Financial Statements and Management s Discussion and Analysis

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1 Financial Statements and Management s Discussion and Analysis May 2015

2 Table of Contents Management s Discussion and Analysis... 3 Results of Operations & Comparison to Budget... 3 Credit Risk... 3 Interest Rate Risk... 4 Liquidity Risk... 4 Consolidated Statement of Financial Condition... 5 Consolidated Statement of Income... 6 Consolidated Statement of Comprehensive Income... 7 Consolidated Statement of Members Equity... 7 Notes to Consolidated Financial Statements Cash and Cash Equivalents Federal Reserve Term Deposits Investments Available-for-Sale Investments in CUSOs Loans to Members Borrowed Funds Members Share Accounts Regulatory Capital For more information, please contact: Catalyst Bruce Fox, Corporate EVP/Chief FCU Investment Officer at Page 2 of 10 or bfox@catalystcorp.org May 2015 Melissa Wardell, SVP/Chief Financial Officer at or mwardell@catalystcorp.org

3 Management s Discussion and Analysis Results of Operations & Comparison to Budget Catalyst Corporate s net income for the five months ended May 31, 2015 totaled $3,659,862 compared to budgeted net income of $2,403,165. Year-to-date (YTD) operations resulted in a coverage ratio of 86.4% versus a budgeted 81.3%. Catalyst Corporate s retained earnings ratio of 1.66% exceeds the regulatory requirement of 0.45% that took effect on October 31, 2013 and the 1.00% regulatory requirement that will take effect on October 31, A summary of the unaudited results of Catalyst Corporate operations for the five months ended May 31, 2015 as compared to the budget is included in the following table. May YTD Actual May YTD Budget Net interest income $5,489,041 $5,014,687 Net fee income 11,635,142 11,352,475 Operating expenses 13,464,321 13,963,997 Net income $3,659,862 $2,403,165 Key Information: Net operating expense $1,829,179 $2,611,522 Coverage ratio 86.4% 81.3% Return on assets 0.36% 0.24% Daily average net assets 12 month rolling $2,451,260,471 $2,400,115,658 Perpetual contributed capital $165,335,205 $164,541,667 Undivided earnings $40,188,371 $38,625,105 Leverage ratio 8.21% 8.29% Retained earnings ratio 1.66% 1.63% Credit Risk All investments are classified as available-for-sale investments. As of May 31, 2015, $113,943,686 of Catalyst Corporate s investments are agency securities and $902,567,113 are asset-backed securities. Catalyst Corporate s asset-backed securities are collateralized by the following asset types as of May 31, 2015: Asset Type Fair Value Credit card $296,539,035 Automobile 241,620,601 Equipment 215,271,708 FFELP Student loan 149,135,769 Total $902,567,113 Catalyst Corporate FCU Page 3 of 10 May 2015

4 Management s Discussion and Analysis (cont d) Interest Rate Risk Catalyst Corporate s primary method of monitoring interest rate risk is through the net economic value (NEV) test. The NEV test measures the dollar and percentage potential change in the fair value of Catalyst Corporate s capital (perpetual contributed capital and retained earnings) given a parallel, instantaneous, and permanent 300 basis point upward and downward change in the yield curve. The objective of the NEV test is to measure whether Catalyst Corporate has sufficient capital to absorb potential changes to the fair value of its balance sheet given large, sustained instantaneous interest rate shocks. A summary of Catalyst Corporate s NEV test as of May 31, 2015 is as follows (in thousands): Fair Value Fair Value +300 Basis Points Fair Value -100 Basis Points 1 NEV $207,500 $177,100 $218,800 % Change in NEV - (14.7%) 5.5% Liquidity Risk Liquidity risk pertains to whether Catalyst Corporate has sufficient short-term assets, marketable securities, and borrowing capacity to meet member credit unions potential liquidity needs. As of May 31, 2015, Catalyst Corporate has $1,095,142,391 in cash and cash equivalents. In addition, Catalyst Corporate has access to an $110,642,926 advised line-of-credit with Federal Home Loan Bank of Dallas, of which $65,000,000 is outstanding as of May 31, This borrowing is secured with qualified investment securities. Catalyst Corporate also has access to a $30,000,000 unsecured Fed Funds line-of-credit with JPMorgan Chase. There are no outstanding advances under this agreement as of May 31, Catalyst Corporate continues to meet members liquidity needs. Catalyst Corporate has outstanding loans of $184,962,460 and additional uncommitted lines of credit to members of $8,001,488,361 as of May 31, All outstanding lines of credit are collateralized by specific or general pledges by members. 1 Interest rates are adjusted down 100 basis points due to the low rate environment at May 31, Catalyst Corporate FCU Page 4 of 10 May 2015

