performers 20th PERCENTILE CEO Strategies Book Pages:

34 19.6% 19.1% 18.9% 18.5% 18.7% 20.3% 20.2% 21.5% A Favorable Industry Trend - Has Your Loan Share of Wallet Grown Too? Dominion Credit Union - Retail Households Loan Share of Wallet Dominion CU CEO Average High Performers 25th PERCENTILE 40% 35% 33.9% 30% 25% 26.0% 28.1% 20% 22.1% 15% 10% 5% 0% 21.8% CEO Strategies Book Pages: 360,

35 How Strong Is Your Share of the Members' Wallet? Dominion Credit Union - Retail Households - 12/31/2015 Share of Wallet* 45% 40% 35% Dominion CU CEO Average High Performers 90th Percentile 41.2% 38.7% 37.1% 33.9% 32.3% 30% 25% 21.8% 28.1% 26.0% 20% 15% 10% 5% 0% Loans 25th Deposits 20th *First mortgages are excluded from the total loan share of wallet since sold balances can skew results. CEO Strategies Book Pages: 360, 361,

36 69.0% 60.3% 66.9% 54.7% 56.3% 49.2% 47.9% 41.4% 42.7% 41.2% 40.0% 39.9% 43.2% 41.4% 46.3% 47.7% Is Your Loans-to-Deposits Ratio Back to Pre-Recession Levels? Dominion Credit Union Call Report Loans-to-Deposits Ratio Dominion CU CEO Average High Performers 6th PERCENTILE 100.0% 90.0% 89.2% 86.6% 80.0% 70.0% 84.2% 79.6% 60.0% 50.0% 40.0% 30.0% 20.0% 50.9% CEO Strategies Book Pages: 25 36

37 44.2% 44.0% 44.8% 44.9% 45.9% 45.7% 45.8% 45.6% 46.3% 45.7% 45.8% 45.5% 44.5% 45.2% 45.8% 44.9% Industry Loan Penetration Shows Improvement - Does Yours? Dominion Credit Union - All Households Retail Loan Penetration 31st PERCENTILE Dominion CU CEO Average High Performers 60.0% 55.0% 50.0% 45.0% 50.7% 47.1% 46.0% 53.1% 50.7% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 45.9% CEO Strategies Book Pages: 132,

38 Which Products Are Driving Your Loan Growth? Dominion Credit Union - All Households - 12/31/ % +30.0% 12-Month Loan Balance Growth Dominion CU CEO Average +29.9% +27.4% +27.7% +25.0% +20.0% +15.0% +10.0% +5.0% +11.9% +11.2% +6.6% +10.2% +7.0% +5.9% +4.7% +7.3% +3.8% +14.7% +0.0% -5.0% -4.6% -10.0% All Loans Direct Auto Indirect Auto Held Mortgage Home Equity Credit Card Consumer Loans 58th 41st 56th 94th 18th 52nd 30th CEO Strategies Book Pages: 37, 38, 45, 47 38

39 Is Loan Churn Hindering Growth? Dominion Credit Union - All Households - 12/31/2015 New Loan Account Balances¹ vs. Net Change in Loan Balances² Over Prior Six Months $21,620,705 $12,397,616 $12,000,000 $10,000,000 $10.0M $9.0M $8,000,000 $6,000,000 $5.5M $4,000,000 $2.9M $2,000,000 $0 $920.5K $2.1M $867.5K $508.8K -$104.5K $642.3K $1.5M $243.5K -$2,000,000 Direct Auto Indirect Auto Held Mortgage Home Equity Credit Card Consumer Loans Commercial Loans ¹Current balances held in accounts that were opened in the previous six months. ²Net change in balances since 6/30/2015. Only shown if credit union processed six months ago. CEO Strategies Book Pages: New Ratios 39

40 How Does Your Loan Mix Compare? Dominion Credit Union - All Households - 12/31/2015 Percent of Total Loans by Loan Type Dominion CU CEO Average 40.0% 35.0% 30.0% 34.6% 33.5% 29.7% 25.0% 20.0% 17.9% 17.2% 15.0% 13.5% 13.0% 10.0% 5.0% 5.7% 6.3% 6.1% 6.8% 9.2% 6.5% 0.0% Direct Auto Indirect Auto Held Mortgage Equity Credit Card Other Consumer¹ 0.0% Business Loans ¹Consumer Loan and Unsecured Line CEO Strategies Book Pages: 39 40

41 How Does Your Deposit Growth Compare? Dominion Credit Union - All Households - 12/31/ Month Deposit Balance Growth +20.0% Dominion CU CEO Average +15.0% +14.3% +13.4% +10.0% +7.1% +10.9% +5.0% +0.0% +2.0% +4.4% +3.0% +4.4% +0.4% -5.0% -10.0% All Deposits Savings Checking MMA CD -7.8% 11th 11th 63rd 45th 29th CEO Strategies Book Pages: 26, 27, 33 41

