REPORT OF THE PRESIDENT/C.E.O. By Jeffrey L. Hayes

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1 REPORT OF THE PRESIDENT/C.E.O. By Jeffrey L. Hayes The curtain has closed on fiscal year 2005 and we now review the past year and report. In the 2005 economy we once again watched interest rates begin to climb exciting depositors, yet giving hesitation to borrowers. As in years past the credit union worked hard at making both depositors and borrowers pleased with interest rates offered. Overall deposit balances decreased approximately 1.6% [$633,982], yet the amount of dividend and interest paid out to members increased 8.0% [$65,572]. In comparison, the overall loan portfolio balance increased 3.3% [$1,072,730], but overall interest earned from the loan portfolio increased a mere 1.9% [$38,129], a direct relation to the increase in portfolio dollars and not interest rate increases. Also in 2005 the credit union worked to make additional services available in the form of the new drive-up ATM machine located at the Cherokee Main Office. This new ATM machine works continually providing members with a source of cash withdrawals, account deposits, account transfers, and account balance information after business hours, and on weekends and holidays. Consistently, this ATM location processes an excess of 1,000 transactions each month at no cost to the credit union member. Document imaging, as a source of long-term and off-site document storage, was added to the credit union this past year. Storage of the many files, forms, documents, and other information is a large space-consuming effort. Such information must not only be stored for specified lengths of time, but must be organized in a readily retrievable manner. Further, state examiners and auditors have noted the need for the credit union to improve its off-site storage of such documents in the event of a disastrous event at the credit union. This new process allows all documents to be scanned and electronically imaged in a single computer server, organized into easily retrievable files, with copies backed-up on computer tape for off-site storage. This process not only assists with organization, but also translates into savings from printer usage, paper reduction, file cabinets, and storage boxes, etc. By the time credit union members gather together once again for the annual meeting the curtain will have fully raised on the new fiscal year, As the Fed continues to raise interest rates this is bound to cause challenges for financial institutions. Millions of dollars have been loaned out on the lower interest rates and will be repaid over the coming years. However, we may soon have a need for higher dividend and interest rates on current deposits. Interest margins will be squeezed and net earning negatively impacted. We have already started experiencing this fact. In 2005 the credit union s year-end net earnings reached $145,046, a substantial decrease from the prior year of $250,052. This must be improved. The coming year will be laced with challenges for management and the board of directors. I can assure you that you have skilled management and a strong board that will study the issues at hand and exercise its understanding and skills in successfully meeting the challenges of the coming years. In conclusion, the beauty of the overall organizational structure within the credit union movement, in comparison to alternative financial institutions, is the base doctrine of people helping people. When you have an opportunity to talk with one of your board members please take a moment to thank them for all the time and effort they voluntarily invest into making the credit union work its best for the membership. There is a difference! North Star Community Credit Union 33rd ANNUAL MEETING MINUTES April 9, 2005 The annual meeting of North Star Community Credit Union was held April 9, 2005, at the Western Iowa Tech Conference Center. Dinner began at 6:00 p.m., followed by the business meeting. Call to Order The business meeting was called to order at 7:00 p.m. by Chairman Ralph Semerad. A quorum was ascertained. There were 244 in attendance. Approval of April 17, 2004 Minutes Motion by Joe Draper, second by Leroy Jenness to approve the minutes as written. Passed. Introductions Jeff Hayes introduced the staff. Ralph Semerad introduced the Board of Directors. Elections of Officer Ralph Semerad introduced those running for positions on the Board of Directors, Joe Peterson, Linda Struck, and John Wilson. There were no nominations from the floor. Joe Draper motioned nominations cease. Mike Morrow seconded. Passed. Having no further nominations, Semerad declared unanimous vote. Report of the Chairman Ralph Semerad explained some title changes. He also explained how the credit union paid higher interest rates and lower rates on loans than area banks. He announced North Star has 8,297 members, 2,036 of those being from the Ida Grove branch. He thanked the board for all their hard work. Report of the Chief Financial Officer Joe Peterson explained what the board of directors does. He also talked about a member survey that will be done in the near future. Report of the Audit Committee and Report of Independent Auditor Val Woods reported the credit union is in compliance with regulations. Woods also reported that Petersen & Associates had audited the credit union as of March 31, 2004 and North Star conformed to generally accepted accounting principles. Report of the Credit Committee Linda Struck reported that the credit committee meets monthly to perform its duties, including loan reviews and approvals, etc. She announced that the credit union started a home equity loan. Report of the CEO Jeff Hayes spoke on the differences between a bank and a credit union. He thanked the board for their volunteer work. He announced the credit union had grown 257 members in the past year and added

