Valley First Credit Union 2022 Annual Report

MAKING GOOD HAPPEN IN THE VALLEY WE CALL HOME

Welcome to the 2022 Valley First Credit Union annual report. The following pages highlight our achievements during the past year in making good happen for our members, our staff, and the communities in the valley we call home.

All these achievements are made possible by our loyal members. Our members provide the resources we use to promote the economic development of our community. In turn, we invest in the financial success of our members in the form of reduced fees, higher savings rates, and lower loan rates. This cooperative relationship is the heart and soul of the credit union.

Our mutual success depends on our ability to mitigate risk and make sound financial decisions. This report shows the financial health of our credit union is strong. We are well-capitalized, maintaining equity reserves and liquid investments that prioritize needed safety and soundness for our members.

The bottom line is we live and work in the communities we serve. Our deposits come from our neighbors in the community who entrust their savings to us. Our loans go to local businesses where we shop. We operate every day in a way that protects our members as if they were our friends and family—because they are!

BOARD CHAIRPERSON’S MESSAGE

TO $1 BILLION

AND BEYOND! TO

This past year was an exciting one in the history of Valley First Credit Union. We beat our annual budget by $1.29 million and ended the year with $9.37 million in Net Income. We had a record year in lending with $735 million in loans, which was ahead of budget by $128.8 million. We finished the year with 80,228 members, ahead of plan by 6,998. Finally, we climbed closer to $1 billion in assets, ahead of budget by $11.9 million. We exceeded every goal for every major financial performance indicator. The state of Valley First Credit Union is strong!

Beyond numbers on paper, these results mean we are in a strong position to fulfill our vision to financially improve the lives of our members and serve the communities we call home. Supporting those closest to us—our members, our staff, and our communities— remains our focus at Valley First.

First and foremost, Valley First exists to serve our members. Our financial success means we can help more members buy a home, secure financing for reliable transportation, and earn more on their savings for college, vacation, or retirement. In 2022, Valley First helped 297 families become homeowners and assisted 9,010 members in buying a new vehicle.

According to Credit Union National Association’s Annual Member Benefit Report, the loan rates in each category they track nationally were lower at Valley

First than they were at competing California banks and credit unions. And our savings rates for Retirement, Certificate and Money Market accounts were all higher. Helping members save money on loans and earn more on savings is where the real, tangible benefit for our members comes in.

Our strong financial footing also allows us to support the communities where we live.

In the past year:

Valley First donated more than $97,000 to local non-profits, including a major sponsorship of the new Modesto Children’s Museum, opening summer 2023.

Our employees attended 165 community events throughout the Central Valley, volunteering 1,115 service hours.

We provided financial education to 2,571 people in our community.

I’m proud to serve as chairman of the board and would like to thank my fellow volunteer board members for their support, hard work, and the gift of your time.

And finally, thank you to all our members for your continued support.

Chris Peterson BOARD CHAIR VALLEY FIRST CREDIT UNION

MAKING GOOD HAPPEN FOR OUR MEMBERS AND COMMUNITY

When I became President and CEO of Valley First Credit Union in May 2019, I promised to continue to pursue our number one goal—serving our membership and communities. As I reflect on the past three and a half years, I believe we have made great strides toward our goal.

The thing about our goal, though, is that we will never reach it. We are constantly striving to improve our service to our members and community. Like the North Star shining brightly in the sky guiding explorers at night, our goal is always there, guiding us. In this past year we put a name on this goal: Making Good Happen.

Making Good Happen means serving our members and helping them achieve their goals for financial independence.

Making Good Happen means supporting the communities we call home by supporting small businesses and providing access to financial services to people who have lacked equal access.

Making Good Happen means volunteering our time and talents to conduct financial literacy classes, participating in community cleanup efforts, and donating to community-minded organizations in the Central Valley.

Serving Members

Valley First now serves more than 80,000 members in 12 counties in the Central Valley, from Sacramento County in the north to Kern County in the south.

In 2022, we gave members more than $431,000 in cash back through various financial products—an 18% increase over 2021. We also paid more than $1.4 million in dividends to members. Perhaps it is not surprising our member service achieved a Member Satisfaction Score of 88%.

Serving the Underserved

As a Community Development Financial Institution (CDFI), Valley First is charged with generating economic growth and opportunity in economically disadvantaged communities with programs that inject new sources of capital into neighborhoods that lack access to financing.

Under CDFI status, Valley First received a $5 million mission-based deposit from Oak Valley Community Bank and two Treasury Department grants totaling more than $600,000 for our Small Dollar Loans and Quick Loans to help members avoid going to check cashers/payday lenders.

We also received Low Income Designation status in 2022, which expands access to capital for small businesses and others who have been underserved in low-income communities. Based on data from the Census Bureau, 67% of our members are designated as low income.