42 Where Are You Seeing Deposit Growth or Runoff? Dominion Credit Union - All Households - 12/31/2015 New Deposit Account Balances¹ vs. Net Change in Deposits² Over Prior 6 Months $16,294,337 -$886,606 $16,000,000 $14,000,000 $14.5M $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 $0.3K $0.2K $1.9M $1.3M $975.0K -$2,000,000 -$4,000,000 -$2.5M -$1.2M Savings Checking MMA CD IRA Commercial Deposits ¹Current balances held in accounts that were opened, or renewed, in the previous six months. ²Net change in balances since 6/30/2015. Only shown if credit union processed six months ago. CEO Strategies Book Pages: New Ratios 42

43 How Does Your Deposit Mix Compare? Dominion Credit Union - All Households - 12/31/2015 Percent of Total Deposits by Product Type¹ Dominion CU CEO Average 40.0% 36.1% 35.0% 30.0% 32.5% 30.4% 25.0% 20.0% 17.3% 20.4% 18.2% 15.0% 13.7% 10.0% 9.9% 5.0% 5.5% 5.4% 0.0% 0.0% Checking Savings Traditional MMA 1.2% Tiered MMA High-Rate MMA CD ¹Does not total 100% because IRA and Business Deposits are not shown. CEO Strategies Book Pages: 28, 98,

44 Keys to Sustainable Growth Does the credit union culture encourage member participation? Are growth initiatives member centric? (i.e. relationship oriented) Do you have a diversity of income sources? Are free products and services leveraged effectively to drive greater value from the household? What are your strategies to address and reduce member subsidization? 44

45 Segmentation

46 Can You Create Value and Differentiation Through Personalization? Information One-to-One Marketing One-to-one marketing is the alignment of Technology, Culture, and Information to leverage each member interaction to deepen the member relationship and grow wallet share. Segmentation is the first step to one-to-one marketing: Age & Income -Life Stage & Financial Capacity Culture Technology Generation -Attitude & Perspective Behavior -Payments & Transactions 46

47 The Raddon Consumer Segments Defined All U.S. Households - Raddon National Consumer Research The diagram below demonstrates how Raddon's Consumer Segments are defined based on household income and the head of household's age. The statistics* reflect the percent of the U.S. household population in each segment along with their average age and income. Age Income $125,000 or more CREDIT DRIVEN 9% of HHs Age: 51 UPSCALE 11% of HHs Income: $165K $50,000 - $124,999 Age: 28 Income: $88K MIDDLE MARKET 17% of HHs Age: 46 Income: $80K MID INCOME DEPOSITOR 13% of HHs Age: 66 Income: $77K Less than $50,000 FEE DRIVEN LOW INCOME DEPOSITOR 19% of HHs 32% of HHs Age: 33 Income: $28K Age: 64 Income: $28K *Source: Raddon National Consumer Research, Fall

48 How Does Your Membership's Age and Income Compare? Dominion Credit Union - Retail Households - 12/31/2015 Percent of Households by Consumer Segment¹ Dominion CU CEO Average High Performers 25.0% 21.3% 22.2% 21.7% 22.7% 20.0% 18.6% 18.9% 18.1% 17.0% 19.7% 18.1% 19.1% 15.0% 15.4% 10.0% 12.5% 11.3% 10.4% 10.7% 11.5% 10.8% 5.0% 0.0% Fee Driven Credit Driven Middle Market Low Income Depositor Middle Income Depositor Upscale 21st 67th 58th 18th 79th 92nd ¹ Percentages represent only those households with appended age and income data. At Dominion CU, 1% of retail households do not have appended demographic data. CEO Strategies Book Pages:

49 How Many Households Are Profitable in Each Consumer Segment? Dominion Credit Union - Retail Households - 12/31/2015 Percent of Retail HHs That Are Profitable Dominion CU CEO Average 35.0% 30.0% 29.4% 28.9% 26.9% 26.1% 26.2% 32.4% 31.4% 31.5% 31.8% 30.5% 28.2% 30.7% 33.2% 25.0% 22.5% 20.0% 15.0% 10.0% 5.0% 0.0% All HH Fee Driven Credit Driven Middle Market Low Income Depositor Mid Income Depositor Upscale 58th 53rd 41st 50th 74th 63rd 43rd CEO Strategies Book Pages:

50 How Do the Consumer and Generational Segments Currently Align? The chart below shows how the generational segments align with the consumer segments, given the current age range for each of the respective generations. TRADITIONALISTS (born / age 70-93) GEN Y (born / age 16-36) GEN X (born / age 37-50) BABY BOOMERS (born / age 51-69) T Age Income $125,000 or more UPSCALE CREDIT DRIVEN $50,000 - $124,999 MIDDLE MARKET MID INCOME DEPOSITOR Less than $50,000 FEE DRIVEN LOW INCOME DEPOSITOR 50

