Turning Up the Volume

CU*Answers Annual Stockholders Meeting

June 18, 2008

Agenda

Call to Order• Review 2007 Minutes• Review Financial Reports

Chair of the Board: Year In Review• Welcome New Owners

Election • Board Members

CEO Report• Turning Up the Volume: What it means as more and more

people sing along (planning for the evolution of a network)CFO ReportBoard Election ResultsAdjourn

Chairman’s Comments

Turning Up the Volume From the Perspective of Your Board

Chair

Your Board

These people start every day with no time to spare in just running their credit unions...and somehow they find the time to work

hard at ensuring the future of this CUSO

Dave Ohman

Vickie Schmitzer

Ray Ward

Dean Wilson

Chris Butler

Joni Shinn

Dave Wright

2008 CUSO of the Year

First CUSO ever to win NACUSO’s top award twice

The award’s actual name is

Companies don’t collaborate, people do

It all starts with your members and comes together through your focus

CUSO Collaboration and Innovation AwardCUSO Collaboration

and Innovation Award

Supporting NACUSO

Could Randy’s head get any bigger?

Get to Know Our New Owners

New Stockholders Since Last Year’s Meeting• Clawson Community CU

(Clawson, MI)

• Kensington Valley Community CU(Highland, MI)

• Great Lakes Members CU(Dearborn, MI)

Board Elections

Let’s hear from the candidates and get to the voting...

CEO Report

Turning Up the Volume:What it means as more and more

people sing along

Planning for the evolution of a network

Growth, Success, Diversity, and Mission

During today’s presentation, two things were evident• Since the last time we met, CU*Answers has enjoyed a

great deal of success and recognition from the marketplace

• A theme of ownership and the need for the constant focus on what sets us apart as a network of businesses, owned by our customers and clients

These two ideas can actually be in conflict with each other, and we must plan for the evolution of our network

Growth, Success, Diversity, and Mission

Nothing challenges a mission more than the concepts of growth, success, and diversity

• To be successful in carrying out your mission, you must grow, which is the first signal of success

• With success comes those attracted to success, and a growing diversity of ideas about where to go, how to get there, and the expected returns

• With growing diversity comes the anguish over the mission and the future direction of the firm

Some would call this simply growing pains, but it’s more problematic for a cooperative than for most businesses

• Think about credit union-to-mutual savings banks conversions and what it means as owners begin to challenge what it’s all about

Planning for the Evolution of a Network

Cooperative or not, the cycle is real and we must all recognize the challenges as we stay committed to the mission

• We must embrace the diversity of our partners• We must respond positively to the inevitable demand

that we change with the marketplace• We must remain respectful of our need to be

answerable, not only to our owners, but to our clients and to an industry

• We must remain committed to being different and true to a collaborative framework

• We must stay committed to what is timeless about our traditions, without remaining stuck in the past

The “We” here is not a group without faces, people without names, or organizations that cannot be called on ... it is us

When it’s time to call BS on our direction, we will be the ones who step up with the plan

Mission

As we grow, it is easy to confuse our day-to-day tasks with our big-picture mission

Twice within the last 60 days, Evie Rasmussen’s challenges have reminded me of our big-picture mission

Evie’s challenge to every business that claims to be a partner:

“Before you claim to be my “partner” make sure you truly are. Don’t just sell me what your business needs to have sold – it needs to benefit my CU too. Do you really need to charge every CU for setting up with your company? Once the platform has been built with whatever processor, why continue the huge charges? So, we’ve got a Catch-22 – we can’t afford many of your services and yet we can’t afford not to and be competitive. The only way we can succeed is to lower the boundaries, roll up your sleeves and collectively use your minds to figure out how to help this fading industry.”

From a blog posting dated June 4, 2008, at www.nacuso.org

“Before you claim to be my “partner” make sure you truly are. Don’t just sell me what your business needs to have sold – it needs to benefit my CU too. Do you really need to charge every CU for setting up with your company? Once the platform has been built with whatever processor, why continue the huge charges? So, we’ve got a Catch-22 – we can’t afford many of your services and yet we can’t afford not to and be competitive. The only way we can succeed is to lower the boundaries, roll up your sleeves and collectively use your minds to figure out how to help this fading industry.”

From a blog posting dated June 4, 2008, at www.nacuso.org

Build a business that is about the ultimate success of its clients and their futures

Mission

Evie is a CU*NorthWest Board member, and therefore a partner to every owner in this room

My response to the challenge:

“For all of us to win in the future, network leaders must be free to change the financial models that drive their organizations in partnering with credit unions...

“Once credit union investors free the firm to attack the challenges of the market with a new mindset, then it will be up to the leaders of the networks to step up. First, by ensuring that network businesses are free of designs that define their value by contract revenue flows, income redistribution models, and by secondary counter norms that claim to lift the participants and ultimately fund the asset value of the network ownership more than the asset value of the participants. The question will be, once free to redesign themselves, will network leaders be able to truly call BS on the models of yesterday?”

