VolCorp 2021 Financial Report by volcorp

FINANCIAL ANALYSIS

Regulatory Considerations Regulatory Topics Retained Earnings and Capital Net Economic Value Analysis Assets and Member Loans Investments Earnings Liquidity

TABLE OF CONTENTS

CONSOLIDATED FINANCIAL STATEMENTS

Independent Auditors’ Report Financial Statements Notes to Consolidated Financial Statements Internal Control Over Financial Reporting

Regulato Regulatory Topics, and Capital, N Analysis, Assets a Investments, I

21 FINANCIAL REPORT

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FINANCIAL ANALYSIS

ory Considerations, , Retained Earnings Net Economic Value and Member Loans, , Earnings, Liquidity 40 YEARS BOLDER

REGULATORY CONSIDERATIONS An integral part of a credit union’s investment policies, procedures and practices is the analysis of all institutions in which it has invested its surplus funds—including corporate credit unions. Part 703 of the National Credit Union Administration’s (NCUA) Rules and Regulations states: “A Federal credit union must conduct and document a credit analysis on an investment and the issuing entity before purchasing it, except for investments issued or fully guaranteed as to principal and interest by the U.S. government or its agencies, enterprises, or corporations or fully insured (including accumulated interest) by the National Credit Union Administration or the Federal Deposit Insurance Corporation. A Federal credit union must update this analysis at least annually for as long as it holds the investment.”

ASSETS (in thousands)

DECEMBER 31, Cash and Uncollected Cash Items

2021

2020

2019

2018

2017

$ 1,380,273

$ 1,388,367

$ 500,608

$ 338,626

$ 439,703

308

328

248

355

248

855,627

877,066

473,819

452,322460,333

123,316

187,332

328,134

364,179

402,838

5,157

5,425

9,722

11,315

9,680

20,372

3,389

3,097

2,706

2,525

2,697

$ 1,008,169

$ 1,093,620

$ 814,629

$ 830,696

$ 875,796

2,487

2,149

(581)

(2,528)

(834)

$ 1,010,656

$ 1,095,769

$ 814,048

$ 828,168

$ 874,962

Member Loans

1,454

3,597

5,531

32,237

6,205

Premises and Equipment

3,315

3,534

3,506

3,572

3,413

679

672

659

669

684

All Other Assets

8,024

9,043

15,553

9,660

8,139

TOTAL ASSETS

$2,404,401

$2,500,982

$1,339,905

$1,212,932

$1,333,106

Certificates of Deposit and balances with other financial institutions U.S. Government agency securities Asset-backed Securities Federal Home Loan Bank Stock Central Liquidity Facility membership stock CUSO Investments Total Investments Unrealized Gains and Losses on AFS Net Investments

NCUSIF Capitalization Deposit

III

21 FINANCIAL REPORT

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Though NCUA’s investment regulation specifically exempts state-chartered credit unions, many are using the regulation as a guideline in their investment policies, procedures, and practices. Recognizing that the analysis of a corporate credit union can be burdensome, we are providing you with this summary analysis of Volunteer Corporate Credit Union.

LIABILITIES & EQUITY (in thousands)

DECEMBER 31, Deposits in Collection

2021 $

Accrued expenses and other liabilities Federal Home Loan Bank Notes Payable Total Liabilities

2020

41,681

2018

$ 80,988

3,599

1,846

205

3,964

1,385

190,000

94,251

81,193

$ 281,452

$ 178,452

86,345

87,488

2017

84,499

45,280

2019

82,816

Daily Shares

2,228,932

2,303,156

1,154,141

832,485

1,054,229

Term Shares

683

851

233

2,183

7,666

$ 2,229,615

$2,304,007

$1,154,374

$ 834,668

$1,061,895

69,242

863

56,914

38,376

34,814

29,235

23,488

2,487

2,149

(581)

(2,528)

(834)

110,630

$ 104,338

$2,500,982

$1,339,905

$1,212,932

Total Shares Member Capital Shares Perpetual Contributed Capital Equity acquired in merger Retained Earnings Unrealized Gains and Losses on AFS Total Capital

129,506

TOTAL LIABILITIES AND EQUITY

$2,404,401

96,812

92,759

$1,333,106

40 YEARS BOLDER

REGULATORY TOPICS Capital Requirements of NCUA’s Rules and Regulations 704 “(1) A corporate credit union must maintain at all times: (i) A leverage ratio of 4.0 percent or greater; (ii) A Tier 1 risk-based capital ratio of 4.0 percent or greater; and (iii) A total risk-based capital ratio of 8.0 percent or greater. (2) To ensure it meets its capital requirements, a corporate credit union must develop and ensure implementation of written short- and long-term capital goals, objectives, and strategies which provide for the building of capital consistent with regulatory requirements, the maintenance of sufficient capital to support the risk exposures that may arise from current and projected activities, and the periodic review and

TOTAL CAPITAL (in thousands)

($Thous)

$140,000

reassessment of the capital position of the corporate credit union. (3) Beginning with the first call report submitted

120,000 100,000

on or after October 21, 2013, a corporate credit union must calculate and report to

80,000

NCUA the ratio of its retained earnings to its moving daily average net assets. If this ratio

60,000

is less than 0.45 percent, the corporate credit union must, within 30 days, submit a retained earnings accumulation plan to the

40,000 20,000

NCUA for NCUA’s approval. The plan must Dec. 2017

Dec. 2018

minimum leverage ratio requirements,

Dec. 2019

earnings sufficient to meet all its future

Dec. 2021

corporate credit union will accumulate

Dec. 2020

contain a detailed explanation of how the

including specific semiannual milestones for accumulating retained earnings. In the case of a statechartered corporate credit union, the NCUA will consult with the appropriate state supervisory authority (SSA) before making a determination to approve or disapprove the plan, and will provide the SSA a copy of the completed plan. If the corporate credit union fails to submit a plan acceptable to NCUA, or fails to comply with any element of a plan approved by NCUA, the corporate will immediately be classified as significantly undercapitalized or, if already significantly undercapitalized, as critically undercapitalized for purposes of prompt corrective actions. The corporate credit union will be subject to all the associated actions under §704.4.”

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Definitions Under Part 704 of NCUA’s Rules and Regulations Leverage ratio means the ratio of Tier 1 capital to moving daily average net assets. Retained earnings means undivided earnings, regular reserve, reserve for contingencies, supplemental reserves, reserve for losses, GAAP equity acquired in a merger, and other appropriations from undivided earnings as designated by management or the NCUA. Total capital means the sum of Tier 1 capital and Tier 2 capital, less the corporate credit union's equity investments not otherwise deducted when calculating Tier 1 capital. Tier 1 capital means the sum of paragraphs (1) and

RETAINED EARNINGS RATIO ($Thous)

(2) of this definition from which items in paragraphs (3) through (6) are deducted:

3.00%

(1) Retained earnings; (2) Perpetual contributed capital;

2.50%

(3) Deduct the amount of the corporate credit 2.00%

union’s intangible assets that exceed one half percent of its moving daily average net

1.50%

assets (however, the NCUA may direct the corporate credit union to add back some of

1.00%

these assets on the NCUA’s own initiative, 0.50%

or the NCUA’s approval of petition from the applicable state regulator or application

Dec. 2017

Dec. 2018

Dec. 2019

Dec. 2020

Dec. 2021

from the corporate credit union); (4) Deduct investments, both equity and debt, in unconsolidated CUSOs; (5) Deduct an amount equal to any PCC or NCA that the corporate credit union maintains at another corporate credit union;

(6) Deduct any amount of PCC received from federally insured credit unions that causes PCC minus retained earnings, all divided by moving daily average net assets, to exceed two percent when a corporate credit union's retained earnings ratio is less than two and a half percent.

