SDFCU ANNUAL REPORT

030406070809

CHAIRMAN’S REPORT

2020 AT-A-GLANCE

TREASURER’S REPORT

SUPERVISORY COMMITTEE REPORT

SDFCU MANAGEMENT TEAM

2020 FINANCIALS

2020 ANNUAL REPORT • 03

I AM PLEASED TO PROVIDE YOU WITH AN UPDATE on your credit union on behalf of the Board of Directors, employees, and volunteers of State Department Federal Credit Union (SDFCU).

Throughout 2020, we remained focused on provid-ing safe, reliable, and efficient financial services to our members. Although 2020 brought many new challenges due to the COVID-19 pandemic, I am pleased to report that our credit union fulfilled its commitment to members by providing consistent, quality, uninterrupted service.

We saw a substantial increase in the number of members taking advantage of our Online Banking and Mobile App digital banking solutions due to the introduction of social distancing. Members were able to self-serve, manage their accounts, deposit checks, and move money from their homes. In 2020, SDFCU was pleased to launch Zelle® person-to-person payment technology, Google Authenticator secure sign-on, and an online chat service. Digital banking is a high priority for SDFCU, we are continuously working on adding features and improving these services.

For members preferring in-person service, our branches remained open. Safety protocols were implemented including regular sanitizing, signage, and protective glass. In addition, we adjusted our hours to include dedicated time in the morning for senior visits. We also launched an online sched-uler giving members the ability to make a branch appointment in advance.

It is in our credit union philosophy of people helping people to provide support to members who may have experienced financial hardships this year. To ease the financial burden for our members, we waived loan late payment fees and penalties for early certificate withdrawals. We also provided aid to our members in the form of loan extensions and 0% APR emergency credit where needed. Our mem-ber service and loan representatives stayed ready

and flexible to work with members on a case-by-case basis.

SDFCU provided financial education for members including financial counseling and 77 webinars. We also saw a large increase in members taking advantage of our no-cost credit monitoring tool, SavvyMoney®, available in Online Banking and the Mobile App.

Despite the challenges of the pandemic environ-ment, SDFCU added 7,754 new members, bringing our total membership to over 90,000 members. Many members took advantage of our low rates in 2020 and we observed that in our Personal Loans and Mortgages. We also added 1,890 new credit cards to our card portfolio and migrated cards to contactless this year.

SDFCU kept community support a priority in 2020. We participated in community events virtually, helped raise money for the Children’s Miracle Network, awarded $75,000 in undergraduate schol-arships to our members, and proudly sponsored the Foreign Service Youth Art Contest. SDFCU is also pleased to be a sponsor of Filene Research Institute’s Center of Excellence for Diversity, Equity and Inclusion (DEI), a five-year research initiative.

We thank you for your membership and assure you SDFCU will continue to look after the financial needs of you, our valued and loyal members. Thank you for your loyalty and patience during this challenging and unprecedented pandemic. SDFCU remains sta-ble, strong, and committed to serving your financial well-being.

Respectfully submitted, Marlene E. Schwartz, Chairman

CHAIRMAN’S REPORT


$260,000 IN LOAN LATE FEES WAIVED/REFUNDED

1,780 CONSUMER LOAN

EXTENSIONS

$24.1 MILLION

IN MORTGAGE FORBEARANCES

19,594 MEMBERS

TOOK ADVANTAGE OF OUR FREE CREDIT MONITORING TOOL IN ONLINE BANKING

PENALTY WAIVED

FOR CASHING IN CERTIFICATES EARLY

NEW MAKE BRANCHAPPOINTMENTS ONLINE

2020 AT-A-GLANCE

6 OUT OF 6 BRANCH LOCATIONS OPEN

AS OF 7/1/2020


72% OF LOAN APPLICATIONS

MADE ONLINE

FREE FINANCIAL EDUCATION WEBINARS

Topics include Getting to Know your TSP, Home-Buying, and Planning for Retirement

1,621 WEBINAR

ATTENDEES INCREASED 85% FROM 2019

ALL OUR CARDS

WENT CONTACTLESS

OVER 100,000 CHATS

IN OUR NEW AI CHATBOT ONLINE

AWARDED

$75,000 IN COLLEGE SCHOLARSHIPS

2020 AT-A-GLANCE


STATE DEPARTMENT FEDERAL CREDIT UNION’S BOARD OF DIRECTORS, MANAGEMENT AND STAFF THANK YOU for your continued support and confidence in your credit union. Our focus is providing safe, secure, and accessible products and services to help members achieve their financial goals.

We successfully navigated through 2020 in excel-lent financial position despite difficult economic and socioeconomic conditions. The pandemic, along with 150 basis points rapid drop in interest rates, caused several significant changes to our balance sheet and income statement.

Net worth percentage dropped from 10.32% to 9.66% because of tremendous share growth of 15.4%. National Credit Union Administration (NCUA) considers well-capitalized credit unions having greater than 7% net worth. So our credit union has $65 million more in equity than is required to be well-capitalized. Share growth was driven by excel-lent rates in comparison to peers, uncertainty with job security, travel and hospitality industries greatly reduced (fewer spending opportunities), and uncer-tainty with the financial markets.

Assets for the year ended December 31, 2020 were $2.4 billion, $277 million (12.8%) more than last year because of our members continuing to invest with us through share growth.

Loans were $1.2 billion, $4 million less than 2019 because members refinanced their loans due to historically low interest rates. Loan originations for the year were quite good with relation to prior years’, $383 million while last year was $315 million. Our loan to share is 58%, decreasing from 67% a year ago.

Net income for the year was $12.5 million, $5.2 million less than last year because of reserving for potential loan losses as a result of the pandemic

and the decrease in net interest margin because of the 150 basis points drop in rates.

Net charge offs were 0.34% of average loans as opposed to 0.36% for our peer group. A fantastic job considering all of the deferrals and forbearances issued to help members. Delinquent loans were also relatively low at 0.37% while peer was 0.52%.

Our investment portfolio continued to be an indus-try leader. In this low interest rate environment, we achieved earnings of $13.4 million, a return of 1.76%, well above the national average of 1.27%.

Our control of expenses was outstanding during 2020. Our operating expense to average asset ratio decreased to 1.85%. The NCUA peer group average for this ratio is 2.90%.

The future looks very promising for your credit union. We look forward to increasing enhancements in our service offerings and providing frictionless conve-nience and service for our members. The Board and the staff remain committed to continuing our strong financial position, and we value your selection of SDFCU as a lifetime partner in achieving your finan-cial goals.

Sincerely, Harold Geisel, Treasurer

TREASURER’S REPORT


STATE DEPARTMENT FEDERAL CREDIT UNION STRIVES TO OFFER EXCEPTIONAL SERVICES to you, our members. Our Supervisory Committee is an oversight committee. It is created by law and appointed by your Board of Directors to independently represent all members. We evaluate SDFCU’s activities and operations to ensure sound-ness, compliance, and appropriate risk manage-ment and appraise internal controls’ adequacy. Its responsibilities include:

• Monitoring Board and management activities

• Providing for financial statement audits

• Conducting annual member account verifications

• Overseeing formal complaint cases

• Verifying compliance with policies, procedures,rules and regulations and

• Monitoring SDFCU’s internal control environment

By fulfilling these responsibilities, the Supervisory Committee determines that the Credit Union is operated in a safe and sound manner. These determinations are made through a combination of activities, which include:

• Conducting discussions with regulatory examinersand review of their reports,

• Conducting discussions with the external auditorand review of the financial statements and man-agement letter,

• Overseeing ongoing audits, assessments, andverifications conducted by the Credit Union’sinternal auditors

The National Credit Union Administration, which is the regulatory agency for all federally charted credit unions, performs periodic examinations. The results of their last examination for SDFCU confirmed that we continue to be a financially safe and sound Credit Union through the pandemic.

To fulfill our financial audit responsibilities for 2020, we hired Doeren Mayhew, CPAs and Advisors, to conduct an independent financial statement audit of SDFCU’s operations and issue a report of their findings. We are pleased to announce we once again received an unqualified opinion from our external auditor. In their report, they concluded that our financial statements are presented fairly.

The Committee Chair also serves as the Credit Union ombudsman in answering all communications, whether complimentary or critical, to help State Department Federal Credit Union fulfill its mission of providing financial services that are responsive to members’ needs.

Based on the results of the examinations, audits and member feedback, it is the opinion of the Supervisory Committee that State Department Federal Credit Union continues to be an institution that is financially strong and well managed with a clear strategic vision, solid leadership, and well laid operational plans for the future.

