Economic outlook 2011

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Economic outlook 2011

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1. Economic outlook 2011

2. Impacts Companies Hiring Cash nearly $2T (7.4% of assets) Cash assets 10.6% in 2009 Decreased debt load Costs – Avoid inflation, avoid downturn in consumer spending Healthcare – Iffy – if stable then hiring could resume, if applied then hiring will freeze Financial reform – difficulty in recovering costs impact on earnings Raw materials – on the rise; could reflect in price from manufacturing costs Production (energy) – on the rise; could reflect in price from shipping and production Growth Large Global Manufacturer Capital intensive – Outsource manufacturing Customers’ economy doing well (Brazil, Japan, India, China); advancement in agriculture & construction Labor supply – robotic and plentiful Small Local Service Sector Labor intensive Customers’ economy iffy Capital sources weak Jobs Cycles: Spending -> Sales -> Expansion -> Investments -> Hiring Consumers are saving and paying down debt Expectations of 2.5 million jobs added – about 200,000 a month Unemployment still at 9% Roughly 10,000 Baby Boomers will turn 65 today, and about 10,000 more will cross that threshold every day for the next 19 years. Real Estate Residential Need to restore wealth Mortgages need to be upside up – 25% still underwater In certain markets home prices must come down – foreclosures will oversupply market $1.7T drop in market value Delinquencies will begin to fade but not by much delinquency at 6.5%; drop to 5% 1.8 million foreclosures in 2010, about 2.1 million in 2011 – peakCompanies Hiring Cash nearly $2T (7.4% of assets) Cash assets 10.6% in 2009 Decreased debt load Costs – Avoid inflation, avoid downturn in consumer spending Healthcare – Iffy – if stable then hiring could resume, if applied then hiring will freeze Financial reform – difficulty in recovering costs impact on earnings Raw materials – on the rise; could reflect in price from manufacturing costs Production (energy) – on the rise; could reflect in price from shipping and production Growth Large Global Manufacturer Capital intensive – Outsource manufacturing Customers’ economy doing well (Brazil, Japan, India, China); advancement in agriculture & construction Labor supply – robotic and plentiful Small Local Service Sector Labor intensive Customers’ economy iffy Capital sources weak Jobs Cycles: Spending -> Sales -> Expansion -> Investments -> Hiring Consumers are saving and paying down debt Expectations of 2.5 million jobs added – about 200,000 a month Unemployment still at 9% Roughly 10,000 Baby Boomers will turn 65 today, and about 10,000 more will cross that threshold every day for the next 19 years. Real Estate Residential Need to restore wealth Mortgages need to be upside up – 25% still underwater In certain markets home prices must come down – foreclosures will oversupply market $1.7T drop in market value Delinquencies will begin to fade but not by much delinquency at 6.5%; drop to 5% 1.8 million foreclosures in 2010, about 2.1 million in 2011 – peak

3. Pew Research – Beyond California

4. A Study of Attitudes toward Financial INSTITUTIONS

5. Introduction, 1 Areas of Inquiry This study was conducted as an online survey. Respondents were drawn from a panel of over 50,000 known Texas residents, representing all areas and backgrounds. We invited selected panelists to an online screening survey. 4986 Texans completed the screening survey. 1240 qualifiers were selected for the in-depth survey. E-Rewards provided sample and data collection services. The survey was active between June 11 and August 29, 2010. A similar survey was conducted in January 2007. This study was conducted as an online survey. Respondents were drawn from a panel of over 50,000 known Texas residents, representing all areas and backgrounds. We invited selected panelists to an online screening survey. 4986 Texans completed the screening survey. 1240 qualifiers were selected for the in-depth survey. E-Rewards provided sample and data collection services. The survey was active between June 11 and August 29, 2010. A similar survey was conducted in January 2007.

6. Introduction, 2 Points of Comparison We determined population demographics (sex and age) based on the 2008 US Census American Community Survey. We set targets and quotas for 24 sex-by-age-by-region cells. We sent email invitations to panel members, who were selected for their demographic characteristics. More than 5,000 people responded. We monitored respondent characteristics and adjusted the recruiting plan to boost participation in low-responding segments. We used special recruiting and selection guidelines for African Americans and Hispanics. We determined population demographics (sex and age) based on the 2008 US Census American Community Survey. We set targets and quotas for 24 sex-by-age-by-region cells. We sent email invitations to panel members, who were selected for their demographic characteristics. More than 5,000 people responded. We monitored respondent characteristics and adjusted the recruiting plan to boost participation in low-responding segments. We used special recruiting and selection guidelines for African Americans and Hispanics.

7. TCUL Regions for 2010 This survey uses TCUL’s new region alignment plan which improves on regional balance. This survey uses TCUL’s new region alignment plan which improves on regional balance.