40 YEARS BOLDER

REGULATORY TOPICS (Continued) Definitions Under Part 704 of NCUA’s Rules and Regulations Tier 1 risk-based capital ratio means the ratio of Tier 1 capital to the moving monthly average net risk-weighted assets.

Tier 2 capital means the sum of paragraphs (1) through (4) of this definition:

(1) Nonperpetual capital accounts, as amortized under §704.3(b)(3);

LEVERAGE RATIO

(2) Allowance for loan and lease losses calculated under GAAP to a maximum of 1.25 percent of risk-weighted assets;

9.00%

(3) Any PCC deducted from Tier 1 capital; and (4) Forty-five percent of unrealized gains on available-for-sale equity securities with

8.00% 7.00%

readily determinable fair values. Unrealized gains are unrealized holding gains, net of

6.00%

unrealized holding losses, calculated as the amount, if any, by which fair value exceeds

5.00%

historical cost. NCUA may disallow such inclusion in the calculation of Tier 2 capital if NCUA determines that the securities are not

4.00% 3.00%

prudently valued. 2.00%

Total risk-based capital ratio means the ratio of total capital to moving monthly average net risk-weighted assets.

Dec. 2017

Dec. 2018

Dec. 2019

21 FINANCIAL REPORT

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Dec. 2020

above ratios are also deducted from the denominator.

Dec. 2021

Any amounts deducted from the numerator of the

VII

1.00%

RETAINED EARNINGS AND CAPITAL A corporate credit union’s balance sheet reflects the liquidity needs and cash flows of its member credit unions. Therefore, it is not unusual for a corporate credit union to experience asset fluctuations of 25 percent or more, not only from month-to-month, but at times within periods of less than 30 days. In addition, corporate credit union month-end assets are often significantly inflated due to routine payrolls that flow into their member credit unions. In recognition of the distortion such fluctuations can cause, NCUA corporate credit union regulations call for the use of the corporates’ moving daily average net assets (MDANA) when calculating the retained earnings and capital ratios. During 2021 assets across the credit union network not only remained elevated from the prior year’s

RETAINED EARNINGS (in thousands)

economic stimulus, but generally reset even higher as further stimulus flowed into consumer accounts. MDANA increased each month during 2021 as the rolling twelve month asset measurement added a relatively higher figure to the calculation. The

$70,000 60,000 50,000

combination of additional deposit inflows during 2021 and MDANA’s inherent lag during times of balance sheet growth led to a year over year

40,000 30,000

increase in MDANA, from $2.06 billion at December 31, 2020, to $2.62 billion at December 31, 2021. A successful year of business operations, along with payments from claims on the U.S. Central Asset

Dec. 2017

Dec. 2018

Dec. 2019

respectively. This resulted in a retained earnings

Dec. 2020

earnings growth, ending at $123.6 and $57.8 million

10,000

Dec. 2021

Management Estate, enabled capital and retained

20,000

ratio of 2.21 percent at December 31, 2021, as compared to 1.91 percent at December 31, 2020. At year-end 2021, VolCorp’s Tier 1 Capital ratio was 4.72 percent, a decline from the prior year’s 5.13 percent due to aforementioned growth in assets.

40 YEARS BOLDER

VIII

NET ECONOMIC VALUE ANALYSIS A corporate’s NEV is defined as the sum of the present values of a time series of cash flows from assets (including the value of embedded options) minus the sum of the present values of a time series of cash flows from liabilities (including the value of embedded options). A corporate’s NEV Ratio is computed by dividing the base residual NEV by the mark-to-market value of base total assets. NEV and the NEV Ratio are used to measure the inherent interest rate risk embedded in a financial institution’s balance sheet and as a proxy assessment of the liquidation value of the financial institution under certain interest rate environments. Under Part 704.8(d)(1)(ii) of its Rules and Regulations for all corporate credit unions, the NCUA Board set a minimum base NEV Ratio of 2 percent and a maximum permissible downward base NEV shift of negative 20% for all corporate credit unions. In addition, the NCUA Board set the same minimum NEV Ratios and maximum permissible downward NEV shifts under industry standard +/- 100, 200, and 300 basis point rate shock scenarios. Shocking a corporate’s balance sheet means determining the impact on the NEV and the NEV Ratio of an immediate, parallel, and sustained upward and downward shift in market interest rates. The NEV shift is the percent increase and percent decrease of current capital. Current capital is the difference between the mark-to-market value of assets and liabilities at current interest rates. The permissible downward NEV shift is dependent, in part, upon the level of authority granted each corporate by the NCUA Board. As a starting point, all corporate credit unions have the authority to operate at Base level. At this level, the permissible shift in the corporates’ NEV Ratio is negative 15 percent under +/- 100, 200, and 300 basis point rate shocks. Each corporate credit union may petition the NCUA Board to operate under expanded authority. To obtain such authority, the corporate credit union must meet all the requirements of Part 704 of the NCUA’s Rules and Regulations and fulfill additional capital, management, infrastructure, and asset liability requirements.

MOVING DAILY AVERAGE ASSETS (in thousands) $2,800,000 2,600,000 2,400,000 2,200,000 2,000,000 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000

Dec

Nov

Oct

Sep

Aug

Jul

Jun

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May

Apr

Mar

Feb

Jan

In September 1997, VolCorp’s Board of Directors requested authority to operate at the expanded level termed Base Plus. In November 1997, VolCorp became the first corporate credit union to receive authority by the NCUA Board to operate above Base level. At Base Plus, VolCorp’s permissible negative NEV shift decreased to negative 20 percent from negative 15 percent. As of December 31, 2021, the change in VolCorp’s NEV is a decrease of $15.5 million in an immediate upward 300 basis point rate shock. This equates to an NEV shift of negative 11.9 percent – well above the maximum 20 percent negative shift permitted by Federal law. Given the level of interest rates at year-end, a downward 300 basis point shock scenario is non-applicable. The following illustrates the impact on Volunteer Corporate’s Net Economic Value of the various interest rate scenarios:

Base NEV (thous.) NEV (from Base, thous.) %

+300bp

$124,354,895

$ 119,199,934

$ 114,072,503

$ (5,179,607)

$(10,334,568)

$(715,461,999)

0.00%

(4.00)%

(7.98)%

(11.94)%

NET ECONOMIC VALUE

NET SHIFT

(in thousands) +300 bp

+200 bp

+100 bp

Base

(2.00)%

+200bp

$129,534,502

NEV (from Base)

0.00%

+100bp

$130,000 128,000 126,000 124,000

(4.00)%

(6.00)%

122,000 120,000 118,000

(8.00)% 116,000 (10.00)%

114,000 112,000

(12.00)%

+300 bp

+200 bp

+100 bp

Base

110,000

40 YEARS BOLDER

ASSETS AND MEMBER LOANS Assets The quality of a financial institution’s assets is one of the most important factors contributing to its financial soundness. As of December 31, 2021, 99 percent of VolCorp’s assets consisted of cash and uncollected cash items, loans to member credit unions, and high-quality, low credit-risk investments. Furthermore, as of December 31, 2021, 99 percent of VolCorp’s marketable securities holdings were rated AA or AAA by S&P, and 89 percent were issued or guaranteed by U.S. Government Agencies. VolCorp monitors the quality of its assets through extensive monthly credit analyses and portfolio modeling. As of December 31, 2021, the continued quality of VolCorp’s investments was illustrated in that VolCorp had a marketable securities portfolio totaling $979 million with a total net unrealized gain of $2.5 million. VolCorp also continues to help members manage their earnings with total off-balance sheet cash and investments under management totaling $3.2 billion at year-end.