We look forward to another strong year

Respectfully submitted,

SUPERVISORY COMMITTEE REPORT

Gay Mount ChairMae Whitehead Vice ChairDenise Watlington Secretary

Lawrence Harris MemberJulianne Shinnick MemberJames Robertson Board Liaison

The Supervisory Committee welcomes comments and suggestions from the membership to improve Credit Union services. These comments are vital for the Committee to meet its responsibilities. If requested, the confidentiality of writers will be protected. If you have a comment or suggestion, please address it to:

SDFCU Supervisory Committee P.O. Box 1741 Alexandria, VA 22313-1741

COMMENTS AND SUGGESTIONS FROM MEMBERS


BOARD OF DIRECTORSMarlene E. Schwartz Chairman

Robert B. Petersen Vice-Chairman

Renee DeVigne Secretary

Harold GeiselTreasurer

Yemi Adigun

Max Aguilar

Hattie Jones

James E. Robertson

Carroll A. Thomas

EXECUTIVE TEAMJan N. RocheChief Executive Officer

Floyd MatsudaChief Information Risk Officer

Randy McClintockChief Financial Officer

Bill ThorlaChief Operating Officer

MANAGING DIRECTORSDonald DiMatteo Managing Director, Lending

Michael HunterManaging Director, Internal Audit

Justin MelanderManaging Director, Human Resources & Administration

Karen O’Connor-Joyner Managing Director, Funds Management

Joan Anne Pendleton Managing Director, Operational Support Services

DIRECTORSBrandon Barhorst Director, Information Security & Risk Mgmt.

Maryrose BernabeDirector, Member Contact Center

Kevin EveretteDirector, Branch Operations

Deborah Frink-ClantonDirector, Accounting

Victor HallSr. Director, Retail Delivery

Jay Luo Director, Information Technology

Michael MorrisDirector, Membership Development

Gladys PerezSr. Director, Marketing & Membership Dev.

Veronica TrottaDirector, Strat. Analytics & Process Reengineering

Chuck Volper Controller

MANAGERSMariem BaichManager, Human Resources

Melissa BarczikManager, Loss Prevention

Cynthia Chamberlain-Weatherspoon Branch Sales Manager

Timothy ComeauManager, Payment Strategy

Jimmie Dobbs Jr. Manager, Digital Product

Peter Gerlach-MackBranch Sales Manager

Catharine GilloglyManager, Real Estate Lending

Mira Hairston-SimsManager, Electronic Correspondence Group

Rikki HandyBranch Sales Manager

Tracy HeadenManager, Loan Servicing

Kimberley HunterManager, Membership Development

Angel Iglesias Manager, Accounting

Shalonda Johnson Manager, Collections

Ramon JonesManager, Lending Solutions

Andrew KeenManager, IT Service Delivery

Lilibeth Maraan Branch Sales Manager

Daryle McGheeBranch Sales Manager

Timothy MihillManager, Member Service Center

Karen Monahan Manager, Support Services

Deborah OchsenreiterManager, Business Systems Solutions

LaFonde ProctorManager, Deposit & Checking Account Operation

Caroline Shaffer Manager, Marketing & Communications

Tiffany StevensBranch Sales Manager

Deniece ThompsonExecutive Office Manager

Daniel VromanManager, Compliance

Wing YuenManager, Training & Development

SDFCU MANAGEMENT TEAMAS OF 4/1/2021

STATE DEPARTMENT FEDERAL CREDIT UNION

FINANCIAL STATEMENTS

DECEMBER 31, 2020 AND 2019 (With Independent Auditor’s Report Thereon)

Insight. Oversight. Foresight.®

Known Internationally as Moore Doeren Mayhew, P.C. An Independent Firm Associated With Moore Global Network Limited.

12060 S.W. 129th Court, Ste. 201 Miami, Florida 33186-4582

305.232.8272 doeren.com

Independent Auditor’s Report March 25, 2021 To the Supervisory Committee and Board of Directors of State Department Federal Credit Union

Report on the Financial Statements We have audited the accompanying financial statements of State Department Federal Credit Union, which comprise the statements of financial condition as of December 31, 2020 and 2019, and the related statements of income, comprehensive income, members’ equity and cash flows for the years then ended, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

To the Supervisory Committee and Board of Directors of State Department Federal Credit Union Page 2

Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of State Department Federal Credit Union as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Doeren Mayhew Doeren Mayhew Miami, FL

Assets 2020 2019 Cash and cash equivalents $90,489,495 $38,803,992Automated Clearing House (ACH) receivable 39,707,039 48,608,059 Investments:

Available-for-sale debt securities (Note 2) 960,726,549 727,737,843Equity 1,479,626 1,458,551

Loans to members, net of allowance for loan losses (Note 3) 1,194,987,415 1,202,779,106Accrued interest receivable 5,156,976 4,920,268Other receivables 5,732,981 4,768,374Federal Home Loan Bank (FHLB) stock 6,286,700 7,485,200Prepaid and other assets 4,271,056 4,157,180Split dollar life insurance (SDLI) 19,232,442 19,221,258Credit union owned life insurance (COLI) 44,361,392 43,213,862Property and equipment, net (Note 4) 19,938,091 20,274,454Net defined benefit plan asset 34,086,933 28,793,545National Credit Union Share Insurance Fund (NCUSIF) deposit 16,202,349 13,827,862

Total assets $2,442,659,044 $2,166,049,554

Liabilities and Members' Equity

Liabilities:Members' shares and savings accounts (Note 5) $2,079,908,215 $1,802,646,940Borrowed funds (Note 6) 102,051,220 134,076,502Accrued expenses and other liabilities 15,038,097 13,814,632

Total liabilities 2,196,997,532 1,950,538,074 Commitments and contingent liabilities Members' equity:

Regular reserve 6,315,918 6,315,918Undivided earnings 229,659,842 217,170,836Accumulated other comprehensive income/(loss) 9,685,752 (7,975,274)

Total members' equity 245,661,512 215,511,480

Total liabilities and members' equity $2,442,659,044 $2,166,049,554


STATEMENTS OF FINANCIAL CONDITIONAS OF DECEMBER 31, 2020 AND 2019

See accompanying notes to the financial statements.

- 3 -

2020 2019Interest income:

Loans to members $52,931,475 $54,158,998Investments 16,039,579 16,719,038

Total interest income 68,971,054 70,878,036

Interest expense:

Members' shares and savings accounts 17,616,926 16,394,726Borrowed funds 2,913,780 4,480,139

Total interest expense 20,530,706 20,874,865

Net interest income 48,440,348 50,003,171

Provision for loan losses 7,561,998 4,157,791

Net interest income after provision for loan losses 40,878,350 45,845,380 Non-interest income:

Interchange income 6,262,103 6,800,549Fees and charges 2,252,138 2,727,926Other income 4,146,766 3,882,152Rental income 1,640,386 1,721,853

Total non-interest income 14,301,393 15,132,480

Non-interest expense:Compensation and benefits 20,205,217 19,976,035Office operations 12,397,030 12,463,645Loan servicing 4,534,399 5,375,113Other expense 3,403,537 3,309,911Office occupancy 2,150,554 2,125,985

Total non-interest expense 42,690,737 43,250,689

Net income $12,489,006 $17,727,171

STATEMENTS OF INCOME


YEARS ENDED DECEMBER 31, 2020 AND 2019


- 4 -

2020 2019

Net income $12,489,006 $17,727,171

Other comprehensive income:Available-for-sale investments:

Net unrealized holding gains on available-for-sale investments 16,263,419 8,498,355

Reclassification adjustment for net investment gains included in net income (1,024,777) (698,604)

Net change in available-for-sale investments 15,238,642 7,799,751

Defined benefit plan:Gains from changes in actuarial assumptions 2,422,384 3,753,231 Amortization of unrecognized net losses from changes

in actuarial assumptions — 800,192 Net change in defined benefit plan 2,422,384 4,553,423

Other comprehensive income 17,661,026 12,353,174

Comprehensive income $30,150,032 $30,080,345


STATEMENTS OF COMPREHENSIVE INCOMEYEARS ENDED DECEMBER 31, 2020 AND 2019


- 5 -

Accumulated

Other Regular Undivided ComprehensiveReserve Earnings Income/(Loss) Total

Balance,December 31, 2018 $6,315,918 $199,252,187 ($20,136,970) $185,431,135

Cumulative effect of change in accounting principle — 191,478 (191,478) —

Net income — 17,727,171 — 17,727,171 Other comprehensive income — — 12,353,174 12,353,174 Balance,

December 31, 2019 6,315,918 217,170,836 (7,975,274) 215,511,480 Net income — 12,489,006 — 12,489,006 Other comprehensive income — — 17,661,026 17,661,026 Balance,

December 31, 2020 $6,315,918 $229,659,842 $9,685,752 $245,661,512


STATEMENTS OF MEMBERS' EQUITYYEARS ENDED DECEMBER 31, 2020 AND 2019


- 6 -

2020 2019Cash flows from operating activities:

Net income $12,489,006 $17,727,171 Adjustments to net cash provided from operatingactivities:

