Jim Blaine December 6, 2006 Arlington, Virginia Hosted by the Federal Deposit Insurance Corporation Affordable, Responsible Loans for the Military: Programs and Prototypes

Jim Blaine December 6, 2006 Arlington, Virginia 2 Post Dated Check $300 Maximum Loan Maximum Fee $15 per $100 Borrowed Term Generally 2-3 Weeks Payday Lending in North Carolina

Jim Blaine December 6, 2006 Arlington, Virginia 3 Consumer Check Amount $300 Less Fee $45 Proceeds to Consumer $255 Interest Rate 300% to 600% APR (Depending on Term of Loan) Typical Payday Transaction

Jim Blaine December 6, 2006 Arlington, Virginia 4 Annual Percentage Rate* Finance Charge Amount Financed Total of Payment(s) Number % % % % % % % % % *Based on 14 day term $8.75 $13.00 $17.50 $22.00 $26.25 $30.75 $35.00 $39.50 $45.00 $50.00 $75.00 $ $ $ $ $ $ $ $58.75 $88.00 $ $ $ $ $ $ $ Payday Lending in North Carolina

Jim Blaine December 6, 2006 Arlington, Virginia 5 Maximum Amount $500 Maximum Term 31 Days Requires SECU Checking Account Requires Direct Deposit at SECU Underwriting Criteria: Breathing, Not Under Bankruptcy Interest Rate 12.00% SECU Salary Advance Program

Jim Blaine December 6, 2006 Arlington, Virginia 6 Just another form of a line of credit! (HELOC, credit card, retail line) Automated advances, repayment No new data processing systems! No new legal opinions or disclosures!! No new training of consumer lenders! No new collection requirements SECU Salary Advance Program … The most “profitable” loan we make!!

Jim Blaine December 6, 2006 Arlington, Virginia 7 Annual Percentage Rate Finance Charge Amount Financed Total of Payment(s) Number 12.00%$2.50*$500$ *Based on 15 day term SECU Salary Advance Program

Jim Blaine December 6, 2006 Arlington, Virginia 8 Interest Rate12.00% (Loan Losses)(4.00)% 8.00% (Cost of Funds)(4.00)% 4.00% SECU Operating Costs(2.00)% Return on Assets (ROA)2.00%* Basic Economics… *Current SECU Overall Return on Assets (ROA) Target is 1.00% …a rate of 18% would be entirely conscionable! SECU Salary Advance Program

Jim Blaine December 6, 2006 Arlington, Virginia 9 Interest Rate 18.00% (Loan Losses)(4.00)% 8.00% (Cost of Funds)(4.00)% 4.00% SECU Operating Costs(2.00)% Return on Assets (ROA) 8.00%!! What if? *Current SECU Overall Return on Assets (ROA) Target is 1.00% …a rate of 18% would be entirely conscionable! SECU Salary Advance Program

Jim Blaine December 6, 2006 Arlington, Virginia 10 Interest Rate 36.00% (Loan Losses)(4.00)% 8.00% (Cost of Funds)(4.00)% 4.00% SECU Operating Costs(2.00)% Return on Assets (ROA) 26.00%!!! Under Talent Bill… … What other legitimate consumer product returns 26.00%? SECU Salary Advance Program

Jim Blaine December 6, 2006 Arlington, Virginia 11 Interest Rate12.00% (Loan Losses) (0.0025)% 11.75% (Cost of Funds)(4.75%) 7.00% SECU Operating Costs(2.25%) Return on Assets (ROA)4.75% The true loss ratio is only ¼ of 1% on this product. SECU Salary Advance Program Here’s our actual… November 2006

Jim Blaine December 6, 2006 Arlington, Virginia 12 Savings Enhancement March 1, 2003 Supplemental Savings Account 5% of Proceeds to Savings (Example $100 Loan, $5 Shares) Pledged Against Loan; SECU becomes a secured lender! If Withdrawn, No Salary Advance Loan for 6 Months Break the Cycle; currently $10+ million in balances! SECU Salary Advance Program

Jim Blaine December 6, 2006 Arlington, Virginia 13 Payday Lender –$15 per hundred borrowed or $75 fee on a $500 loan for 1 month. SECU –1% of amount borrowed or $5 in interest on a $500 loan for 1 month. 40,000 SECU members use the salary advance loan each and every month. Each member “saves” $70 each month (theirs $75 – ours $5!). Monthly savings : $70 x 40,000 people = $2.8 million. Yearly savings: $2.8 million x 12 months = $33.6 million. Let’s calculate that difference… … Wealth creation at its best!!!!

Jim Blaine December 6, 2006 Arlington, Virginia 14 … Up to half the people who take out sub-prime loans could qualify for a prime loan which charges as much as 4% less interest … (“Fannie Mae”, Economist 8/31/2002) … One More Thing …

Jim Blaine December 6, 2006 Arlington, Virginia 15 RATE15 YR TERM30 YR TERM 7.75%$941.28$ %$999.45$ %$1,059.36$ %$1,120.95$ %$1,184.13$1, %$1,248.84$1, %$1,314.99$1, … Give someone back 15 years of their life!! Loan Amount: $100,000 The social cost of a 4% “mispricing”… The Social Problem

Jim Blaine December 6, 2006 Arlington, Virginia % Basic Transportation Loans (to $15,000); Hertz/Enterprise. First Time Homebuyers Mortgage (102% Financing) low closing costs; interest on escrow; no PMI; in-branch refinances. BALANCE Financial Counseling (No Cost); CCCS San Francisco. Check Cashing?? (Check Cashers Charging 1-3%!) Financial Planning – Members Trust/XCU Capital Financial Assessment Program; “Not Yet Wealthy”; “Special Needs”. Other Opportunities

Jim Blaine December 6, 2006 Arlington, Virginia 17 Credit Unions are not a four letter word… … and banks are vital to the success of our communities!

Jim Blaine December 6, 2006 Arlington, Virginia 18 So, Go ahead, do the right thing! Questions.