Member Loans VolCorp has a responsibility to meet the liquidity needs of its membership, while protecting the deposits of its member credit unions. In response to this need, VolCorp has extended 261 lines of credit to member credit unions totaling almost $1.7 billion of funding commitments. As of December 31, 2021, outstanding loans and lines of credit to members equaled $1.5 million, or less than 1 percent of total assets. The CASH AND quality of the loan portfolio is governed by UNCOLLECTED ITEMS LOANS the loan policies established by the Board 57.41% 0.06% of Directors and by the procedures followed by management in implementing these policies. All lines are reviewed at least semi-annually and detailed financial analyses are performed. From this review, it is determined which credit unions will be monitored on a more frequent basis and which credit unions may need additional attention. Moreover, each line of credit is either secured by a general pledge of the borrowing credit union’s assets, or specific limited pledge commensurate with the limit (DECEMBER 31, 2021) of the line of credit. No loans at VolCorp are currently delinquent and delinquency is extremely rare. Since its charter, VolCorp has never charged off a loan to a member credit union.

ASSET

DISTRIBUTION

INVESTMENTS 42.03% OTHER ASSETS 0.50%

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INVESTMENTS When making investment decisions, VolCorp has always prioritized safety, liquidity, and yield. In order to minimize credit risk, VolCorp’s policies allow funds to be placed only in limited government-sponsored enterprises, the Federal Reserve Bank, U.S. government guaranteed agency securities, or in other highly rated securities and top-rated banks and domestically chartered corporations. These policies further limit investments in banks, corporations and securities individually and in aggregate, and require extensive analysis and monitoring. VolCorp’s approved-institution analysis considers size, capital adequacy, asset quality, management, earnings performance, and liquidity.

FHLB & OTHER FINANCIAL INSTITUTIONS 2.56% ASSET-BACKED SECURITIES 12.22%

CUSO’S 0.34%

INVESTMENT DISTRIBUTION (DECEMBER 31, 2021)

U.S. GOVERNMENT AGENCY SECURITIES 84.88%

40 YEARS BOLDER

XII

EARNINGS Like all credit unions, VolCorp is a not-for-profit financial cooperative, existing solely for the benefit of its members. VolCorp strives to help members improve their financial position by providing cost-effective services and attractive investment yields. VolCorp does not maximize earnings at the expense of its member owners. It is also not the policy of VolCorp to increase earnings by jeopardizing the safety of the membership’s shares and capital through high risk investments or investment practices. Even so, VolCorp must maintain a stable earnings position in order to pay dividends, cover budgeted expenses, provide service excellence, innovate, maintain capital adequacy, and meet statutory reserve requirements. Financial strength is heavily reliant on careful balance sheet management, including monitoring the performance of each of VolCorp’s securities and making the appropriate strategic decisions as dictated by economic conditions. VolCorp held no impaired or non-compliant securities during the year, and did not experience write-downs on any securities in its portfolio. Net income for 2021 equaled $29.9 million, resulting in a 129 basis point return on assets.

COMPARATIVE INCOME (in thousands)

Year ended December 31,

2021

2020

2019

2018

2017

Cash and FI balances

$ 3,644

$ 3,944

$ 11,208

$ 6,097

$ 3,554

Investment Securities

5,516

8,912

20,513

19,416

12,493

529

576

176

9,177

12,892

32,250

26,089

16,223

6,207

4,707

20,723

13,543

7,003

730

2,932

992

6,207

4,729

21,453

16,475

7,995

2,970

8,163

10,797

9,614

8,228

2,563

2,728

3,078

3,063

3,060

38,242

5,296

5,193

5,131

4,713

40,805

8,024

8,271

8,199

7,788

Salaries and Benefits

7,301

6,714

6,286

5,722

5,353

Other

6,565

5,721

5,905

5,391

5,023

13,866

12,435

12,191

11,113

10,376

$29,909

$ 3,752

$ 6,877

$ 6,700

$ 5,640

Interest Income

Loans Total Interest Income Interest Expense Dividends on Shares Interest on Borrowed Funds Total Interest Expense Net Interest Income Non-Interest Income Item Processing Gain (Loss) on Securities Other Total Non-Interest Income Non-Interest Expenses

Total Non-Interest Expenses Net Contribution to Retained Earnings

XIII

21 FINANCIAL REPORT

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LIQUIDITY VolCorp is the primary depository institution and source of liquidity for the majority of its member credit unions. As such, VolCorp has the responsibility of protecting the safety of its members’ deposits while providing sufficient liquidity to meet their cash flow needs. To meet this responsibility, VolCorp maintains sufficient cash and overnight investments to provide for reasonable cash flow demands. Management understands and anticipates daily variances and adjusts for seasonal trends. VolCorp’s liquidity position is monitored daily and adjusted, as necessary, for anticipated fluctuations in our members’ liquidity needs.

40 YEARS BOLDER

XIV

CONSOLIDA

Independen Financial St Consolidated Fin Internal Control Over

21 FINANCIAL REPORT

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ATED FINANCIAL STATEMENTS

nt Auditors’ Report, tatements, Notes to nancial Statements, Financial Reporting

40 YEARS BOLDER

XVI

Volunteer Corporate Credit Union and Subsidiary CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021

REPORT Independent Auditors’ Report ...........................................................................................

FINANCIAL STATEMENTS Consolidated Balance Sheets .............................................................................................

Consolidated Statements of Income ..................................................................................

Consolidated Statements of Comprehensive Income ........................................................

Consolidated Statements of Changes in Members’ Equity ................................................

Consolidated Statements of Cash Flows ............................................................................

Notes to Consolidated Financial Statements .....................................................................

INTERNAL CONTROL OVER FINANCIAL REPORTING Management Report Regarding Statement of Management’s Responsibilities, Compliance with Designated Laws and Regulations, and Management’s Assessment of Internal Control over Financial Reporting ..................................................