51 What Is the Generational Distribution of Your Member Households? Dominion Credit Union - Retail Households - 12/31/2015 Percent of Households by Generational Segment 50.0% 45.0% 40.0% 35.0% Households are assigned to a segment according to the head of household's birth year. Dominion CU CEO Average High Performers 47.5% 36.2% 33.7% 30.0% 25.0% 23.4% 24.9% 24.2% 22.0% 26.7% 29.3% 20.0% 15.0% 12.2% 12.8% 10.0% 7.2% 5.0% 0.0% Traditionalists Baby Boomers Gen X Gen Y th 97th 33rd 27th CEO Strategies Book Pages: 346,

52 VIDEO: Regions The Next Step Project Credit Score Meaning: The Factors That Affect Your Credit Score Rent or Buy? Start Saving For Retirement Now Job Relocation: Moving For a New Job How To Manage Your Student Loan Debt How To Budget Your Money After Landing Your First Job Source: Regions.com/ashlee 52

53 14.8% 16.8% 16.3% 18.1% 17.6% 19.3% 20.0% 20.4% 20.4% 22.2% How Does Your Gen Y Household Growth Compare? Dominion Credit Union - Retail Households Percent of Retail Households Headed by Gen Y Dominion CU CEO Average High Performers 27th PERCENTILE 35% 30% 29.3% 25% 26.7% 20% 19.4% 15% 17.7% 10% 5% 0% 22.0% CEO Strategies Book Pages: 346,

54 Do Your Gen Y Households Skew Younger or Older? Dominion Credit Union - Retail Households - 12/31/2015 Percent of Households in Gen Y Segments Proportion of Younger v. Older Gen Y Dominion CU CEO Average GenY90 GenY % 26.7% 16% 25.0% 22.0% 32% 20.0% 18.5% 18.2% 15.0% 10.0% 8.5% 84% 68% 5.0% 3.5% 0.0% All Gen Y ( ) GenY80 (Before 1990) GenY90 ( ) 27th 58th 8th Dominion CU CEO Average CEO Strategies Book Pages: 346, New Segmentation 54

55 What Is Each Generation's Balance Contribution? Dominion Credit Union - Retail Households - 12/31/2015 Percent of Balances by Generational Segment Dominion CU CEO Average 70.0% Loans Deposits 60.0% 58.4% 50.0% 47.5% 42.9% 46.0% 40.0% 30.0% 31.0% 27.7% 33.1% 20.0% 22.6% 18.3% 21.0% 13.4% 13.8% 10.0% 0.0% 2.3% 7.8% Traditionalists Baby Boomers Gen X Gen Y Traditionalists Baby Boomers Gen X 2nd 79th 22nd 81st 9th 98th 53rd 7.2% 7.0% Gen Y 81st How can you help Baby Boomers shed debt prior to retirement? How strong are your Gen Y lending competencies? As rates rise, how well can you manage Baby Boomers' and Traditionalists' deposits? Long-term, how will a massive wealth transfer affect the deposit arena? CEO Strategies Book Pages:

56 Are Your Baby Boomer HHs Higher or Lower Income, Older or Younger? Dominion Credit Union - Retail Households - 12/31/2015 Baby Boomers: % of Retail HHs 47.5% 97th PERCENTILE At Dominion CU, 47.5% of retail households are headed by a Baby Boomer. The distribution of these households by consumer segment is shown below. Compared to the average, do you have more baby boomer households in higher or lower income segments? How about older or younger segments? Upscale Distribution of Baby Boomer Households by Consumer Segment Low Income Depositor Mid Income Depositor Middle Market 91st 14th 68th 46th Dominion CU 26.6% 21.0% 40.7% 11.7% CEO Average 16.9% 31.9% 38.6% 11.8% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% CEO Strategies Book Pages: 348, New Segmentation 56

57 Which Baby Boomers Contribute the Most Total Balances? Dominion Credit Union - Retail Households - 12/31/2015 At Dominion CU, Baby Boomer households have a total of $133.1M and $55.3M in deposit and loan balances, respectively. The amount of these balances held by Baby Boomers in each Consumer Segment is shown below. $60.0 Baby Boomer HHs: Total Balances by Consumer Segment ($ millions) Total Deposits Total Loans $56.4 $50.0 $50.3 $40.0 $30.0 $20.0 $20.6 $15.9 $19.9 $10.0 $7.7 $10.4 $7.1 $0.0 Upscale Low Income Depositor Mid Income Depositor Middle Market CEO Strategies Book Pages: New Ratios 57

