Memorandum on findings

QUALTRUST

PO Box 154668
Irving, TX 750165448

STAR RATING: 3 G
Predictive Indicator neutral
As of September 30, 2009
Credit Union ID 68569

INTRODUCTION

A credit union is a nonprofit, cooperative financial institution, owned and administered by individual members, who must meet eligibility requirements to join. Credit unions pay no federal income tax. Community development credit union are chartered to serve the needs of low income members who reside in financially distressed or under-served communities. Forty corporate credit unions, located throughout the country, function as central banking facilities for the U.S. credit union industry. The Bankrate proprietary credit union rating model analyzes capitalization, asset quality, earnings, and liquidity to produce composite and component "Star" ratings that can be used as a measure of the rated entity's financial safety and soundness. Additionally, early warning components of the model highlight operating characteristics of immediate concern and recommended follow-up actions.

COMPONENT HIGHLIGHTS

Institution Commentary

OVERVIEW of Institution
QUALTRUST is a state chartered credit union, which, as of September 30, 2009, reported total assets of approximately $174.3466 million. At that date, loans and deposits held by the instutition amounted to $110.3568 million and $155.4692 million, respectively. Equity, the difference between a credit union's total assets and total liabilities, was determined to have been $16.5692 million, which was 9.50% of total assets.

COMPOSITE SUMMARY
Bankrate believes that, as of September 30, 2009, this credit union exhibited a generally satisfactory condition, characterized by below standard capitalization, satisfactory asset quality, substantially lower than normal profitability, and ample liquidity.

CAPITAL ANALYSIS
Balance sheet structural changes, through the one year period of time ended September 30, 2009, have had little or no positive, and quite possibly a negative, impact upon the instutition's capital position. Our analytical methodology does take into account the quantity, quality, durability, and direction of net worth, and, as set forth above, we have determined, based upon our series of tests, that this credit union demonstrates below standard capitalization.

ASSET QUALITY ANALYSIS
The institution reveals, as previously stated, satisfactory asset quality. That conclusion incorporates our analysis of data depicting regional economic conditions as well as our computations of a somewhat higher than standard September 30, 2009 nonperforming asset ratio and well below normal reserve coverage for nonperforming loans.

Credit card lending activities should not, based on our analysis of asset quality trends and conditions, have a substantial negative impact upon future results. For banking institutions, substantially higher than normal asset growth can be deemed speculative and can lead to financial deterioration and a reduced credit rating. This credit union exhibits such growth; hence, additional inquiry is warranted.

EARNINGS ANALYSIS
For the nine months ended September 30, 2009, this institution recorded a net loss of $-318.24 thousand, which represented a return on average assets (ROA) of -0.03%. Year earlier results amounted to a net profit of $706.94 thousand, or a 0.68% annualized ROA. ROA is the key measurement of profitability within the credit union industry, and the industry's ROA, for the nine months ended September 30, 2009, approximated 0.28%.

We have concluded that, for the first nine months of 2009, the institution achieved a substantially below average return on average assets , and, in fact, sustained an actual loss for that nine month period ended September 30, 2009, as noted perviously . A significantly higher than average overhead ratio is in evidence.

LIQUIDITY ANALYSIS
As of September 30, 2009, the institution displayed strong balance sheet liquidity. Accounting principles require some security investments to be categorized as "Available-for-Sale." Changes in market value of securities so classified are reflected through GAAP (Generally Accepted Accounting Principles) net worth. We believe that, in view of the composition of the institution's reported investment portfolio, securities categorized as "Available-for-Sale" should not normally have a very meaningful effect upon future net worth.

INSTITUTION SUMMARY
This credit union has been rated generally satisfactory.
Negative factors that impacted that rating follow:

• Capitalization
• Earnings

Positive factors that impacted that rating follow:

• Liquidity

As noted previously, early warning indicators possibly requiring specific investigation include:

• Asset Growth
• Overhead

As stated, we have determined a Composite Star rating for this credit union of 3 G , indicative of a generally satisfactory financial condition. At times, conditions of financial institutions change rapidly and significantly. Hence, our Safe & Sound Star ratings should not be deemed predictive of likely future ratings. However, in view of early warning indicators set forth within this report, in combination with the institution's financial data, we believe that the Star rating for this institution is unlikely to change within the ensuing twelve month period.