8. Sample Proportions by TCUL Region Both the screener and in-depth survey samples were fitted to this profile. Both the screener and in-depth survey samples were fitted to this profile.

9. Generation, Income, and Ethnicity in the Sample The screener sample and the final in-depth sample include good mixes of people from different backgrounds. * From panel registration data. ** Minorities were a priority for in-depth sample. S5.1c, S6, S12; n=4986/2040 The screener sample and the final in-depth sample include good mixes of people from different backgrounds. * From panel registration data. ** Minorities were a priority for in-depth sample. S5.1c, S6, S12; n=4986/2040

10. Marital Status, Education, & Occupation The in-depth sample contains people of varied backgrounds, in proportions that look much like the ‘real world.’ * These questions only appeared in the in-depth survey. No quotas were set. Q30, Q31, Q34; n=2040 The in-depth sample contains people of varied backgrounds, in proportions that look much like the ‘real world.’ * These questions only appeared in the in-depth survey. No quotas were set. Q30, Q31, Q34; n=2040

11. General Habits

12. Financial Institutions Used, All Texas Citizens, 2010 Four-in-ten Texans report using a credit union. Credit unions are almost twice as strong as the next-nearest type of institution. S7. Which of these financial institutions do you currently use?; n=4986 Four-in-ten Texans report using a credit union. Credit unions are almost twice as strong as the next-nearest type of institution. S7. Which of these financial institutions do you currently use?; n=4986

13. Financial Institution Use, by Regions Credit union use varies widely by region. Half of South Central citizens use credit unions. Only a third do so in the Northeast. S7. Which of these financial institutions do you currently use?; n=4986 Credit union use varies widely by region. Half of South Central citizens use credit unions. Only a third do so in the Northeast. S7. Which of these financial institutions do you currently use?; n=4986

14. Institutions Used, by Region, Sex/Age, and Ethnicity This table shows the variance in usage by sex/age and ethnic background. It also reveals other notable patterns and deserves a few minutes study. S7. Which of these financial institutions do you currently use?; n=4986 This table shows the variance in usage by sex/age and ethnic background. It also reveals other notable patterns and deserves a few minutes study. S7. Which of these financial institutions do you currently use?; n=4986

15. Institutions Used, by Generational Cohort Credit union use is especially high among Boomers and low among Gen Y. Gen Y women aren’t particularly keen on investment firms, either. S7. Which of these financial institutions do you currently use?; n=4986 Credit union use is especially high among Boomers and low among Gen Y. Gen Y women aren’t particularly keen on investment firms, either. S7. Which of these financial institutions do you currently use?; n=4986

16. Pew Research Center – Generations 2010 Dec 16 2010Dec 16 2010

17. Comparing 2010 to 2007 Financial Institutions Used, Statewide Although the percentages have changed, and investment firms show gains, overall positions remain quite similar. S7. Which of these financial institutions do you currently use?; 2010 n=4986; 2007 n=2071 This chart compares July 2010 to January 2007 results. It is impossible to say when or how change occurred, but it is clear that more Texans hold funds, stocks, and other investments now than did 42 months ago. Although the percentages have changed, and investment firms show gains, overall positions remain quite similar. S7. Which of these financial institutions do you currently use?; 2010 n=4986; 2007 n=2071 This chart compares July 2010 to January 2007 results. It is impossible to say when or how change occurred, but it is clear that more Texans hold funds, stocks, and other investments now than did 42 months ago.

18. Comparing 2010 to 2007 Financial Institutions Used, by Sex/Age Group Most growth for investment institutions came from Texans 50+. Credit unions gained ground among women 35 and older. S7. Which of these financial institutions do you currently use?; 2010 n=4986; 2007 n=2071 Most growth for investment institutions came from Texans 50+. Credit unions gained ground among women 35 and older. S7. Which of these financial institutions do you currently use?; 2010 n=4986; 2007 n=2071

19. Preferences

20. Comparing 2010 to 2007 Preferred Financial Institution, Statewide Here too, investment firms show gains. But even combined, managers, brokers, and mutual funds only get about half the votes of credit unions. S9. Which of these handles most of your financial business?; 2010 n=4986; 2007 n=2071 Here too, investment firms show gains. But even combined, managers, brokers, and mutual funds only get about half the votes of credit unions. S9. Which of these handles most of your financial business?; 2010 n=4986; 2007 n=2071

21. Reasons behind PFI Choice, Compared Texans cite very different reasons for choosing a credit union than for choosing a bank or an investment institution. S11. Which of these are reasons you use __ for most of your financial business?; CU n=947, Bank n=3158, Inv. Firm n=499 Texans cite very different reasons for choosing a credit union than for choosing a bank or an investment institution. S11. Which of these are reasons you use __ for most of your financial business?; CU n=947, Bank n=3158, Inv. Firm n=499