Provision for loan losses 7,561,998 4,157,791Depreciation and amortization 2,106,957 2,157,276Gain on sale of available-for-sale investments (1,024,777) (698,604)Net amortization and accretion on

available-for-sale investments 6,290,501 4,890,951 Increase in fair market value of equity investments (21,075) (163,843)Increase in the cash surrender value of SDLI (11,184) (763,740)Increase in the cash surrender value of COLI (1,147,530) (1,115,578)

(Increase)/decrease in:ACH receivable 8,901,020 (20,228,228)Accrued interest receivable (236,708) 109,445 Other receivables (964,607) (569,700)Prepaid and other assets (113,876) (45,145)Net defined benefit plan asset (2,871,004) (1,224,000)

Increase/(decrease) in:Accrued expenses and other liabilities 1,223,465 193,192

Total adjustments 19,693,180 (13,300,183)

Net cash provided from operating activities 32,182,186 4,426,988

STATEMENTS OF CASH FLOWS




- 7 -

2020 2019Cash flows from investing activities:

Net change in loans to members 229,693 (18,326,280)Proceeds from the maturities, sales and repayment of available-for-sale investments 285,108,874 261,851,389 Purchase of available-for-sale investments (508,124,662) (393,977,457)Purchase of equity investments — (212,163)Redemption of FHLB stock 1,198,500 3,408,400 Purchase of property and equipment (1,770,594) (767,066)Increase in NCUSIF deposit (2,374,487) (600,422)

Net cash used in investing activities (225,732,676) (148,623,599) Cash flows from financing activities:

Net change in members' shares and savings accounts 277,261,275 232,394,268 Proceeds from borrowed funds 20,000,000 50,000,000 Repayment of borrowed funds (52,025,282) (132,049,611)

Net cash provided from financing activities 245,235,993 150,344,657 Net change in cash and cash equivalents 51,685,503 6,148,046

Cash and cash equivalents - beginning 38,803,992 32,655,946

Cash and cash equivalents - ending $90,489,495 $38,803,992

Supplemental Information

Interest paid $20,626,091 $21,007,876

Schedule of Non-Cash Transactions

Transfer from available-for-sale investments to equity investments $— $1,082,545


STATEMENTS OF CASH FLOWS

Cash Flows (Continued)



- 8 -


NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019

- 9 -

Note 1 - Nature of Business and Significant Accounting Policies Organization State Department Federal Credit Union (the “Credit Union”) is a cooperative association

organized in accordance with the provisions of the Federal Credit Union Act for the purpose of promoting thrift among, and creating a source of credit for, its members. Participation in the Credit Union is limited to those individuals who qualify for membership. The field of membership is defined by the Credit Union’s Charter and Bylaws.

Use of Estimates The preparation of financial statements in conformity with accounting principles generally

accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenues and expenses for the periods then ended. Actual results could differ from those estimates. Estimates that are particularly susceptible to change include the determination of the allowance for loan losses, the fair value of available-for-sale investments, the fair value of loan servicing assets, the estimate of the defined benefit plan’s projected benefit obligation. The significant accounting principles and policies used in the preparation of these financial statements, together with certain related information, are summarized below.

Concentrations of Credit Risk A significant amount of the Credit Union’s business activity is with members who are employees

or former employees of the U.S. Department of State who work and/or reside in the Washington, D.C. area. Therefore, the Credit Union may be exposed to credit risk by the economic climate of the overall geographical region in which borrowers reside.

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Certain changes in assets and liabilities are reported in a separate component of comprehensive income. Other comprehensive income relates to the change in the unrealized gain on available-for-sale investments and unrealized gains and losses from changes in actuarial assumptions and amortization related to the defined benefit pension plan. When available-for-sale investments are sold, the gain or loss realized on the sale is reclassified from accumulated other comprehensive income/(loss) to the gain/(loss) on sale of investment securities reported in the statements of income. Amortization of the unrealized gain or loss related to the defined benefit pension plan is reclassified from accumulated other comprehensive gain/(loss) to compensation and benefits expense in the statements of income.



- 10 -

Note 1 - Nature of Business and Significant Accounting Policies (Continued)

Accounting Standards Adopted in 2019 In 2019, the Credit Union adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. ASU No. 2016-01 changes the accounting for certain equity securities requiring them to be recorded at fair value with unrealized gains or losses reflected in earnings. The Credit Union adopted the ASU using a modified retrospective approach in the first quarter of 2019 and recorded a cumulative-effect adjustment as of January 1, 2019, that decreased undivided earnings by approximately $191,000 as a result of a transition adjustment to reclassify net unrealized losses on equity securities from accumulated other comprehensive loss to undivided earnings.

Cash and Cash Equivalents For purposes of reporting cash flows, cash and cash equivalents includes cash on hand, amounts

due from banks (including cash items in the process of clearing) and interest-bearing deposits in banks with an original maturity of 90 days or less including overnight deposits. Amounts due from banks and corporate credit unions may, at times, exceed federally insured limits.

Automated Clearing House (ACH) Receivable This ACH receivable represents funds due from third parties for payrolls which have been posted

to members’ accounts. The receivable is generally collected within two to three business days and the risk of loss is considered low.

Available-for-Sale Investments

Debt securities are classified as available-for-sale when the Credit Union anticipates that the investments could be sold in response to rate changes, prepayment risk, liquidity, availability of and the yield on alternative investments and other market and economic factors. These debt securities are reported at fair value. Unrealized gains and losses on available-for-sale investments are reported as a separate component of members’ equity. Investments are adjusted for the amortization of premiums and accretion of discounts as an adjustment to interest income on investments over the term of the investment.

Unrealized gains and losses on available-for-sale investments are recognized as direct increases or decreases in other comprehensive income. Premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Declines in the estimated fair value of available-for-sale investments below their cost that are other-than-temporary are reflected as realized losses in the statements of income.



- 11 -

Note 1 - Nature of Business and Significant Accounting Policies (Continued) Available-for-Sale Investments (Continued)

Factors affecting the determination of whether an other-than-temporary impairment (OTTI) has occurred include, among other things: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) that the Credit Union does not intend to sell these securities, and (4) it is more likely than not that the Credit Union will not be required to sell before a period of time sufficient to allow for any anticipated recovery in fair value. Gains and losses on the sale of securities are recorded on the trade date and the costs of securities sold are determined using the specific identification method. Unrealized losses on municipal bonds are reviewed quarterly for indicators of OTTI.

Equity Investments Equity investments are comprised of mutual funds and are measured at fair value. Changes in the fair value of equity investments are included in gain on investments in the statements of income, while dividends received are included in interest income on investments in the statements of income.

Transfers of Financial Assets

Transfers of financial assets or a participating interest in an entire financial asset are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Credit Union, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Credit Union does not maintain effective control over the transferred assets through an agreement to repurchase them before maturity.

Loans to Members Loans that the Credit Union has the intent and ability to hold for the foreseeable future are stated

at unpaid principal balances, less an allowance for loan losses and net deferred loan origination fees and costs. Interest on loans to members is recognized over the terms of the loans and is calculated on principal amounts outstanding.

The accrual of interest on loans is discontinued at the time the loan is 90 days delinquent unless

the loan is well-secured and in the process of collection. Past due status is based on contractual terms of the loan. In all cases, loans are placed on non-accrual or charged off at an earlier date if collection of principal or interest is considered doubtful.



- 12 -

Note 1 - Nature of Business and Significant Accounting Policies (Continued) Loans to Members (Continued) All interest accrued but not collected for loans that are placed on non-accrual or charged off is

reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Certain direct loan origination fees and costs are deferred and recognized as an adjustment to interest income over the contractual life of the loans.

Allowance for Loan Losses

The allowance for loan losses (allowance) is an estimate of loan losses inherent in the Credit Union’s loan portfolio. The allowance is established through a provision for loan losses which is charged to expense. Loan losses are charged off against the allowance when the Credit Union determines the loan balance to be uncollectible. Cash received on previously charged-off amounts is recorded as a recovery to the allowance.

The allowance is evaluated on a regular basis by management and is based upon management’s periodic assessment of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. For purposes of determining the allowance, the Credit Union has segmented certain loans in the portfolio by product type. Loans are divided into the following segments: Consumer, Real Estate and Commercial. The Credit Union further disaggregates the consumer and real estate segments into classes based on the associated risks within those segments. Consumer loans are divided into five classes: Auto, Credit cards, Personal, Moneyline (personal line of credit) and Share secured. Real estate loans are divided into two classes: First mortgage and Home equity. The allowance consists of specific and general components. The specific component covers impaired loans and specific allowances are established for these loans based on a thorough analysis of the most probable source of repayment, including the present value of the loan’s expected future cash flows, the loan’s estimated market value, or the estimated fair value of the underlying collateral. The general component covers non-impaired loans and is based on historical losses adjusted for current factors. This actual loss experience is adjusted for economic factors based on the risks present for each portfolio segment or class of loans.



