Working Together, Building Community.

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1 Working Together, Building Community. A N N U A L R E P O R T

2 A Letter from the President During the past year, the Bank set lending records, launched new programs and made substantial impact in the communities we serve and we have no plans on slowing down in 2014.

3 We are committed to our mission. As businessman Howard Schultz once said, Companies should not have a singular view of profitability. There needs to be a balance between commerce and social responsibility. For National Cooperative Bank (NCB or the Bank), this statement rings true. We have always viewed social responsibility as a guiding principle for our lending practices. We are committed to finding the balance, and raising the bar in developing new, innovative programs that have a positive impact in the communities we serve. As our economy continues to recover, we are keenly aware of the impact cooperatives have in the national landscape. The cooperative structure continues to gain appeal, especially given how well many of these organizations faired during the recession. It s the performance of these organizations that led the partnership between NCB and Mondragon, the world s largest industrial worker-owned and run cooperative based in Spain. Through its cooperative bank, Laboral Kutxa, it has joined NCB to build cooperative stakeholder businesses throughout the US. Sharing the principles of doing well by doing good, socially responsible values and the growing understanding that cooperative markets extend beyond borders, led to this first of its kind partnership.

4 The model continues to expand in all areas of business, markets and economic conditions, because at the heart of the cooperative s success is its committed members. In 2013, we implemented a host of new programs to further our goals of improving the quality of life in communities across the country. As our mission states we are working together to build communities, and the impact has been powerful. During the past year, we have been able to commit almost $380 million to our mission banking initiatives, with the principal areas including housing, business co-ops, small businesses, community development, renewable energy and healthcare. We are able to have this impact because of the strength of the Bank s creative lending programs and the dedication of the loan officers and executives that are consistently finding new ways to meet the needs of our customers. In the past year we have been able to increase lending activity, resulting in NCB s earnings rise to $21.2 million, a 55 percent increase from 2012.

5 Mortgage Banking For this period, loan sales totaled $1.5 billion (compared to $1.4 billion in 2012). Gains on mortgage banking activities and loan sales increased 33.8% during the year, due to improved pricing in the secondary mortgage markets and the Bank s participation in its first CMBS transactions since December Commercial Banking During the past year, the Bank launched new initiatives and programs to support the ongoing expansion and development of our commercial cooperative customers. Financing in this area was strong and will be a continued focus for the Bank in the coming year. In 2013, the Bank arranged $147.3 million in financing to these sectors, helping these organizations continue to evolve to meet the dynamic needs of the communities they serve.

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7 Solar Energy In 2013, we made a considerable commitment in expanding our lending to solar energy projects. Our newest relationship with Strata Solar resulted in the Bank providing $82 million in financing for 15 solar projects in North Carolina, which generated 94 megawatts of power. Strata Solar was a natural partner to fund these sustainable projects, as a similar mission-focused firm making a positive lasting impact on communities it serves.

8 Grocery Highlights Grocery and food cooperatives continue to be a growing customer segment of the Bank. In 2013, the Bank originated loans totaling $25.6 million that were used to finance store expansions and development, as well as the creation of new cooperatives in this sector. This year we also committed $250,000 to support the Food Co-op Initiative (FCI), a non-profit dedicated to new food cooperatives nationwide. As part of our mission to develop new cooperatives, this vital funding will be instrumental in creating new food co-ops, especially in underserved areas, and will help these organizations thrive and compete in the marketplace. In addition to the important development work by FCI, the Bank is also playing a role in the success of existing food cooperatives. We continue to lend to these organizations to support their expansion efforts. For the second time, Wheatsville Food Co-op in Austin, Texas turned to NCB to address its financing needs to expand its presence in the local community. The $4.7 million loan allowed it s members to refinance existing debt as well as make leasehold improvements and purchase equipment for its newest, South Austin location. The Bank has a long history of providing essential capital to food cooperatives like Wheatsville and other independent retailers across the country.

