CHAIRMAN S & PRESIDENT S REPORT

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2 CHAIRMAN S & PRESIDENT S REPORT bundled services for all-in-one banking / website and technology enhancements to improve access / card chip technology to fight fraud /deposit rates far above the national average / In we followed the blueprint we developed based on the feedback you gave us in. Here s what we heard ~ Many of you were not aware of all the products and services Signal makes available to members to meet the needs of their daily lives as well as life stages like saving for retirement, buying a home, and preparing for the financial independence of a child. ~ Our website was dated and difficult to navigate, and our mobile and online banking programs were not up to snuff. ~ Members are concerned about fraud and identity theft in an increasingly online and connected world. ~ Many of you are concerned about your savings yields and loan rates. Making your income go farther includes finding the best loan rates and being able to get a return on your savings that actually means something. Thank you to all of you who contacted us, filled out our surveys, and let us know how you feel about being a Signal member. We wouldn't be here if it wasn't for you! Here s what we did... ~ We developed bundled products and services to help you simplify your banking. An innovative offering in the credit union industry, product bundles cater to a member's relationship with the credit union. Only need basic products? Use the Connect Bundle to get your checking and savings accounts in one package, along with free Bill Pay transactions and loan discounts. Want a bigger banking relationship? We created the Premium Bundle for those of you carrying higher balances and seeking a better return on your investments. We reward your participation with a rebate of your home appraisal fees, a boost to your certificate rates, free checks twice a year, free Bill Pay transactions, and loan discounts. All members new to Signal were offered the option of a Connect Bundle or a Premium Bundle to begin their relationship with us. Some new members opted for our à la carte option, Signal Selections, which gave them the flexibility of creating their own banking relationship with us, but at a cost depending on their banking habits, as Selections accounts are not exempt from some fees that do not apply to the bundles. Most new members chose the Connect Bundle, which offered potential savings of hundreds of dollars per year in fewer fees and discounted loan rates. Existing members had the choice of remaining in an "unassigned" membership or upgrading into a bundle. Many of those who have done so were already using the products in the bundle, and thus were able to get the benefits of the bundles without changing their banking behavior. Based on member feedback, in 2017 we will be developing and launching additional bundles to further tailor our products to our members' needs. ~ We improved our technology to give you easier access. We heard you loud and clear on our old website. The design was stale, there were too many pages, and navigation took too many clicks. We launched a new website in August, with a fresh and more modern look, cleaned up site structure, and most information available within 2 clicks from the home page. We envision the website as a 24/7 concierge for anyone seeking information about Signal's products and services, and will continue to enhance and modify the site to make information available to members and non-members as easily as possible. Text Banking, a new service separate from the mobile banking app, also launched in, giving you the ability to get balance and history information about your accounts instantly, with a few taps on your smartphone or tablet no sign-in needed. Waiting in line to pay for something and want to make sure you can cover the expense? Text BAL to a short code, and we'll text your balance right back to you. You can also get the last four transactions just as quickly. So the next time you want to know your balance, skip the call or the ATM just text us. The Signal mobile banking app also came in for enhancements in. Fingerprint authentication as well as password changing are now available from within the app, plus check images, in addition to the standard functions like transfers and deposits. ground-breaking products / service-focused / member education / Our online banking portal got an upgrade to the newest software, as well a new look to more closely match the new website, and featuring a dashboard for members wanting a snapshot of their accounts and transactions, and a new name: ebanking. We redesigned the ads that appear in online banking as well, and even won an Intelligent Design Marketing Ad