2010 ANNUAL MEETING ADDRESS Thoughts from our CEO and our Chairman of the Board

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1 Texas Bay Area Credit Union Annual Report

2 ANNUAL MEETING AGENDA February 8, 2011 THE ORDER OF OUR ANNUAL MEETING AGENDA IS FIXED BY SECTION 3.03, ARTICLE D OF OUR BY-LAW. The order of business at the annual meeting shall be as follows: 1. Ascertain that a quorum is present. 2. Reading and approval of the minutes of the last meeting. 3. Report of the directors by the chairman of the board of directors, or in his absence by the vice-chairman. 4. Report of the president. 5. Unfinished business. 6. New business, other than election of directors. 7. Election of directors. 8. Adjournment. Note: Chairman may rearrange agenda if so authorized by vote of members present. ANNUAL MEETING ADDRESS Thoughts from our CEO and our Chairman of the Board On May 18, 1936, employees of Houston Sinclair Refinery came together to form a credit union that believed in the idea of financial cooperatives and adhering to deeply rooted values of democracy - the idea of self-help, equality, responsibility, and solidarity - was the best alternative to a traditional banking system. These credit union pioneers followed the principles of voluntary service, open membership, economic participation by members, education and training, autonomy and independence, cooperation among credit unions, and believing that credit union members save together and borrow together. This year, Texas Bay Area Credit Union celebrates our 75th Anniversary! The philosophies that helped formed this credit union are still strong today. Over the last 75 years, your credit union has witnessed some of the proudest American achievements. These achievements include the victory in World War II, the opening of the Golden Gate Bridge, the first commercial flight over the Atlantic, the completion of Mount Rushmore, color TV, polio vaccination, Disneyland, NASA, witnessing the building and collapse of the Berlin Wall, Civil Rights legislation, first man on the moon, and officially ending the Cold War. During the last 75 years, your credit union has survived 13 recessions, including the most recent Great Recession of The Great Recession of 2008 was challenging. However, during this time, your credit union remained committed to our core values of speaking in we can instead of we can t, being honest and truthful, showing respect for others, delivering what we promise, committing fully to a team effort, loyalty, and never forgetting to celebrate accomplishments. This commitment has helped strengthen the credit union even further to meet present and future challenges and opportunities. Although the Great Recession of 2008 was nationally significant, locally, the recession was not as crippling as the one experienced in the mid-1980s. That recession lasted for nearly five years and more than 220,000 jobs were lost. The Great Recession of 2008 in the Houston area lasted about 17 months and experienced significantly fewer jobs lost. Over the last several months, Houston has experienced significant increases in purchasing indexes, rig count, airport passenger traffic, home sales, home prices, trade transactions at the Port of Houston, and payroll employment, all pointing to a rebound in the local economy. Tonight, we celebrate our diamond anniversary. Your credit union s best days are still ahead. As your CEO and Board Chairman, the leadership team and staff have positioned the credit union for future success. With the failure of many national banks, community banks, and the merging of credit unions, your credit union has emerged as one of the financial leaders in the area that would make our founders of this credit union proud. We could not have achieved this without the support of our members. We know that you have many choices when it comes to financial institutions and we are honored that you have chosen Texas Bay Area Credit Union. Our success is built on your level of your participation. Take a moment and ask yourself, are you saving and borrowing enough from Texas Bay Area Credit Union? If not, we are here to help you meet your savings and borrowing needs with a variety of products and services. Together, we look forward to working with you in 2011 and for the next 75 years! Jesse Gutierrez President Rudy Wright Chairman

3 INDEPENDENT AUDITOR S REPORT Supervisory Committee, Texas Bay Area Credit Union Pasadena, Texas August 23, We have audited the accompanying statements of financial condition of Texas Bay Area Credit Union as of June 30,, and the related statements of income, members equity, and cash flows for the year then ended. These financial statements are the responsibility of the Credit Union s Management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by Management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Texas Bay Area Credit Union as of June 30,, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Nearman, Maynard, Vallez, CPAs GROWTH OVER A 5 YEAR SPAN Comparison LOANS $143,636, $144,760, $141,977, $128,883, $123,895,747 $150,000,000 $140,000,000 $130,000,000 $120,000,000 $110,000,000 $100,000,000 $90,000,000 $80,000,000 $70,000,000 $60,000, DEPOSITS $206,032, $200,052, $183,178, $161,851, $150,998,066 $210,000,000 $200,000,000 $190,000,000 $180,000,000 $170,000,000 $160,000,000 $150,000,000 $140,000,000 $130,000,000 $120,000, ASSETS $239,576, $234,477, $216,931, $191,441, $177,179,318 $240,000,000 $230,000,000 $220,000,000 $210,000,000 $200,000,000 $190,000,000 $180,000,000 $170,000,000 $160,000,000 $150,000, MEMBERS 27, , , , ,816 27,000 26,000 25,000 24,000 23,000 22,000 21,000 20,000 19,000 18,