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10 Credit Unions The Bank also continued to strengthen its relationships with credit unions in 2013, drawing on the shared principles of these similar organizations. During the past year, we remained a viable option for these member-owned financial organizations, to handle their correspondent banking services as more corporate credit unions move away from providing these services. One of our newest partners is the St. Louis Community Credit Union (SLCCU) which transitioned its settlement activity and the majority of its correspondent banking services to NCB. SLCCU and other credit unions are turning to the Bank to benefit from the significant investment we ve made in our infrastructure and staff to address their financial needs. This, combined with our strong economic value has been instrumental in the growth and appeal of this program. We continue to attract new credit unions and expect to significantly increase our deposit relationships with this sector in 2014.

11 Alaska/Native American Our relationship with credit unions goes beyond just the correspondent banking services we are able to provide. In Alaska, credit unions were the Bank s partner for two commercial real estate deals in One such deal was the Bank s purchase of a $7.25 million loan participation in a $12.25 million loan facility with Alaska USA Federal Credit Union. The building is owned by a subsidiary of The Tatitlek Corporation, an Alaska Native village corporation of Prince William Sound. This transaction highlights our ability to be a strong partner for credit unions, as well as answer the financial needs and further our long-standing relationship with native communities.

12 In July of 2013, NCB provided a $30 million mortgage in cooperation with Fannie Mae to Amalgamated Houses in the Bronx. As the oldest limited equity housing cooperative in the United States, Amalgamated Houses is a shining example of how the cooperative structure can work and thrive for many generations, and provide an excellent affordable housing option in New York City Founded in 1927, Amalgamated Houses provides a beautiful and strong community for 1,500 moderate-income families. NCB s loan provided $8.5 million to refinance existing debt and $19.6 million to undertake a number of substantial exterior renovations projects over the next ten years.

13 Real Estate Team Continues to Set Records The real estate team continues to surpass all of our expectations annually, and 2013 was no exception. During this period, our real estate division reported more than $1 billion in lending nationwide. We arranged nearly $720 million in financing for housing communities, and $232 million in new loans for over 1,200 individual unit owners. Additionally, we arranged another $68 million for commercial real estate projects across the country. Out of those totals, the team in our New York office arranged $664.3 million for cooperative building loans in the metropolitan area, which boasts the largest number of cooperative housing communities in the country. This region is a key market for the Bank, which captures the majority of the market share as the leading lender in the area. The New York residential group also posted strong results, securing $43 million in financing for 160-unit owners, while expanding its newest loan programs like superintendent residence and professional office space initiatives, which totaled $7 million in new financing. Outside of the New York region, the West Coast residential lending team arranged over 500 loans totaling $109 million. NCB also provided financing for the development of two new limited equity housing cooperatives in Marineland Community Association in Hermosa Beach, CA; a 60 pad mobile home park, secured a $6 million mortgage from NCB, along with a $2.2 million loan from the State of California Mobilehome Park Resident Ownership Program to acquire the 4.19 acres of land and convert it to an income-restricted cooperative. In addition, NCB worked with ROC USA Capital to provide a $5.4 million loan to Clackamas River Community Cooperative in Clackamas, Oregon; a 76-site community which acquired and converted their property to a limited-equity cooperative

14 Cash Mangement Solutions Continue to Grow NCB strives to offer a broad set of banking solutions to our customers. Our cash management solution for housing communities continues to be a popular option, offering housing cooperatives and community associations lockbox, online payment and remote deposit services. In 2013, the program continued to grow to over $106 million since launching just three years earlier. Through NCB, we ve been able to offer new and better services to our clients while also streamlining our own administrative functions. NCB s support team is always available and makes our satisfaction their priority. It s one of our most highly valued business relationships. George J. Hatch, Director of Finance Pride Property Management Corp.

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17 Highlighting Our Customers Our commitment of Working Together, Building Community has never resonated deeper for us at the Bank, than now. As we talk about the success of our work, we always come back to our mission of staying true to the cooperative principles that guide us and our customers. Our cooperative make-up has always set NCB apart from other lending organizations. We are committed to the goal of strengthening America s communities through cooperation, and find it to be more relevant now than ever. We are committed to bringing much-needed attention to the benefit of the cooperative business model, which often remains a well-hidden secret to those unfamiliar with cooperatives. We are able to do this in a host of ways, including large-scale, global initiatives like the United Nations 2012 declaration of the International Year of Cooperatives and the International Cooperative Alliance's "2020 Vision" of defining goals for a decade long cooperative initiative. On a national scale, we continue to compile and publish the NCB Co-op 100, the only annual report of its kind to track and distribute information on the top 100 cooperatives in the country; highlighting the effect they have on our national economy. This past year we hosted a New Economy Roundtable Discussion in Washington, DC. We were joined by leading industry and economic experts, where the discussion focused on spreading the benefits of the cooperative model and approach when seeking economic solutions.