Supporting the Valley’s Small Businesses

In 2022, we opened a Small Business Development Center office powered by Valley Sierra SBDC inside the Turlock Branch to connect local entrepreneurs with resources and expanded our small business banking program with new products/services to help fill a much-needed credit gap in our community.

Within this annual report you will find more tangible examples of how we are Making Good Happen in the lives of our members and the communities we serve.

Thank you to all our members, employees, and volunteer leaders for your dedication to Valley First. Here’s to continued organizational and personal financial health in 2023!

Kathryn J. Davis, CCE PRESIDENT & CEO VALLEY FIRST CREDIT UNION

SUPERVISORY COMMITTEE REPORT

The Valley First Credit Union Supervisory Committee has reviewed the financial records, member account records, and independent accounting firm’s audit and believes the Credit Union has maintained accurate and timely accounting records and applied the policies and procedures established by the Board of Directors.

The Supervisory Committee is a group of volunteers who are elected by the members to ensure the management of Valley First Credit Union follows the guidelines and procedures set forth by the regulatory agencies that govern credit union operations.

The Committee is responsible for ensuring the financial records of the Credit Union fairly and accurately reflect its financial position and operating results.

The Supervisory Committee is also responsible for overseeing the accurate and timely reporting of the Credit Union’s financial status and monitoring the effectiveness of the internal controls to protect credit union resources.

Included in this responsibility is also the review of member account records to verify their accuracy and oversee the audit performed by our independent auditing firm, Moss Adams, Certified Public Accountants.

Kashmir Gill SUPERVISORY COMMITTEE CHAIR

VALLEY FIRST CREDIT UNION

TREASURER’S REPORT

I am proud to report that Valley First Credit Union experienced another solid financial year in 2022. A few highlights from the year include:

Total assets increased by $69 million, resulting in year-end assets of $964 million, ahead of budget by $11.9 million.

Total Shares decreased by $13 million to $795 million. This decrease was seen in all categories but was driven mainly by decreases in regular shares and share drafts due to inflation and other economic factors affecting members’ savings.

Total net loans increased by $201 million from the prior year ending in a record year in lending of $734.5 million primarily because of increases in consumer and real estate loans. The percentage of loans to assets grew from 59.5% to 76.19%.

The Credit Union had net income of $9.4 million, which was a $1.22 million increase from the prior year.

Return on Assets improved from 0.98% in 2021 to 1.01% in 2022.

The Net Worth ratio increased from 8.87% in 2021 to 9.21% in 2022.

Based on the National Credit Union Administration (NCUA) benchmarks, we remain categorized as a “well capitalized” credit union.

As we look toward the future, I am confident our organization will continue to utilize our financial strength to help our members and continue our goals around banking with a purpose.

Patricia Gillihan SECRETARY/TREASURER VALLEY FIRST CREDIT UNION

STATEMENT OF CONDITION INCOME STATEMENT

FOR OUR MEMBERS

2022 HIGHLIGHTS

Valley First is committed to banking with a purpose— to better the financial lives of the people and businesses in the communities we call home.

MEMBER SERVICE

50*

Gave more than $ 431K in cash back through various financial products (an 18% increase over 2021)

Paid more than $ 1.4MM in dividends to members

88 %

Helped 297 families buy a home

GIVING BACK TO OUR MEMBERS Achieved a Net Promoter Score of and a Member Satisfaction Score of

9,010 member auto loans

2022 RECOGNITION

$ 282,126 Purple Rewards paid (36% increase from 2021)

IN OUR COMMUNITY

SERVING THE FINANCIAL NEEDS OF THE CENTRAL VALLEY

Valley First Credit Union is a member-owned, not-for-profit financial cooperative based in Modesto with branches in Fresno, Clovis, Turlock, Ceres, Modesto, Oakdale and Tracy.

We serve more than 80,000 members in 12 counties in the growing and diverse communities between Sacramento and Bakersfield.

SUPPORTING THE VALLEY’S SMALL BUSINESSES

Expanded our small business banking program with new products and services to help fill a much-needed credit gap in our community.

Opened a Small Business Development Center office inside the Turlock Branch to connect local entrepreneurs with resources.

DONATING TIME, RESOURCES, AND TALENT

Attended 165 community events throughout the Central Valley, volunteering 1,115 service hours.

SERVING THE UNDERSERVED

Donated more than $97,000 to local non-profits.

As a Community Development Financial Institution (certified in 2021), Valley First is charged with generating economic growth and opportunity in economically disadvantaged communities with programs that inject new sources of capital into neighborhoods that lack access to financing.

In 2022 we received Low Income Designation status, which expands access to capital for small businesses and others who have been underserved in low-income communities.

