2015 ANNUAL REPORT ONE VOICE 222,000 + STRONG

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1 2015 ANNUAL REPORT ONE VOICE 222,000 + STRONG

2 ONE VOICE 222,000 + STRONG MESSAGE FROM THE PRESIDENT The independent spirit of our Members is what started the great organization we know as TDECU just over sixty years ago in What has kept us growing strong throughout those six decades is our ability to combine the best from each of us and to come together as one united voice to grow our communities, support the financial needs of the Member-owned cooperative, and to look to each other to find the best path forward. We are one voice. And together, we have grown to more than 222,000 strong an increase of nearly 19,000 Members in 2015 and we are on the road to reach $3 billion in assets in Our year in 2015 was another great example of what we at TDECU can do when we come together. The year ended with our computer systems upgrade and the start of a new era of more efficient and effective Member service that will come from upgraded systems. And while we did encounter a few forecasted bumps along the way to more secure and Member-focused systems, our employees and Members remained patient and supportive in reaching a successful outcome. The year also saw an incredible level of value returned to our Members in the form of competitive deposit and loan rates. As of December 2015, our Members saved over $400,000 on Buc-ee s gasoline purchased using TDECU credit cards. And in comparison with national averages of interest-earning checking accounts, TDECU checking accounts provide Members with twice Front Cover Image Guide Top left: Ferris Wheel at State Fair of Texas, Dallas Top right: Shrimp Fleet, Freeport Bottom left: Victoria County Courthouse, Victoria Bottom right: TDECU Stadium, University of Houston the dividends. Auto loans with TDECU saved our Members $959 on average, and our credit card rates average 34% lower than the competition. These real world savings help the real world bottom line of each of our Members and show what it truly means to have strength in numbers. Our relationship with the University of Houston expanded in 2015 to include new on-campus activities, in-classroom projects and collaboration with administration and faculty. Taken together, these initiatives allowed TDECU to reach over 245,000 students, faculty, staff and alumni with our message. Our sponsorship of TDECU Stadium helped us efficiently grow awareness of TDECU among potential new Members by generating an audience reach of nearly 71 million via media coverage in television, newspaper, magazine, online and social media outlets. More than 6,000,000 were reached via game day broadcasts and brand exposure in and around the stadium. As we look to 2016, our focus continues to be on you, the Member. With our expansion into Dallas/Fort Worth, new member centers scheduled for Port Lavaca and Texas City, and enhancements to web and mobile banking, we look forward to growing our strength in numbers in the coming year. I would like to thank each and every Member, our TDECU Board of Directors, and our loyal, dedicated employees for your continued commitment to the vision and future of TDECU. TDECU truly is Your Credit Union. Stephanie Sherrodd President and Chief Executive Officer

3 YOUR CREDIT UNION IN ,000+ Members $2.7+ Billion in Assets $1.4+ Billion in New Loans $318+ Million in New Mortgage Loans $31+ Million Saved with Better Rates and Lower Fees $432,532 Saved at Buc-ee s with a TDECU Credit Card $388,902 Saved with TDECU Real Estate Rewards Program $177,142 in Student Loans $3+ Billion Cleared Checks 55+ Million Debit Card Transactions 4.2+ Million ATM Transactions 2.2+ Million Online Banking Transactions 1.3+ Million Calls Answered by Member Care 27,491 New Checking Accounts 3,407 TDECU Insurance Policies 726 Employees $840,000 Donated to Community Organizations $53,000 in Livestock Purchased at Auction from Local 4-H Programs $42,000 Awarded in Scholarships 100,000+ Visitors at Fun on the Farm (Houston Livestock Show & Rodeo ) 4,200+ School Supply Donations 3,000 Miles for the BP MS150 1,770+ Food Drive Donations 1,200+ Volunteer Hours in Local Communities 100+ Hours of Financial Literacy Classes for Youth 87 Financial Education Events Buffalo Bayou, Houston

4 ONE VOICE 222,000 + STRONG MESSAGE FROM THE CHAIRMAN It is with great satisfaction and pride that I can report to you, our Members, that 2015 was another outstanding year at your credit union. TDECU assets grew to $2.7 billion and the credit union increased membership to over 222,000. We provided over $318 million in mortgage loans and more than $683 million in auto loans enabling our Members to have the homes and automobiles they wanted and needed to improve their lives. We converted to a new core computer system that will allow us to provide new, more efficient, and faster services to our Members. We expanded into Dallas/Fort Worth through a merger with Texas Catholic Community Credit Union, and we look forward to bringing new and improved financial services in 2016 to their more than 7,000 Members. And importantly, we achieved this growth while maintaining the high level of safety and soundness that are the cornerstone of our operations, ending the year with a solid capital ratio of 8.38%. Even as we grow though, we remain equally focused on enriching and strengthening the communities we serve. TDECU s outreach efforts in 2015 allowed us to give back through financial literacy programs, scholarships for deserving students, and in support of local charities that serve as the backbone of our communities. In 2015, our employees volunteered over 1,200 hours of their time to support local charitable efforts. And as an organization, we contributed financial support to organizations like the Houston Livestock Show and Rodeo, the MS Society, and local food banks, to name a few. Looking ahead to 2016, we have new and updated member centers scheduled for several locations and are planning to bring improvements to TDECU s web and mobile banking services. As we continue to grow, we also continue to build a team with visionary, forward-looking thinkers who can help us on our journey toward improving financial lives. To this end, we added three new Advisory Board Members in These individuals integrate with and support the Board and Executive Team to bring additional expertise to the table, and to help us look at new and innovative ways to provide an even better Member experience through enhanced technologies and digital channels. Thank you to our Members, our Board and our dedicated team for making 2015 a year of impressive accomplishments for TDECU. It is an honor and a pleasure to serve as your Chairman. Richard Smith Chairman, TDECU Board of Directors