58 How Much Do Baby Boomers Contribute to Deposit Balances? Dominion Credit Union - Retail Households - 12/31/2015 Baby Boomer HHs: % of Total Deposit Balances 58.4% 98th PERCENTILE All Baby Boomers Baby Boomers: Deposit Balance per HH Dominion CU CEO Average $16,091 $19,721 Percentile 37th Upscale $22,951 $28,668 36th Baby Boomer HHs: Deposit Share of Wallet Low Income Depositor $9,208 $13,704 19th 32.5% 36th PERCENTILE Mid Income Depositor $16,797 $22,796 20th Middle Market $10,763 $14,092 31st $0 $10,000 $20,000 $30,000 $40,000 CEO Strategies Book Pages: 348, 390, New Segmentation 58

59 Deposits

60 $Millions How Much Do High Balance Households Contribute to Total Deposits? Dominion Credit Union - Retail Households - 12/31/2015 HOUSEHOLD DEPOSIT BALANCE <= $100 $100 to $1000 $1000 to $5000 $5000 to $20000 > $20000 # of Households 5,476 4,801 3,115 2,109 2,056 % of Households 31.2% 27.3% 17.7% 12.0% 11.7% Percentile Total Deposit Balances $93,039 $1,921,497 $7,471,049 $21,532,171 $198,580,594 % of Deposits 0.0% 0.8% 3.3% 9.4% 86.5% Percentile Households and Deposits by Deposit Segment 35.0% 31.2% Total Deposits % of HH $ % 27.3% $ % 20.0% 17.7% $ % 10.0% 5.0% 0.0% 12.0% 11.7% $93,039 $1,921,497 $7,471,049 $21,532,171 $198,580,594 <=$100 $100 to $1,000 $1,000 to $5,000 $5,000 to $20,000 >$20,000 < Household Deposit Balance > $100 $50 $0 CEO Strategies Book Pages: N/A 60

61 How Do Your High Deposit Balance Households¹ Compare? Dominion Credit Union - Retail Households - 12/31/2015 The graphs below show statistics for your high deposit balance households¹ compared to the CEO Average. Dominion CU CEO Average 11.7% 13.9% $96,586 $91, % 84.9% % of Households 31st Deposit Balance / HH 69th % of Total Deposits 68th 64.4% 0.52% 0.48% 35.7% ($100) Core Deposit Mix Average Deposit Rate ($107) Deposit Profit / HH 4th 59th 43rd ¹Households with >$20,000 in deposit balances. CEO Strategies Book Pages: N/A 61

62 The Risk of Run-Off A Real World Example The graph below shows actual household data for a $400M organization in the Midwest. This institution identified 62 high-deposit balance households that collectively held $5.7M in deposits at the end of Less than a year later, these households only had $139,000 on deposit at the credit union. Do you have similar risk at your institution? $90,000 $80,000 Average Deposit Balance - 62 Select Households 12/31/ /30/2015 Example Client s HH Data $81,100 $70,000 $60,000 $55,168 $50,000 $40,000 $30,000 $20,000 $10,000 $0 $10,500 $30,800 $22,850 $2,055 $825 $1,704 $925 $877 Total Retail Deposits Savings Checking High Rate MMA Business Checking Source: Example Client s Household Data 62

63 How Broad Is The Range of Rates on Money Markets and CDs? Dominion Credit Union - All Households - 12/31/ % 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% 0.44% Dominion CU 0.20% 25th Percentile MMA 0.27% 50th Percentile 0.40% 75th Percentile 0.50% 90th Percentile 0.75% 95th Percentile The gray bars in the graphs demonstrate the average deposit rates at each of the percentile levels among all CEO Strategies Group participants. Your credit union's weighted average rates on money market and CD accounts are shown in blue. How do your rates compare? How much pressure are top payers putting on deposit prices? New CDs All CDs 1.80% 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% 0.88% Dominion CU 0.56% 25th Percentile 0.84% 50th Percentile 1.08% 75th Percentile 1.26% 90th Percentile 1.59% 95th Percentile 2.00% 1.80% 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% 1.11% Dominion CU 0.81% 25th Percentile 1.06% 50th Percentile 1.29% 75th Percentile 1.48% 90th Percentile 1.82% 95th Percentile CEO Strategies Book Pages: 240, 256,

64 High Balance Households: More Willing to Move Funds for Reasonable Rate Increase 30% 25% 26% Would Accept Rate of 1% or Less to Open Product Less than $25K in Deposits 23% $25K or More 20% 15% 10% 16% 16% 12% 14% 9% 8% 5% 0% MMA 6 Month CD One Year CD Two Year CD Source: Raddon National Consumer Research 64

65 How Much Do High Deposit Households Contribute to MMA Balances? Dominion Credit Union - Retail Households - 12/31/2015 At Dominion CU, there are 856 high-deposit balance households that hold $84,431,282 in MMA balances. Another 331 households hold the remaining $1,059,088 in MMA balances. Money Market Account Usage by Households with More Than $20,000 in Total Deposits Dominion CU CEO Average 41.6% 39.7% $98, % $68, % % of HH with MMA 57th HH MMA Balance 96th Avg. Int. Rate on MMA 81st CEO Strategies Book Pages: N/A 65