From a blog posting dated June 5, 2008, at www.nacuso.org

“For all of us to win in the future, network leaders must be free to change the financial models that drive their organizations in partnering with credit unions...

“Once credit union investors free the firm to attack the challenges of the market with a new mindset, then it will be up to the leaders of the networks to step up. First, by ensuring that network businesses are free of designs that define their value by contract revenue flows, income redistribution models, and by secondary counter norms that claim to lift the participants and ultimately fund the asset value of the network ownership more than the asset value of the participants. The question will be, once free to redesign themselves, will network leaders be able to truly call BS on the models of yesterday?”

From a blog posting dated June 5, 2008, at www.nacuso.org

You are the investors in these networks; you are the future network leaders...we all might need a new mindset about business

Understanding New Financial ModelsCan We Agree That We’re a Different Kind of Business?

We must distribute our financials to owners and to the NCUA in order to be compliant

But more important than being compliant is the responsibility we all have to understand the economics of our CUSO and how our performance and returns are based on our commitment to our mission

In 2008, I was happy that people started to engagemore than ever before around our numbers...

... I just wonder if was the result of endeavoring to better understand the mission, or simply a reaction to some blips on the radar, or even a temporary response to due diligence tasks

Can We Agree That We’re a Different Kind of Business?

By Working Together, Can We Inspire Others?Since we last met, we have been busy talking about

how collaboration and network business design might be the key to redesigning our entire industry and the business processes related to building credit unions

Working on a new mindset

Dump the Movement, Start a Network

We’ve even started selling the concept to credit unions as a good marketing program for consumers

• The network advantage, direct to members

“Movement” ...what does that say to members?“Industry” ...what does that say to members?“Network” ...what does that say to members?

We think there is more to this than simply marketing to consumers

But consumers are beginning to see the power in networks

We Presented cuasterisk.com as a Template

Business network design driving us to:

Play where members play...Re-map your business processes to reach members

Focus inside-out and outside-in simultaneously...Re-map your business processes to distribute work

Respond to vested external innovators...Re-map your business processes to drive innovation

Expand your HR pool by leveraging peers...Re-map your business processes to capture the power of talent

Consider a new set of network pricing concepts...Re-map your business processes for earning engines

We Presented Our Success as an Example For Others

It’s working for CU*Answers:Capturing the benefits of scaleProjecting a larger persona than a standalone

organizationChallenging us to diversify our focusEnabling us to participate in more initiatives Inspiring a competitive advantageAmplifying the cooperative effect and aligning with

our market

We are selling it not only for CUSOs but as a process for every

business leader

We Sold Our Vision of Network CompaniesCUSOs: The Hubs of an Industry

Point to Point

We Sold Our Vision of Network CompaniesCUSOs: The Hubs of an Industry

Point to Point

What is the opportunity,

and where is it focused?

We Sold Our Vision of Network CompaniesCUSOs: The Hubs of an Industry

A Hub

We Sold Our Vision of Network CompaniesCUSOs: The Hubs of an Industry

A Hub

What is the opportunity,

and where is it focused?

We Sold Our Vision of Network CompaniesCUSOs: The Hubs of an Industry

A Network

We Sold Our Vision of Network CompaniesCUSOs: The Hubs of an Industry

A Network

What is the opportunity,

and where is it focused?

We Sold Our Vision of Network CompaniesCUSOs: The Hubs of an Industry

Which is bigger? The opportunity of one, or the opportunity of all?

A network multiplies the work of one into an opportunity for all of its participants

A vision where Evie’s opportunity is embedded and is equally important as all of the network’s opportunities...a true partnership

We Sold Our Role In a National Scene

We Sold Our Role In a National Scene

We Made the Commitment Be Different Working Under the Best Contracts

At the 2007 CEO Strategies event, CU*Answers took the next step in making sure that your balance sheet and asset valuations were paramount to our own

Contract changes that said we were about ongoing operations and execution more than our sale value

• Assignment• Cancellation clauses• Anxiety about CU*Answers

selling out

“...secondary counter norms that claim to lift the participants and ultimately fund the asset value of the network ownership more than

the asset value of the participants”

Walkin’ the Talk

All of the things we presented to the marketplace since we last met might make CU*Answers confident that we are walking the talk, but what do they say to you?

You are the ultimate judge...Are we on mission? • If not, I hope you’ll speak up right now and add your

voice to figuring out how this CUSO should get there• If so, I hope you will speak up and carry that message to

the rest of the credit union industry, so that even more will join this effort next year

“...secondary counter norms that claim to lift the participants and ultimately fund the asset value of the network ownership more than

the asset value of the participants”

Remaining Respectful of Our Need to be Answerable

Someone I admire very much said to me recently, “It’s not fun to debate with you, Randy.”