- 13 -


Allowance for Loan Losses (Continued) These economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations. These factors are inherently subjective and are driven by the repayment risk associated with each portfolio segment. The Credit Union maintains a separate general valuation allowance for each portfolio segment. Consumer and Real Estate Segment Allowance Methodology For consumer and real estate loans not individually evaluated for impairment, the Credit Union determines the allowance on a collective basis utilizing historical and forecasted losses to represent the best estimate of inherent losses existing at the measurement date. Loans are pooled, generally by loan types with similar risk characteristics. As of December 31, 2020 and 2019, the historical loss time frame used for each class was 24 months.

Commercial Segment Allowance Methodology

Commercial loans are specifically reviewed by management for impairment. Based on management’s credit quality risk assessment and analysis of leading predictors of losses existing as of the measurement date, loan losses are estimated. These loss estimates are adjusted, as appropriate, based on additional analysis of long-term average loss experience compared to previously forecasted losses, external loss data, or other risks identified from current economic conditions and credit quality trends. For loans where the specific review process resulted in no estimated losses, the Credit Union utilizes a peer group loss factor to estimate loan losses within the commercial loan portfolio. Impaired Loans A loan is considered impaired when, based on current information and events, it is probable that the Credit Union will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration of all the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.



- 14 -


Allowance for Loan Losses (Continued) Impaired Loans (Continued) Impairment is measured on a loan-by-loan basis for loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral, less costs to sell, if the loan is collateral dependent. A loan is collateral dependent if its repayment is expected to be provided solely by the underlying collateral. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Credit Union does not separately identify individual consumer loans for impairment disclosure, unless such loans are the subject of a restructuring agreement. Troubled Debt Restructurings (TDRs) Under certain circumstances, the Credit Union will provide borrowers relief through loan restructurings. A loan restructuring represents a TDR if for economic or legal reasons related to the borrower's financial difficulties the Credit Union grants a concession to the borrower that it would not otherwise consider. Restructured loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms. Loans that are reported as TDRs are considered impaired and measured for impairment as described above. TDR activity was immaterial for disclosure for the years ended December 31, 2020 and 2019. TDR Designation and COVID-19 Loan Modifications On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law. Section 4013 of the CARES Act, “Temporary Relief From Troubled Debt Restructurings,” provided financial institutions the option to temporarily suspend certain requirements under GAAP related to TDRs until December 31, 2020 to account for the effects of COVID-19. On December 27, 2020, the 2021 Consolidated Appropriations Act was signed into law, extending this option until January 1, 2022. On April 7, 2020, regulatory agencies issued a statement, “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working With Customers Affected by the Coronavirus (Revised)” (Statement), to encourage financial institutions to work prudently with borrowers and to describe the agencies’ interpretation of how accounting rules under Accounting Standards Codification (ASC) 310-40, “Troubled Debt Restructurings by Creditors,” apply to certain COVID-19-related modifications. The regulatory agencies have confirmed with staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not TDRs.



- 15 -


Allowance for Loan Losses (Continued)

TDR Designation and COVID-19 Loan Modifications (Continued) Under the guidance, modifications should be short term in nature (e.g., six-months or less) and COVID-19 related. Subsequent modifications should be re-evaluated. The presumption is that the borrower would not be experiencing financial difficulty had it not been for COVID-19. Therefore, if the borrower is not current for reasons other than COVID-19 or is requesting a long term modification, the traditional TDR designation may apply. Further, the agencies’ examiners will exercise judgment in reviewing loan modifications, including TDRs, and will not automatically adversely risk rate credits that are affected by COVID-19, including those considered TDRs. The Statement also provides guidance on past due reporting, non-accrual loans and charge-offs among other items. Given the uncertainty in general related to the ultimate impact of COVID-19, the impact of loans modified under this guidance is unknown. Consumer and Real Estate Credit Quality Indicators

The majority of the Credit Union’s consumer and residential loan portfolio comprises secured loans that are evaluated at origination on a centralized basis against standardized underwriting criteria. The ongoing measurement of credit quality of the consumer and residential loan portfolios is largely done on an exception basis. If payments are made on schedule, as agreed, then no further monitoring is performed. However, if delinquency occurs, the delinquent loans are turned over to the Credit Union’s collections department for resolution, which generally occurs fairly rapidly and often through repossession and foreclosure. Credit quality for the entire consumer and residential loan portfolio is measured by the periodic delinquency rate, nonaccrual amounts, and actual losses incurred. The Credit Union evaluates the credit quality of loans in the consumer and real estate loan portfolios based primarily on the aging status of the loan and payment activity. Accordingly, nonaccrual loans are considered to be in a nonperforming status for purposes of credit quality evaluation. Commercial Credit Quality Indicators

The Credit Union categorizes commercial loans into risk categories based on relevant information about the ability of the borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, and current economic trends among other factors. These credit quality indicators are used to assign a risk rating to each individual credit. The risk ratings can be grouped into eight major categories, defined as follows:



- 16 -


Allowance for Loan Losses (Continued) Commercial Credit Quality Indicators (Continued)

Rating

1. Secured loan with no identified risk. 2. Strongest credit - a strong credit with no existing or known potential weaknesses deserving

management’s close attention. 3. Average risk - borrower is a reasonable credit risk and demonstrates the ability to repay the

debt from normal business operations. Risk factors may include reliability of margins and cash flows, liquidity, dependence on a single product or industry, cyclical trends, depth of management, or limited access to alternative financing sources. Historic financial information may indicate erratic performance, but current trends are positive.

4. Pass but watch - a loan that otherwise meets the definition of a standard or minimum

acceptable quality loan, but which requires more than normal attention due to any of the following items: deterioration of borrower financial condition less severe than those warranting more adverse grading, deterioration of repayment ability and/or collateral value, increased leverage, adverse effects from a downturn in the economy, local market or industry, adverse changes in local or regional employer, management changes (including illness, disability, and death), and adverse legal action. Payments are current per the terms of the agreement. If conditions persist or worsen, a more severe risk grade may be warranted.

5. Special mention (weaknesses noted) - a loan that has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Credit Union’s position at some future date. Special mention loans are not adversely classified and do not expose the Credit Union to sufficient risk to warrant adverse classification.

6. Substandard (probable loss) - a loan that is not adequately protected by the current sound

worth and paying capacity of the borrower or the value of the collateral pledged, if any. Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Well-defined weaknesses include a lack of marketability, inadequate cash flow or collateral support, failure to complete construction on time or a project’s failure to fulfill economic expectations. They are characterized by the distinct possibility that the Credit Union will sustain some loss if the deficiencies are not corrected.



- 17 -


Allowance for Loan Losses (Continued) Commercial Credit Quality Indicators (Continued)

7. Doubtful - a loan that has all the weaknesses inherent in those classified as substandard with

the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable.

8. Loss - Charge-off.

Loan Charge-off Policies

Loan losses are charged off against the allowance when the Credit Union determines the loan balance to be uncollectible. Loans are typically charged off no later than 90 days past due, unless they are in foreclosure. Past due status is based on contractual terms of the loan. In all cases, loans are placed on non-accrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

Mortgage Servicing Rights

Mortgage servicing assets are recognized when rights are acquired through the sale of financial assets and are measured at fair value at the date of transfer. Fair value is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds, and default rates and losses.

Capitalized servicing rights are included in prepaid and other assets, reported at amortized cost,

and are amortized to non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. Service fee income is calculated based on a contractual percentage of the outstanding principal balance of the loans being serviced. The amortization of mortgage servicing rights is netted against loan servicing fee income.

Federal Home Loan Bank (FHLB) Stock As a member of the FHLB, the Credit Union is required to invest in stock of the FHLB. The

FHLB stock is carried at cost and its disposition is restricted. Based on its restricted nature, no ready market exists for this investment and it has no quoted market value.



- 18 -


Property and Equipment Land is carried at cost. Buildings and equipment are carried at cost, less accumulated

depreciation. Depreciation is computed principally by the straight-line method based upon the useful lives of the related assets. The cost of leased assets and leasehold improvements is amortized using the straight-line method over the term of the lease, or the estimated life of the asset, whichever is less. The Credit Union reviews property and equipment (long-lived assets) for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Maintenance, repairs, and minor alterations are charged to current operations as expenditures occur and major improvements are capitalized.

National Credit Union Share Insurance Fund (NCUSIF) Deposit The deposit in the NCUSIF is in accordance with National Credit Union Administration (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 would be refunded to the credit union 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. The NCUSIF deposit is required to be periodically reviewed for impairment.

Members’ Shares and Savings Accounts Members’ shares are the savings deposit accounts of the owners of the Credit Union. Share

ownership entitles the members to vote in annual elections of the Board of Directors. Irrespective of the number of shares owned, no member has more than one vote. Members’ shares are subordinated to all other liabilities of the Credit Union upon liquidation. Interest on members’ shares and savings accounts is based on available earnings at the end of an interest period and is not guaranteed by the Credit Union. Interest rates on members’ share accounts are set by the Board of Directors, based on an evaluation of current and future market conditions.

