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TALLAHASSEE, Fla. – Southeast Corporate’s investment products and services aren’t what they used to be, and that’s a good thing. The corporate has revamped its investment operations over the last three years and is starting to really see the fruits of that effort. “The way I look at it is we now have a more full array of products. On-balance sheet certificates; if they don’t want that and they want securities we can show them that, and like most other corporates we have the brokered CD through SimpliCD,” said Greg Wirthmann, Southeast Corporate’s Senior Vice President Chief Investment Officer. Wirthmann came to Southeast two and a half years ago from Constitution Corporate to help overhaul Southeast’s investment operation. “It was a lot more work than I anticipated. It’s really been gratifying to see the members are accepting us in our new role,” he said. One thing that had to change was communication. The corporate has added a lot more investment related information to its Web site and publications, such as a glossary of investment terms, a daily commentary, market indices, and lots of historical information. “If they want to know what the CPI was in 1994, they can go to the Web site and find out.” So what has Southeast achieved on the investment end? Its term portfolio has gone from $273 million in March of 2002 to $1.298 billion as of May of this year. It just recently started a $325 million commercial paper program for the first time ever in its history. Commercial paper is a short-term debt instrument issued by high rated organizations, bank holding companies and even corporates. Southeast received commercial paper ratings from Fitch IBCA, Inc. (an F-1+ rating) and Standard & Poor’s (an A-1+ rating). Both ratings were the highest possible for Southeast’s commercial paper. Southeast can issue up to $325 million of commercial paper, however it is only issuing $50 million at this time in order to ensure name familiarity with investors. The remaining $275 million will be issued if liquidity needs arise. The corporate issued the paper within two weeks of starting the program. Buyers included money market funds, bank trust departments and pension funds. Wirthmann said the commercial program was done in anticipation of the need for more liquidity in coming years as the economy picks up and CU lending increases. “Once the program is in place you can issue whenever you want. We can now pick up the phone and get an additional $275 million in a few days with a fairly competitive rate,” said Wirthmann. One of the advantages of commercial paper is it’s not secured as is most other borrowing sources where the corporate would have to use some of its assets as collateral. Southeast Corporate was the leading corporate in first quarter 2004 in terms of volume in U.S. Central’s broker/dealer program, Credit Union Investment Solutions, Inc. U.S. Central’s ISI allows corporates to sell marketable securities to its members. With total in par value at $164,700,000, Southeast investments department topped out by a $32,700,000 margin. Wirthmann said the corporate didn’t expect this kind of volume. He said the goal was $125 million for all of 2004. With $165 million in the first quarter, the perspective has changed. The way ISI works is corporate employees act as independent contractors for ISI. Southeast recruited three financial strategists from major brokerage houses Morgan Stanley and Edward Jones. “Each of them had Series 7 licenses. They are able to sell the securities to credit unions. On a given day a credit union doesn’t like a callable or structured product we offer, they can show them market securities,” said Wirthmann. He believes the rapid success with ISI comes down to trust. “I think it has to do with the nature of the relationship credit unions have with Southeast as a trusted financial service provider. We hear about brokers trying to sell them things they’re not looking for. The point is it’s not just about pricing, but the relationship, trust and providing good advice,” said Wirthmann. With rates expected to rise, Southeast is asking CUs to move shorter. “We’re suggesting that credit unions shorten their duration and look at a lot more floating rate products,” said Wirthmann. He said the rate increases will start this month. “We think the Fed will tighten on June 30 and in August. We should end the year at 1.75 and end 2005 at 3.75 to 4. If you go back and look at a Greenspan-led Fed, they always initiate a change in monetary policy with a 25 basis point change of rates.” [email protected]

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