Our Mission: To help members achieve their financial goals by focusing on excellent service and value. Integrity

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2 2 Our Mission: To help members achieve their financial goals by focusing on excellent service and value. Integrity We devote ourselves to the highest ethical standards in all our professional and personal obligations Responsibility We are a socially and ethically responsible organization Vision We encourage innovation in the discovery and development of new products and services Quality We set our standards high to provide excellent service and value Citizenship We acknowledge that it is our responsibility to take an active role in our communities

3 3 Celebrating 60 years! CONTENTS Chairman s Message Supervisory Committee Report Credit Committee Report Treasurer s Report Financial Statement 9 Community Engagement 2011 Awards 10 11

4 4 Chairman s Message As we move into 2012, a significant anniversary for Credit Union 1, it s a time to reflect on more than just the last year. It s a time to reflect on all of the places the credit union has been the last six decades; the things that have been accomplished, the challenges met head on, the lessons learned, the changes made since we began this journey, the lives we ve touched and the impact we have made on all of Alaska. There is no question that by investing in our communities we strengthen our society and set the stage for future generations to manage their money sensibly. On all fronts it was a banner year, and we made great strides in uniting our neighbors, assisting those in need, and most importantly, helping Alaskans meet their financial goals while focusing on excellent service and value. When I look back, and at 2011 in particular, I am convinced beyond a shadow of a doubt that Credit Union 1 reached out to more Alaskans than ever. We loaned over $195 million to our members, up $26.7 million from 2010; and as of December 31, Credit Union 1 had a total of 66,136 members, an increase of 4,262, or 7%. We proudly contributed over $167,000 and 3,265 volunteer hours to more than 101 Alaskan charities, schools and non-profit organizations in 2011, and we taught Discover Financial Fitness classes to 645 individuals. (See the Community Engagement report for more details.) Of major significance was the launch of the One for All Alaska Fund, which raised over $14,000 in It was created as a place for our members to donate knowing that their contributions would stay in their community and the fund s focus for the year was fighting hunger. An organization that works to eliminate hunger was chosen as the beneficiary in each place that Credit Union 1 operates. In addition, we launched our Skip-A- Pay program in May. This allows members to skip their qualifying loan payment in OnLine Access for a $25 fee, of which $5 goes to the One for All Alaska Fund, and is then distributed evenly to the organizations. Members skipped 1,503 payments from the launch through the end of the year, resulting in $7,515 being contributed to the One for All Alaska Fund. It was also a special year on the awards stage. Most notably, we won in the top three categories of the Credit Union National Association s (CUNA) coveted awards. Credit Union 1 received a first place Louise Herring Philosophy in Action Member Service Award for the innovative implementation of our Mountain View Branch and the unique services it provides to the previously unbanked area of Anchorage. POUR, the CU1-hosted fundraising event for Bean s Café and The Children s Lunchbox, won a second place Dora Maxwell Social Responsibility Recognition Award which recognizes the credit union for social responsibility projects within the community. The credit union also won a Desjardins Adult Financial Education honorable mention for the Individual Development Accounts we offer in conjunction with Urban Works (formerly the Urban League) to help those with modest incomes save for life-enhancing goals. These awards, which are all named after credit union pioneers, are evidence that we are working hard across the board to help our members and our communities flourish Anchorage Teachers Federal Credit Union is founded Now called Alaska School Employees Credit Union, a Soldotna Branch opens The credit union becomes Frontier Alaska State Credit Union and has a newly-expanded field of membership. Anyone living or working in Alaska can join.