Borrowed Funds The Credit Union maintained borrowed funds outstanding from the FHLB as of December 31,

2020 and 2019. All borrowings are collateralized by pledged securities. Employee Benefits

See Note 12 for significant accounting policies and other key information on employee benefit assets, including split-dollar life insurance, institution-owned life insurance and net defined benefit plan assets.



- 19 -


Regular Reserve The Credit Union is required to maintain a statutory reserve (regular reserve) in accordance with

the Federal Credit Union Act. This statutory reserve represents a regulatory restriction and is not available for the payment of interest.

Fees and Charges The Credit Union earns fee and commission income from a range of services it provides to its

members. Deposit fee income and interchange fee income are earned on the execution of financial services performed. This includes fees arising from 1) Participating in transactions with members and third-party financial intuitions, such as interchange fee income for debit and credit card transaction handling and member use a third-party’s ATM; 2) Certain services initiated or requested by the member, including paper statement delivery fees, overdrawn account charges, insufficient funds charges, and stop payment fees.

Rental Income Rental income is recognized on a straight-line basis over the life of the underlying lease terms. Income Taxes

The Credit Union is exempt, by statute Internal Revenue Code Section 501(c)(14), from federal and state income taxes. Reclassification Certain amounts reported in the 2019 financial statements have been reclassified to conform with the 2020 presentation. Total equity and net income are unchanged due to these reclassifications. Recent Accounting Pronouncements Lease Accounting

In February 2016, the FASB issued ASU No. 2016-02, Leases, which is intended to increase transparency and comparability of accounting for lease transactions. The ASU will require lessees to recognize most leases on the balance sheet as lease assets and lease liabilities and will require both quantitative and qualitative disclosures regarding key information about leasing arrangements. Lessor accounting is largely unchanged. The guidance is effective January 1, 2022 with an option to early adopt.



- 20 -

Note 1 - Nature of Business and Significant Accounting Policies (Continued) Recent Accounting Pronouncements (Continued) Accounting for Financial Instruments - Credit Losses

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses. The ASU introduces a new accounting model, the Current Expected Credit Losses (CECL) model, which requires earlier recognition of credit losses. The FASB’s CECL model utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity securities and other receivables at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. For available-for-sale securities where fair value is less than cost, credit-related impairment, if any, will be recognized in an allowance for credit losses and adjusted each period for changes in expected credit risk. This model replaces the multiple existing impairment models, which generally require that a loss be incurred before it is recognized.

The CECL model represents a significant change from existing models and may result in material changes to the Credit Union’s accounting for loans. The Credit Union has not determined the effect this ASU will have on its financial statements and its related disclosures. This ASU will be effective for the Credit Union on January 1, 2023. Early application is permitted for annual periods beginning January 1, 2019.

Subsequent Events

Management has evaluated subsequent events through March 25, 2021, the date the financial statements were available to be issued. No significant such events or transactions were identified.



- 21 -

Note 2 - Available-for-Sale Investments The following table presents the amortized cost and estimated fair value of debt securities as of

December 31, 2020: Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Available-for-sale:

Mortgage-backed securities $479,985,581 $4,609,871 ($2,015,321) $482,580,131 Collateralized mortgage

obligations (CMOs) 337,758,295 8,204,775 (768,185) 345,194,885

SBA securities 22,756,311 — (208,517) 22,547,794

Taxable municipal bonds 106,278,085 4,151,077 (25,423) 110,403,739 Total $946,778,272 $16,965,723 ($3,017,446) $960,726,549

The following table presents the amortized cost and estimated fair value of debt securities as of December 31, 2019: Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value

Mortgage-backed securities $675,042,699 $3,752,821 ($4,340,623) $674,454,897 SBA securities 32,789,983 3,726 (339,574) 32,454,135 Taxable municipal bonds 21,195,526 150,429 (517,144) 20,828,811 Total $729,028,208 $3,906,976 ($5,197,341) $727,737,843



- 22 -

Note 2 - Available-for-Sale Investments (Continued) The amortized cost and estimated fair value of debt securities as of December 31, 2020, by

contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Available-for-sale Amortized Fair Cost Value Within 1 year $— $— 1-5 years 1,944,156 2,104,331 5-10 years 44,010,677 46,398,794 Over 10 years 60,323,252 61,900,614 Mortgage-backed securities 479,985,581 482,580,131 CMOs 337,758,295 345,194,885 SBA securities 22,756,311 22,547,794 Total $946,778,272 $960,726,549

Information pertaining to investments with gross unrealized losses as of December 31, 2020,

aggregated by investment category and length of time that individual investments have been in a continuous loss position follows:

Less than 12 Months 12 Months or Longer Total

Gross Gross Gross

Fair Unrealized Fair Unrealized Fair Unrealized Value Losses Value Losses Value Losses Available-for-sale: Mortgage-backed securities $169,365,643 ($1,541,334) $57,612,911 ($473,987) $226,978,554 ($2,015,321) CMOs 93,772,743 (768,185) — — 93,772,743 (768,185) SBA securities 3,449,025 (11,736) 19,098,769 (196,781) 22,547,794 (208,517) Taxable municipal bonds 8,236,504 (25,423) — — 8,236,504 (25,423) Total $274,823,915 ($2,346,678) $76,711,680 ($670,768) $351,535,595 ($3,017,446)



- 23 -

Note 2 - Available-for-Sale Investments (Continued)

Information pertaining to investments with gross unrealized losses as of December 31, 2019, aggregated by investment category and length of time that individual investments have been in a continuous loss position follows:

Less than 12 Months 12 Months or Longer Total

Gross Gross Gross

Fair Unrealized Fair Unrealized Fair Unrealized Value Losses Value Losses Value Losses

Available-for-sale: Mortgage-backed securities $228,768,058 ($1,604,971) $241,072,128 ($2,735,652) $469,840,186 ($4,340,623) SBA securities 31,456,005 (339,574) — — 31,456,005 (339,574) Taxable municipal bonds — — 16,479,220 (517,144) 16,479,220 (517,144) Total $260,224,063 ($1,944,545) $257,551,348 ($3,252,796) $517,775,411 ($5,197,341)

Unrealized losses on securities issued by the U.S. Government and its Agencies have not been

recognized into income because of the implicit guarantee of the principal balances of these securities by the U.S. Government and its Agencies. The decline in fair value is primarily due to differences between security yields and market interest rates. Additionally, the decline in fair value is expected to be recovered as securities approach their maturity date and/or market rates decline. Management has the ability and intent to hold these securities through to recovery of fair value, which may be maturity. Unrealized losses taxable municipal bonds are reviewed monthly for indicators of other-than-temporary impairment.

Proceeds from the sales of investments classified as available-for-sale approximated

$268,481,000 and $257,145,000 during the years ended December 31, 2020 and 2019, respectively. Gross gains of approximately $1,025,000 and $699,000 were realized from these sales during the years ended December 31, 2020 and 2019, respectively.

Note 3 - Loans to Members

2020 2019Consumer:

Auto $250,976,191 $252,250,465Credit cards 83,106,496 87,039,407Personal 45,332,929 49,070,542Moneyline 8,191,816 9,647,779Share secured 990,753 1,196,246

388,598,185 399,204,439 Real Estate:

First mortgage 698,295,478 679,886,788Home equity 103,478,637 115,374,465

801,774,115 795,261,253 Commercial:

Real estate 14,163,324 14,421,57714,163,324 14,421,577

1,204,535,624 1,208,887,269Less: Allowance for loan losses (9,548,209) (6,108,163)

Loans to members, net $1,194,987,415 $1,202,779,106


NOTES TO THE FINANCIAL STATEMENTSDECEMBER 31, 2020 AND 2019

The composition of loans to members as of December 31, 2020 and 2019 is as follows:

- 24 -

Note 3 - Loans to Members (Continued)

Allowance for Loan Losses

Consumer Real Estate Commercial Total

$4,425,290 $1,624,886 $57,987 $6,108,163 (5,208,377) (297,658) — (5,506,035)1,309,601 74,482 — 1,384,083 5,369,190 1,898,514 294,294 7,561,998

$5,895,704 $3,300,224 $352,281 $9,548,209

$— $47,569 $— $47,569

5,895,704 3,252,655 352,281 9,500,640

$5,895,704 $3,300,224 $352,281 $9,548,209


$— $4,688,196 $— $4,688,196

388,598,185 797,085,919 14,163,324 1,199,847,428

Total loans $388,598,185 $801,774,115 $14,163,324 $1,204,535,624

Allowance for loan losses:

Beginning allowanceCharge-offsRecoveriesProvision for loan losses

Ending allowance

Ending balance, individuallyevaluated for impairment

Ending balance, collectively evaluated for impairment

Loans:

Ending balance, individuallyevaluated for impairment

The following table presents the activity in the allowance and a summary of the allowance byportfolio segment as of and for the year ended December 31, 2020:



The following table presents a summary of the recorded investment in loans by portfolio segmentas of December 31, 2020:

Ending balance, collectively evaluated for impairment

Ending allowance

- 25 -


Allowance for Loan Losses (Continued)


$3,881,208 $1,449,167 $191,135 $5,521,510 (5,026,343) (276,132) (293) (5,302,768)1,462,863 266,440 2,327 1,731,630 4,107,562 185,411 (135,182) 4,157,791

$4,425,290 $1,624,886 $57,987 $6,108,163

$— $229,681 $— $229,681

4,425,290 1,395,205 57,987 5,878,482

$4,425,290 $1,624,886 $57,987 $6,108,163


$— $6,053,704 $— $6,053,704

399,204,438 789,207,550 14,421,577 1,202,833,565

Total loans $399,204,438 $795,261,254 $14,421,577 $1,208,887,269

DECEMBER 31, 2020 AND 2019

The following table presents the activity in the allowance and a summary of the allowance byportfolio segment as of and for the year ended December 31, 2019:

Loans:

Ending balance, individually

Ending balance, collectively

Ending allowance

Ending balance, individually

Ending balance, collectively

Ending allowance

The following table presents a summary of the recorded investment in loans by portfolio segmentas of December 31, 2019:

Provision for loan losses

evaluated for impairment



Allowance for loan losses:

Beginning allowanceCharge-offs


Recoveries

NOTES TO THE FINANCIAL STATEMENTS


- 26 -


Impaired Loans

Unpaid AverageRecorded Principal Related Recorded

Investment Balance Allowance Investment

$3,199,797 $3,199,797 $— $3,479,076 $366,242 $366,242 $— $183,121

$972,064 $972,064 $31,397 $1,633,707 $150,093 $150,093 $16,172 $75,047

$4,171,861 $4,171,861 $31,397 $5,112,783 516,335 516,335 16,172 258,168

$4,688,196 $4,688,196 $47,569 $5,370,951



The table below summarizes key information for loans evaluated for impairment as of and for theyear ended December 31, 2020.

Without an allowance recorded:Real Estate:

With an allowance recorded:

First mortgage

Real Estate:First mortgage

Home equity

Home equity

TotalsFirst mortgageHome equity

- 27 -


Impaired Loans (Continued)

Unpaid AverageRecorded Principal Related Recorded

Investment Balance Allowance Investment

$3,758,355 $3,758,355 $— $1,879,178

2,295,349 2,295,349 229,681 1,147,675 $6,053,704 $6,053,704 $229,681 $3,026,853


Total



Without an allowance recorded:


The table below summarizes key information for loans evaluated for impairment as of and for theyear ended December 31, 2019.

With an allowance recorded:


- 28 -


Age Analysis of Past Due Loans

90 Days30-59 Days 60-89 Days and Greater TotalPast Due Past Due Past Due Past Due Current Total Loans

$2,216,401 $637,317 $300,939 $3,154,657 $247,821,534 $250,976,191 370,109 201,334 216,154 787,597 82,318,899 83,106,496 211,197 69,243 94,472 374,912 44,958,017 45,332,929 106,290 34,429 13,949 154,668 8,037,148 8,191,816

— — — — 990,753 990,753 2,903,997 942,323 625,514 4,471,834 384,126,351 388,598,185

3,802,429 — 2,262,650 6,065,079 692,230,399 698,295,478 750,260 49,131 595,501 1,394,892 102,083,745 103,478,637

4,552,689 49,131 2,858,151 7,459,971 794,314,144 801,774,115

— — — — 14,163,324 14,163,324 — — — — 14,163,324 14,163,324

$7,456,686 $991,454 $3,483,665 $11,931,805 $1,192,603,819 $1,204,535,624



Consumer:AutoCredit cardsPersonalMoneyline


The following table presents the aging of the recorded investment in past due loans and loans onnon-accrual as of December 31, 2020:

Home equity

Commercial:

Share secured

Real estate

Total

Loans on which the accrual of interest has been discontinued or reduced approximated$3,484,000 as of December 31, 2020. There were no loans 90 days or more past due and stillaccruing interest as of December 31, 2020.

- 29 -


Age Analysis of Past Due Loans (Continued)

90 Days30-59 Days 60-89 Days and Greater TotalPast Due Past Due Past Due Past Due Current Total Loans

$2,688,256 $604,718 $260,531 $3,553,505 $248,696,960 $252,250,465 591,551 190,233 431,856 1,213,640 85,825,767 87,039,407 450,724 237,898 279,133 967,755 48,102,787 49,070,542 143,722 17,827 78,430 239,979 9,407,800 9,647,779

— — — — 1,196,246 1,196,246 3,874,253 1,050,676 1,049,950 5,974,879 393,229,560 399,204,439

4,674,256 781,473 1,855,039 7,310,768 672,576,020 679,886,788 442,439 61,358 214,038 717,835 114,656,630 115,374,465

5,116,695 842,831 2,069,077 8,028,603 787,232,650 795,261,253

— — — — 14,421,577 14,421,577 — — — — 14,421,577 14,421,577

$8,990,948 $1,893,507 $3,119,027 $14,003,482 $1,194,883,787 $1,208,887,269



AutoCredit cardsPersonalMoneyline

Real Estate:

Share secured

Loans on which the accrual of interest has been discontinued or reduced approximated$3,119,000 as of December 31, 2019. There were no loans 90 days or more past due and stillaccruing interest as of December 31, 2019.

Real estate

Total

Commercial:

Consumer:


The following table presents the aging of the recorded investment in past due loans and loans onnon-accrual as of December 31, 2019:

First mortgageHome equity

- 30 -


Consumer and Real Estate Credit Quality

Performing Nonperforming Performing NonperformingLoans Loans Loans Loans

Consumer:Auto $250,675,252 $300,939 $251,989,933 $260,531 Credit cards 82,890,342 216,154 86,607,551 431,856 Personal 45,238,457 94,472 48,791,409 279,133 Moneyline 8,177,867 13,949 9,569,349 78,430 Share secured 990,753 — 1,196,246 —

387,972,671 625,514 398,154,488 1,049,950 Real Estate:

First mortgage 696,032,828 2,262,650 678,031,750 1,855,039 Home equity 102,883,136 595,501 115,160,427 214,038

798,915,964 2,858,151 793,192,177 2,069,077

Total $1,186,888,635 $3,483,665 $1,191,346,665 $3,119,027

As of December 31, 2019As of December 31, 2020



The Credit Union considers the performance of the loan portfolio and its impact on the allowancefor loan losses. For real estate and consumer loan classes, the Credit Union evaluates creditquality based on the aging status of the loan and payment activity. Accordingly, nonaccrual loansare considered to be in a nonperforming status for purposes of credit quality evaluation.


The following tables present the recorded investment based on performance indication as ofDecember 31, 2020 and 2019:

- 31 -


2020 2019

3 Average risk $13,070,264 $13,321,032 4 Pass, but watch 1,093,060 1,100,545

Total $14,163,324 $14,421,577



Risk Rating

Commercial Credit Quality

The Credit Union considers the performance of the loan portfolio and its impact on theallowance for loan losses. For commercial loan classes, the Credit Union evaluates credit qualitybased on risk ratings assigned to each loan as described in Note 1.

The following table presents the commercial real estate loans recorded investments based on riskrating as of December 31, 2020 and 2019:

- 32 -



- 33 -

Note 4 - Property and Equipment Property and equipment is carried at cost, less accumulated depreciation and amortization, and is

summarized as of December 31, 2020 and 2019 by major classification as follows: 2020 2019

Land $3,476,686 $3,476,686 Buildings 25,638,376 24,824,544 Furniture and equipment 4,177,513 4,010,970 Data processing equipment 13,827,908 13,517,464 Leasehold improvements 1,562,555 1,562,555 Leased assets 110,340 110,340 Construction-in-process 542,967 175,797 49,336,345 47,678,356 Less accumulated depreciation and amortization (29,398,254) (27,403,902)

$19,938,091 $20,274,454

Note 5 - Members’ Shares and Savings Accounts

Members’ shares and savings accounts are summarized as follows as of December 31, 2020 and 2019:

2020 2019

Share accounts $389,514,918 $316,869,755 Share draft accounts 444,164,689 369,394,378 Money market accounts 709,023,998 588,736,289 Individual retirement accounts (IRAs) 31,088,081 30,371,949 Share and IRA certificates 506,116,529 497,274,569

$2,079,908,215 $1,802,646,940

As of December 31, 2020, scheduled maturities of share and IRA certificates are as follows: 2020

Within one year $258,328,477 1 to 2 years 73,340,969 2 to 3 years 46,918,749 3 to 4 years 100,998,595 4 to 5 years 26,529,739

$506,116,529



- 34 -

Note 5 - Members’ Shares and Savings Accounts (Continued)

The aggregate amount of members’ time deposit accounts in denominations of $250,000 or more as of December 31, 2020 was approximately $105,034,000.