of the Month Award in December from our advertising partner, Deep Target. While we work toward a single sign-on solution to allow our credit card accounts to be included in online banking, we upgraded the design of our Visa portal as well. ~ We focused on fighting fraud through chip technology and education. The chip-enabled credit cards we issued in reduced fraud on members credit card accounts by 34% in vs In early 2017 we will be mass-reissuing our debit cards, also with chip technology, offering another layer of security for members. We stepped up our efforts to educate members about card fraud, identity theft, and online safety. This included blog posts, blasts, and education of staff to understand the benefits of chip technology,and the most common forms of identity theft. We also developed step-by-step guides to help members sign up for electronic services and learn how to use them. And in 2017 we have plans to develop a seminar on avoiding identity theft. ~ We increased certificate rates and offered a high-yield money market. We continued to build on our success by offering highly competitive rates, especially on our share certificates and money market accounts. To help our members during the sometimes uncertain election year, we created a 3-tiered ladder certificate 2 3

3 TREASURER S REPORT ACCREDITED BUSINESS In the year Signal Financial turned 69 years old we earned Better Business Bureau A accreditation and an A health rating from depositaccounts.com. to help our members diversify their investments into short, medium and longer term certificates. Our highest rate beat the national average by 40%. In we also recognized the importance of giving members options in how they save. Certificates aren't for everyone, so we turned our attention to money market accounts as well. Our emoney Market Account, aka the Signal Premium Money Market Account, offers a 1% yield on balances above $25,000. Other high-yield money market account offerings are planned for 2017, in response to the new rate environment and to provide more options for members who want a good savings rate, no matter their income. ~ W e continued to offer our groundbreaking 5/5 Adjustable Rate Mortgage. With a mortgage like the 5/5 ARM, which adjust no more than 1% every five years, members can get the low rates of an ARM with less risk of a payment increase. It's a truly attention-getting offer that's been popular with members. The mortgage team at Signal gets high marks for service, expertise, and accessibility. They hold regular in-branch hours, and partner with local real estate agents to help members consider their options and find the right house with the right financing. We look forward to 2017 being an even better year for our members to use their financial home (Signal) to finance their dream home. ~ W e continued to build Signal into a more competitive, more member-focused credit union Signal aims to become the primary financial partner for the majority of our members. Service and relationship-building are important pieces of building our reputation as a good primary financial partner. In, we made great strides in improving our member service, including the hiring and training of new call center operators and upgrading branch staff to Member Relationship Specialists, who can function as "universal tellers." Our marketing focused on building more name recognition in our area, and we strengthened our SEG relationships as well. To the Board of Directors, officials and staff of Signal Financial FCU: thank you for your unflagging service in, and your continuing dedication to the credit union. Our warmest gratitude to all our members your trust and partnership allow Signal to remain one of the most successful credit unions in the Washington area, and safeguards it as an oasis of cooperation and collective benefit in a world of division and fragmentation. We look forward to continuing to grow with you in 2017! Andrew M. Mekelburg, Chair Francois R. Verleysen, President/CEO Signal had a very good year in. Net Income was $945,000 an increase of $671,000 over. Overall, our assets increased to $357.5 million from $333.3 million, representing an increase of $24.2 million. That's more than twice the increase of over 2014, which was $10.0 million. Our gross loan growth of 5.69% continues to improve and kept pace with tremendous paydowns and payoffs as our members' situation changed. Our commercial loan portfolio grew to $88.8 million, increasing our net interest income by $3.9 million. Total shares at the end of the year were $288.9 million, an increase of $8.6 million over s $280.3 million. The introduction of bundled products, along with other strong offerings, has helped Signal increase its products per household and share