5 This Way, That Way Street Signs, Lake Jackson WE RE HERE TO SERVE YOU TDECU PROUDLY SUPPORTED THE FOLLOWING ORGANIZATIONS IN 2015: 5K Hero Run AAMA AHA Heart and Stroke Walk BACH Bluebonnet Youth Ranch Boys and Girls Club Brazoria County Dream Center Brazoria County Hispanic Chamber of Commerce Brazoria County Livestock Show Brazosport Chamber Taste of the Town Chambers in all TDECU markets Cuero Livestock Show Edna Chili Fest Edna Livestock Show Freeport Fishin Fiesta Greater Fort Bend Economic Development Council Greater Houston Black Chamber of Commerce Greater Houston Partnership Habitat for Humanity Hallettsville Kolache Fest Hallettsville Livestock Show Heights Crawfish Festival Houston Hispanic Chamber of Commerce Fun on the Farm at the Houston Livestock Show and Rodeo Lemonade Day Missouri City Crawfish Festival MS 150 Bike Ride Pasadena Strawberry Festival Port Lavaca Livestock Show Robert Garner Firefighters Foundation Run for the Rose School partners in all markets Seadrift Shrimp Fest Susan G. Komen Run Texas Zoo Wild About Wine True to Life Ministries University of Houston Victoria Bootfest Victoria Livestock Show Warriors Weekend Muster Yoakum Livestock Show *This list includes only a portion of the organizations TDECU supported in 2015.

6 ONE VOICE 222,000 + STRONG Richard Smith Chairman (term ends March 2018) Roland Hendricks Treasurer (term ends March 2018) Carrie Fisher Advisory Board Director (term ends October 2017) Anita Sehgal Advisory Board Director (term ends October 2017) Ed Zingleman Director (term ends March 2017) BOARD OF DIRECTORS Daniel Buche Vice Chairman (term ends March 2017) Eileen Campbell Director (term ends March 2016) Peggy Miltenberger Director (term ends March 2016) David Sikora Advisory Board Director (term ends October 2017) George Hornback, Jr. Secretary (term ends March 2018) Frank Coe Director (term ends March 2018) David Ozuna Director (term ends March 2017) Edward Speed Director (term ends March 2016) OFFICERS Stephanie Sherrodd President & Chief Executive Officer Tim Bennett Vice President, Chief Brand Officer Courtland Crouchet Senior Vice President, Chief Retail Officer Isaac Johnson, IV Senior Vice President, Chief Risk Officer Rhonda Kleinecke Senior Vice President, Chief Financial Officer Chuck Smith Senior Vice President, Chief Lending Officer Steve Stevens Senior Vice President, Retail Lending Andrew Wayman Vice President, Digital Strategy

7 TDECU YOUR CREDIT UNION. Founded in 1955, TDECU is the fourth largest credit union in Texas and the largest in the Houston area. We offer all types of financial products including banking, investments, insurance and real estate. With more than 222,000 Members and greater than $2.7 billion in assets, we are committed to providing the highest quality service and financial products to our Members. TDECU currently provides convenient access online, by phone and through our 40 service locations, including 34 member centers, and offers a complete selection of convenient, innovative, and competitive products and services. Stock Yards, Fort Worth

8 ONE VOICE 222,000 + STRONG TREASURER S REPORT 2015 was another strong year to add to TDECU s proud history of financial strength, safety and security. Our forward-thinking approach to credit union products, services and the Member experience helped us end the year with an increase of over $300 million in assets to reach $2.7 billion in total. TDECU s total equity grew to an impressive $233 million. It is with pride that I can report on behalf of our Board of Directors and TDECU s leadership team a year of continued financial strength and stability for the organization. As we continue to focus on improving financial lives, our lending solutions give our Members a cost-effective way to reach their goals. In 2015, we worked with our Members to fund a record $2.5 billion in total loans, compared with just under $2.2 billion in Also in 2015, we introduced student loans to our wide offering of services which will enhance our commitment to provide lending solutions to Members at all stages of their lives. I am delighted to report we assisted 17 students in their quest for higher education by providing over $177,142 in new student loans. As you know, a benefit to your membership at TDECU is represented by the dividends earned on your deposits. Deposits increased by $183 million in 2015 and TDECU paid over $12 million in dividends on Member deposits. I am also pleased to report we grew TDECU s membership by more than 9%, which took us from 203,128 Members in 2014 to 222,118 Members in On behalf of the Board of Directors and TDECU s Executive Team, I want to assure you we will continue to direct and manage the credit union with your best interests in mind. I thank you for allowing me the privilege to serve as a steward for this organization, and look forward to continuing to serve the needs of TDECU Your Credit Union. Roland Hendricks Treasurer, TDECU Board of Directors