5 5 We were also honored to receive a legislative citation for our Mountain View Branch and the impact it has had on the community. Initiated by Representative Max Gruenberg, this is a formal recognition by the legislature of our accomplishments in the area including the Mountain View Street Fair which had an estimated 4,000 people in attendance during its third year. We have had 1,489 new members start their relationship with Credit Union 1 at this branch. Additionally, we have funded 1,973 new loans in a neighborhood where pawn shops and payday lenders were previously the only places to obtain financing. A much-needed facility upgrade for our Nome members came to fruition in The goal was to expand our relationships within Nome and the surrounding communities by investing in the region, so we acquired a building in a central location and bade farewell to the old, outdated one. As a result, our membership has more than doubled for that branch and our loan volume tripled over 2010 s numbers. We are proud to offer the best in financial services to our Nome members in a great new building and look forward to developing deeper roots in the area. In financial terms, 2011 was an exceptional year. We saw a 4% increase in the overall redemption rate for our One for All Rewards program, meaning that 40% of our members now take advantage of the points they earn for having a relationship with Credit Union 1. I encourage you to utilize these points if you haven t already, it s part of how we return our profits to you! Our third payment to the National Credit Union Share Insurance Fund (NCUSIF) was $1.6 million. This fund protects credit unions nationwide from the need for government aid. This expense is forecasted to decline in 2012 but will continue for many years to come. It is a sharp reminder of the effects the recession had on the credit union industry. However, this fund demonstrates how credit unions take care of themselves and contribute to keep the system strong. When looking at 2012, we expect interest rates to stay low, which may limit long-term income growth; however, we are planning accordingly and setting aside reserves for years with leaner income. We will be making our entrance to the mobile banking world by allowing you secure access to your accounts anytime, anywhere through your mobile device. We are also going to expand and enhance our One for All Rewards program to keep it the most unique program of its kind. Above all, we re going to focus on our roots: education. We re expanding our Bill Countryman Scholarship program and will be offering up to $25,000 to Alaskan students this year. We re also going to bring financial education to every person we can from our teller lines, to schools and the general public. It is our duty to inform, educate and help build solid financial foundations. Rest assured that your credit union is strong, stable and has plans in place to stand firm through any economic uncertainty that faces us. We will remain focused on the future, while remembering the past, to help build the strongest Alaska possible. Roger Aldrich, Chairman 1983 Leslie Ellis is named Frontier s general manager Frontier is the first credit union in Alaska to offer credit cards Frontier offers members 24/7 account access by phone.

6 6 Supervisory Committee Report The Supervisory Committee is appointed by the board of directors and is responsible for ensuring that the financial statements of the credit union are accurately and fairly presented by management and that operational practices and procedures are sufficient to safeguard member assets. These duties are required by federal and state regulations. State of Alaska statutes summarize the committee s responsibilities and read as follows: The Supervisory Committee shall conduct an annual audit of the accounts of the credit union and submit a report of the audit to the board of directors and a summary of the audit to the members at the next annual members meeting of the credit union. The Supervisory Committee may conduct supplementary audits as it considers necessary or as ordered by the commissioner, and submit reports of the supplemental audits to the board of directors. To fulfill these obligations, the Supervisory Committee hired the international accounting firm of KPMG LLP to perform an independent audit of our financial statements and confirmation of member accounts. The results of the audit, conducted as of and for the year ending September 30, 2011, indicate that the financial statements of Credit Union 1 are fairly stated. Additionally, the credit union s internal auditor reviews and evaluates the systems of management s control and reports the results to the Supervisory Committee and management on an ongoing basis. Credit Union 1 is regulated by the State of Alaska and insured by the National Credit Union Administration (NCUA), and is subject to examination by both entities on an annual basis. The positive results of these examinations and those conducted by our internal and independent auditors are strong indications of the ongoing soundness and effective management of this institution. Damien Stella, Chair Marietta Hall, Secretary Carl Markon, Member Chelsey Homan, Member 1987 Named after a longtime board member, the 1st annual Bill Countryman Scholarships are awarded FedAlaska Federal Credit Union (founded 1948) merges into Frontier, creating Credit Union Ketchikan s Ward Cove Federal Credit Union (founded 1954) merges into Credit Union 1. OnLine Access launches.

7 7 Credit Committee Report It is essential for the health of the credit union to remain competitive and consistent offering the best loan for the best price while prudently monitoring the financial environment and building solid loan relationships. As evidence of the credit union s ability to do these things, overall loan performance was excellent in Growth on the consumer side of the portfolio increased $26.4 million, or 9.6%, with the top-performing consumer category being used auto loans, up 18.5%. Growth in the real estate loan portfolio was strong, increasing $14.9 million or 8.4% over Credit cards and other unsecured loans increased 6.2%. The credit union s lending operations remain prudent. Credit Union 1 management regularly reviews a sample of loans granted and the credit union s lending department is scrutinized by internal and external auditors, as well as state and federal examiners. None found any weaknesses in the credit union s underwriting policies. Credit Union 1 continues to have an exceptionally low ratio of delinquent loans in the portfolio, which was.48% for Loan charge offs, as a percentage of average outstanding loans, were.41% which is a significant decrease from Recoveries were up an astounding 54% from the previous year, which is proof of incredible member assistance efforts. It is a testament to Credit Union 1 s strong underwriting and collection practices that a $788 million dollar financial institution has maintained such a low delinquency ratio and charge off rate. In the face of uncertain economic times and the nation s recovery, the credit union s loan performance remained strong and its portfolio grew in Scott Butterworth, Chairman Davina Napier, Secretary Deborah Casey, Member LOAN PORTFOLIO FOR (IN MILLIONS) $225 $248 Consumer Loans $51 $54 Credit Cards & Unsecured Loans $177 $192 Real Estate 1998 Credit Union 1 offers members Visa Check Cards and online Bill Pay North Country Credit Union (founded 1952) merges into Credit Union 1. Two new Fairbanks branches are built. Credit Union 1 extends into Nome Credit Union 1 celebrates 10 years by opening a new Headquarters building. One for All Rewards program launches; it s still the only rewards program of its kind in Alaska.

