Corporate One Business Report 2013/2014

2014 Business Report

Corporate One Where credit unions belong.

Corporate One Federal Credit Union

Welcome to the Corporate One 2014 Business Report Corporate One entered 2014 financially stronger than we’ve ever been. We have a large, diverse membership that includes more than 900 credit unions in 42 states, ranging in size from $100,000 to $27 billion in assets. We are coming off the successful integration of our merger with the former Southeast Corporate Federal Credit Union, which resulted in the integration of new technology, enhanced solutions, the addition of new expertise, and the expansion of our infrastructure. Since our inception in 1949, our mission has been to add value and enhance the abilities of credit unions. While we have grown into a more robust organization than we could have ever imagined, our purpose as a corporate partner to credit unions has not changed. Having emerged from the financial crisis with our business model intact, and as the largest corporate credit union in the industry, with more than $5.5 billion in assets under management as of our last annual report, the value we provide credit unions is once again

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about our service and the innovative, competitive solutions we offer.

A strong capital position is paramount to Corporate One being a stable, long-term partner to our member-owners. Our capital position is detailed in Corporate One’s most recent audited financials, and there you will see Corporate One has more total regulatory capital than any other corporate in the country, and we exceed all regulatory ratios. Further, profitable correspondent, investment and brokerage solutions continue to yield solid earnings for Corporate One, which have contributed to steadily growing reserves and undivided earnings (RUDE) over the last four years. A robust capital position ensures we have the ability to leverage our balance sheet to support our members’ liquidity needs, and it enables us to make investments in infrastructure and offerings so we can continue to deliver the innovative solutions our members have come to expect from us—ones that grow

Where Credit Union‘s Belong.

“

Since our inception in 1949, our mission has been to add value and enhance the abilities of credit unions. While we have grown into a more robust organization than we could have ever imagined, our purpose as a corporate partner to credit unions has not changed.

’’

revenue, create opportunity, deepen member relationships and maximize efficiencies.

We have many exciting plans and partnerships on the horizon that will allow credit unions to succeed in keeping long-standing members satisfied, and competing effectively for new ones. Enhancing key existing solutions, such as Merchant Capture and ACH Services, expanding our footprint into Mobile, and growing those product lines, including Cards and Liquidity Solutions, that offer credit unions and our business the most opportunity for success, is our focus for the future. Additionally, we continue to support the efforts of our two wholly owned credit union service organizations, Accolade Asset/Liability Advisory

Services and Member Business Solutions, both of which provide valuable business solutions to credit unions.

At Corporate One, we strive to be more than simply another vendor to credit unions, but a dedicated partner in their successes. We have a history of providing credit unions the solutions they need to succeed. And, we look forward to continuing our work on behalf of our members, and credit unions nationwide.

Lee C. Butke President, Chief Executive Officer

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Financial Highlights $5.5B 6.44% 1.12% Total assets under management

Permanent leverage ratio (NCUA required minimum is 4%)

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Retained earnings ratio (NCUA required minimum is .45%)

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$0

$45.0 $40.0

- $100 MILLIONS

MILLIONS

$35.0 $30.0 $25.0 $20.0 $15.0

- $200 - $300 - $400

$10.0

- $500

$5.0 $0.0

- $600 2013

2012

2011

2010 2009

2008

OTTI Charges by Year

2013

2012

2011

2010

2009

2008

Net Unrealized Losses Trend

Consolidated Statements of Income Year ended December 31, 2013 Interest income: Investments and securities Loans

2012

$ 33,039,734 731,483

$ 32,479,672 322,902

TOTAL INTEREST INCOME

33,771,217

32,802,574

Dividend and interest expense:

Share accounts

Other borrowings

10,281,645 806,151

11,690,664 814,469

TOTAL DIVIDEND AND INTEREST EXPENSE

11,087,796

12,505,133

NET INTEREST INCOME

22,683,421

20,297,441

SERVICE FEE INCOME, NET

14,354,002

12,426,189

(11,810,075) 9,395,260

(10,482,096) 8,229,396

(2,414,815) 2,558,089

(2,252,700) 53,143

143,274

(2,199,557)