After a little soul searching, I worried that for all my passion, zealousness, and absolute drive to be understood and all-encompassing in my explanations, I end up discouraging you from digging deeper and adding your voice where it is so needed

In 2009, I will work hard to make sure that the experience is based more on the bedside manner of Dr. Jekyll than the demeanor of Mr. Hyde

We are listening...I am listening

A Look at The Numbers

Understanding how it all adds up dollars- and cents-wise is a

little bit more complicated these days

And explaining it to a casual third-party observer might

your biggest problem

The Revenue Picture Continues to ChangeThe Chance to Earn Comes From a Growing Market Influence

CU*Answers direct revenues continue to evolve with new processes, internal capabilities, and new offerings

• Projected for 2008: $25.090M

Just as important, CU*Answers’ influence through partnering with other CU*BASE networks and investing in new initiatives is starting to really add up

• Xtend projected for 2008: $595K (- $40K)

• eDOC projected for 2008: $3.056M (+ $500K)

• CU*NW projected for 2008: $927K (- $10K)

• CU*S projected for 2008: $231K (+ $2K)

• Processing Alliance proj. for 2008: $475K (- $8K)Gotta watch out for Enron type hocus-pocus here...the important number is how many

members we participate with (over 6 million)How relevant we can be to 6 million people is the

big question in our future

$1.305M

$265K

-400,000

-200,000

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2003 2004 2005 2006 2007 2008 (Proj.)

Net Income before Patronage Dividends & Taxes Patronage Dividends

Net Income & Patronage DividendsWhat do shareholders get, and what are we putting away for our future?

Before Consolidation

$1.305M includes an accrued expense for an eDOC Intangible Asset Write-off of $840K, netting $465K in GAAP net income

(for details, check out Note 5 – Intangible Assets on the audited financials)

Intangible Asset Write-offs

Let’s take a second to talk about what events create a need for us to have an intangible asset write-off

What is different about eDOC than past events that created similar kinds of expenses?

If this gets you going, think about tracking sales tax, income tax, and other miscellaneous taxes in 14 states

Diversity definitely has an upside and a downside when it comes to accounting

Return on InvestmentHow did things work out in 2007?

2007 Gross Income Submitted by Owners to CU*Answers$

15,284,983 (Includes all vendor pass-throughs)

2007 Patronage Dividends Paid $ 200,0002007 Class A Stock Dividends Paid 86,515 (4.00%)

2007 Class B Stock Dividends Paid 22,304 (4.00%)

2007 Interest Paid Credit Unions on Loans 520,788 (~9.00%)

Total Revenue Returned to Credit Unions$ 829,607Return Per Total Dollars Received:

$0.0833$0.0833$830K $9,964K (excludes vendor pass-throughs) = $ 0.0833 return per CU*A

$ received

Return Per Total Dollars Received: $0.0833$0.0833

$830K $9,964K (excludes vendor pass-throughs) = $ 0.0833 return per CU*A $ receivedGlass half full: “All this, and great investment in our

future through eDOC, too!”Glass half empty: “Pretty good, but that shareholder

value drop of $31.04 dampers my enthusiasm.”

Projecting Shareholder ValueAfter the 2008 dividend, what shape is your investment in?

In 2006, we invested to jump to the future with a new endeavor

Depending on when you bought in, your perspective might be different Ownership price 1985: $10, 1991: $59.31, 2000: $176, 2005: $460, 2008: $460

$137.61

$183.98$171.64

$156.00$168.65

$186.08

$0

$40

$80

$120

$160

$200

2003 2004 2005 2006 2007 2008 (Proj.)

The delta is the additional capital paid in to participate as an owner, paid so as not to dilute the ownership

value of the pioneers before you

The eDOC Innovations YearsThe eDOC Innovations Years

Shareholder Value Projection for 2008New Math For a Company Extending Itself By Investment

Very rough numbers, and very simple concepts

For the details, you need to understand the fine print of the

Audited Consolidated Financial Statements

you receive every year

Investing in eDOC InnovationsSummarizing the Process

Quarter after quarter, year after year, CU*Answers has reported positive financial performance, and everyone has become accustomed to the trend

Then, wham! ...a dip, a drop, a left-hand turn, almost overnight

(well, kind of, if you consider 2 years to be overnight) But it certainly got people wondering about the investment

and how it worked This document is to give you a little history and a

quick summary of the process

Members Served

2008 has been a great conversion and sales year – we go into 2009 with new clients waiting for their conversion date

The numbers below represent CU*Answers alone, and these days, that’s not the whole story...keep your eye on cuasterisk.com

903,457898,000821,000

699,000635,000

985,000

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

2003 2004 2005 2006 2007 2008 (Proj.)

We Can Help With That Casual Third-Party Observer

Remember Randy’s earlier challenge to all of us to remain respectful of our need to be answerable, not only to our owners, but to our clients and to an industry

Our Board is always ready to talk about their role in leading this firm – reach out to Chris

Randy is always ready to talk about our team’s accountability and what that means to you – reach out to Randy

I am always available to give you the dollars and cents background – reach out to me

Bob Frizzle, CFObfrizzle@cuanswers.com800-327-3478, ext. 142

Conclusion(Randy just has to have the last word)

Good night!