8 8 Treasurer s Report As of December 31, 2011, total assets for the credit union grew 5.4% to $787,832,000. This growth had a corresponding increase in member deposits, which were up 4.6% to $691,834,000. Credit Union 1 s net income for 2011 was a record-breaking $7.7 million, even after paying a National Credit Union Share Insurance Fund (NCUSIF) stabilization expense of $1.6 million. Income earned by a financial institution is often measured as a percentage of total assets. For 2011, Credit Union 1 s return on assets (ROA) was 1.02%. Before paying the NCUSIF stabilization expense, the credit union s ROA was 1.23%. These earnings have helped build equity within the institution. At the end of 2011, the credit union s equity (or capital ) was 10.19% of total assets and as such, Credit Union 1 is designated well capitalized by the National Credit Union Administration (NCUA). This number is important because it enables the credit union to expand its services, upgrade facilities, maintain a strong workforce and enhance its products and services. The equity also insulates and protects the credit union during economic downturns and interest rate uncertainty. Credit Union 1 has forged innovative ways for Alaskans to meet their financial goals for 60 years, whether through savings or loan products. When looking at 2012, the board is optimistic for the credit union s future success and stability, and feels that we are wellpositioned to remain strong. Low interest rates and increasing operational costs will once again be our biggest challenges. However, we will remain diligent and focus on efficiency, minimizing expenses and managing margins while offering the best in financial services for our members. Joe Towslee TREASURER 2006 Credit Union 1 becomes the first financial institution in Alaska to open an on-site Learning Center (Little 1 s) for employee families. A new Eagle River Branch opens The NextGen and Credit Solutions departments are formed to help new borrowers and those with past credit problems get on their feet Credit Union 1 opens a cyber branch and begins teaching financial education classes in Anchorage s West High School.

9 9 Financial Statement (unaudited, in thousands) Assets Cash 2010 $11, $13,343 historical NET INCOME (in thousands) Investments 224, ,995 Loans (Net) 448, ,113 Fixed Assets (Net) 34,866 35, $2,953 Other Assets 27,806 29,499 Total Assets $747,357 $787,832 Liabilities & Members Equity Members Shares $661,284 $691,834 Liabilities 8,421 10,484 Members Equity 77,652 85,514 Total Liabilities & Members Equity $747,357 $787,832 Income Statement Loans $26,928 $27,428 Investments 6,135 4,529 Interest Income 33,063 31,957 Dividends & Interest Expense 6,087 3,945 Net Interest Income Before Provision for Loan Loss 26,976 28,012 Provision 3,107 1,733 Net Interest Income 23,869 26,279 Operating Income 14,178 15,673 Operating Expense 30,213 32,649 Net Income From Operations 7,834 9,303 Non-Operating Income (Expense) NCUSIF Stabilization Expense (1,573) (1,579) Net Income $6,261 $7, $2, $5, $1, ,000 2,000 3,000 4,000 $6,796 $6,261 5,000 $7,724 6,000 7,000 8, Credit Union 1 becomes the first financial institution to enter the Mountain View community of Anchorage in over 20 years Credit Union 1 opens a new branch in Nome Credit Union 1 celebrates 60 years of giving to members, communities and employees!