66 How Much Do Households Value CD Enhancements? Percent Rating CD Enhancement as Extremely or Very Valuable 80% 70% 60% 50% 40% 30% 20% 10% Total High Balance Rate Movers 66% 66% 70% 64% 59% 49% 50% 46% 75% 0% No Penalty CD Rising Rate CD Bump Rate CD Source: Raddon National Consumer Research 66

67 How Much Do High Deposit Households Contribute to CD Balances? Dominion Credit Union - Retail Households - 12/31/2015 At Dominion CU, there are 641 high-deposit balance households that hold $45,509,376 in CD balances. Another 243 households hold the remaining $1,323,263 in CD balances. Note your average rate on CDs for high-deposit members below. What is the risk of these households moving funds at maturity - or withdrawing funds early - to earn a higher rate? Certificate of Deposit Usage by Households with More Than $20,000 in Total Deposits Dominion CU CEO Average 31.2% $70,997 $73, % 1.07% 26.5% % with CD 70th HH CD Balance 51st Avg. Int. Rate on CDs 55th CEO Strategies Book Pages: N/A 67

68 What Is The Profit Contribution by Deposit Segment? Dominion Credit Union - Retail Households - 12/31/2015 $250 Household Profit by Deposit Balance Segment Total Profit / HH Loan Profit / HH Deposit Profit / HH $200 $195 $187 $150 $100 $78 $125 $70 $158 $99 $76 $117 $50 $0 $11 ($50) ($47) ($100) ($150) <=$100 $100 to $1,000 ($88) $1,000 to $5,000 ($96) $5,000 to $20,000 ($111) ($107) >$20,000 Total Profit $427,761 $336,058 $308,061 $160,802 $21,771 CEO Strategies Book Pages: N/A 68

69 The Cost of Cannibalization 2.50% 2.00% 1.50% Effective Cost of a 1% Deposit Product Offer at Various New Money Ratios 2.20% 1.80% 1.53% Assume $10M flows into this product. 40% is brand new; remainder are existing funds priced up from 0.20%. The effective cost of bringing in $4M in new money is 2.20%. 1.34% 1.00% 0.50% 0.00% 40% New Money 50% New Money 60% New Money 70% New Money < Remaining cannibalized funds priced up from 0.20% > Source: Math 69

70 What Is The Deposit Contribution From Existing Households? Dominion Credit Union - All Households - 12/31/2015 Total Balances in New Deposit Accounts The pie chart to the right shows how much of the $16,294,337 in balances in new deposit accounts came from new households versus existing households. New Households $16,294,337 $610,775, 4% Cross-Sold Households Do you know how much of this is new money? $15,683,562, 96% CEO Strategies Book Pages: New Ratios 70

71 25.0% 26.1% 26.0% 26.2% 24.8% 26.6% 25.1% 27.0% What Is Your Opportunity for New Money from Existing Households? Dominion Credit Union - Retail Households Deposit Share of Wallet Dominion CU CEO Average High Performers 20th PERCENTILE 40% 35% 34.8% 37.1% 30% 25% 29.1% 32.3% 20% 15% 10% 5% 0% 26.0% CEO Strategies Book Pages: 361,

72 Case Study: Using Member Rewards to Deepen Relationships $1.2B Credit Union in the Northeast; 79,000 members age 18+ Credit union is establishing permanent member relationship programs. Phase 1: CD Relationship Program Launched Feb 3, 2015 Goals Increase member loyalty Contribute to CU goal of $53M in new deposits $6M in new money from 2/3/15-3/31/15 during kickoff of program To Qualify Have $100K+ in total deposits, loans and/or investments (12,000 members eligible) Bring minimum of $10K in new money to the CU Benefits Bonus rate paid on qualifying certificates (up to 36-month term) +25bps for CDs opened with $10,000 - $24,999 in new deposits +50bps for CDs opened with $25,000 or more in new deposits Results Kick-off period: 186 CDs opened; 157 with +50bps bump; $10.5M in new money; Thru 12/31/15: 589 CDs opened; $37M in new money 72

73 Case Study: Using Member Rewards to Deepen Relationships $1.2B Credit Union in the Northeast; 79,000 members age 18+ Phase 1: CD Relationship Program Other Info Staff Training & Incentives Educate staff on program eligibility and prepare them to answer member questions new money requirements; which CDs are eligible; how ineligible members can become eligible (e.g. refi mortgage at CU to achieve $100K in balances) During kickoff, top 12 employees bringing in a minimum of $100K in new money received a full day of PTO. Marketing & Promotion Initially only targeted and informed eligible members (direct mail); after kickoff, advertised to entire membership Dedicated webpage explains and promotes the program Marketing push if/when deposits are needed (show program on home page, target eligible members who haven t taken new CD, etc.) Combination of and direct mail (has strong appeal with older members.) Tracking Daily report is run to identify newly eligible/ineligible members (bonus rate is paid until CD term is up, but member must re-establish eligibility and bring new money to re-qualify) Challenges Enforcing the new money requirement; some members with high deposits request the better rate without adding new money (5-7% of the CDs in this program are exceptions that receive bonus rate with no new money) Successes Program was more effective at attracting new money than anticipated exceeded initial 8 week goal by more than 50% 73