18 While serving the needs of our customers and developing new programs remains a priority, we are putting greater stock in the coming year in promoting the co-op brand. As a Bank, we will continue to look for new opportunities to encourage the cooperative model and have a number of new programs in development to support these efforts across a variety of sectors. We will continue to educate the public on how the cooperative model is part of daily lives. Our communities stand to benefit greatly by increasing the recognition of cooperatives, and we are committed to getting the message out far and wide, and exploring new avenues to tell the cooperative story. As we expand our efforts in both lending, cash management and education, we recognize it s only possible through the power of our voices, our members and our employees. So I want to close this letter by thanking our dedicated team at the Bank, who has been unwavering in furthering our mission. Combined with the loyalty of our customers, both long-standing and new, we are able to continue to make a difference in our economy, in our neighborhoods and in our future.

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20 Consolidated Balance Sheets December 31, 2013 and December 31, 2012 (Dollars in thousands) Assets Cash and cash equivalents $ 333,050 $ 220,285 Federal funds sold 4,504 6,523 Total cash and cash equivalents (note 4) 337, ,808 Restricted cash (note 4) 3, Investment securities (note 5): Available-for-sale (amortized cost of $58,591 and $37,322, respectively) 56,169 38,000 Held-to-maturity (fair vale of $29,291 and $16,537, respectively) 29,489 16,479 Loans held-for-sale (includes $23,706 and $55,050, measured at fair value, respectively) (note 6) 59,005 82,745 Loans held-for-investment (note 8) 1,236,615 1,239,316 Loans pledged for secured borrowings (note 8) 14,989 35,198 Total loans held-for-investment 1,251,604 1,274,514 Less: Allowance for credit losses on loans (note 8) (14,498) (22,540) Total loans held-for-investment, net 1,237,106 1,251,974 Federal Home Loan Bank Stock, at cost (note 12) 9,651 9,651 Other assets (note 13) 79,614 81,497 Total assets $ 1,812,005 $ 1,707,754 Liabilities andmembers' Equity Liabilities Deposits (note 15) $ 1,314,078 $ 1,237,439 Secured borrowings (note 16) 10,649 30,859 Borrowings (note 16) 229, ,982 Other liabilities (note 9) 30,659 30,770 Total liabilities 1,584,414 1,500,050 Commitments and contingencies (notes 9, 14, 21) Members' equity Common stock, $100 par value. 2,350,000 shares authorized; 2,119,044 and 2,103,922 shares issued and outstanding, respectively (note 17) 211, ,392 Retained earnings (deficit) unallocated 18,262 (3,040) Accumulated other comprehensive (loss) income (2,575) 352 Total members' equity 227, ,704 Total liabilities and members' equity $ 1,812,005 $ 1,707,754

21 Consolidated Statements of Income Years Ended December 31, 2013 and 2012 (Dollars in thousands) (Dollars in thousands) Interest income: Loans $ 65,166 $ 66,677 Investment securities 1,073 1,188 Other 2,097 2,756 Total interest income 68,336 70,621 Interest expense: Deposits (note 15) 8,867 11,483 Borrowings (note 16) 8,264 9,936 Total interest expense 17,131 21,419 Net interest income 51,205 49,202 (Reduction of) provision for credit losses on loans (note 8) (1,515) 1,425 Net interest income after (reduction of) provision for credit losses on loans 52,720 47,777 Non-interest income: Gain on mortgage banking activities and loan sales (note 7) 38,220 28,556 Letter of credit fees (note 9) 1,078 1,541 Loan servicing fees (note 7) 4,819 5,077 Real estate loan fees 1,555 1,308 Commercial loan fees Deposit fee income 1,554 1,766 Other 2,044 2,445 Total non-interest income 50,069 41,166 Non-interest expense: Compensation and employee benefits (note 18) 47,208 40,306 Contractual services 4,385 4,184 Provision for losses on unfunded commitments (note 9) 681 3,325 Occupancy and equipment (notes 11, 14) 6,606 6,207 Information systems 8,263 6,135 Loan costs 4,304 3,033 Foreclosure and REO costs 772 1,847 FDIC premium 1,341 2,068 Deposit costs 1,769 1,716 Other-than-temporary impairment (note 5) Other 4,177 5,535 Total non-interest expense 79,630 74,497 Income before income taxes 23,159 14,446 Income taxprovision (note 19) 1, Net income $ 21,198 $ 13,654