2 adjoining counties to our field of membership. This increased the credit union s potential members from 45,000 to 270,000. He spoke on new services offered this year, such as home equity loans, new ATM drive-up in Cherokee and document imaging program. He warned the audience of giving out personal information to anyone. Old Business None. New Business Jeff Hayes presented a plaque and gift of appreciation to Laurie Gerstandt for her 20 years of service to the credit union. Members of the Board of Directors were sworn in. Charles Carlson motioned for the meeting to adjourn, seconded by Jerry Chettinger. Meeting adjourned at 7:40 p.m. Entertainment was provided by the Amazing Arthur. Cash prizes were drawn. Respectfully submitted, Laurie Gerstandt Acting Secretary Barb Kratz Secretary Attest: Ralph Semerad Chairman Check out our new look at View product and service information, share and loan rates, contact information, locations, and promotions. There s an online calculator to help figure loan payments and the cost of credit life and credit disability insurance. Make credit union MasterCard payments online and reorder checks. A link to our Home & Family Finance Resource Center links you to an online guide featuring facts about topics that matter to you, from credit card fraud to saving for your children s education. Another link takes you to MEMBERS Financial Services, providing you with insurance and investment opportunities. And remember, you have access to your accounts 24 hours a day and 7 days a week through our home banking system, CU Online 24/7. View account balances, view and print statements, transfer funds, make loan payments, and apply for loans. Our new site is easy to use, fast, and best of all it s FREE! Log on to today! North Star Community Credit Union s field of membership is now open to all persons living or working in Buena Vista, Cherokee, Clay, Crawford, Ida, Monona, O Brien, Plymouth, Sac, Sioux, and Woodbury counties. Your savings Federally insured to $100,000 NCUA National Credit Union Administration a U.S. Government Agency

3 THERE IS A DIFFERENCE Saturday, April 8, 2006

4 ANNUAL MEETING AGENDA Call to order Ascertainment of Quorum Minutes of the Last Meeting Introductions Elections Report of the Chairman Report of the Chief Financial Officer Report of the Audit Committee Report of the Independent Auditor Report of the Credit Committee Report of the President/C.E.O. Other Business Unfinished Business New Business Oath of Directors Adjournment Entertainment by the Buena Vista University Choir Drawings for cash NORTH STAR COMMUNITY CREDIT UNION STAFF Jeff Hayes President/C.E.O. Laurie Gerstandt Vice President Sandy Gray Branch Manager Lisa Perrin Loan Officer Kristen Weiland Loan Officer Crystal Lukins Loan Officer Jeannette Ott Operations Manager Julie Moye Loan Clerk/Receptionist Karen Wulf Branch Loan Clerk Kallie Morrow Marketing Specialist Debra Erickson Teller Kathy Wittrock Teller Mary Berger Teller Angela Rehse Member Services Representative Angie Schiernbeck Teller Amy Retleff Part-Time Teller Elaine Meyer Teller Anita McClain Teller Allyson Iversen Teller Kara Gunderson Part-Time Teller Tish Hamann Part-Time Teller Jerry Chettinger Custodian Dwight and Mary Newman Custodians REPORT OF THE CHAIRMAN OF THE BOARD On behalf of the Board of Directors, I would like to welcome our members and guests to the 34th Annual Meeting of North Star Community Credit Union. North Star Community Credit Union had a profitable year even though profits were down 41.99% compared to fiscal Membership did grow 2.46% for fiscal During the past year the Credit Union strived to provide good interest rates on CD s and Savings accounts even though the Federal Government kept raising the prime rate. We also held down loan rates in order to better serve the members. These factors led to lower profits during the fiscal 2005 year. I feel the board and staff did an excellent job in providing services to the members. During 2006, the Board will continue to focus on providing good services and interest rates to the members. I would like to thank the members for their support and patience during the past year. Your continued support helps make North Star Community Credit Union successful. I would like to thank the board members for the time they have volunteered during the past year. I look forward to serving you, the members, during the coming year. RALPH SEMERAD Chairman of the Board BOARD OF DIRECTORS Executive Committee Joe Peterson Ralph Semerad Chief Financial Officer Chairman Ron Oman Barb Kratz Vice Chairman Secretary Ron Oman Valerie C. Woods Credit Committee Linda struck Audit Committee Cyndi Rock-Raasch John Wilson Ron Johnson