INDEPENDENT AUDITORS’ REPORT To the Board of Directors and Supervisory Committee of Volunteer Corporate Credit Union and Subsidiary Report on the Financial Statements and Internal Control Opinions on the Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated financial statements of Volunteer Corporate Credit Union and Subsidiary, which comprise the consolidated balance sheets as of December 31, 2021 and 2020, and the related consolidated statements of income, comprehensive income, changes in members’ equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Volunteer Corporate Credit Union and Subsidiary as of December 31, 2021 and 2020, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. We also have audited Volunteer Corporate Credit Union and Subsidiary’s internal control over financial reporting, including controls over the preparation of regulatory financial statements in accordance with the instructions for the National Credit Union Administration (NCUA) 5310 – Corporate Credit Union Call Report, as of December 31, 2021, based on criteria established in Internal Control ‐ Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, Volunteer Corporate Credit Union and Subsidiary maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control ‐ Integrated Framework (2013) issued by COSO. Basis for Opinions We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audits of the Financial Statements and Internal Control Over Financial Reporting section of our report. We are required to be independent of Volunteer Corporate Credit Union and Subsidiary and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

-1-

Responsibilities of Management for the Financial Statements and Internal Control Over Financial Reporting Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of effective internal control over financial reporting relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Management is also responsible for its assessment about the effectiveness of internal control over financial reporting, included in the accompanying Management's Report Regarding Statement of Management's Responsibilities, Compliance with Designated Laws and Regulations, and Management's Assessment of Internal Control over Financial Reporting. In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Volunteer Corporate Credit Union and Subsidiary’s ability to continue as a going concern within one year after the date that the consolidated financial statements are available to be issued. Auditors’ Responsibilities for the Audits of the Financial Statements and Internal Control Over Financial Reporting Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and about whether effective internal control over financial reporting was maintained in all material respects, and to issue an auditors’ report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit of financial statements or an audit of internal control over financial reporting conducted in accordance with generally accepted auditing standards will always detect a material misstatement or a material weakness when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered to be material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements. In performing an audit of the consolidated financial statements and an audit of internal control over financial reporting in accordance with generally accepted auditing standards, we:  

Exercise professional judgment and maintain professional skepticism throughout the audits. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

-2-

 



Obtain an understanding of internal control relevant to the consolidated financial statement audit in order to design audit procedures that are appropriate in the circumstances. Obtain an understanding of internal control over financial reporting relevant to the audit of internal control over financial reporting, assess the risks that a material weakness exists, and test and evaluate the design and operating effectiveness of internal control over financial reporting based on the assessed risk. Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements. Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Volunteer Corporate Credit Union and Subsidiary’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the consolidated financial statement audit. Definition and Inherent Limitations of Internal Control over Financial Reporting An institution’s internal control over financial reporting is a process effected by those charged with governance, management, and other personnel, designed to provide reasonable assurance regarding the preparation of reliable consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. Because management’s assessment and our audit were conducted to meet the reporting requirements of Section 704.15 of the NCUA Regulations, our audit of Volunteer Corporate Credit Union and Subsidiary’s internal control over financial reporting included controls over the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America and controls over the preparation of schedules equivalent to basic financial statements in accordance with the instructions for the National Credit Union Administration NCUA 5310 – Corporate Credit Union Call Report. An institution’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets of the institution; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the institution are being made only in accordance with authorizations of management and those charged with governance; and (3) provide reasonable assurance regarding prevention, or timely detection and correction of unauthorized acquisition, use, or disposition of the institution’s assets that could have a material effect on the consolidated financial statements.

-3-

Because of its inherent limitations, internal control over financial reporting may not prevent, or detect and correct, misstatements. Also, projections of any assessment of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

Nashville, Tennessee June 14, 2022

-4-

Volunteer Corporate Credit Union and Subsidiary Consolidated Balance Sheets (In Thousands) December 31, Assets Cash Uncollected cash items Cash and cash equivalents

Certificates of deposit Federal Home Loan Bank stock Central Liquidity Facility membership stock Securities available for sale, at fair value Investment in Credit Union Service Organizations Loans to members and member affiliates Accrued interest receivable and other assets Premises and equipment, net National Credit Union Share Insurance Fund deposit

2021

2020

1,338,355 $ 41,918 1,380,273

1,304,111 84,256 1,388,367

308 5,157 20,372 981,430 3,389 1,454 8,024 3,315 679

328 5,425 20,372 1,067,955 3,097 3,597 7,635 3,534 672

Total assets

2,404,401

2,500,982

Liabilities and members' equity Liabilities Members’ depository accounts Deposits in collection Accrued expenses and other liabilities

2,229,615 $ 41,681 3,599

2,304,007 84,499 1,846

2,274,895

2,390,352

69,242 863 56,914 2,487

69,242 863 38,376 2,149

129,506

110,630

Total liabilities Members' equity Perpetual contributed capital Equity acquired in merger Retained earnings Accumulated other comprehensive income Total members' equity

Total liabilities and members' equity

2,404,401 $

2,500,982

The accompanying notes are an integral part of these consolidated financial statements. -5-

Volunteer Corporate Credit Union and Subsidiary Consolidated Statements of Income (In Thousands) For the Years Ended December 31, Interest and dividend income Cash Investments Loans to members and member affiliates

2021 $

3,644 $ 5,516 17

2020 3,944 8,912 36

Total interest and dividend income

9,177

12,892

Interest expense Members' depository and share accounts Borrowings

6,207 -

4,707 22

Total interest expense

6,207

4,729

Net interest income

2,970

8,163

Non-interest income Item processing Income from investment in Credit Union Service Organizations Currency services Corporate credit union liquidation distributions Other

2,563

2,728

292 1,875 32,672 3,403

391 1,836 3,069

Total non-interest income

40,805

8,024

7,301 4,174 1,232 119 1,040

6,714 4,014 728 106 873

13,866

12,435

Non-interest expense Salaries and benefits Office operations and occupancy Professional and outside services Travel and conferences Other Total non-interest expense

Net income

29,909 $

3,752

The accompanying notes are an integral part of these consolidated financial statements. -6-

Volunteer Corporate Credit Union and Subsidiary Consolidated Statements of Comprehensive Income (In Thousands) For the Years Ended December 31, Net income Other comprehensive income: Unrealized gain on available for sale securities

Other comprehensive income Total comprehensive income

2021 29,909

2020 3,752

338

2,730

338 30,247

2,730 6,482

The accompanying notes are an integral part of these consolidated financial statements. -7-

Volunteer Corporate Credit Union and Subsidiary Consolidated Statements of Changes in Members’ Equity (In Thousands)

Perpetual Contributed Capital Balance at January 1, 2020

Equity Acquired in Merger

69,242 $

863 $

Accumulated Other Comprehensive Income

Retained Earnings

34,814 $

(581) $

Total 104,338

Perpetual contributed capital dividends

(190)

Net income

3,752

Unrealized gains on securities available for sale

2,730

38,376

2,149

110,630

Balance at December 31, 2020

69,242

863

(190)

Perpetual contributed capital dividends

(35)

Non-pro rata capital dividends

(11,336)

Net income

29,909

Unrealized gains on securities available for sale

Balance at December 31, 2021

69,242

863 $

56,914

338 $

2,487 $

338 129,506

The accompanying notes are an integral part of these consolidated financial statements. -8-

Volunteer Corporate Credit Union and Subsidiary Consolidated Statements of Cash Flows (In Thousands) For the Years Ended December 31, Operating activities Net income $ Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization Net amortization (accretion) of securities Net (gain) loss on sale of premises and equipment Income from investment in Credit Union Service Organizations Net change in accrued interest receivable and other assets Net change in accrued expenses and other liabilities Net cash provided by (used in) operating activities Investing activities Net change in certificates of deposit with other financial institutions Net change in Federal Home Loan Bank stock Net change in Central Liquidity Facility Membership stock Net change in loans to members and member affiliates Net change in National Credit Union Share Insurance Fund deposit Purchases of securities Maturities, prepayments, and calls of securities Purchases of premises and equipment Proceeds from sale of premises and equipment