17,542,109 8,200,292 4,686,362 2,035,433

14,223,258 7,520,804 2,362,440 2,069,209

Net loss on investments:

Total other-than-temporary impairment losses

Portion of loss recognized in other comprehensive income Net impairment losses recognized in earnings Net gain on sales of securities TOTAL NET GAIN (LOSS) ON INVESTMENTS Operating expenses:

Salaries and employee benefits

Office operations and occupancy expense

Amortization of intangibles expense

Other operating expenses TOTAL OPERATING EXPENSES NET INCOME

32,464,196

26,175,711

$ 4,716,501

$ 4,348,362

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Our Membership Corporate One’s membership has grown in diversity and size since our inception nearly 65 years ago. In the last fifteen years, we have seen a significant expansion of our membership, transforming us from a state-charted corporate credit union owned by Ohio credit unions to a federally chartered corporate owned by credit unions in every region of the U.S. We now help credit unions serve more than 18 million natural person members* across the country. This geographical reach speaks to the strength

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of the solutions we offer credit unions as well as the service we provide, and works to better stabilize us during regional swings of economic activity for the benefit of our membership.

In addition to serving credit unions in every region of the United States, our members are of every size. Of our credit union members, approximately 15 percent have more than $250 million in assets, 18 percent can be considered mid-sized

338 associate members

533 partner members

(credit unions only)

36 network members

(credit unions only)

(non-credit unions)

907 total members Membership by type

15%

66% 18%

Below $75M

$75M to $250M

Over $250M

Membership by asset size

467

329

64

33

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Membership by region

18.1 Million Number of natural person members served by extension

with $75 to $250 million in assets, and 66 percent hold $75 million or less in assets. We have a distinctive and diverse mix of credit union member owners.

And, through serving them we have become experts at helping credit unions of all sizes in various parts of the country succeed. As a result, our solutions have been strategically designed to be flexible, and can be scaled to fit the credit unions using them, priced so even the smallest credit union can compete with larger institutions when it comes to services offered.

Our solutions also feature expanded service hours so members can receive assistance when they may need it, and processing deadlines to ensure members near or far have solutions that enable them to serve their own members well.

As our membership and as our corporate have grown, so has our ability to serve the nation’s credit unions. And, we are proud to be the corporate where all credit unions belong.

*As reported to Callahan’s Peer-to-Peer.

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Innovative Network of Solutions As a full-service corporate credit union, Corporate One’s solutions have been designed to work together strategically so that credit unions have infinite solutions possibilities in achieving their respective goals. Understanding that not all credit unions are the same, Corporate One has developed a full suite of correspondent, investment and liquidity solutions to meet the needs of all credit unions, large or small, state- or federally chartered, wherever they may be.

Additionally, we have two wholly owned credit union service organizations, Accolade Asset/Liability Advisory Services and Member Business Solutions (MBS) that help credit unions more effectively manage their balance sheets, and offer successful member business lending programs, respectively. Our turnkey solutions create opportunity, and allow easy entry into an array of products that enable credit unions to grow through increased revenue, maximized operating efficiencies and membership expansion.

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Through our correspondent solutions, credit unions have access to world-class offerings so they can meet their members’ needs for convenient, easy-to-use financial services, and effectively compete with the bank down the street. Our proven-effective correspondent solutions are complemented with liquidity options as well as on- and off-balance sheet investment solutions and a best-in-class brokerage operation.

Included standard with each of our solutions is significant back office support, access to accredited payments experts and experienced, licensed investment professionals as well as extensive training opportunities—true value-adds for credit union personnel.

With the support of our members, Corporate One continues to be a successful provider of financial solutions for credit unions nationwide. Through cooperation and aggregation, we help credit unions remain the number one choice for their own members.

Spotlight on Infinite Solution Possibilities Corporate One offers a variety of wholesale financial services to credit unions—from payment solutions to business services solutions to investment and liquidity solutions, we have a myriad of offerings to help credit unions reach new heights. These solutions in particular are creating opportunity and driving growth among our membership.