74 Deposit Management in a Rising Rate Environment Strategic Considerations What is your strategy to retain deposits from high-deposit balance households? Given the risk and cost of cannibalization, how should you view wholesale borrowing alternatives vis a vis deposit campaigns as a means to acquire funds? How can you use relationship pricing to help preserve key member relationships and minimize the impact to the cost of funds? Is your staff prepared for a highly competitive deposit environment? 74

75 Checking & Mobile Banking

76 Case Study: Using Member Rewards to Deepen Relationships $1.2B Credit Union in the Northeast; 79,000 members age 18+ Credit Union is establishing permanent member relationship programs. Phase 2: ATM Fee Reimbursement Program Launched Feb 8, 2016 Objectives Reward and retain existing members; attract new members Increase services per individual Increase new checking accounts, loans and deposits To Qualify (3,100 members eligible) Checking Account Min. $1K in avg. balance in combined share accounts E-statements for all accounts Active Bill Pay (1 per month) Debit Card Issued At least one (1) loan / credit card on the books Benefit Foreign ATM Fee Reimbursement Up to $5 per transaction; no monthly limit PROMOTION STRATEGY 1) Target/inform eligible members 2) Promote to all members; target those missing one requirement 3) Incorporate into onboarding 76

77 35.4% 35.3% 36.4% 36.8% 37.3% 37.5% 38.3% 38.4% 38.9% 39.1% 39.6% 39.7% 39.7% 40.8% 41.3% 41.6% Industry Checking Growth Continues - How Do You Compare? Dominion Credit Union - Retail Households Retail Checking Penetration Dominion CU CEO Average High Performers 3rd PERCENTILE 75.0% 70.0% 65.0% 60.0% 55.0% 50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 61.0% 55.0% 70.0% 64.4% 10.0% 5.0% 0.0% 40.8% CEO Strategies Book Pages: 122,

78 VIDEO: Fifth Third Bank Promoting Speed of Mobile Banking Features Source: 78

79 What Are Your Retail Checking Strengths and Weaknesses? Dominion Credit Union - Retail Households - 12/31/2015 Retail Checking Scorecard Relationship Growth Non-Int. Income Profitability Percentile CEO Average HH Penetration 41% 3 64% Average HH Balance $3, $4,008 HH Growth -0.2% % Balance Growth +14.3% % Non-Int. Income / Acct $ $163 NSF Income / Acct $65 47 $71 Debit Card Inc. / Acct $62 35 $71 Service Profit / HH ($16) 54 ($24) Cross-Sell Profit / HH $ $72 Total Profit / HH $ $ Below Average < Percentile > Above Average CEO Strategies Book Pages: 33, 34, 111, 233,

80 How Does the Checking Relationship Contribute to Profitability? Dominion Credit Union - All Households - December 2015 Household Profit by HH Checking Status Total Profit Loan Profit Deposit Profit $250 $217 $200 $150 $100 $109 $86 $118 $50 $40 $0 -$50 ($45) -$100 ($69) ($99) -$150 ($131) Non-Checking HHs New Checking HHs All Checking HHs CEO Strategies Book Pages: N/A, New Segmentation Scheme 80

81 Case Study: Measuring the Value of Mobile Banking $850M Credit Union in the Midwest In Summer 2015, RFG completed a study of a credit union s household and mobile banking data. The analysis measured the performance of households based on their mobile banking status, using data over a five year period. The following slides highlight key findings from this research. 25.0% Case Study Credit Union Data % of Households Using Mobile Banking (2014) 20.0% 19.2% 16.3% 15.0% 13.6% 10.0% 10.5% 11.3% 5.0% 3.9% 4.9% 0.0% All HH Fee Driven Credit Driven Middle Market Low Inc. Depositor Mid Inc. Depositor Upscale 81

82 Case Study: Measuring the Value of Mobile Banking $850M Credit Union in the Midwest Overall, the 10.5% of households that were users of mobile banking exhibited higher services, loan penetration and profitability than households overall. Household Stats (2014) All Retail Households Mobile Bankers Case Study Credit Union Data 2.93 $ % 58.5% $96 Services per HH Loan Penetration HH Profit 82

