Strategy

Our strategy is to position the Corporation as an interrelated group of specialized financial services companies serving niche markets of small businesses and consumers while optimizing the productivity of our capital. Our operational objectives are premised on simultaneously achieving three goals: creditworthiness, profitability, and growth. We believe we must continually balance these goals in order to deliver long-term value to all of our stakeholders.

Our strategy follows a four-part process to meet these goals:

• Identify market niches. We focus on product or market niches in financial services where our understanding of customer needs and our ability to meet them create added value. This permits us not to have to compete primarily on price. We do not believe it is necessary to be the largest or leading market share company in any of our product lines, but we do believe it is important that we are viewed as a preferred provider of those products in niche segments.

• Hire exceptional management with niche expertise. We compete in niches only when we have attracted senior managers who have proven track records in the niche for which they are responsible. Our structure allows the senior managers of each line of business to focus their efforts on understanding their customers and meeting the needs of the markets they serve. This structure also promotes accountability among managers of each line of business. We attempt to create a mix of short-term and long-term incentives that provide these managers with the incentive to achieve creditworthy, profitable growth over the long term.

• Diversify capital and earnings risk. We diversify our revenues and allocate our capital across complementary lines of business and across different regions as a key part of our risk management. For example, our commercial bank has a different profile of customers in Midwestern and Western states. These economies have performed differently over the past five years due to differences in local business conditions. These differences have affected demand and credit quality of our products. Our customers’ businesses and needs are cyclical, but when combined in an appropriate mix, we believe they provide sources of diversification and opportunities for growth in a variety of economic conditions.

• Reinvest in new opportunities. We reinvest on an ongoing basis in the development of new and existing opportunities. We are willing at times to dampen short-term earnings growth by investing for future return. We are biased toward seeking new growth through organic expansion of existing lines of business or start-ups with highly qualified managers. Over the past ten years, we have made only a few acquisitions. Those have typically not been in competitive bidding situations.