FIRST QUARTER SUMMARY

1
INSIDE WASHINGTON A CREDIT UNION UPDATE
Allied Solutions Summer Networking Conference
Beaver Creek, Colorado August 26, 2008
Presented by Fred R. Becker, Jr. President and
CEO National Association of Federal Credit Unions
2
OVERVIEW

• Credit Union Asset Quality
• NCUA Outreach Task Force
• Congress Today
• Legislative Issues
• Regulatory Issues
• Treasury Blueprint
• Litigation Issues
• Crisis Action

3
CREDIT UNION ASSET QUALITY
4
DELINQUENCY RATIO
Source NAFCUs March 2008 Flash Report NCUA
Call Report
5
NET CHARGE-OFF RATIO
Source NAFCUs March 2008 Flash Report NCUA
Call Report
6
CHARGE-OFFS DUETO BANKRUPCY
Source NAFCUs March 2008 Flash Report NCUA
Call Report
7
DELINQUENCY RATIO
Note Credit union delinquencies are reported as
2 months or more past due, while FDIC
delinquencies are reported 90 days or more past
due. Source NCUA Call Report FDIC Quarterly
Banking Profile
8
DELINQUENCY RATIOS as of March 31, 2008
Note Credit union delinquencies are reported as
2 months or more past due, while FDIC
delinquencies are reported 90 days or more past
due. Source NCUA Call Report FDIC Quarterly
Banking Profile
9
NCUA OUTREACH TASK FORCE
10
OUTREACH TASKFORCE (OTF) REPORT - February 26,
2008

• 12 Recommendations in 4 major areas
• 1. Membership Profile and Financial Services
• collect membership profile data through the AIRES
  examination process
• collect financial services data on 5300 Call
  Report
• publish aggregate data on membership profile and
  financial services in the NCUA Annual Report or
  other publication(s) and
• develop a means for each FCU to obtain its
  proprietary membership profile data from NCUA.

11
OUTREACH TASKFORCE (OTF) REPORT (Continued)

• 2. Senior Executive Officer Compensation
• collect FCU and federal corporate credit union
  senior executive officer compensation during the
  examination, and then use AIRES and the Corporate
  Examination Database to capture the information
• publish aggregate data on senior executive
  officer compensation in the Annual Report or
  other NCUA publication(s) and
• promulgate a regulation requiring FCUs and
  federal corporate credit unions to annually
  disclose individual senior executive officer
  compensation to their members.

12
OUTREACH TASKFORCE (OTF) REPORT (Continued)

• 3. Low-Income Definition
• revise NCUA Rules and Regulations to replace
  median household income (MHI) with median family
  income (MFI) as one of the standards for
  qualifying a credit union as low income and
• include a grandfather provision of five years to
  allow adequate transition time for any low-income
  credit union failing to qualify under the MFI
  standard.

13
OUTREACH TASKFORCE (OTF) REPORT (Continued)

• 4. Outreach
• expand its outreach program(s) to include a
  broader spectrum of credit unions serving, or
  having the ability to serve, members of low or
  moderate income
• emphasize increased regional involvement in the
  implementation of outreach policies and
• improve its oversight of Community Development
  Revolving Loan Fund programs.

14
MEAN HOUSEHOLD INCOME FOR CU MEMBERS BANK
CUSTOMERS
Source 2004 FRB SCF Data
15
LEGISLATIVE ISSUES
16
Its sort of a little poetic justice, in that
the people that brewed this toxic Kool-Aid found
themselves drinking a lot of it in the
end. Warren Buffet Chairman Berkshire-Hathaw
ay
17
CONGRESS TODAY

• A more activist agenda!

18
We now have confirmation of two facts we have
known for some time One, the Federal Reserve
System is not a strong advocate for consumers,
and two, there is no Santa Claus. People who are
surprised by the one are presumably surprised by
the other. Representative Barney Frank
(D-Mass.) Chairman House Financial Services
Committee
19
LEGISLATIVE ISSUES

• Credit Union Regulatory Improvements Act
  (CURIA)
• Credit Union Regulatory Relief Act (CURRA)
• Credit Union, Bank and Thrift Regulatory
  Relief Act (CUBTRRA)
• Credit Unions Small Business Lending Act
• Affordable Financial Services Enhancement Act
• Bankers Attacks/CRA

20
MORTGAGE LOAN APPROVAL RATE
Loans originated plus loans approved but not
accepted as a percent of all loans applications.
Minority applicants include those who
identified themselves as Native American,
Asian/Pacific, Black, or Hispanic.