83 Case Study: Measuring the Value of Mobile Banking $850M Credit Union in the Midwest At the Case Study Credit Union, households that never used mobile banking exhibited fewer services, less loan usage and lower profitability than households that eventually went on to use mobile. After adopting mobile banking, households demonstrated an even higher level of engagement. These data suggest those who are likely to adopt mobile banking already have a strong relationship with the credit union, and the relationship deepens further after the service is adopted. Case Study Credit Union data Services per HH All Retail HH Fee Driven Credit Driven Middle Market Low Income Depositor Mid Income Depositor Upscale After Mobile Before Mobile Never Used Mobile Loan Penetration After Mobile 58.5% 54.8% 59.7% 61.0% 60.5% 63.9% 60.6% Before Mobile 55.8% 50.7% 56.1% 58.4% 60.3% 60.6% 58.7% Never Used Mobile 49.8% 57.9% 56.3% 54.7% 46.5% 46.1% 49.0% HH Profitability After Mobile $154 $116 $158 $199 $167 $117 $200 Before Mobile $136 $115 $83 $176 $123 $147 $185 Never Used Mobile $64 $96 $82 $122 -$3 $39 $133 83

84 Case Study: Measuring the Value of Mobile Banking $850M Credit Union in the Midwest The longer that households used mobile banking, the greater their relationship tended to be. Households with longer mobile banking duration had more services per household and greater loan usage. Profitability did not appear to correlate with mobile banking duration, but that may be indicative of the changing deposit and loan relationship over time (types of loans opened, loans paid down, increase of deposit product use, etc.) Case Study Credit Union data Years of Mobile Banking Usage HH Profile Never Service per HH Loan Penentration 51.4% 53.7% 56.3% 58.1% 59.1% 65.3% HH Profit $40 $68 $82 $105 $24 $74 84

85 Case Study: Measuring the Value of Mobile Banking $850M Credit Union in the Midwest The stronger relationships exhibited by mobile banking users was reflected in a higher percentage of these households being profitable. In particular, mobile banking users were much less likely to be in the D profit segment, which typically includes a high percentage of disengaged households. Profit Segments (2014) % of HHs in Segment 45.0% 40.0% Case Study Credit Union Data All Retail Households Mobile Bankers 37.8% 39.9% 35.0% 30.0% 25.0% 26.0% 20.0% 15.0% 10.0% 11.4% 14.3% 14.6% 14.8% 12.8% 12.1% 16.3% 5.0% 0.0% A HH B HH C HH D HH E HH Profitable Households Unprofitable Households 85

86 VIDEO: Video Banking Goes Mobile Financial Town Launches BankOn Mobile Video Banking Source: financialtown.com 86

87 Payments & Credit Cards

88 How Does Your Interchange Income Compare? Dominion Credit Union - All Households - 12/31/2015 Dominion CU CEO Average Card Penetration Average Monthly Transactions Annual Interchange Income 87% 88% $ % 26.2% $62 $71 $81 % Checking Accts with Debit Card 47th % of HH with Credit Card 65th Per Debit Card Per Credit Card Acct Per Debit Card Per Credit Card Acct 37th 83rd 35th 94th CEO Strategies Book Pages: 114,

89 Case Study: Leveraging Payments Data for More Effective Marketing $350M Credit Union in the Southeast Theoretical Basis for Payments-Based Marketing: Idiosyncratic Fit Heuristic*: A general principle of consumer behavior... whereby consumers are enticed by offers for which they enjoy a relative advantage. Payments data offer the intelligence on how to create the perception of a relative advantage. ( When you appreciate my idiosyncrasies, I like you more. ) How Is the Credit Union Using This Data? Marketing obtains file with payments data from all sources except manual checks (ACH, Debit Card, Credit Card, Bill Pay) 1. Credit card marketing: Identify members who conducted PayPal or itunes ( PayTunes ) transactions and incent them to open and use CU credit card to fund these accounts. 2. Life change marketing: Identify key life changes (marriage, birth of child, etc.) and market the credit union as a trusted and effective financial partner for navigating these milestones. *Ran Kivetz, Itamar Simonson (2003) The Idiosyncratic Fit Heuristic: Effort Advantage as a Determinant of Consumer Response to Loyalty Programs. Journal of Marketing Research: November 2003, Vol. 40, No. 4, pp URL: Publisher: American Marketing Association, 89

90 Case Study: Leveraging Payments Data for More Effective Marketing $350M Credit Union in the Southeast PayTunes Promotion: Focuses on members who make PayPal and/or itunes purchases but do not have a credit card with the credit union. One promotion per quarter. Marketing places target file into a pre-determined folder (less than 30 min of time). Core system takes the file, s members with credit card offer, and tracks usage. Members are paid $50 for one transaction via PayPal or itunes purchase. They are given 60 days to apply, qualify, and buy. Credit card members who are paytunes transactors demonstrate significantly higher activity than those who are not. Credit card profitability more than justifies $50 incentive to member. Campaign Results Started in June % average response rate Profit Average $12K per quarter Q Results 3.85% response versus control of 1.98% Profit = $14,872 90