9 Asiel s Restaurant, Lake Jackson CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) As of December 31, 2015 EARNING ASSETS Total Loans, net of allowance 2,496,024,089 Total Investments 164,083,766 Total Earning Assets 2,660,107,855 OTHER ASSETS Land, Premises & Equipment 53,630,092 Accounts Receivable 11,082,756 National Credit Union Share Insurance Fund Deposit 19,100,184 Miscellaneous Other Assets 29,849,609 Total Other Assets 113,662,641 TOTAL ASSETS $2,773,770,496 LIABILITIES Total Shares & Deposits 2,236,943,150 Other Liabilities 53,495,541 Borrowings 250,227,267 EQUITY Retained Earnings (Capital/Member Equity) 233,104,538 TOTAL LIABILITIES AND EQUITY $2,773,770,496 CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the year ending December 31, 2015 INTEREST INCOME Loans to Members 118,216,137 Investments and Cash Equivalents 244,218 Total Interest Income 118,460,355 INTEREST EXPENSE Shares & Deposits 12,703,243 Borrowed Funds 2,463,339 Total Interest Expense 15,166,582 Net Interest Income 103,293,773 Provision for Loan Losses 18,418,398 Net Interest Income After Provision for Loan Losses 84,875,375 NON-INTEREST INCOME Fee Income 20,692,457 Other Income 36,357,130 Total Non-Interest Income 57,049,587 NON-INTEREST EXPENSE Operating Expenses 123,388,522 Non-Operating Income 1,570,534 Total Non-Interest Expense 121,817,988 NET INCOME $20,106,974 *Detailed audited Financial Statement with Report of Independent Auditors for the fiscal year ended December 31, 2014, and monthly interim unaudited Financial Statements are available for members at each TDECU member center. Federally insured by NCUA.

10 ONE VOICE 222,000 + STRONG AUDIT COMMITTEE REPORT The Audit Committee of Texas Dow Employees Credit Union (TDECU) acts as your independent representative to ensure the financial condition of the credit union is safe and sound. The Audit Committee is an extension of the Board of Directors and has oversight responsibilities for the financial reporting control process, the system of internal control, the audit process, monitoring compliance with laws and regulations, and monitoring the compliance of operating policies and procedures for TDECU and its subsidiaries. Throughout the year, internal audits, external audits, and regulatory examinations are performed to carry out these responsibilities in an efficient and prudent manner. The Texas Finance Code requires an annual audit of the financial records of the credit union. To accomplish this in 2015, the Audit Committee engaged the services of Doeren Mayhew, one of the top accounting firms serving credit unions in the United States, to audit the financial statements. Doeren Mayhew performed the financial audit as of December 31, Based on the audit, Doeren Mayhew rendered an unmodified opinion on the financial statements as of December 31, The audit report as of December 31, 2015, will be completed in the second quarter of In 2015, the following bylaw changes were made: 2. TDECU also updated its Nomination By Petition which now states, Nominations for vacancies may also be made by petition signed by one (1%) percent of Members as of June 30th of the current year. The petition form must include the mailing address as reflected on TDECU s records and the last four (4) digits of the signing Member s account number in order to verify the person signing the petition is a Member of TDECU in good standing. The Board will make available a copy of the petition form to be used. Each nominee by petition must submit a brief statement of qualifications and biographical data in a form approved by the Board of Directors. For 2015, the Board of Directors meeting fee was $750 per Board of Directors meeting and $375 per committee meeting. As TDECU grows in both its geographic market coverage and technology offerings, the Audit Committee will provide a matrix of specialty audit firms to audit various components of TDECU. This will allow us to monitor our direction and remain on our well-established path of financial safety and soundness. In closing, the Audit Committee commends the entire TDECU staff and volunteers for serving the membership and making 2015 a successful year. 1. TDECU field of membership expanded to include employees of Buc-ee s Ltd. who work in, or are paid or supervised from its headquarters in Lake Jackson, Texas; and Members of Texas Catholic Community Credit Union (TCCCU) from its merger with TDECU. Roland Hendricks Audit Committee Chairman, TDECU Board of Directors

11 TDECU GROWTH OVER FIVE YEARS. $2,430,226,806 $2,773,770,497 $2,520,159,135 $1,841,513,451 $1,984,102,082 $2,165,845,406 $1,538,744,290 $1,728,901,609 $1,922,650,804 $2,182,605, ASSETS LOANS $2,053,394,955 $2,236,943, ,118 $1,508,833,506 $1,632,984,143 $1,823,228, , , , , DEPOSITS MEMBERS

12 TDECU.org Federally insured by NCUA