2021

2020

29,909 $

3,752

553 238 19 (292) (389) 1,753 31,791

20 268 2,143

510 451 (16) (391) 1,306 1,641 7,253

(80) 4,297 (20,372) 1,934

(7) (154,655) 241,280 (373) 20

(13) (604,989) 347,297 (542) 20

88,696

(272,448)

(74,392) (42,818) (11,336) (35) (128,581) (8,094) 1,388,367 1,380,273 $

1,149,633 3,511 (190) 1,152,954 887,759 500,608 1,388,367

Supplemental cash flow information: Interest paid $ Noncash item - Unrealized gain on available for sale securities $

6,207 $ 338 $

Net cash provided by (used in) investing activities Financing activities Net change in members’ depository accounts Net change in deposits in collection Non-pro rata capital dividends Payment of perpetual contributed capital dividends Net cash provided by (used in) financing activities Net change in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year

4,728 2,730

The accompanying notes are an integral part of these consolidated financial statements. -9-

Volunteer Corporate Credit Union and Subsidiary Notes to the Consolidated Financial Statements (In Thousands) Note 1: DESCRIPTION OF BUSINESS Volunteer Corporate Credit Union and Subsidiary (VolCorp) was created in April 1981 by the general assembly of the State of Tennessee to function as a credit union support system to credit unions in Tennessee to facilitate mergers, joint ventures, and cooperative efforts and to provide credit unions with investment, liquidity, and payment system services. VolCorp is regulated by the Tennessee Department of Financial Institutions’ Credit Union Division and the National Credit Union Administration (NCUA). Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of VolCorp conform to accounting principles generally accepted in the United States of America and to general practices within the credit union industry. The following represent the more significant of those policies and practices: Principles of Consolidation The accompanying consolidated financial statements include the accounts of VolCorp and its wholly-owned subsidiary, Symphony, LLC. Symphony, LLC was formed in November 2020. All significant intercompany balances and transactions have been eliminated in consolidation. Basis of Accounting The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The Financial Accounting Standards Board (FASB) provides authoritative guidance regarding U.S. GAAP through the Accounting Standards Codification (ASC) and related Accounting Standards Updates (ASUs). Use of Estimates The preparation of U.S. GAAP consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Estimates that are particularly susceptible to significant change in the near term are related to estimating the fair value of financial instruments and the status of contingencies. Financial Instruments and Concentrations of Credit Risk In the normal course of business, VolCorp invests in highly rated domestic corporations and uses nationally recognized broker/dealers in the execution of trades for financial instruments. Exposure to individual counterparties may be significant. In providing financial services solely to the credit union industry, VolCorp is dependent upon the viability of that industry. At December 31, 2021, VolCorp had $82,001 in deposits held at other financial institutions that were in excess of Federal Deposit Insurance Corporation coverage limits.

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Volunteer Corporate Credit Union and Subsidiary Notes to the Consolidated Financial Statements (In Thousands) Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Cash and Cash Equivalents Cash and cash equivalents includes cash, deposits held at other financial institutions, and uncollected cash items with original maturities fewer than 90 days. Uncollected Cash Items and Deposits in Collection These accounts represent deposits made by VolCorp’s members that have not cleared the Federal Reserve Bank (Federal Reserve). Such amounts generally become available for investment or withdrawal by members within one to three days. The uncollected cash items represent the amounts due from the Federal Reserve, and the deposits in collection represent the amount due to the members when they become available. These amounts are not interest bearing. Transactions as Agent VolCorp acts as an agent in facilitating overnight investment transactions between participating member credit unions and the Federal Reserve. Transactions with the Federal Reserve are facilitated via the Excess Balance Account (EBA) pursuant to Regulation D. VolCorp acts as intermediary for these transactions but is not otherwise obligated by the transaction. VolCorp's consolidated financial statements do not reflect these transactions except for the fees earned. At December 31, 2021 and 2020, VolCorp was agent for participating member credit unions on EBA funds totaling $1,712,500 and $946,129, respectively. Certificates of Deposit These items are certificates of deposit in various institutions. Federal Home Loan Bank stock, at Cost Federal Home Loan Bank (FHLB) capital stock, can only be sold at par or a value as determined by the issuing institution and only to the respective institution or to another member institution. These securities are recorded at cost and evaluated annually for possible impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income. Central Liquidity Facility Membership Stock Central Liquidity Facility (CLF) membership stock, can only be sold at par or a value as determined by the CLF and only to the CLF. These securities are recorded at cost and evaluated annually for possible impairment. VolCorp became a member of the CLF as an agent on behalf of a subset of its member credit unions to provide those credit unions access to extensions of credit from the CLF based on liquidity needs. VolCorp does not have access to extensions of credit through the CLF.

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Volunteer Corporate Credit Union and Subsidiary Notes to the Consolidated Financial Statements (In Thousands) Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Securities VolCorp has adopted Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 320 Debt and Equity Securities which requires all investments in debt securities and all investments in equity securities that have readily determinable fair values to be classified into three categories as follows: Trading Securities Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value with unrealized gains and losses included in earnings. No securities have been classified as trading securities. Securities Held to Maturity Debt securities that VolCorp has the positive intent and ability to hold to maturity are classified as held to maturity securities and reported at amortized cost using a method that does not differ materially from the level interest yield method. Securities Available for Sale Debt securities not classified as either held to maturity debt securities or trading securities are classified as available for sale securities and reported at estimated fair value with unrealized gains and losses excluded from earnings and reported as other comprehensive income (loss) within members’ equity. If quoted market prices are not available, fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Declines in the fair value of securities below their cost that are related to credit losses and are other-than-temporary are reflected as realized losses. In estimating other-than-temporary losses, management considers (1) the length of time and extent that fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) the financial condition and nearterm prospects of the underlying collateral with loan level due diligence performed by an outside third party and (4) whether VolCorp does not have the intent to sell the security and it is more likely than not that it will be able to retain the security until recovery of the cost basis. Declines in the fair value of available for sale securities below their cost that are deemed to be other-than-temporarily impaired are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of impairment related to other factors is recognized in other comprehensive income. Premiums and discounts are recognized in interest income using the interest method over the period until maturity or the expected maturity date based on prepayments. Gains and losses on investment dispositions are recognized using the specific identification method for determining the cost of securities sold. - 12 -

Volunteer Corporate Credit Union and Subsidiary Notes to the Consolidated Financial Statements (In Thousands) Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Investment in Credit Union Service Organizations Investments in Credit Union Service Organizations (CUSOs) are recorded using the equity method of accounting for investments in entities in which it has an ownership interest, but does not exercise a controlling interest in the operating and financial policies of an investee. Under this method, an investment is carried at the acquisition cost, plus the CUSO's equity in undistributed earnings or losses since acquisition. VolCorp periodically tests its investments for potential impairment whenever events and circumstances indicate a loss in the fair value of the investments may be other than temporary. The equity method is considered appropriate due to either VolCorp’s percentage of ownership or the ability to exert influence over the CUSOs. Loans to Members and Member Affiliates Loans are stated at unpaid principal balances. No allowance for loan losses has been established as all outstanding loans are secured by a general or specific pledge of the member credit unions’ assets, and there have been no historical losses. Interest on loans is recognized over the terms of the loans and is calculated on principal amounts outstanding. Premises and Equipment, net Land is carried at cost. Premises and equipment are carried at cost, net of accumulated depreciation. Premises and equipment are depreciated using the straight-line method over the estimated useful lives of the related assets which primarily range from 2 to 50 years. Long-Term Assets Premises and equipment and other long-term assets are reviewed for impairment when events indicate that their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value. Income Taxes VolCorp is exempt by statute, from federal and state taxes on income related to its exempt purposes. However, VolCorp is subject to unrelated business income tax as discussed below. Accordingly, no provision for income taxes is included in the accompanying statements of income. The IRS and certain state taxing authorities are currently revisiting what, if any, products and services provided by state chartered credit unions are subject to unrelated business income tax (UBIT). There is little guidance in the IRS regulation on what activities should be subject to UBIT. The IRS issued guidance in the form of technical advice memorandums. As a result, there is uncertainty regarding whether state chartered credit unions should pay income tax on certain types of net taxable income from activities that may be considered by taxing authorities as unrelated to the purpose for which VolCorp was granted non-taxable status. In the opinion of management, any liability resulting from taxing authorities imposing income taxes on the net taxable income from activities deemed unrelated to VolCorp’s non-taxable status is not expected to have a material effect on VolCorp’s financial position or results of operations.