5 Catalyst Corporate Federal Credit Union Consolidated Statement of Financial Condition May 31, 2015 Unaudited Assets Cash and cash equivalents $1,095,142,391 Federal Reserve term deposits 500,000,000 Investments: Available-for-sale 1,016,510,799 Federal Home Loan Bank capital stock 3,625,800 Investments in credit union service organizations (CUSOs) 4,722,153 Loans to members 184,962,460 Accounts receivables and other assets 14,705,793 Property and equipment, net 13,801,742 Goodwill 2,767,548 Total assets $2,836,238,686 Liabilities Borrowed funds $65,000,000 Members share accounts 2,558,390,841 Members share certificates 2,220,000 Accrued expenses and other liabilities 5,574,610 Total liabilities 2,631,185,451 Members Equity Perpetual contributed capital (PCC) 165,335,205 Undivided earnings 40,188,371 Accumulated other comprehensive loss (470,341) Total members equity 205,053,235 Total liabilities and members equity $2,836,238,686 The accompanying notes are an integral part of the consolidated financial statements. Catalyst Corporate FCU Page 5 of 10 May 2015

6 Catalyst Corporate Federal Credit Union Consolidated Statement of Income For the five months ended May 31, 2015 Unaudited Current Month Year-to-Date Interest income Investments available-for-sale $562,997 $2,436,750 Loans to members 438,313 2,157,946 Other 282,141 1,513,072 Total interest income 1,283,451 6,107,768 Interest expense Interest on borrowed funds 8,483 31,774 Interest on members share accounts and certificates 117, ,953 Total interest expense 126, ,727 Net interest income 1,157,118 5,489,041 Net fee income Share draft and depository processing fees 1,273,983 6,464,549 Off-balance-sheet income 716,330 3,550,804 Other fee income 647,652 3,367,403 Outside processing and service costs (385,790) (1,747,614) Net fee income 2,252,175 11,635,142 Operating expenses Compensation and benefits 1,874,852 9,439,079 Information technology 388,471 1,909,435 Office occupancy 103, ,140 Professional fees 85, ,032 Other operating expense 275,120 1,219,635 Total operating expenses 2,727,067 13,464,321 Net income $682,226 $3,659,862 The accompanying notes are an integral part of the consolidated financial statements. Catalyst Corporate FCU Page 6 of 10 May 2015

7 Catalyst Corporate Federal Credit Union Consolidated Statement of Comprehensive Income For the five months ended May 31, 2015 Unaudited Current Month Year-to-Date Net income $682,226 $3,659,862 Other comprehensive income Net unrealized holding gains on investments classified as available-for-sale 26, ,514 Other comprehensive income 26, ,514 Comprehensive income $708,630 $4,561,376 The accompanying notes are an integral part of the consolidated financial statements. Catalyst Corporate Federal Credit Union Consolidated Statement of Members Equity For the five months ended May 31, 2015 Unaudited Perpetual Contributed Capital Undivided Earnings Accumulated Other Comprehensive Loss Total Balance at December 31, 2014 $163,249,767 $37,070,266 ($1,371,855) $198,948,178 Net income 3,659,862 3,659,862 PCC issued 2,085,438 2,085,438 Dividends paid on PCC (541,757) (541,757) Other comprehensive income 901, ,514 Balance at May 31, 2015 $165,335,205 $40,188,371 ($470,341) $205,053,235 The accompanying notes are an integral part of the consolidated financial statements. Catalyst Corporate FCU Page 7 of 10 May 2015