Corporate One’s Cards Solutions, featuring ATM/ Debit and Credit Cards, was designed specifically for small to mid-sized credit unions that are challenged to find affordable programs offering the same high-quality features larger institutions tout. Leveraging a strategic partnership with PSCU, Corporate One’s Cards Solutions aggregates volumes so credit unions with low to moderate volumes now have access to a world-class cards program rivaled by any large competitor. Our program includes “top of wallet” features such as joint rewards, stateof-the-art fraud mitigation and 24/7/365 member care that cardholders have come to expect, but with turnkey options and competitive pricing that won’t overwhelm smaller or more moderately sized credit unions.

ACH transactions, which are now the preferred bill pay method for the majority of consumers, have become an integral offering for all credit unions.

Corporate One’s comprehensive ACH Services, including receipt and origination, can not only help credit unions provide a desired service to members, but can greatly increase efficiencies, mitigate fraud and generate additional revenue. A hallmark of our program is the expertise available to members, including three Accredited ACH Professionals (AAPs) on staff, and a strategic partnership with EPCOR, one of the nation’s leading payments associations, that

provides small credit unions free membership and larger credit unions free training opportunities.

Providing cost-effective liquidity options to credit unions is a fundamental reason for the creation of corporate credit unions. With the largest balance sheet in the corporate network, Corporate One members can rest assured liquidity will be available when they need it. Corporate One’s Liquidity Solutions include lines of credit, both advised and committed, and warehouse lines of credit. Under our lines of credit, we offer term, demand and settlement loans as well. Additionally, we offer external funding through SimpliCD issuance, and we provide access to the secondary market through our strategic alliance with Multi-Bank Securities. We also stand ready to assist our members in gaining access to emergency liquidity through the Federal Reserve or Central Liquidity Facility, should they need it.

One of the most effective strategies for growing a credit union’s ATM/Debit and Share Draft programs is providing members convenient access to their funds via a fleet of surcharge-free ATM locations.

In the development of Alliance One, Corporate One teamed up with our members to create one of the nation’s largest selective surcharge ATM groups so credit unions could conveniently and cost-effectively reap the benefits of a large ATM fleet. Today, Alliance One is a nationwide cooperative group of nearly 900 financial institutions that have joined forces to let their cardholders access each others’ more than 4,700 ATMs without having to pay foreign ATM surcharges. It overlays seamlessly with existing networks, and provides increased interchange income to credit unions with ATMs, thanks to each additional transaction flowing through their ATM network.

Corporate One is a full-service corporate credit union able to expand and strengthen your institution through comprehensive offerings, including: • • • • • • •

ACH Services Alliance One ATM/Debit and Credit Card Solutions ATM Deposit Automation Direct Send International Payments Lines of Credit

•

Loans (Settlement, Demand, Fixed-Term) • Remote Deposit Capture (Branch, Merchant and Deposit Return Services) • Overnight and Term Deposits • Safekeeping

•

Share Draft Processing

• SimpliCD •

Securities (offered through Multi-Bank Securities, Inc.) • Warehouse Lines of Credit • Wire Services • Vault Services

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Corporate One Federal Credit Union

Executive Leadership

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Melissa Ashley, EVP, Chief Financial Officer

Tammy Cantrell, EVP, Asset/Liability Management

Joseph Ghammashi, CRP EVP, Chief Risk Officer

Jim Horlacher, EVP, Chief Information Officer

Where Credit Union‘s Belong.

Board of Directors

Phillip R. Buell, Secretary, Superior FCU

Robert D. Burrow, Bayer Heritage FCU

Sonja J. Delaney, Midwest Community FCU

Robert A. Fertitta, Navigator CU

Timothy D. McMurry, PowerNet CU

Charles F. Plassenthal, Dayton Firefighters FCU

R. Lee Powell, Jr., Desco FCU

John J. Shirilla, Treasurer, Best Reward CU

Janice L. Thomas, Vice Chair, PSE CU

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Please reach out.

We’d love to talk.

8700 Orion Place Columbus,Ohio 43240-2078

P.O. Box 2770 Columbus, Ohio 43216-2770

866/MyCorp1 www.corporateone.coop