22. Differentiation

23. Difference between Credit Unions and Banks by Region and Credit Union Membership Votes have shifted from ‘same’ into ‘different’ in many cells, including among non-members. Members show a rise in ‘significantly different’ votes. Q1. Which statement best describes your opinion… ? 2010 n=1240, 2007 n=1022 Votes have shifted from ‘same’ into ‘different’ in many cells, including among non-members. Members show a rise in ‘significantly different’ votes. Q1. Which statement best describes your opinion… ? 2010 n=1240, 2007 n=1022

24. Differences between Credit Unions and Banks Top-of-Mind Comment Profile; All Texans Membership and member participation are strong differentiators. And many cite credit unions as having better rates and lower fees than banks. Q2. In your opinion, how are banks and credit unions different?; Sees some or significant difference, n=1056 Membership and member participation are strong differentiators. And many cite credit unions as having better rates and lower fees than banks. Q2. In your opinion, how are banks and credit unions different?; Sees some or significant difference, n=1056

25. Description Attribution to Credit Unions versus Banks Most Texans say banks are open to all (unlike CUs), that they provide counsel (like CUs), but that they are not cooperatives. Q4. Indicate whether you believe each of the following statements is true for banks or credit unions, if either; n=1240 Most Texans say banks are open to all (unlike CUs), that they provide counsel (like CUs), but that they are not cooperatives. Q4. Indicate whether you believe each of the following statements is true for banks or credit unions, if either; n=1240

26. Superlatives Profile: All Texans Credit unions lead in areas of related to rates, fees, liberality, and concern. Banks hold the advantage in services and convenience. Q5. Please indicate which type of financial institution—banks or credit unions—each statements fits best.; n=1240 Credit unions lead in areas of related to rates, fees, liberality, and concern.Banks hold the advantage in services and convenience. Q5. Please indicate which type of financial institution—banks or credit unions—each statements fits best.; n=1240

27. Why Aren’t You a Credit Union Member? Comment Profile; Non-members Many non-members don’t know of a local credit union, have never considered joining or feel that they do not qualify for membership. Q3. Why don’t you have an account at a credit union?; n=717 Many non-members don’t know of a local credit union, have never considered joining or feel that they do not qualify for membership. Q3. Why don’t you have an account at a credit union?; n=717

28. Performance

29. Banking Services, Importance Ratings and Shares Many of these items have high interest to most Texans, and most are important to at least half the population. Q19. How important is this when you want to open an account or do business? n=1240 Many of these items have high interest to most Texans, and most are important to at least half the population. Q19. How important is this when you want to open an account or do business? n=1240

30. Service Importance & Satisfaction, All Texans Some of the most important items vary widely in satisfaction. Interest rate-related items draw the most fire, but there are also performance gaps. Q19. How important? (7 to 10) and Q26. How satisfied? (7 to 10); All Texans, n=1240 Some of the most important items vary widely in satisfaction. Interest rate-related items draw the most fire, but there are also performance gaps. Q19. How important? (7 to 10) and Q26. How satisfied? (7 to 10); All Texans, n=1240

31. Satisfaction when PFI is a Credit Union This group has the smallest average gap of any segment and relatively small gaps on most performance issues. Q19. How important? (7 to 10) and Q26. How satisfied? (7 to 10); PFI is CU, n=260 This group has the smallest average gap of any segment and relatively small gaps on most performance issues. Q19. How important? (7 to 10) and Q26. How satisfied? (7 to 10); PFI is CU, n=260

32. Satisfaction when PFI is a Bank Banks show some large gaps on both rate-related and performance-related items. Q19. How important? (7 to 10) and Q26. How satisfied? (7 to 10); PFI is Bank, n=794 Banks show some large gaps on both rate-related and performance-related items. Q19. How important? (7 to 10) and Q26. How satisfied? (7 to 10); PFI is Bank, n=794

33. Gap Comparison: Overall, Credit Unions, Banks Texans who do most of their business with credit unions almost always show lower gaps than other groups. Based on Q19. and Q26.; Overall n=1240, PFI is CU n=260, PFI is bank=794 Texans who do most of their business with credit unions almost always show lower gaps than other groups. Based on Q19. and Q26.; Overall n=1240, PFI is CU n=260, PFI is bank=794

34. involvement

35. Cause marketing means getting involved with the cause Cause marketing means getting involved with the cause

36. Contacts Rick Grady – [email protected] – 469.385.6485 Doug Foister – [email protected] – 469.385.6477

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