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Volunteer Corporate Credit Union and Subsidiary Notes to the Consolidated Financial Statements (In Thousands) Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Taxes, continued VolCorp has adopted FASB ASC 740, Income Taxes, which prescribes a recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. FASB ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Management evaluates the tax positions taken on tax filings and consults with outside professionals in evaluating the likelihood of unfavorable results from any such tax positions. The tax years from 2018 and forward remain open to tax audits; however, there are currently no audits for any tax periods in progress. National Credit Union Share Insurance Fund Deposit and Insurance Premiums The deposit in the National Credit Union Share Insurance Fund (NCUSIF) is in accordance with NCUA regulations, which require the maintenance of a deposit by each insured credit union in an amount equal to one percent of its insured shares. The deposit will be refunded to VolCorp if its insurance coverage is terminated, it converts to insurance coverage from another source, or the operations of the fund are transferred from the NCUA Board. VolCorp is required to pay a percentage of total insured shares as insurance premiums to the NCUSIF unless the NCUA Board waives the payment. No payments were made during 2021 and 2020. Perpetual Contributed Capital (PCC) PCC is a permanent, non-voting, non-cumulative equity investment. Payment of dividends is based on available earnings and is not guaranteed. PCC, in the event of liquidation, is subordinate to all other liabilities of VolCorp. Dividends declared on PCC are determined by management and approved by the Board of Directors based on an evaluation of current and future market conditions. Comprehensive Income (Loss) Comprehensive income (loss) consists of net income and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses on debt securities available for sale, which are also recognized as a separate component of members’ equity. Loss Contingencies Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there are currently such matters that will have a material effect on the consolidated financial statements. Restrictions on Cash There were no restrictions or requirements related to cash at December 31, 2021 and 2020.

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Volunteer Corporate Credit Union and Subsidiary Notes to the Consolidated Financial Statements (In Thousands) Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fair Value of Financial Instruments VolCorp has an established process for determining fair values. Fair value is based upon quoted market prices, when available. If listed prices or quotes are not available, fair value is based upon pricing by an independent outsourced firm which uses proprietary models including market data, interest rate yield curves, option volatilities and other third party information. Management reviews the methodology and results of the pricing by the independent outsourced firm. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. Furthermore, while VolCorp believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Generally accepted accounting principles have a three-level valuation hierarchy for fair value measurements. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are explained as follows: 

Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever possible.



Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.



Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for valuations in situations in which there is little, if any, market activity for the asset or liability at the measurement.

Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates. Advertising Costs Advertising costs are expensed as incurred. Advertising expense for the years ended December 31, 2021 and 2020 was $95 and $93, respectively.

- 15 -

Volunteer Corporate Credit Union and Subsidiary Notes to the Consolidated Financial Statements (In Thousands) Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Off Balance Sheet Financial Instruments In the ordinary course of business, VolCorp enters into commitments to extend credit. Such financial instruments are recorded when they are funded. Subsequent Events VolCorp evaluated all events or transactions that occurred after December 31, 2021, through June 14, 2022, the date these consolidated financial statements were available to be issued. Reclassifications Certain items in prior financial statements have been reclassified to conform to the current presentation. The reclassifications had no impact on net income or members’ equity. Note 3: CERTIFICATES OF DEPOSIT At December 31, 2021 and 2020, certificates of deposit are classified as held to maturity and are carried at cost less any impairment, as fair market value in not readily determinable, of $308 and $328, respectively. The certificates of deposit outstanding at December 31, 2021, are to mature during the year ending December 31, 2022. Note 4: SECURITIES AVAILABLE FOR SALE The amortized cost and approximate estimated fair value of securities available for sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) at December 31, 2021 and 2020 were as follows:

Gross Unrealized Gains

December 31, 2021

Amortized Cost

U.S. Government agency securities Asset-backed securities Total

$ 855,627 $ 123,316 $ 978,943 $

December 31, 2020

Amortized Cost

U.S. Government agency securities Asset-backed securities Total

$ 877,066 $ 188,740 $ 1,065,806 $

Gross Unrealized Losses

4,542 $ 304 4,846 $

Gross Unrealized Gains

(2,212) $ 857,957 (147) 123,473 (2,359) $ 981,430

Gross Unrealized Losses

2,679 $ 692 3,371 $

Fair Value

(935) $ 878,810 (287) 189,145 (1,222) $ 1,067,955

U.S. Government agency securities consist of mortgage-backed securities and debentures. Assetbacked securities consist primarily of securitized credit card, student loan, mortgage, automobile dealer floor plan receivables and other assets. VolCorp sold no securities during the years ended December 31, 2021 and 2020. - 16 -

Volunteer Corporate Credit Union and Subsidiary Notes to the Consolidated Financial Statements (In Thousands) Note 4: SECURITIES AVAILABLE FOR SALE (Continued) The amortized cost and estimated fair value of securities available for sale at December 31, 2021, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Amortized Cost Fair Value $ 141,869 $ 141,986 197,791 198,738 416,980 416,548 222,303 224,158 $ 978,943 $ 981,430

December 31, 2021 Due in less than one year Due after one year through five years Due after five years through ten years Due after ten years Total

Information pertaining to securities with gross unrealized losses at December 31, 2021 and 2020 aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

Less Than 12 Months Fair Unrealized Value Losses

December 31, 2021 U.S. Government agency securities $ 149,596 $ Asset-backed securities 15,824 Total $ 165,420 $

1,269 $ 60,565 $ 30 6,775 1,299 $ 67,340 $

Less Than 12 Months Fair Unrealized Value Losses

December 31, 2020 U.S. Government agency securities $ 123,737 Asset-backed securities 855 Total $ 124,592

$ $

12 Months or Longer Fair Unrealized Value Losses

187 34 221

943 $ 210,161 $ 117 22,599 1,060 $ 232,760 $

12 Months or Longer Fair Unrealized Value Losses $ 138,048 $ 8,748 $ 146,796 $

Total Fair Unrealized Value Losses

Fair Value

2,212 147 2,359

Total Unrealized Losses

748 $ 261,785 $ 253 9,603 1,001 $ 271,388 $

935 287 1,222

At December 31, 2021 and 2020, VolCorp had 32 and 42 securities in a loss position, respectively. The unrealized losses associated with these investments are primarily driven by changes in interest rates and are not related to the credit quality of the securities. VolCorp does not intend to sell these securities, and it is not likely they will be required to sell the securities before the amortized cost basis is recovered, which may be at maturity. Management does not consider these securities to be other-than-temporarily impaired at December 31, 2021 and 2020.