22 2013 Board of Directors Alfred A. Plamann (Chair) President Plamann and Associates La Canada, CA Michael J. Mercer (Vice Chair) President and Chief Executive Officer Georgia Credit Union Affiliates Duluth, Georgia Cyrus Amir-Mokri Assistant Secretary for Financial Institutions Department of the Treasury Washington, DC Peter Conrad President & CEO The Co-operative Central Bank Boston, MA Steven F. Cunningham S.F. Cunningham, LLC Vienna, VA Jane Garcia CEO La Clinica de La Raza Oakland, CA Janis Herschkowitz President and Chief Executive Officer PRL, Inc. Cornwall, Pennsylvania Andrea Levere President CFED Washington, DC Martin Lowery Executive Vice President, External Affairs National Rural Electric Cooperative Association Arlington, VA L. Ray Moncrief Chief Operating Officer Kentucky Highlands Investment Corporation London, Kentucky Kenneth Rivkin Managing Director at Auction.com and Hermes Financial Management 227 East 57th Street Corporation New York, NY Mary Ann Rothman Executive Director Council of New York Cooperatives & Condominiums New York, NY Robynn Shrader CEO National Cooperative Grocers Association Iowa City, Iowa Douglas Wille CFO Wakefern Corporation Keasbey, New Jersey Judy Ziewacz Former Executive Director State of Wisconsin, Office of Energy Independence Madison, Wisconsin

23 Office and Branch Locations Corporate Office Regional Offices Retail Branches 2001 Pennsylvania Ave, NW Suite 625 Washington, DC (202) (800) Operations Center 2011 Crystal Drive Suite 800 Arlington, Virginia (703) (800) California nd Street, Suite 320 Oakland, California (510) New York 250 Park Avenue, Suite 900 New York, New York (212) Alaska 801 B Street, Suite 300 Anchorage, Alaska (907) Main Office 139 South High Street Hillsboro, Ohio (937) Hillsboro Kroger 575 Harry Sauner Road Hillsboro, Ohio (937) Wilmington 2829 Rombach Avenue Wilmington, Ohio (937) Account Information You can view loan, stock and deposit account information in the online banking section of If you have specific questions regarding your account, please contact your loan administrator or NCB Deposit Operations. Fayetteville State Route 68 Fayetteville, Ohio (513) Inquiries For general information on NCB, please call (800) Banking products and services provided by NCB,FSB. Member FDIC.

24 The Seven Cooperative Principles 1. Voluntary and Open Membership Cooperatives are voluntary organizations, open to all people able to use its services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination. 2. Democratic Member Control Cooperatives are democratic organizations controlled by their members those who buy the goods or use the services of the cooperative who actively participate in setting policies and making decisions. 3. Members' Economic Participation Members contribute equally to, and democratically control, the capital of the cooperative. This benefits members in proportion to the business they conduct with the cooperative rather than on the capital invested. 4. Autonomy and Independence Cooperatives are autonomous, self-help organizations controlled by their members. If the co-op enters into agreements with other organizations or raises capital from external sources, it is done so based on terms that ensure democratic control by the members and maintains the cooperative s autonomy. 5. Education, Training & Information Cooperatives provide education and training for members, elected representatives, managers and employees so they can contribute effectively to the development of their cooperative. Members also inform the general public about the nature and benefits of cooperatives. 6. Cooperation among Cooperatives Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures. 7. Concern for Community While focusing on member needs, cooperatives work for the sustainable development of communities through policies and programs accepted by the members. (800)