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5 Texas Bay Area Credit Union s history began on May 18, 1936 when it was originally formed as Houston Sinclair Refinery Employees Federal Credit Union. Two hundred twenty five people assembled at Pasadena High School to attend the meeting to form the credit union. The credit union s first meeting was held on June 3, 1936 when credit union officials were elected. L. E. McMakin was elected president, G. L. Hess was elected vice president, W. B. Joseph was elected treasurer, and M. A. Joanen was elected to be the secretary. The Board of Directors requested that the treasurer should be bonded for $ 1,000 as soon as possible. The credit union started its operation from an office inside the refinery plant. At that time, a membership share was set at $ 5 and the maximum deposit limit was set at $ 200. At the same time, the maximum amount for a secured loan was set at $ 200 and the maximum amount for an unsecured loan was $ 50. The dividend rate was set at 6% and was to be paid annually. In 1962, the board of directors voted to change the name to Sinclair Houston Credit Union. In the 1970s, the name was changed to Atlantic Richfield Credit Union and its newest office, at 1301 Hwy 225 in Pasadena, was opened. In the 1990s, Lyondell Federal Credit Union, Mobil Oil Credit Union, and Plant 18 Credit Union merged with Atlantic Richfield Credit Union and the current name, Texas Bay Area Credit Union, was adopted.

6 INCOME & EXPENSE STATEMENT INCOME December Personal Loans 6,873,643 Real Estate Loans 3,140,179 Commercial Loans 60,796 Participation Loans 77,095 Credit Card Loans 756,927 LOAN INCOME $10,908,641 Southwest Corp. FCU 13,460 Certificates of Deposit 794,406 Other Investments 685,662 INVESTMENT INCOME $1,493,529 Fee Income $3,209,044 Other Operating Income 2,734,241 OTHER INCOME $5,943,285 TOTAL INCOME $18,345,454 EXPENSE Employee Compensation & Benefits 6,141,043 Travel/Conference 76,448 Supervision Dues 30,762 Office Occupancy 703,818 Office Operations 3,162,530 Interest on Borrowed Money 205,146 Education/Promotion 542,231 Member Insurance 528,366 Loan Services 510,037 Professional Services 103,706 Miscellaneous Expense 396,538 OPERATIONS EXPENSE $12,400,627 Loan Loss 1,404,658 ODP Loss 26,093 TOTAL EXPENSE $13,831,377 NET income BEFORE DIVIDENDS $4,514,078 DIVIDENDS Shares 117,843 Share Drafts 386,708 Certificates 1,146,324 Money Market 322,800 IRA 654,658 Escrow 0 Christmas Club 236 DIVIDEND EXPENSE $2,628,569 NET After DIVIDENDS $1,885,508 Disposition of Assets ($39) Total Non-Operating Income/(Loss) ($526,660) NET INCOME $1,358,809 CERTIFIED CORRECT Syed Dinar Vice President / Chief Financial Officer

7 STATEMENT OF CONDITION ASSETS December Personal Loans 83,974,370 Real Estate Loans 49,542,344 Commercial Loans 886,524 Participation Loans 1,433,394 Credit Card Loans 7,800,062 Loans to Members $143,636,694 Allowance for Loan Loss (1,290,597) Allowance for ODP Loss (111,243) Accounts Receivable 3,983,443 Cash on Deposit 3,266,140 Southwest Corp FCU 5,865,209 FHLB Checking 149,035 FHLB-Bank Stock 382,300 Certificates of Deposit 50,714,000 Other Investments 13,365,312 investments $70,475,856 NCUSIF Deposit 2,017,468 Prepaid/Deferred Expenses 302,017 Fixed Assets 10,083,657 Accrued Equity-Bank Stock 5,975,825 TNB Bank Stock 537,514 Accrued Income 700,005 all other assets $19,616,487 TOTAL ASSETS $239,576,781 LIABILITIES Accounts Payable 1,519,175 Notes Payable 4,297,100 Deferred Income 0 Accrued Liabilities 1,882,636 accounts payable $7,698,911 Shares 46,201,477 Share Drafts 40,009,792 Certificates 50,332,790 Money Market 39,931,428 IRA 29,433,786 Escrow 70,761 Christmas Club 51,986 member deposits $206,032,019 TOTAL Liabilities $213,730,930 EQUITY Regular Reserves 7,371,544 Undivided Earnings 17,115,498 member CAPITAL $24,487,042 TOTAL EQUITY $24,487,042 NET INCOME $1,358,809 TOTAL LIABILITY & EQUITY $239,576,781 CERTIFIED CORRECT Syed Dinar Vice President / Chief Financial Officer

8 BOARD OF DIRECTORS Chairman Rudy Wright 2011 Vice-Chairman Tom Merchant 2013 Secretary Raymond Andrews 2011 Treasurer John Swanson 2013 Larry Clowers 2011 Fred Bender 2012 Mike Cacciotti 2013 Wayne Otwell 2012 Jeff Barba 2012 Advisory Directors Todd Wise Mark Wygant ADMINISTRATIVE OFFICERS No changes to Senior Management since the last annual report. PRESIDENT & C.E.O. Jesse Gutierrez EXECUTIVE Deena Knox CHIEF FINANCIAL OFFICER Syed Dinar CHIEF LENDING OFFICER Rita Acosta CHIEF TECHNOLOGY OFFICER Dennis Y Barbo Strategic Development and Public Relations Paul Withey BRANCH OPERATIONS Rachel Hunt OFFICE LOCATIONS & CONTACT INFORMATION Fuqua Branch Office Fuqua Street Houston, Texas North Shore Branch Office Wallisville Rd. Houston, Texas Pasadena Branch Office 1301 Highway 225 Pasadena, Texas Mailing Address Fuqua Street Houston, Texas Phone: FAX: Automated Telephone Response Teller: Web Site: webmail@tbacu.org