- 17 -

Volunteer Corporate Credit Union and Subsidiary Notes to the Consolidated Financial Statements (In Thousands) Note 5: INVESTMENT IN CREDIT UNION SERVICE ORGANIZATIONS VolCorp’s investment in CUSOs at December 31, 2021 and 2020 is as follows:

December 31, 2021 Percentage Recorded of Ownership Value 4.41 % $ 151 10.67 2,314 22.22 924 $ 3,389

Name Credit Union Business Group, LLC Primary Financial Company, LLC CU Investment Solutions, LLC December 31, 2020

Percentage Recorded of Ownership Value 4.41 % $ 139 10.67 2,284 22.22 674 $ 3,097

Name Credit Union Business Group, LLC Primary Financial Company, LLC CU Investment Solutions, LLC

Investments in CUSOs are accounted for under the equity method based on VolCorp’s percentage of ownership or the ability to exert significant influence over the CUSOs. Note 6: FAIR VALUE MEASUREMENTS The following table presents the assets carried at fair value subject to measurement on a recurring basis. Assets are presented as of December 31, 2021 and 2020, by their nature and by FASB ASC 820, Fair Value Measurements and Disclosures, valuation hierarchy:

December 31, 2021

U.S. Government agency securities Asset-backed securities Total assets at fair value

Total Value Value Level 1 $ 857,957 $ 123,473 $ 981,430 $ -

Value Value Level 2 Level 3 $ 857,957 $ 123,473 $ 981,430 $ -

Total Value Value Level 1 $ 878,810 $ 189,145 $ 1,067,955 $ -

Value Value Level 2 Level 3 $ 878,810 $ 189,145 $ 1,067,955 $ -

December 31, 2020

U.S. Government agency securities Asset-backed securities Total assets at fair value

There were no liabilities carried at fair value for 2021 and 2020.

- 18 -

Volunteer Corporate Credit Union and Subsidiary Notes to the Consolidated Financial Statements (In Thousands) Note 6: FAIR VALUE MEASUREMENTS (Continued) The following valuation method was used for assets carried at fair value as of December 31, 2021 and 2020: 

U.S. Government agency securities and asset-backed securities – fair values are estimated using pricing models that use observable inputs or quoted prices of securities with similar characteristics. These securities are classified within Level 2 of the valuation hierarchy.

Note 7: PREMISES AND EQUIPMENT Premises and equipment at December 31, 2021 and 2020, respectively were as follows: December 31, Land Building Furniture, fixtures, and equipment

2021 $

Less: accumulated depreciation and amortization Total

427 $ 2,429 5,796 8,652 5,337 3,315 $

2020 427 2,429 5,837 8,693 5,159 3,534

Depreciation expense was $553 and $510 for the years ended December 31, 2021 and 2020, respectively. Note 8: MEMBERS’ DEPOSITORY ACCOUNTS At December 31, 2021 and 2020, the balances of the various types of members’ depository accounts are as follows: December 31, Daily shares Share certificates Total

$ $

2021 2,228,932 $ 683 2,229,615 $

2020 2,303,156 851 2,304,007

Share certificates as of December 31, 2021 are scheduled to mature within one year. At December 31, 2021, two members’ deposit accounts totaled $267,162 and represented 11.98% of total member depository accounts. At December 31, 2020, one member’s deposit accounts totaled $239,263 and represented 10.38% of total member depository accounts. The aggregate amount of members’ depository accounts over $250 as of December 31, 2021 and 2020 was approximately $2,161,181 and $2,236,077, respectively.

- 19 -

Volunteer Corporate Credit Union and Subsidiary Notes to the Consolidated Financial Statements (In Thousands) Note 9: BORROWINGS VolCorp, as a member of the FHLB of Cincinnati, is eligible for advances from this bank pursuant to the terms of various borrowing agreements. VolCorp has pledged 103 securities, with a carrying value of $861,767 as collateral under the borrowing agreement with the FHLB of Cincinnati as of December 31, 2021. At December 31, 2020, VolCorp had 106 securities pledged with a carrying value of $880,400 as collateral under the borrowing agreement with the FHLB of Cincinnati. There was no amount outstanding on this line of credit at December 31, 2021 and December 31, 2020. The maturity is overnight for this line of credit. At December 31, 2021, VolCorp had $806,430 in additional borrowing availability with the FHLB of Cincinnati. VolCorp maintains a federal funds line of credit with one regional bank. Securities with a carrying value of $103,895 and $104,066 were pledged as collateral with this bank at December 31, 2021 and 2020, respectively. No amounts were outstanding under this line of credit at December 31, 2021 or 2020, and borrowing availability totaled $70,000. This agreement may be cancelled at the discretion of either party. Effective June 30, 2021, VolCorp renewed an unsecured federal funds facility from another regional bank with a borrowing availability of $15,000. This agreement expires on June 30, 2022 unless otherwise extended or terminated. No amounts were outstanding under this line of credit at December 31, 2021 or 2020. Note 10: REGULATORY CAPITAL REQUIREMENTS VolCorp is subject to various regulatory capital requirements administered by the NCUA. Failure to meet minimum capital requirements can initiate certain additional actions by regulators that, if undertaken, could have a direct material effect on VolCorp’s consolidated financial statements. Failure to meet minimum capital requirements would require VolCorp to submit a plan of action to correct the shortfall. Additionally, the NCUA could require an increase in capital to specific levels, reduction of interest, and ceasing or limiting VolCorp’s ability to accept deposits. Beginning October 2016, a portion of PCC is excluded from Tier 1 capital as defined by the NCUA. The portion of PCC also reduces daily average net assets and monthly moving average net riskweighted assets for the applicable ratio calculations. NCUA Regulations as of December 22, 2017 were modified to include all PCC received from federally insured credit unions when the corporate credit union’s retained earnings ratio is greater than 2.50%.

- 20 -

Volunteer Corporate Credit Union and Subsidiary Notes to the Consolidated Financial Statements (In Thousands) Note 10: REGULATORY CAPITAL REQUIREMENTS (Continued) At December 31, 2021 and 2020, VolCorp’s capital ratios were as follows:

Regulatory Capital Amount Ratio

Required Capitalization under NCUA Regulation 704 Under Adequately Well Capitalized Capitalized Capitalized

2021 (1) Leverage (2) Tier 1 Risk Based Capital Total Risk Based Capital(2)

$ 123,630 $ 123,630 $ 123,630

4.72% 53.79% 53.79%

< 4.00% < 4.00% < 8.00%

4.00% 4.00% 8.00%

5.00% 6.00% 10.00%

2020 (1) Leverage (2) Tier 1 Risk Based Capital (2) Total Risk Based Capital

$ 105,384 $ 105,384 $ 105,384

5.13% 66.15% 66.15%

< 4.00% < 4.00% < 8.00%

4.00% 4.00% 8.00%

5.00% 6.00% 10.00%

(1) to rolling daily average net assets (2) to moving monthly average net risk‐weighted assets

The retained earnings ratio is key in maintaining capital adequacy in compliance with NCUA regulations. Beginning in October 2013, NCUA regulation 704.3 requires corporate credit unions to calculate and report a retained earnings ratio of at least 0.45%. VolCorp’s retained earnings ratio at December 31, 2021 and 2020 was 2.21% and 1.91%, respectively. Non-Pro Rata Capital Dividends On October 5, 2010, VolCorp was issued recovery claim certificates of approximately $59,500 for membership capital accounts at U.S. Central Federal Credit Union previously depleted through the recognition of losses. U.S. Central Federal Credit Union was placed into liquidation on October 1, 2010. During 2021, VolCorp recognized $32,672 of corporate credit union liquidation distributions related to the recovery claim certificates upon receipt of the distributions. During 2021, VolCorp paid $11,336 of non-pro rata capital dividends to member natural person credit unions that recognized losses as a result of U.S. Central Federal Credit Union’s liquidation. During 2021, VolCorp also paid $3,698 of non-pro rata interest distributions to association member natural person credit unions that recognized losses as a result of U. S. Central Federal Credit Union’s liquidation. Based on NCUA projections, the remaining recovery claim certificates will be satisfied by distributions during future periods. VolCorp recognizes income from corporate credit union liquidation distributions during the period distributed funds are received.