91 Case Study: Leveraging Payments Data for More Effective Marketing $350M Credit Union in the Southeast Life Change Marketing¹ Key Life Events Identified: Surname change Jewelry store purchase Bridal store purchase First baby store purchase New individual in HH Turned ages 16, 18, 62, 65 Campaign Results Started in June 2013 Response rates = 2.1% - 5.7% Profit average = $5,132 October 2015 results: Response rate = 4.0% Profit = $14,144 When data exposes these events, credit union sends to member that speaks, generally*, to life s ongoing changes and challenges and reminds member that the credit union can be relied upon to help whenever such events occur. *These data offer powerful insights into member behavior and preferences utilize a soft sell approach to avoid appearing overly intrusive into their personal lives. ¹Excludes new households to avoid overlap with on-boarding. 91

92 How Strong Is Your Credit Card Performance? Dominion Credit Union - Retail Households - 12/31/2015 Credit Card Scorecard Relationship Growth Usage Profitability Percentile CEO Average Share of Wallet 37.1% % HH Penetration 29.5% % Avg. Balance / HH $2, $2,588 Balance Growth +4.7% % HH Growth +1.3% % Utilization Ratio¹ 22.7% 12 32% Monthly Tx / Card Non-Int. Inc. / Acct $ $81 Weighted Avg. Rate 9.87% % Service Profit / HH $ $146 Total Profit / HH $ $ Below Average < Percentile > Above Average ¹5300 Data, All Households CEO Strategies Book Pages: 45, 48, 115, 125, 185,

93 How Strong Is Your Credit Card Performance with Gen Y? Dominion Credit Union - Retail Households - 12/31/2015 Dominion CU CEO Average Credit Cards: HH Penetration 24.3% 23.4% $2,002 Credit Cards: HH Balance $2,128 $2, % 20.5% $1,231 GenY80 GenY90 GenY80 GenY90 44th 69th 50th 93rd Credit Cards: HH Growth Credit Cards: Service Profit / HH +23.3% +40.2% $168 $113 $ % +10.1% $36 GenY80 GenY90 GenY80 GenY90 39th 23rd 78th 98th CEO Strategies Book Pages: N/A 93

94 Payments & Mobile Banking Strategic Considerations How can you utilize payments and transaction data to better understand your members? What is the value and contribution of mobile banking to the member relationship? What role will mobile technology play in retaining the growth of checking households and expanding these relationships? How well does your front-line staff know and promote your mobile banking solutions? 94

95 Auto & Real Estate Lending

96 What Percentage of Your Households Are Indirect or Commercial? Dominion Credit Union - 12/31/2015 Most households are considered retail households - they joined the credit union through the branch or online channel and have no business accounts. The graph below shows the volume of other household types at your credit union - those that joined through the indirect channel and those with business relationships. Indirect households are any households where the earliest account opened is an indirect loan. Business households are any households with at least one business deposit or loan account. 25% % of Households by Business Line Dominion CU CEO Average 90th Percentile 20% 20.8% 15% 10% 8.2% 5% 2.4% 0.2% 0.0% 0% Indirect Households Business Households Percentile 5th -- # of Households % CEO Strategies Book Pages: 8 96

97 How Does Your Direct And Indirect Auto Lending Compare? Dominion Credit Union - All Households - 12/31/2015 Direct Auto Auto Loan Scorecard Indirect Auto Percentile CEO Average HH Penetration 15.5% % Balance Growth +6.6% % Weighted Avg. Rate 3.57% % Service Profit / HH $ $170 Total Profit / HH $ $302 HH Penetration 2.2% % Balance Growth +27.4% % Weighted Avg. Rate 3.32% % Service Profit / HH $86 22 $230 Total Profit / HH $ $ Below Average < Percentile > Above Average CEO Strategies Book Pages: 46, 170, 173, 175, 179,

98 VIDEO: Alternative Online Auto Lending for Sub-Prime Borrowers CUNA Partnering With SpringboardAuto.com Enabling Credit Union Referrals CUNA Mutal Group partnering with online lender SpringboardAuto.com Credit unions can refer members with sub-prime credit that might not qualify for an auto loan with the CU Automated credit engine provides realtime responses Will start auto lending services through credit union referrals in selected states later this year Source: springboardauto.com 98

99 How Strong Is Your Direct Auto Lending to Younger Gen Y Households? Dominion Credit Union - Retail Households - 12/31/2015 GenY90 - Direct Auto Loan Scorecard Relationship Growth Profitability Percentile CEO Average HH Penetration 20.8% % Avg. HH Balance $15, $11,654 Balance Growth +65.6% % Weighted Avg. Rate 4.41% % Service Profit / HH $ $203 Total Profit / HH $ $ Below Average < Percentile > Above Average CEO Strategies Book Pages: N/A 99

100 VIDEO: Quicken s Super Bowl Commercial Draws Criticism Source: Twitter 100