8 Notes to Consolidated Financial Statements 1. Cash and Cash Equivalents Cash and cash equivalents include pass-through reserves deposited with the Federal Reserve Bank of $81,079,000 as of May 31, Member credit unions reserve balances are included in the members share accounts in the consolidated statement of financial condition. Cash on deposit and cash items in the process of collection from correspondent banks and the Federal Reserve Bank are included in cash and cash equivalents in the consolidated statement of financial condition. 2. Federal Reserve Term Deposits At May 31, 2015, Catalyst Corporate has $500,000,000 invested in term deposits through the Federal Reserve Bank s Term Deposit Facility. These term deposits mature in June Investments Available-for-Sale The amortized cost and estimated fair value of investments available-for-sale as of May 31, 2015 are as follows: Amortized Cost Estimated Fair Value Unrealized Gain/(Loss) Asset-backed securities $902,335,241 $902,567,113 $231,872 Agency mortgage-backed securities 111,296, ,596,703 (700,072) Federal agency securities 3,349,124 3,346,983 (2,141) Total $1,016,981,140 $1,016,510,799 ($470,341) Securities are pledged to secure borrowings. The fair value of pledged securities was $66,799,917 at May 31, Investments in CUSOs Investments in CUSOs are comprised of the following as of May 31, 2015: Investment in CO-OP $2,231,882 Investment in Primary Financial, LLC 1,657,261 Investment in CU Business Group 733,010 Investment in CU Investment Solutions, LLC 100,000 Total $4,722,153 Catalyst Strategic Solutions is a wholly-owned subsidiary of Catalyst Corporate. All significant intercompany balances and transactions have been eliminated in the Catalyst Corporate consolidated financial statements. Catalyst Corporate FCU Page 8 of 10 May 2015

9 Notes to Consolidated Financial Statements (cont d) 5. Loans to Members The composition of loans to members is as follows as of May 31, 2015: Open-end credit lines $23,129,242 Term loans 161,833,218 Total $184,962, Borrowed Funds At May 31, 2015, Catalyst Corporate has fixed rate borrowings from Federal Home Loan Bank of Dallas of $65,000,000 maturing in June These borrowings are collateralized by marketable securities with a fair value of $66,799, Members Share Accounts Members share accounts are summarized as follows as of May 31, 2015: Cash management $2,091,588,976 Performance tiered 264,408,186 Reg D reserve 81,079,000 Other shares 121,314,679 Total $2,558,390,841 Catalyst Corporate members transferred $4,592,586,038 to the Excess Balance Account at the Federal Reserve Bank as of May 31, Catalyst Corporate FCU Page 9 of 10 May 2015

10 Notes to Consolidated Financial Statements (cont d) 8. Regulatory Capital As a federally-chartered corporate credit union, Catalyst Corporate is subject to various regulatory capital requirements administered by the NCUA. The table below presents Catalyst Corporate s actual and required capital ratios as of May 31, 2015: Capital Ratio Capital Denominator Ratio Minimum level to be classified as adequately capitalized Minimum level to be classified as well capitalized Retained earnings ratio RE DANA 1.66% 0.45% N/A Leverage ratio Tier one risk-based capital ratio Total risk-based capital ratio RE + PCC-CUSO Investments RE+ PCC-CUSO Investments RE + PCC-CUSO Investments DANA 8.21% 4.00% 5.00% MANRA 29.13% 4.00% 6.00% MANRA 29.13% 8.00% 10.00% RE = Retained earnings for regulatory ratios include retained earnings acquired through business combination with Georgia Corporate PCC = Perpetual contributed capital CUSO Investments = Investments in unconsolidated CUSOs DANA = 12-month average daily net assets MANRA = 12-month average net risk-weighted assets Catalyst Corporate FCU Page 10 of 10 May 2015

First Quarter 2018 Financial Review

First Quarter 2018 Financial Review Historically the first quarter of the year is always a time of high liquidity and strong earnings. We are pleased to report that this trend has continued into 2018.