of wallet. Credit Unions continue to compete strongly with banks, by offering state of the art services and competitive rates. As a result, Credit Unions are becoming more recognized by consumers and businesses as a valuable alternative to banks. Signal is poised to continue its strong growth in 2017 partly due to its growing strength as a primary financial institution for members. I would like to acknowledge the support and dedication of the volunteers and staff for their hard work in managing and protecting our members assets. With our superb team, I am confident Signal will attract new members and prove to be the financial institution that members will stay with for years to come. Deborah Cullen, Treasurer SUPERVISORY COMMITTEE S REPORT The Supervisory Committee is responsible for overseeing the operations of the credit union. Our mission is to protect our members assets and make sure their funds are safeguarded. The Supervisory Committee is also responsible for making sure all internal controls are established and maintained effectively. We also ensure that all records are maintained properly and accurately. CliftonLarsonAllen, Certified Public Accountants, performed an independent financial statement audit of the year ending. The Credit Union received an unqualified opinion for the audit. In addition, NCUA completed our examination in, during which they observed no significant concerns. The Supervisory Committee believes all audits, verifications, examinations and compliance reviews present an accurate reflection of financial results, and the Credit Union s assets remain sound and secure. Sandra Rubin, Supervisory Committee Chair 4 5

4 STATEMENT OF FINANCIAL CONDITION STATEMENT OF INCOME Full audited financial statements can be found on our website: signalfinancialfcu.org. Years ended December 31, and ASSETS Cash and Cash Equivalents $14,978,295 Deposits in Other Financial Institutions SecuritiesAvailable for Sale 59,741,898 SecuritiesHeld to Maturity Other Investments 2,330,409 Loans, Net 269,985,473 Loans Held for Sale Accrued Interest Receivable 1,370,568 Premises and Equipment, Net 3,912,742 NCUSIF (National Credit Union Share Insurance Fund) Deposit 2,844,970 Other Assets 2,359,401 $11,503,097 1,449,000 3,768,444 47,550,747 1,414, ,005, ,919 1,223,102 4,488,667 2,715,702 3,030,616 Total Assets $357,523,756 $333,303,429 INTEREST INCOME AND EXPENSE Interest Income Loans $12,780,382 Securities, Interest Bearing Deposits, Cash Equivalents 1,256,895 Total Interest Income 14,037,277 $11,775, ,071 12,063,530 Interest Expense Members Share and Savings Accounts 1,360,408 1,347,384 Interest on Borrowed Funds 435,053 42,945 Total Interest Expenses 1,795,461 1,390,329 Net Interest Income Provision for Loan Losses Net Interest Income After Provision for Loan Losses LIABILITIES AND MEMBERS EQUITY Liabilities Members Share and Savings Accounts Borrowed Funds Accrued Interest Payable Accrued Expenses and Other Liabilities Total Liabilities $288,954,686 30,150, ,589 2,066, ,412,659 $280,315,103 15,150, ,863 2,093, ,801,875 Members Equity Regular Reserves 6,430,310 6,430,310 Undivided Earnings 29,973,238 29,028,615 Accumulated Other Comprehensive Income (Loss) (292,451) 42,629 Total Members Equity 36,111,097 35,501,554 Total Liabilities and Members Equity $357,523,756 $333,303,429 NON-INTEREST INCOME AND EXPENSE Non-Interest Income Service Charges and Fees Other Non-Interest Income Net Loss on Sale of Securities Net Loss on Sale of Assets Total Non-Interest Income 12,241,816 11,213,201 2,492,275 1,200,436 $9,749,541 $10,012,765 $4,968, ,466 (3,947) 5,423,804 $4,656, ,652 (37,155) 5,149,156 Non-Interest Expense General and Administrative Employee Compensation and Benefits 7,578,804 7,858,347 Office Occupancy and Operations 2,750,344 2,927,185 Other Operating Expenses 3,899,574 4,102,895 Total Non-Interest Expense 14,228,722 14,888,427 NET INCOME 6 Years ended December 31, and $944,623 $273,494 7

5 MARYLAND Kensington Branch 3015 University Boulevard, West Kensington, MD (301) or (800) Chesapeake Branch (restricted access) Columbia Pike Silver Spring, MD Largo Branch 9500 Arena Drive, Suite 103 Largo, MD WASHINGTON, DC CityCenterDC Branch 1201 New York Avenue NW Washington, DC Capitol Hill Branch 1391 Pennsylvania Avenue Washington, DC Columbia Heights Branch 1400 Irving Street, NW, Suite 115 Washington, DC VIRGINIA Ashburn Branch (restricted access) Loudoun Parkway Ashburn, VA BOARD OF DIRECTORS Andrew Mekelburg Chair Jonathan Morrison Vice Chair Deborah Cullen Treasurer Mary McCormick Secretary Eileen Booker Dennis Fike Michael Harris Donna Hauprich Carl Tebell SUPERVISORY COMMITTEE Sandra Rubin Chair Mark Fieni Tammy Jeffers 3015 University Boulevard, West, Kensington, MD signalfinancialfcu.org