MCU moving to a new business model MCU

MCU – moving to a new business model MCU Board Maleny Community Centre Thursday 15 September 2016

MCU Maleny Credit Union Strategic Questions • Where have we come from? • Where do we want to go? • What are we proposing?

Where have we come from? • When MCU started in 1984: o • A small credit union doing personal loans, financial inclusion MCU in 2001? o A tiny ‘ADI’ doing green loans, microfinance, a few home loans. MCU slowly becoming a small community bank like most ADIs. • What happened in 2011? o A merger with CUA was proposed and rejected by members o Since then the board and management have stabilised, nevertheless profitability is still under pressure • Where is MCU in 2016? o As Maleny continues to evolve as a community, demographics necessitated a strategic review

What’s happening in the mutual ADI sector? • APRA regulation and increased competition are changing the playing field • The number of mutual ADIs is now less than 80 (down from over 600 in the early 90 s) • Merger is the most common response to falling profitability but not always the most appropriate • • Alternatives are limited If there was an EASY solution, everyone would be flocking to it Margin pressure, IT costs and compliance are REAL challenges Changing a business model takes lots of time and money.

What do we need in 2016 and beyond? • • • Real community banking – based on relationships and service Flexible services – meeting community and small business needs Contemporary internet and online banking Bigger and better loans, a wider range of products, at a good price Community projects that make Maleny a better place to live Retaining jobs and investment in the community

What’s happening for MCU? • • • Profits are flat-lining with a loss recorded this year. Margin pressure, falling rates and competition are key factors. We need to invest in a new IT system and key staff. MCU remains small and our capital position restricts growth. Maintaining the status quo (business as usual) is not a long term option

Other options considered • Business as usual – not viable long term • Wind up – carries significant costs (wind up and redundancies) and leaves us with no financial services provider • Heritage alternative partnership – they are not ready to do business • Merger – after 2011 experience, not under active consideration

What are we proposing? • Joining the Alliance Bank model – with Bendigo and 4 excredit unions • • Enhanced member value proposition Consistent with Objects of company Retains MCU identity Continuity of financial services for our local community Member investment shares repaid to supportive members Building (Maple Street) retained under member ownership Capital invested in Charitable Trust for other community projects.

What happens next? • • • Constitutional change required – AGM Nov 2016 Approval of transaction by APRA and members – early 2017 Transfer of business – later in 2017 New IT System – later in 2017 The changes will take time … Let’s make this happen. Together.