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Volunteer Corporate Credit Union and Subsidiary Notes to the Consolidated Financial Statements (In Thousands) Note 11: RELATED PARTY TRANSACTIONS Each of the directors of VolCorp is affiliated with credit unions that, in the ordinary course of business, may engage in financial transactions with VolCorp. Outstanding balances of members’ share accounts with these related parties were $308,610 and $331,889 at December 31, 2021 and 2020, respectively. There were no loans with an outstanding balance with related parties as of December 31, 2021 and 2020. Note 12: EMPLOYEE BENEFITS VolCorp maintains two defined contribution plans. Under the 401(k) employee savings plan, all fulltime employees who have been employed at least one year are required to contribute 5% of their gross annual salary to the plan. Contributions are fully vested when made. VolCorp makes no contributions to the employee savings plan. Under the retirement savings plan, VolCorp contributes an amount equal to 10% of each participant’s salary to the plan. Employees who have been employed at least one year become participants in the plan. Benefits are fully vested after five years. VolCorp made contributions to the retirement savings plan of $430 and $452 during the years ended December 31, 2021 and 2020, respectively. The Credit Union has two collateral assignment split dollar agreements between the Credit Union and a key employee. The agreements involve a method of paying for insurance coverage by splitting the elements of a life insurance policy. Under the agreements, the employee is the owner of the policies and made collateral assignments to the Credit Union in return for loans equal to the amount of premiums to be paid on behalf of the employee plus accrued interest at the applicable long-term federal rate when placed into effect in 2017 plus an additional 19 basis points. At the time of death of the key employee, the Credit Union will be paid the loan amounts plus accrued interest and the balance of the insurance benefits will be paid to the designated beneficiaries. As of December 31, 2021 and 2020, the balance of the loan approximated $5,911 and $5,838, respectively, and is included in accrued interest receivable and other assets on the balance sheets. Note 13: COMMITMENTS, CONTINGENCIES AND OFF BALANCE SHEET ACTIVITIES In the normal course of business, there may be various outstanding legal proceedings or potential claims. In the opinion of management, after consultation with legal counsel, the financial position of VolCorp will not be affected materially by the outcome of any such legal proceedings or potential claims. Some financial instruments, such as loan commitments, irrevocable letters of credit, and lines of credit, are issued to meet member-financing needs. These are agreements to provide credit or to support the credit of others as long as conditions established in the contract are met and usually have expiration dates. Commitments may expire without being used. These instruments contain, to varying degrees, elements of credit and market risk in excess of the amounts recognized in the balance sheets. The credit risk relates to the possibility that a loss may occur from the failure of another party to perform according to the terms of a contract. - 22 -

Volunteer Corporate Credit Union and Subsidiary Notes to the Consolidated Financial Statements (In Thousands) Note 13: COMMITMENTS, CONTINGENCIES AND OFF BALANCE SHEET ACTIVITIES, continued The market risk relates to the possibility that future changes in market prices may make a financial instrument less valuable or more onerous. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral upon exercise of the commitment. The contractual amount of financial instruments with off balance sheet risk at December 31, 2021 and 2020 were as follows: December 31, Unfunded commitments under lines of credit Unfunded commitments under letters of credit Total

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$ $

2021 1,711,467 $ 404 1,711,871 $

2020 1,559,575 467 1,560,042

MANAGEMENT REPORT REGARDING STATEMENT OF MANAGEMENT'S RESPONSIBILITIES, COMPLIANCE WITH DESIGNATED LAWS AND REGULATIONS, AND MANAGEMENT'S ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL REPORTING Statement of Management's Responsibilities The management of Volunteer Corporate Credit Union and Subsidiary (the “Corporate”) is responsible for preparing the Corporate’s annual consolidated financial statements in accordance with generally accepted accounting principles; for designing, implementing, and maintaining an adequate internal control structure and procedures for financial reporting, including controls over the preparation of regulatory financial statements in accordance with the instructions for the NCUA 5310 – Corporate Credit Union Call Report; and for complying with Federal and, as applicable, State laws and regulations pertaining to affiliate transactions, legal lending limits, loans to insiders, restrictions on capital and share dividends and regulatory reporting that meets full and fair disclosure. Management's Assessment of Compliance with Designated Laws and Regulations The management of the Corporate has assessed the Corporate’s compliance with Federal and State laws and regulations pertaining to affiliate transactions, legal lending limits, loans to insiders, restrictions on capital and share dividends and regulatory reporting that meets full and fair disclosure during the fiscal year that ended on December 31, 2021. Based upon its assessment, management has concluded that the Corporate complied with the Federal and State laws and regulations pertaining to affiliate transactions, legal lending limits, loans to insiders, restrictions on capital and share dividends and regulatory reporting that meets full and fair disclosure during the fiscal year that ended on December 31, 2021. Management's Assessment of Internal Control over Financial Reporting The Corporate’s internal control over financial reporting is a process effected by those charged with governance, management, and other personnel, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of reliable consolidated financial statements in accordance with accounting principles generally accepted in the United States of America and financial statements for regulatory reporting purposes, i.e., NCUA 5310 – Corporate Credit Union Call Report. The Corporate's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Corporate; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America and financial statements for regulatory reporting purposes, and that receipts and expenditures of the Corporate are being made only in accordance with authorizations of management and directors of the Corporate; and (3) provide reasonable assurance regarding

ADDRESS 2460 Atrium Way Nashville, TN 37214

ONLINE volcorp.org vportfolio.org symphonycuso.org volcorpdesign.org

NUMBERS (615) 232-7900 (800) 470-3444 After Hours: (615) 232-7977 Operations Fax: (615) 232-7979

EXTENSIONS 1 - Member Services/Operations/Item Processing/ACH 2 - Investment Sales 3 - Marketing and Business Development 4 - Administration and President’s Oﬃce 8 - Symphony CUSO 9 - Dial By Name Directory 0 - Operator

HOURS Monday, Tuesday, Wednesday and Friday: 7:30 a.m. to 4:30 p.m. (Central time). Thursday: 8:30 a.m. to 4:30 p.m. (Central time).

Our Member Services Department closes at 4:15 p.m. (Central time) each day. Office closings are coordinated with the Federal Reserve Bank holiday schedule.

NCUA

Savings Federally Insured to at least $250,000. NCUA, a U.S. Government Agency.