Louis Hernandez, Jr.June 20, 2011

1

Too Small to Fail: How the Financial Industry Crisis Changed the World’s Perceptions

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Accelerating Global Change

Source: World Bank

Global Economy Has Improved

Economic Shifts: China and India Grow; U.S. and Japan Decline

U.S. Japan China India

Sh

are

of

Wo

rld

GD

P

Source: International Monetary Fund* Projection

1990 2014*20092000

41.9%

3.3%

45.5%

5.1%

33.7%

17.61%

31.1%

13.7%

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China India U.S.5

(1.3 billion)

25% with Highest IQ(335 million)

(1.2 billion)

(307 million)28% with Highest IQ(324 million)

Population Shifts: China and India Have More Honors

Kids than the U.S. Has Kids

Tota

l P

op

ula

tio

n

Education Drives Higher Incomes

2002 2007

1.18 1.230.99

4.95

Millions of College Graduates

U.S. China

Source: National Center for Education Statistics, China Economic Review

U.S. (2000 - 2007)

China (2000 - 2007)

9.9%

61.5%

Change in Real GDP per Capita

Source: ERS International Macroeconomic Data Set

6

7

African Amer. Pop. Up 3.2%

Hispanic Pop.Up 2.9%

White Pop. Down -3.9%

Demographic Shifts Changing Ethnic Population

8

3.0% GDP growth in 2011

Retail sales up 6.5%

Unemployment still high at 9.1%

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Housing starts at historic lows

Home values depressed

Foreclosures up 2%

10

Jan-

00

Jan-

02

Jan-

04

Jan-

06

Jan-

08

Jan-

10

0

20

40

60

80

100

120

140

160

25.3

63.4

Consumer Confidence Remains Low

From Subprime Bubble to Dodd-Frank:An Industry in Transition

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The fastest distance between 2 points

A guy walking a tight rope

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Margin Compression

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

3.00%

3.20%

3.40%

3.60%

3.80%

4.00%

4.20%

4.40%

3.18%

3.61%

Credit Union Bank

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Channel Proliferation

15

52%

Operating Expense (Since 1995)

64%

Compliance (as of 2009)

208%

Loan Loss Provision(Since 1995)

Costs have Increased

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Source: Raddon Financial Group, March 2011

Regulatory Compliance Burdens Small FIs

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Industry Consolidation Continues

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ExpandedMarketplace

19

thereHave

Beenchallenges

Moment of Clarity

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Big Five Dominance

37% of U.S. Deposits

20% of Branches

60% of Assets

22

Consumers Prefer Community-Based Institutions

Consumerization Financial Services

of

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Embracing Consumerization Opens New Markets

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Position To Win

Technology Has Always Played an Important Role

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Technology

Incr

ease

Rev

enue

Reduce CostsCustomer

Intelligence

Manage Channel Proliferation

Mitigate Regulatory Burden

Increase Non-Interest Income

Diversify Revenue

Technology Impact

28

Now’s the Time forCollaboration

29

Collaboration in Technology

Pacific coast bankers bank

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Collaboration in Technology

Collaboration in Technology

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Embrace Your Opportunity

Follow me and download a copy of this presentation on Facebook and LinkedIn:

www.facebook.com/toosmalltofail

www.linkedin.com/in/louishernandezjr

33

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www.opensolutions.com

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Order Your Copy Today!

Louis Hernandez, Jr.June 20, 2011

35

Too Small to Fail: How the Financial Industry Crisis Changed the World’s Perceptions