5 FINANCIAL STATEMENT FOR THE NORTH STAR COMMUNITY CREDIT UNION CHIEF FINANCIAL OFFICER S ANNUAL REPORT ASSETS...12/31/ /31/2004 LOANS...$ 33,687, $ 32,614, ALLOWANCE FOR LOAN LOSS...($ 105,438.97) ($ 111,494.75) CASH IN BANK...$ 780, $ 719, INVESTMENTS...$ 8,590, $ 11,105, FIXED ASSETS...$ 891, $ 832, ACCRUED INTEREST INVESTMENTS...$ 10, $ 13, OTHER ASSETS...$ 99, $ 92, NCUSIF DEPOSIT...$ 404, $ 389, ACCRUED INTEREST - LOANS...$ 99, $ 84, TOTAL ASSETS...$ 44,459, $45,741, LIABILITIES, SAVINGS, EQUITY PROMISSORY NOTES...$ 0.00 $ 831, ACCRUED EXPENSES...$ 32, $ 31, DIVIDENDS PAYABLE...$ 93, $ 61, OTHER LIABILITIES...$ 23, $ 17, TOTAL LIABILITIES...$ 149, $ 941, SHARE CERTIFICATES...$ 21,865, $ 17,855, SHARE ACCOUNTS...$ 14,398, $ 19,200, SHARE DRAFT ACCOUNTS...$ 3,611, $ 3,453, TOTAL SAVINGS,SHARES...$ 39,876, $40,510, LEGAL RESERVES...$ 2,443, $ 2,443, OTHER RESERVES...$ 1,846, $ 1,596, UNDIVIDED EARNINGS...$ 145, $ 250, TOTAL RESERVES & UNDIVIDED EARNINGS...$ 4,434, $ 4,289, TOTAL LIABILITIES, SAVINGS & EQUITY...$ 44,459, $45,741, INCOME INTEREST FROM LOANS...$ 2,083, $ 2,045, INTEREST FROM INVESTMENTS...$ 316, $ 343, OTHER INCOME...$ 242, $ 226, TOTAL INCOME...$ 2,642, $ 2,614, EXPENSES SALARIES & BENEFITS...($ 724,511.90) ($ 703,916.40) OFFICE OCCUPANCY EXPENSE...($ 93,613.46) ($ 96,429.77) OFFICE OPERATIONS EXPENSE...($ 584,491.36) ($ 557,965.49) DUES...($ 15,121.74) ($ 15,186.20) ANNUAL MEETING...($ 6,500.04) ($ 4,999.92) PROMOTIONAL EXPENSE...($ 87,600.26) ($ 74,091.90) BOARD EXPENSE...($ 10,780.13) ($ 15,950.11) TOTAL EXPENSES...($ 1,522,618.89) ($ 1,468,539.79) NET EARNINGS...$ 1,120, $ 1,145, TRANSFER TO RESERVES...($ 87,853.39) ($ 74,273.72) DIVIDENDS TO MEMBERS...($ 887,151.01) ($ 821,579.33) TO UNALLOCATED EARNINGS...$ 145, $ 250,051.56

6 INDEPENDENT AUDITOR S REPORT Board of Directors North Star Community Credit Union Cherokee, Iowa We have audited the accompanying statements of financial condition of North Star Community Credit Union as of March 31, 2005 and 2004, and the related statements of income, changes in retained earnings, and cash flows for the years 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 audits in accordance with the United States of America generally accepted auditing standards. Those standards require that we plan and perform the audits 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 audits provide 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 North Star Community Credit Union as of March 31, 2005 and 2004 and the results of its operations and its cash flows for the years then ended in conformity with the United States of America generally accepted accounting principles. PETERSEN & ASSOCIATES Papillion, Nebraska May 12, 2005 REPORT OF THE CREDIT COMMITTEE The function of the Credit Committee is to approve and review all loans the Credit Union grants. We are appointed by our fellow board members immediately after the annual meeting and serve in this capacity for a year. We meet monthly to consider many requests that affect the present loans, along with the loan applications for additional credit. Loan Balances 12/31/05 Amount % of Total New Car loans...$ 6,577, % Used Car loans...$10,242, % Total Car loans...$16,819, % Real Estate loans...$12,539, % Consumer loans...$ 3,989, % MasterCard...$ 338, % Total Loans...$33,687, % New dollar loans generated in $15,580, Number of loans granted...3,501 Average loan...$4, Weekly average...$299, Daily average...$56, Number of loans per week Number of loans per day The Ida Grove Branch granted 1,414 loans in the amount of $6,783, in new loan dollars generated. Credit Committee Members Ron Oman Linda Struck John Wilson REPORT OF THE AUDIT COMMITTEE The main purpose of the auditing committee is to assure the directors and members that the financial dealings of the credit union are in good order. The committee protects members from loss caused by inadequate operational methods. The audit committee is required by law to regularly inspect cash, securities, notes, and accounts. Another main role of the audit committee is to monitor the performance of the elected officials. Two outside entities review the operations of the credit union. During 2005, Petersen and Associates of Papillion, Nebraska conducted an internal audit. The Credit Union Division of the Iowa Department of Commerce conducts occasional examinations of the credit union, the last one being in June of Both of these entities state that our credit union is operationally sound and in compliance with guidelines set forth by the State of Iowa. Respectfully submitted, Valerie C. Woods, Ron Johnson, Cyndi Rock-Raasch