10 1 0 Community Engagement Corporate Contributions Credit Union 1 believes in investing in the communities that invest in us. We do this by providing corporate contributions in three main focus areas: social services, health and youth, and education. We also do this by raising funds in our branches for various organizations and social projects. In 2011, we reinvested $167,613 into the community through our corporate donation and fundraising efforts. From raising funds for individuals living with HIV/AIDS in Alaska, to providing important mentoring opportunities for youth, to providing meals and access to food to those who are hungry, to participating in disease-fighting relays and races, Credit Union 1 is proud to demonstrate what it means to live One for All. One for All Alaska Fund In 2011, Credit Union 1 created the One for All Alaska Fund as a vehicle to raise funds toward our yearly community service focus. Last year, that focus was fighting hunger because too many in our community don t know how they are getting their next meal, not only for themselves, but also their children. The funds raised in each community where we have branches across the state stayed in that community to help feed hungry Alaskans. A total of $14, was distributed to the following organizations in January of 2012: The Children s Lunchbox, Anchorage Dare to Care, Anchorage Chugiak-Eagle River Food Pantry, Eagle River Kenai Peninsula Food Bank, Soldotna Kodiak Island Food Bank, Kodiak North Star Council on Aging Meals on Wheels Program, Fairbanks Salvation Army Food Programs, Ketchikan Nome Community Food Bank, Nome Volunteerism Credit Union 1 employees Love to volunteer, with a capital L. In 2011, we put in a total of 3,265 volunteer hours for organizations and causes throughout the state. Whether it s doing road clean up in the spring, helping run check out at events, serving meals at Thanksgiving or painting houses for those in need, you can see Credit Union 1 employees year round, making a difference in your community. Financial Education and School Business Partnerships Credit Union 1 offers a comprehensive financial education program called Discover Financial Fitness. This class is offered to both youth and adults as a free service to any organization or school who requests it. In 2011, we reached 645 individuals through our Discover Financial Fitness program, providing classes to the following organizations and schools: Abused Women s Aid in Crisis (AWAIC) Alaska Military Youth Academy Cook Inlet Tribal Council Clark Middle School Covenant House Lake Otis Elementary McKinley Heights School Mountain View Diner Shishmaref School Southcentral Foundation West High School Credit Union 1 provides these classes through a collaboration with Urban Works (formerly the Urban League) to potential Individual Development Account (IDA) participants. The IDA program helps those with modest incomes save for life-enhancing goals. Urban Works chooses qualifying participants and provides case management and guidance. In addition to offering the classes, Credit Union 1 committed to providing matching funds for ten IDA s a year for five years, beginning in Credit Union 1 also works closely with youth in our communities through our annual Bill Countryman Scholarship Program (which gave out $10,000 in scholarships to students around Alaska in 2011) and our five School Business Partnerships. Through our partnership with West High School, we have our own branch called the CU1 Learning Lab that is a financial education center students can utilize to learn more about buying a car, applying for jobs or even just simply how to use a savings account. We also have partnerships with Clark Middle School, Tyson Elementary, Mountain View Elementary and Family Partnership Charter School. In addition to providing volunteers for school events, we also work with individual educators to teach our Discover Financial Fitness classes in the classrooms. Credit Union 1 Volunteers for Bean s Café For more information about Credit Union 1 s Community Engagement, contact: Chrissy Bell, CFRE Community Engagement Director (907) oneforallalaska@cu1.org

11 Awards LOCAL AWARDS Outstanding Service Award Bean s Café Mountain View Legislative Citation Kodiak Daily Mirror Reader s Choice Award Board of Directors Roger Aldrich, Chair Tim Craig, Vice Chair Joe Towslee, Treasurer Colin Baxter, Secretary Steve Cavin, Director Carl Markon, Director Fred Stassel, Director Emeritus John Weddleton, Director Executive Management Ms. Leslie Ellis, President/CEO Lisa Monsen, Executive Vice President Credit Committee Scott Butterworth, Chairman Davina Napier, Secretary Deborah Casey, Member President/CEO Leslie Ellis was presented with the 2011 Advancing the Status of Women Award by Soroptimist International of Anchorage Supervisory Committee Damien Stella, Chair Marietta Hall, Secretary Carl Markon, Member Chelsey Homan, Member NATIONAL AWARDS Louise Herring Philosophy-in-Action Member Service Award for the Mountain View Branch Dora Maxwell Social Responsibility Community Service Award for POUR Desjardins Adult Financial Education Diamond Award Retail Merchandising Mountain View Branch Diamond Award Community/PR POUR Golden Mirror Award Image Enhancement Mountain View Branch Branch Locations ANCHORAGE Abbott 1941 Abbott Road DeBarr 4020 DeBarr Road Downtown 824 W. 8th Avenue Eagle River Business Blvd. Federal Building 222 W. 7th Avenue Midtown 3525 Eureka Street Mountain View 115 N. Bragaw Street South Anchorage 8935 Old Seward Highway CU1 Learning Lab West High School Fairbanks 1st Avenue 909 1st Avenue University 1453 University Avenue South KETCHIKAN KODIAK NOME SOLDOTNA 2444 Hemlock Street 111 Lower Mill Bay Road 406 Warren Place Sterling Highway

12 1 2 Your savings federally insured to at least $250,000 and backed by the full faith and credit of the United States Government Contact Credit Union 1 at: 1941 Abbott Road, Anchorage, AK cu1.org (907) National Credit Union Administration, a U.S. Government Agency