Note 6 - Borrowed Funds Federal Home Loan Bank (FHLB)

As a member of the FHLB, the Credit Union has access to a pre-approved secured line of credit with the capacity to borrow up to a certain percentage of the value of its pledged government-back securities, as defined in the FHLB Statement of Credit Policy. The total carrying value of the collateral as of December 31, 2020 and 2019 was approximately $139,725,000 and $181,676,000, respectively. The unused line of credit under this agreement as of December 31, 2020 and 2019 was approximately $33,482,000 and $42,149,000, respectively. The following advances were outstanding as of December 31, 2020 and 2019:

Interest Interest Final Payment

Type Rate Maturity Date Type 2020 2019 Fixed 1.730% March 19, 2020 Monthly $— $20,000,000

Fixed 1.769% December 18, 2020 Monthly — 30,000,000 Variable 1.263% February 26, 2021 Monthly 2,051,220 4,076,502 Variable 0.723%

February 26, 2021 Monthly 20,000,000 — Fixed 2.509% July 15, 2021 Quarterly 30,000,000 30,000,000 Fixed 2.497% July 21, 2021 Quarterly 30,000,000 30,000,000 Fixed 3.184% November 16, 2023 Quarterly 20,000,000 20,000,000

$102,051,220 $134,076,502

The outstanding balances by maturity dates as of December 31, 2020 are as follows:

2020 Within 1 year $82,051,220

1 to 2 years — 2 to 3 years 20,000,000

$102,051,220



- 35 -

Note 6 - Borrowed Funds (Continued) M&T Bank As of December 31, 2020, the Credit Union maintained a $15,000,000 unused secured line of

credit with M&T Bank. In order to access the unused portion of the line of credit, the Credit Union would need to pledge qualifying collateral in accordance with the terms of the agreement. There were no borrowings outstanding or assets pledged under this agreement as of December 31, 2020 or 2019.

Federal Reserve Bank (FRB) Discount Window

As of December 31, 2020 and 2019, the Credit Union maintained appropriate agreements on file

to access liquidity from the FRB Discount Window. In order to access the borrowings, the Credit Union would need to pledge qualifying collateral in accordance with the terms of the agreement. There were no borrowings outstanding or assets pledged under this agreement as of December 31, 2020 or 2019.

Note 7 - Commitments and Contingent Liabilities Off Balance-Sheet Risk The Credit Union is a party to financial instruments with off-balance-sheet risk in the normal

course of business to meet the financing needs of its members and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the statements of financial condition.

Commitments to extend credit are agreements to lend to a member as long as there is no violation

of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses. Since many of the commitments may expire without being fully drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

As of December 31, 2020 and 2019, the total unfunded commitments under such lines of credit

was approximately $642,754,000 and $573,972,000, respectively. The Credit Union evaluates each member’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if any, is based on management’s credit evaluation of the member.



- 36 -

Note 8 - Lessor Commitments The Credit Union owns and leases office space to various tenants. The minimum remaining

noncancelable lease payments receivable approximated the following as of December 31, 2020: Year ending

December 31, Amount 2021 $1,079,000

2022 1,255,000 2023 107,000 2024 108,000 2025 52,000

Thereafter 156,000 $2,757,000

The cost and related accumulated depreciation of the building space that is leased as of December 31, 2020, approximated $8,540,000, and $6,356,000, respectively and $8,882,000 and $6,612,000, as of December 31, 2019, respectively. Rental income under these leases was approximately $1,640,000 and $1,722,000 for the years ended December 31, 2020 and 2019, respectively.

Note 9 - Regulatory Capital The Credit Union is subject to various regulatory capital requirements administered by the

NCUA. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Credit Union’s financial statements. Under capital adequacy regulations and the regulatory framework for prompt corrective action, the Credit Union must meet specific capital regulations that involve quantitative measures of the Credit Union’s assets, liabilities, and certain off-balance-sheet items as calculated under generally accepted accounting practices. The Credit Union’s capital amounts and net worth classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Credit

Union to maintain minimum amounts and ratios (set forth in the table below) of net worth (as defined in NCUA Regulations) to total assets (as defined in NCUA Regulations). Credit unions are also required to calculate a Risk-Based Net Worth Requirement (RBNWR) which establishes whether or not the Credit Union will be considered “complex” under the regulatory framework. The Credit Union’s RBNWR as of December 31, 2020 and 2019 was 6.85% and 6.39% respectively. The minimum requirement to be considered complex under the regulatory framework is 6.00%. Management believes, as of December 31, 2020 and 2019, that the Credit Union meets all capital adequacy requirements to which it is subject.



- 37 -

Note 9 - Regulatory Capital (Continued) As of December 31, 2020, the most recent call reporting period, the NCUA categorized the Credit

Union as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized” the Credit Union must maintain a minimum net worth ratio of 7.00% of assets. There are no conditions or events since that notification that management believes have changed the Credit Union’s category. The Credit Union’s actual and required net worth amounts and ratios are as follows:

As of December 31, 2020 As of December 31, 2019

Amount Ratio/

Requirement

Amount Ratio/

Requirement Actual net worth $235,975,760 9.66% $223,486,754 10.32% Amount needed to be classified as “adequately capitalized” $146,559,543 6.00% $129,962,973 6.00% RBNWR calculated amount $167,322,145 6.85% $138,410,567 6.39% Amount needed to be classified as “well capitalized” $170,986,133 7.00% $151,623,469 7.00%

Because the RBNWR is less than the net worth ratio, the Credit Union retains its original

category. Further, in performing its calculation of total assets, the Credit Union used the quarter end option, as permitted by regulation.



- 38 -

Note 10 - Fair Value Measurements

Accounting standards establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under this guidance are described below.

Basis of Fair Value Measurements

Level 1 - Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets

or liabilities that the Credit Union has the ability to access at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 - Valuation is based on inputs other than quoted market prices included within Level

1 that are observable for the asset or liability, either directly or indirectly. The valuation may be based on quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 - Valuation is generated from model-based techniques use at least one significant

assumption not observable in the market. Level 3 assets and liabilities include financial instruments whose value is determined by using pricing models, discounted cash flow methodologies, or similar techniques.



- 39 -

Note 10 - Fair Value Measurements (Continued)

Assets Measured at Fair Value on a Recurring Basis Assets measured at fair value on a recurring basis are summarized as follows:

Assets at Fair Value as of December 31, 2020 Level 1 Level 2 Level 3 Total Available-for-sale: Mortgage-backed securities $— $482,580,131 $— $482,580,131

CMOs — 345,194,885 — 345,194,885

SBA securities — 22,547,794 — 22,547,794

Taxable municipal bonds — 110,403,739 — 110,403,739

Equity securities 1,479,626 — — 1,479,626 $1,479,626 $960,726,549 $— $962,206,175

Assets at Fair Value as of December 31, 2019 Level 1 Level 2 Level 3 Total Available-for-sale: Mortgage-backed securities $— $674,454,897 $— $674,454,897

SBA securities — 32,454,135 — 32,454,135

Taxable municipal bonds — 20,828,811 — 20,828,811

Equity securities 1,458,551 — — 1,458,551 $1,458,551 $727,737,843 $— $729,196,394



- 40 -

Note 10 - Fair Value Measurements (Continued)

Assets Measured at Fair Value on a Non-Recurring Basis Impaired Loans

Loans for which the Credit Union has measured impairment are generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. The fair value consists of the loan balances less the valuation allowance and/or charge-offs.

Assets measured at fair value on a non-recurring basis are summarized as follows:

Assets at Fair Value as of December 31, 2020 Level 1 Level 2 Level 3 Total Impaired loans $— $— $1,074,588 $1,074,588

Assets at Fair Value as of December 31, 2019 Level 1 Level 2 Level 3 Total Impaired loans $— $— $2,065,668 $2,065,668

Note 11 - Loan Servicing Mortgage loans serviced for others are not included in the accompanying statements of financial

condition. The unpaid principal balances of these loans and the related custodial escrow balances approximate the following as of December 31, 2020 and 2019: 2020 2019 Mortgage loan portfolio serviced for: Federal National Mortgage Association (FNMA) $102,093,000 $130,024,000 Custodial escrow balances $856,000 $959,000



- 41 -

Note 11 - Loan Servicing (Continued)

The following table presents mortgage servicing rights activity and fair value information as of and for the years ended December 31, 2020 and 2019:

2020 2019 Mortgage servicing rights: Balance, beginning of year $820,714 $1,067,958 Capitalization —

216,365 Amortization (577,031) (463,609) Balance, end of year $243,683 $820,714 2020 2019 Fair value of mortgage servicing rights $510,463 $1,031,608

As of December 31, 2020 and 2019, the fair value of mortgage servicing rights was determined by an independent third party using market value discount rates based on the specific characteristics of each pool of loans. The fair value of servicing rights was determined using an average discount rate of 12.0% as of December 31, 2020 and 2019 and an average prepayment speed rate of 10.6% and 10.4% as of years ended December 31, 2020 and 2019, respectively.

