1 1 Overview of disruption in Agenda

2 Possible signs of disruption

3 Moving beyond disruption

2 Section I What is Disruption?

1. What Is Disruption???

3 4 How Fast Can an Industry Change?

5 6 7 8 Successful Disruption: GPS Devices

2004 2009 2014 Garmin StreetPilot 2620 TomTom iPhone Navigation Google Maps App App

Cost: $100 Cost: Free Cost: $1,516

Source: CUNA Mutual Group Analysis

9 Kodak Could Have Been The Disruptor George Eastman with an early First digital camera developed Kodak camera model by Kodak in 1974

10 Successful Disruption: Smartphones

Source: CUNA Mutual Group Analysis 11 Source: CUNA Mutual Group Analysis 12 “It took 22 years to sell 55 million MACs. It took 5 years to sell 22 million iPods and 3 years to sell as many iPhones. And so…its on a trajectory that’s off the charts.” Tim Cook, Apple CEO

13 SECTION 2

Overview Of Disruption In Financial Services

1414 The Battleground: Financial Institutions

Non-Bank Retailers Competitors Financial Services

Savings Lending Card Platform Companies Payments Players Investments

Telecoms New Entrants

Alternative Payments

Source: CUNA Mutual Group Analysis 15 Themes In Retail Financial Services Disruption

Disruptors seek to:

• Use technology-driven business models, e.g., platform strategies

Source: CUNA Mutual Group Analysis 16 Themes In Retail Financial Services Disruption

Disruptors seek to: • Use technology-driven business models, e.g., platform strategies

• Have a lower cost structure

Source: CUNA Mutual Group Analysis 17 Themes In Retail Financial Services Disruption

Disruptors seek to: • Use technology-driven business models, e.g., platform strategies

• Have a lower cost structure

• Find ways to bypass relevant laws and regulations

Source: CUNA Mutual Group Analysis 18 Themes In Retail Financial Services Disruption

Disruptors seek to:

• Use technology-driven business models, e.g., platform strategies

• Have a lower cost structure

• Find ways to bypass relevant laws and regulations

• Utilize low cost ways of moving money

Source: CUNA Mutual Group Analysis 19 Themes In Retail Financial Services Disruption

Disruptors seek to:

• Use technology-driven business models, e.g., platform strategies

• Have a lower cost structure

• Find ways to bypass relevant laws and regulations

• Utilize low cost ways of moving money

• Aggregate customer data and monetize it

Source: CUNA Mutual Group Analysis 20 Themes In Retail Financial Services Disruption

Disruptors seek to: • Use technology-driven business models, e.g., platform strategies

• Have a lower cost structure

• Find ways to bypass relevant laws and regulations

• Utilize low cost ways of moving money

• Aggregate customer data and monetize it

• Enter a single financial service before moving to other categories

Source: CUNA Mutual Group Analysis 21 22 Startups Are To Credit Unions & Banks …

23 … What Piranhas Are To Water Buffalos

24 On The Surface Membership Growth Seems Robust

Credit Union System Membership Trend In millions 114.0 109.2 105.0 101.5 98.4 96.0 94.0 92.0 92.6 89.3 90.7 87.0 88.2

05 06 07 08 09 10 11 12 13 14 15 16 17

Source: CUNA Economics & Statistics and CUNA Mutual Group - Economics

25 Below The Surface We See Some Signs of Disruption

% of CUs With No or Negative Membership Growth: 2011-2017 Asset Category

70%

53%

31%

10% 9% 3%

< $20M $20M-$100M $100M-$500M $500M-$1B $1B-$5B $5B+

Source: NCUA 5300 Call Report Data, CUNA Mutual Group analysis

26 Disruptive Startups Trying To Unbundle CUs & Banks

Source: “How Retail Banking Should Take A Few Cues From The Software Industry”, People. Paper. Electrons, 1/30/2015

27 Disruptive Startups Trying To Unbundle CUs & Banks

Source: “How Retail Banking Should Take A Few Cues From The Software Industry”, People. Paper. Electrons, 1/30/2015

28 Disruptive Startups Partnering with Financial Institutions

Source: “How Retail Banking Should Take A Few Cues From The Software Industry”, People. Paper. Electrons, 1/30/2015

29 30 Nearer-Term Threat: Disruptive Financial Institutions

31 Share of Originated Personal Balances

Traditional Timeframe/Lender Banks Credit Unions FinTechs

2017 (Through 29% 24% 32% 15% June)

Full year 2016 26% 23% 30% 21%

Full year 2015 27% 22% 28% 23%

Full year 2012 35% 32% 4% 29%

32 Source: Transunion 11/17 Disruption Example: Florida CU Member

*Note: Includes direct mail, email, online display ads Source: Competiscan; CUNA Mutual analysis

33 Demographics vs Psychographics

34 Disruption Example: Florida CU Member

*Note: Includes direct mail, email, online display ads Source: Competiscan; CUNA Mutual analysis

35 SECTION 3

Signs Your CU is Being Disrupted

3636 Possible Signs Of Disruption

1 Your MEMBER VALUE PROPOSITION membership has been declining in recent years MEMBERSHIP

Source: CUNA Mutual Group Analysis

37 Possible Signs Of Disruption

NET OPERATING 2 INTEREST < EXPENSES Your assets INCOME

per branch CAPITAL & EXPENSES have been falling steadily tied up can’t be in inefficient redeployed to branch provide new networks products & services

Source: CUNA Mutual Group Analysis

38 Possible Signs Of Disruption

3 PRIMARY FINANCIAL The percentage INSTITUTION of members metric having share draft accounts MEMBER has been declining value proposition