21
2006 Approved 1-4 Family Purchase Loans
Percentage of Approvals with Rate Spreads gt 3
Source Federal Financial Institutions
Examination Council HMDA Data
22
LEGISLATIVE ISSUES (continued)

• Mortgage Issues
• - Subprime
• - Predatory Loans
• - GSE Reform
• - FHA Reform
• - Bankruptcy
• Consumer Issues
• - Credit Card Reform
• - Interchange Fees
• - Overdraft Protection
• Student Lending

23

24
The giant retailers are lobbying Congress for a
sweetheart deal - H.R. 5546. WHO WINS The
giant retailers who reap higher profits and
get exemptions from antitrust laws that could
lead to abuse. WHO LOSES Consumers who will
never see the savings. Small credit unions that
get squeezed. Local communities that will have
fewer choices for credit services. Tell
Congress H.R. 5546 means consumers lose.
25
GAO REPORT ON BANK FEES

• Lack of disclosure of fees and conditions under
  which fees are assessed at both banks and credit
  unions.
• Bank and thrift charges on fees are on average
  higher than credit unions.
• Credit unions have a lower percentage of
  violations for Reg DD and Reg E.
• Non-interest income for credit unions is much
  lower than that of banks.

26
2002-2006 DISCLOSURE-RELATED VIOLATIONS
Source GAO Bank Fees, January 2008
27
NON-INTEREST INCOME CREDIT UNIONS VS. BANKS
Source NCUA FDIC
28
REGULATORY ISSUES FOR 2008

• NCUA
• - Data Collection, member services
• - Conversions and Mergers
• - Field of Membership Expansion
• - CUSO Revisions
• - MBL Revisions
• Federal Reserve
• Unfair and Deceptive Practices
• - Regulation Z
• - HOEPA Reform
• - Reg D - Transfer Limitation
• RESPA Reform

29
TREASURY BLUEPRINT FOR REGULATORY RESTRUCTURING

• Immediate Recommendations
• Intermediate Recommendations
• Long Term Suggestions
• Recreation of the World
• Secretary Paulson testified in July that new
  urgency was needed regarding the plan.

30
TREASURY BLUEPRINT FOR REGULATORY RESTRUCTURING
(continued)

• Mortgage Origination Commission
• - Chiefs of the current federal regulatory
  agencies, including NCUA
• Prudential Financial Regulatory Agency
• - Consolidation of national bank, national
  savings association and federal credit union
  charters.
• Federal Insurance Guarantee Corporation
• - Single federal deposit insurance fund to
  replace FDIC coverage and the NCUSIF.

31
TREASURY BLUEPRINT FOR REGULATORY RESTRUCTURING
(continued)

• The broadest overhaul of Wall Street regulation
  since the Great Depression
• Nelson D. Schwartz and Floyd Norris, The
  New York Times, Sunday, March 30, 2008

32
TREASURY BLUEPRINT FOR REGULATORY RESTRUCTURING
(continued)

• Dismantling the thrift charter and crippling
  banking charters will weaken banking in America.
  We must be careful not to let regulatory boxes
  substitute for real improvement.
• Edward Yingling, President/CEO, ABA
• Washington Post, April 1, 2008
• Fred, glad we are on the same side.
• Cam Fine, President/CEO, Independent
  Community Bankers Association, April 1, 2008
  in reaction to NAFCUs public comments on the
  blueprint as reported in the BNA Daily Report
  for Executives

33
LITIGATION ISSUES

• American Bankers Association (ABA)
• Coalition for Credit Union Charter Choice
• Unrelated Business Income Tax (UBIT)

34
CRISIS ACTION

• Terrorist Attacks - 9/11
• Hurricanes
• Fires
• Earthquakes

35
PANDEMIC EXERCISE

• 2,700 registrants
• CUs, banks, insurance, securities
• CUs and banks 62 of registrants
• 70 - less than 250 employees
• NAFCU participated as member of exercise control
  team

36
FINDINGS

• Exercise shows financial services industry is
  well prepared
• Majority felt need to improve pandemic planning
  after exercise
• Majority underestimated dependence on third party
  vendors

37
INSIDE WASHINGTON A CREDIT UNION UPDATE
Allied Solutions Summer Networking Conference
Beaver Creek, Colorado August 26, 2008
Presented by Fred R. Becker, Jr. President and
CEO National Association of Federal Credit Unions