Note 12 - Employee Benefits

401(k) Retirement Plan

Credit Union employees who are at least 20 years old and have completed at least one month of service at the Credit Union are eligible to join a 401(k) retirement plan the first of the month following satisfaction of eligibility requirements. The Credit Union contributes a 4% safe-harbor contribution, and a matching contribution equal to 100% of an employee’s elective contributions not to exceed 3% plus 50% of an employee’s elective contributions exceeding 3% not to exceed 4%. Employees are eligible for employer contributions upon joining the plan. Employees are immediately vested in the Credit Union’s safe-harbor contributions, while the matching contributions vest 20% annually and are fully vested after five years of qualifying service. The total expense related to the Credit Union’s 401(k) plan contributions was approximately $1,186,000 and $1,086,000 for the years ended December 31, 2020 and 2019, respectively.



- 42 -

Note 12 - Employee Benefits (Continued)

Split Dollar Life Insurance (SDLI)

The Credit Union entered into split dollar insurance agreements which are a collateral assignment arrangement between the Credit Union and key employees. The agreements involve a method of paying for insurance coverage for the executives by splitting the elements of a life insurance policy. Under the agreements, the executives are the owner of the policies and make a collateral assignment to the Credit Union in return for a loan equal to the amount of premiums to be paid on behalf of the executives plus accrued interest at a specific rate. At the time of death, the Credit Union will be paid the loan amount plus accrued interest and the balance of the insurance benefits will be paid to the executives’ designated beneficiaries.

Credit Union Owned Life Insurance (COLI)

The Credit Union has purchased a series of COLI policies intended to help fund employee benefit costs and provide insurance benefits to the related employees. The policies carry a minimum guaranteed interest rate that could increase in a rising interest rate environment, or strong equity market performance. NCUA Regulation §701.19 permits the investment in otherwise impermissible investments (assets) if the Credit Union can support that the investment is directly related to its obligation under an employee benefit plan obligation and only intends to hold the investment for as long as it has an actual or potential obligation under the employee benefit plan.

Defined Benefit Plan

The Credit Union sponsors a defined benefit pension plan that covers substantially all eligible employees. The Plan was frozen effective August 1, 2006. As a result, participants will not accrue any further benefits based on service or changes in compensation occurring after the effective date of the election to freeze the plan and participants are 100% vested in the frozen benefit accruals.



- 43 -


Defined Benefit Plan (Continued) The following sets forth the funded status of the plan included in the accompanying statements of financial condition and other key information as of December 31, 2020 and 2019: 2020 2019 Change in plan assets: Fair value of plan assets at beginning of year $68,953,106 $58,290,369 Actual return on plan assets 10,401,335 11,861,894 Employer contributions — — Benefits paid (1,203,875) (1,177,992) Settlements — (21,165) Fair value of plan assets at end of year 78,150,566 68,953,106 Projected benefit obligation (44,063,633) (40,159,561)

Funded status $34,086,933 $28,793,545

2020 2019 Accumulated benefit obligation ($44,063,633) ($40,159,561)

2020 2019 Amounts recognized in the statements of financial condition: Noncurrent assets $34,086,933 $28,793,545 Current liabilities — — $34,086,933 $28,793,545

2020 2019 Recognized in accumulated other comprehensive income/(loss):

Unrecognized net loss ($4,262,525) ($6,684,909) Unrecognized prior service cost — — ($4,262,525) ($6,684,909)



- 44 -


Defined Benefit Plan (Continued)

2020 2019 Components of net periodic pension credit: Interest cost $1,222,128 $1,431,936 Expected return on plan assets (4,093,024) (3,456,236) Amortization of unrecognized net income — 800,192 Net periodic pension credit ($2,870,896) ($1,224,108)

2020 2019 Change in accumulated other comprehensive income/(loss):

Accumulated other comprehensive income/(loss) – beginning of year ($6,684,909)

($11,238,332)

Recognized loss — 800,192 Net gain during the year 2,422,384 3,753,231 Total recognized in other comprehensive income 2,422,384 4,553,423 Accumulated other comprehensive income/(loss) – end

of year ($4,262,525) ($6,684,909) 2020 2019 Total recognized in net periodic pension cost and other comprehensive income $5,293,388 $5,777,423

The assumptions used to develop the net period pension cost for the year ended December 31, 2020 and 2019 were as follows: 2020 2019 Discount rate 3.10% 4.14% Expected long-term rate of return on plan assets 6.00% 6.00% Amortization method Straight-Line Straight-Line



- 45 -


Defined Benefit Plan (Continued) The assumptions used to develop the periodic benefit obligation as of December 31, 2020 and 2019 were as follows: 2020 2019 Discount rate 2.32% 3.10% Weighted-average rate of compensation increases n/a - frozen n/a - frozen

The discount rate is determined annually by Credit Union management based on historical data provided by its actuary.

The long-term rate of return on assets is determined by applying historical average investment

returns from published indexes relating to the current allocation of assets in the portfolio.

Plan assets are invested in a broadly diversified combination of equity and bond commingled trust index funds, each with its own investment objectives, investment strategy and risks. The Plan Sponsor retains discretion to determine the appropriate strategic asset allocation versus plan liabilities, as governed by the Plan’s Statement of Investment Policy.

The long-term investment objectives are to maintain plan assets at a level that will sufficiently cover long-term obligations and to generate a return on plan assets that will meet or exceed the rate at which long-term obligations will grow. A broadly diversified combination of equity and fixed income portfolios and various risk management techniques are used to help achieve these objectives. In addition, consideration is paid to each Plan’s funding levels and the Plan Sponsor’s risk tolerance when determining the overall asset allocation. Asset rebalancing normally occurs when the equity and fixed income allocations vary by more than 10% from their respective targets.

The following table sets forth the expected benefit payments as of December 31, 2020:

Year ending December 31,

Amount

2021 $1,509,053 2022 1,535,783 2023 1,570,760 2024 1,643,878 2025 1,680,339

Thereafter 9,444,535 $17,384,348



- 46 -


Defined Benefit Plan (Continued)

The Credit Union has not determined the amount of contribution, if any, to be contributed for the plan year beginning January 1, 2021.

The Credit Union’s weighted-average asset allocations as of December 31, 2020 and 2019 by

asset category are as follows:

2020 2019 Asset category: Common/collective trust – equity 60.00% 58.5% Common/collective trust – fixed income 14.00% 14.6% Mutual funds – fixed income 24.86% 25.6% Cash equivalents 1.14% 1.3% 100.00% 100.0%

The fair value of the Credit Union’s pension plan assets by asset class are as follows: (the three levels of input used to measure fair value are more fully described in Note 10: Fair Value Measurements):

Assets at Fair Value as of December 31, 2020 Level 1 Level 2 Level 3 Total Common/collective trust – equity $— $46,854,799 $— $46,854,799 Common/collective trust – fixed income — 10,985,500 — 10,985,500 Mutual funds – fixed income 19,418,631 — — 19,418,631 Cash equivalents 891,636 — — 891,636 $20,310,267 $57,840,299 $— $78,150,566

Assets at Fair Value as of December 31, 2019

Level 1 Level 2 Level 3 Total Common/collective trust – equity $— $40,333,681 $— $40,333,681 Common/collective trust – fixed income — 10,099,657 — 10,099,657 Mutual funds – fixed income 17,641,981 — — 17,641,981 Cash equivalents 877,787 — — 877,787 $18,519,768 $50,433,338 $— $68,953,106



- 47 -

Note 13 - Changes in Accumulated Other Comprehensive Income/(Loss)

The following table presents the changes in accumulated other comprehensive loss by component for the years ended December 31, 2020 and 2019:

Unrealized Gains/(Losses) on Available-for-Sale

Investments

Defined Benefit Plan Items

Total Balance, December 31, 2018 ($8,898,638) ($11,238,332) ($20,136,970) Other comprehensive income 8,498,355 3,753,231 12,251,586 Amounts reclassified to income statement (890,082) 800,192 (89,890) December 31, 2019 (1,290,365) (6,684,909) (7,975,274) Other comprehensive income 16,454,897 2,422,384 18,877,281 Amounts reclassified to income statement (1,216,255) — (1,216,255) December 31, 2020 $13,948,277 ($4,262,525) $9,685,752

When available-for-sale investments are sold, the gain or loss realized on the sale is reclassified from accumulated other comprehensive income to the gain/(loss) on sale of available-for-sale investments reported in the statements of income. Amortization of the unrealized loss related to the defined benefit pension plan is reclassified from accumulated other comprehensive income/(loss) to other expense in the statements of income.

* * * End of Notes * * *

SDFCU ANNUAL REPORT

Documents

Transcript of SDFCU ANNUAL REPORT