This year, 2008, promises to be interesting
and challenging for all of us! It is a year of political transition in which we will elect a
new president of the United States
and new leaders in many federal, state and local government positions. It is also a year that promises to have some economic challenges, both here in the United States
and around the world.

Challenges test us and force us to become sharper, and with these challenges come opportunities. In this article, we want to share with you how your Travis Credit Union Board
of Directors and management team has prepared for the coming year and positioned your credit union for the future.

Over the past several years, the TCU Board
of Directors, senior management and staff have engaged in extensive annual planning sessions to establish key credit union goals and objectives. Beginning in early 2007,
these planning sessions took on an added dimension as we embarked upon a comprehensive, multi-year strategic planning process to anticipate future changes, assess TCU strengths and weaknesses, identify opportunities and threats to our growth,
and establish the credit union’s future
strategic direction.

As a result of this extensive planning process, we developed a multi-year strategic plan that will guide our efforts this year and for several years to come. When we first drafted this plan last summer, we anticipated there would be challenging economic issues in 2008 such as those facing us today. We took some positive steps to ensure the financial strength and continued growth of the credit union in the years to come. As a result, the credit union is well positioned for the challenges that lie before us in 2008—and beyond.

Our strategic planning efforts included what
we termed an “environmental scan” to help
us understand our marketplace, competitive forces in the financial services industry and trends that are shaping this country and our credit union’s future. Most importantly,
we took a proactive stance in planning for
these changes.

Using information provided to us by several national and state credit union industry sources and information from regional sources about the economy, we examined the external environment and how it might impact our credit union in the near future. One of the issues we identified in 2007 was pressure on the credit union’s financial performance in 2007 and 2008.

One specific area we carefully assessed at previous planning sessions was our approach to mortgage lending. We have not made subprime mortgage loans and have worked
to educate members about options available
to them if they have loans elsewhere that will reset. Our 2007 planning process did lead
us to anticipate a weak housing market,
lower home prices, a slowing economy,
and deteriorating credit quality in 2008 and
possibly in 2009. Certainly no one could have foreseen the extent of the mortgage meltdown and credit crunch and the Federal Reserve’s aggressive moves in January to stimulate economic growth. In the short term we expect these factors to contribute to lower credit union earnings, possible increased asset growth and lower returns on our assets. Financial solvency is a critical long-term strategy and
we will take steps to improve cost controls and to manage and mitigate risk going forward.

While some financial institutions have recently reported financial problems related to subprime lending and aggressive mortgage lending practices, Travis Credit Union’s more prudent approach to making home loans and to educating our members about mortgage options has resulted in a mortgage portfolio that is sound. Nevertheless, we have felt the affects of the weakened economy and credit crunch. For the first time in many years we
had negative loan growth for the year––
almost $31 million less than in 2006. Delinquency was much higher than in previous years as members turned to the use of credit cards and became delinquent on auto loans
to stay afloat. Despite our efforts, we had to charge off more than anticipated in our 2007 budget. In combination with the poor loan growth, this resulted in negative earnings
in 2007.

Credit unions, like Travis, build capital and set aside these reserves in good years in order to weather years like we experienced in 2007. Because our capital reserves are far in excess of regulatory requirements we are positioned
to enhance services even when we experience economic downturns. Our strong capital position ($188 million) also allows us to continue providing you many free products
and services, expand to provide even greater convenience and to remain focused on the future while being mindful of managing in a
very prudent manner.

Another area of focus in our strategic plan is
to make sure we have effective internal processes. We have several projects in the 2008 plan about working smarter this year. Internally, we are focusing on analyzing, monitoring and reviewing all our internal operational processes to improve organizational efficiencies and effectiveness. We also intend to improve our performance management processes to ensure that we measure and reward those employee efforts that result in cost savings and improved effectiveness.

As an organization, we have planned strategically, are taking the necessary steps to weather the current economic challenges, and are preparing for the future. As individuals, we can also take steps to ensure that our families are prepared for economic challenges that might occur this coming year. Some of these strategies include the following:

Managing debt

Travis Credit Union offers credit counseling
and financial planning services to help you
and your family manage finances, control over-spending and handle debt. Be sure to check
out BALANCE if you need help managing existing debt.

Borrowing wisely

Our loan personnel are highly trained and can suggest options to help you manage your loan portfolio. Let us try to save you some money.

Increasing savings

One of the best protections against unforeseen financial issues is to have a contingency plan. Many experts recommend you try to establish
a minimum of three to six months of monthly expenses as a reserve to protect against short-term financial problems caused by loss of a job, unexpected medical bills or unforeseen price increases in commodities, such as gasoline, groceries, etc. If establishing such
a contingency fund is a priority for you and
your family, we hope you will visit one of our branches and talk with our new accounts personnel to evaluate the options we can
offer to help you meet your savings goals.

Financial planning

To help improve your short- and long-term financial planning and budgeting, our branch employees are happy to work with you to help you plan for and achieve your financial goals.

Volunteering to help others

In difficult economic times, community organizations depend upon volunteer assistance and contributions to help them meet increased demand for assistance from the community at large. If you are in a position to volunteer assistance to a worthwhile organization in your community, we all benefit.

Strategic planning at Travis Credit Union has assured us that we are well-positioned for the economic challenges we face this year. Engaging in this type of planning with our personal finances can give us the same peace of mind. Current economic conditions may influence our income and growth in the short term. However, taking prudent action ensures that we will continue to be a strong, safe and secure financial institution for you now and in the future.