More than 60% of our loans are done in communities where more than half of the households have incomes below 60% of the area income or the poverty rate is at 25% or higher. Forty-five percent of our total loan portfolio is to Hispanic borrowers.

Valley First launched Small Dollar Loans and Quick Loans to help members avoid going to check cashers/payday lenders.

Provided financial education to 2,571 people in our community.

MAKING GOOD

HAPPEN FOR OUR MEMBERS

Happy HoliPays empowers Valley First Contact Center representatives to take their assistance to a higher level and help a member cover a medical or utility bill, make their rent or mortgage payment for a month, or put food on the table for their family. Over the course of a three-day period during the holidays, Contact Center representatives are given a special budget to deposit cash into the accounts of members who are struggling to make ends meet.

AMANDA’S STORY

Last November a loyal Valley First member was facing a difficult financial situation. Amanda had moved from the Central Valley to Northern California to study archaeology at Cal Poly Humboldt and had fallen behind on some bills after having to replace all four tires on her car—an invaluable tool for getting around school, to work, and back home to Modesto.

Amanda was on the phone with a Valley First Contact Center team member, explaining why she was overdrawn on her account, when she got a surprise gift.

Contact Center: Amanda, just to let you know, it is Happy HoliPays here at Valley First. I know it doesn’t fix everything, but how about an extra $300 to help with your situation?

Amanda: I don’t even know what to say to that. Is this real life? You guys are amazing.

CC: It’s just our way of saying thank you for being a member and staying with Valley First.

Amanda: I literally just moved all the way to Arcata— 7 hours away—and I refused to leave Valley First.

CC: I’m so happy you stuck with us, Amanda.

Amanda: I’m so happy I did, too. I live in a beautiful place, and I have the best credit union in the world!

Valley First recently caught up with Amanda as she was driving to Portland—on those new tires— to give a presentation at the Society for American Archaeology.

Valley First: Congratulations on your graduation. It’s great to hear you are doing well. How did the little boost from Valley First help you through your situation?

Amanda: It was so beneficial. I was able to get to work. You were able to help me continue working on my education. I now have a degree!

VF: How did it feel to get help from Valley First Happy HoliPays?

Amanda: It just solidified why I love this credit union so much. Thank you for always being there for me!

EVERETT’S STORY

Supporting a family of five on one salary can be a challenge—one that Valley First member Everett knows all too well. Sometimes you fall behind and it can be hard to catch up, as Everett explained to our Contact Center representative in November. With bills stacking up, and needing to take time off to have surgery, things were looking bleak—until Valley First stepped in to help.

Everett: I think every week for the past month I’ve had to go $400, $800, now this week almost $1,100 in the hole. My check goes in tomorrow morning and it’s only $1,200. So, I’m like, “Well, at least that pays back the bank.” I don’t have the money for rent this month and I’m just struggling trying to keep everything afloat. It just keeps getting harder and harder.

Contact Center: Well, Everett, we want to help you. Would it be OK if we were to grant you $1,500 to cover your rent?

Everett: What?! THANK YOU! Very Merry Christmas to you all!

Valley First tracked Everett down recently to see how things are going.

IN OUR COMMUNITY

Valley First: Hello, Everett, it’s Valley First Credit Union calling to check in and see how you and your family are doing!

Everett: We’re getting by. Things are still tight, but what you did was a tremendous help. You helped me pay my rent that month. It helped me get over the hump.

VF: We’re glad to hear that. That’s the point of Happy HoliPays. Sometimes we all need a little help to get through a tough time in our lives. How did it feel when our Contact Center told you we would give you money to pay your rent—no strings attached?

Everett: It was overwhelming! I’m not a gambler but I imagine it’s like going to a casino and hitting the jackpot. How you help people is a blessing.

Helping people, especially during the holidays, is indeed a blessing. The purpose of Happy HoliPays is to help our members, but it also has a profound impact on our staff. It truly is better to give than receive! Thank you to our loyal members who make it possible.

PARTNERING ON COMMUNITY INVESTMENT

Valley First Credit Union accepted its first mission-based deposit in 2022 in support of the Credit Union’s Community Development Financial Institution (CDFI) initiatives. Oak Valley Community Bank made a $5 million deposit, structured as a Share Certificate over the next five years. This deposit not only adds to Valley First’s capital, but more importantly allows the Credit Union to continue programs and offerings that are community-minded and help people gain better access to financial services.

“We’re grateful to Oak Valley Community Bank for taking a leadership role in our community to support the lending activity we’re doing for low-income families throughout the Central Valley,” said Valley First President and CEO Kathryn Davis. “We have a deep commitment to providing access to fair and affordable credit for housing, reliable transportation, Small Dollar Loans, and supporting our local small businesses. Oak Valley’s support will provide us with the ability to continue making these loans.”