Source: CUNA Mutual Group Analysis

39 Possible Signs Of Disruption

4 EARLY WARNING SIGN Your average of disruption number of products per NEGATIVE FEEDBACK member loop has declined

Source: CUNA Mutual Group Analysis

40 Possible Signs Of Disruption

FUTURE BORROWER PIPELINE 5 IS IN JEOPARDY The share of members Gen Y (18-34) Loan to Share < 30 years old = Baby boomers has dropped (52-70) in recent years

= = = = L/S >YOA >ROA >ROE >Asset Growth

Source: CUNA Mutual Group Analysis

41 Possible Signs Of Disruption

6 WHICH “PIRANHAS” Your members’ are your members using? outbound ARE DISRUPTIVE ACH payees FINANCIAL INSTITUTIONS include Lending Club, gaining a foothold with your members? Prosper, Sofi, Wells Fargo, Chase, etc.

Source: CUNA Mutual Group Analysis

42 Possible Signs Of Disruption

1 2 3 Your Your assets The percentage membership per branch of members having has been declining have been share draft accounts falling steadily in recent years has been declining

4 5 6 Your average The share Your members’ number of products of members outbound per member < 30 years old ACH payees has declined has dropped include Lending Club, in recent years Prosper, Sofi, Wells Fargo, Chase, etc.

Source: CUNA Mutual Group Analysis

43 SECTION 4

Moving Beyond Disruption

4444 Disruptive Financial Strive to provide a true Institutions: 1 omnichannel experience Defining Deliver a simple, convenient 2 Characteristics user experience

3 Optimize branch networks

4 Provide tools that deliver value

5 Leverage data analytics extensively

6 Actively engage in experimentation

7 Invest, acquire and engage in strategic partnerships

45 Imitation Is The Sincerest Form Of Flattery

46 Embrace Member Centricity

Provide a robust, consistent multi-channel experience

Optimize branch networks

Become an “analytical ”

Actively engage in and How Can support experimentation Credit Unions Create More Make strategic build / buy / partner / Member Value? collaborate decisions

Source: CUNA Mutual Group Analysis 4747 PFM Embrace Tools / Financial Patronage Dividends Rewards Member Education Programs Centricity: Examples

Competitive Rates Relationship Underwriting / Pricing

48 Member Centric Experience: Reducing Anxiety is Key

49 Embrace Member Centricity

Provide a robust, consistent multi-channel experience

Optimize branch networks

Become an “analytical credit union”

Actively engage in and How Can support experimentation Credit Unions Create More Make strategic build / buy / partner / Member Value? collaborate decisions

Source: CUNA Mutual Group Analysis 5050 Provide A Robust Multi-Channel Experience

Percent of Individuals Using Each Channel by Interaction Type Online Mobile In person ATM

PAY BILLS 69% 21% 16% 0%

DEPOSIT CHECK (entire amt.) 5% 17% 60% 30%

OPEN DEPOSIT 33% 19% 73% 0% ACCT.

% OF CU’S* OFFERING 98% 84% 100% 97%

* Credit unions with total assets > $20M Source: “Channel Effectiveness For Financial Services”, The Nielsen Company, 6/1/2016; NCUA 5300 Call Report Data

51 Embrace Member Centricity

Provide a robust, consistent multi-channel experience

Optimize branch networks

Become an “analytical credit union”

Actively engage in and How Can support experimentation Credit Unions Create More Make strategic build / buy / partner / Member Value? collaborate decisions

Source: CUNA Mutual Group Analysis 5252 CU Branch Networks: Greater Efficiencies Needed

53 Embrace Member Centricity

Provide a robust, consistent multi-channel experience

Optimize branch networks

Become an “analytical credit union”

Actively engage in and How Can support experimentation Credit Unions Create More Make strategic build / buy / partner / Member Value? collaborate decisions

Source: CUNA Mutual Group Analysis 5454 Data & Analytics: Financial Services Applications

Customer Operational Insight Efficiency

Customer Risk Centricity Management

Adapted from: “Banking on Big Data: Harnessing Big Data to Drive valuable Big Decisions,” Cognizant, July 23, 2014

Underpinned by a Robust Data & Analytics Capability

55 Embrace Member Centricity

Provide a robust, consistent multi-channel experience

Optimize branch networks

Become an “analytical credit union”

Actively engage in and How Can support experimentation Credit Unions Create More Make strategic build / buy / partner / Member Value? collaborate decisions

Source: CUNA Mutual Group Analysis 5656 Research publications

Centers of Excellence

I3 (Ideas, Innovation, Implementation) Actively Engage In Incubator And Support Experimentation

57 Embrace Member Centricity

Provide a robust, consistent multi-channel experience

Optimize branch networks

Become an “analytical credit union”

Actively engage in and How Can support experimentation Credit Unions Create More Make strategic build / buy / partner / Member Value? collaborate decisions

Source: CUNA Mutual Group Analysis 5858 Invests in early-stage FinTech and InsurTech companies to learn from each other and bring disruptive technologies into credit union ecosystem Uses the technology and innovative solutions in our portfolio of companies through commercial arrangements designed to address gaps and opportunities within the insurance and credit union spaces

59 Embrace Member Centricity

Provide a robust, consistent multi-channel experience

Optimize branch networks

Become an “analytical credit union”

Actively engage in and Recap: support experimentation Six Action Steps For Creating More Make strategic build / buy / partner / Member Value collaborate decisions

Source: CUNA Mutual Group Analysis 6060 What Will The “Disruptors” Look Like For Your CU?

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61 62 Q & A

63 CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a mutual insurance holding company, its subsidiaries and affiliates. CORP-1845303.1-0717-0819 www.cunamutual.com