2013 Annual Report

We are the Members’ Watchdog.

Federally insured by NCUA Chairman’s and President’s Report Financial Strength 16,000 members signup for this capability, completing almost 30,000 We are pleased to report to you, our member-owners, check deposits totaling close to $9 million by the end of the year. We are that Space Coast Credit Union was successful in also excited to see that Mobile Deposit has actually resulted in a decrease improving our financial strength during 2013. SCCU in ATM deposits, and we are hopeful that the cell phone will eventually was able to improve its Net Worth ratio from 10.23% in replace expensive and clunky ATM deposits in the future. 2012 to 11.49% at the end of year 2013. We were very Towards the end of the year we were able to implement our new pleased at this improvement considering that the assets ExpressSign capability, which enables our members to “sign” for their car Dr. Karen O. Palladino of the credit union grew by 3.26% by the end of the year. loan through the Internet. This represents a dramatic time savings for Chairman We were also pleased to see our loan delinquency levels our members who have historically had to drive to a branch to complete reduce from 5.11% at the end of 2012 to 3.74% at the their loan transactions. Since this service rolled out in November, we have end of 2013. While this level is still much higher than closed over 1,400 loans in this manner, representing a savings of thousands that of our peers, our delinquency levels continue to of hours of our members’ precious time. We believe that this capability will steadily improve as mortgages work their way through expand quickly as the preferred way to complete loan transactions. the legal system in Florida. Our loan loss reserves are Members’ Watchdog more than adequate for these delinquencies, so this As a member-owned cooperative, which exists solely to serve the members’ high level does not pose a threat to future earnings. best interests, protecting our members is in our DNA. We were very Douglas R. Samuels Production Equals Service pleased to see the Watchdog brand, the thing that sets us apart, really take President, CEO Our desire is to provide our members with excellent hold among our employees and our members, particularly in our South financial services in a fast and efficient manner. We are pleased to report Florida area of operations. that in 2013, the credit union assisted with $563 million in auto financing During 2013, we advanced our ongoing battle against the rampant injustice and $296 million in home financing, which were above our expectations of “rate mark-ups” wherein banks participate in charging higher interest for the year. rates on car loans than the rates for which the consumer qualifies. We We survey members regarding every interaction because we believe that we made headway educating unsuspecting consumers through our efforts with should be accountable for how well we provide service to our members. Members’ Watchdog and through our public relations campaign called, As can be seen in the member reviews on SCCU.com, our members are “Yo soy poderosa” which roughly translated means, “I am powerful.” We overwhelmingly pleased with our service delivery. If we are doing our jobs believe that mobilizing the power of the members of this cooperative to right, this is how it should be. An individual member is involved in a car ensure that they are protected from financial abuses is our challenge, our purchase every couple of years, while our employees are involved with opportunity, and our mission. about 5,000 purchases per month. Who better to provide experience and When members understand that their “bank” is really just themselves, they guidance in these kinds of events? can utilize the buying power of all the members to protect themselves. If you were to read through the thousands of member reviews about the Our members provided 21,953 reviews in 2013, and these experiences service we provide, it is apparent that our employees 1) have tremendous were viewed nearly 352,000 times. Increasingly popular are the member knowledge and skill in the auto and home business, and 2) love helping reviews of car dealers with whom our members have dealt, as these reviews our members. We are convinced that these were the ingredients to our were viewed over 332,000 times. The member reviews can be trusted continued success throughout 2013. because we only allow reviews by members who have actually had those Expanded Branching specific experiences. These are reviews by members for members, and they During 2013, we expanded or improved the classical service to our members represent the strength of the members’ voice. through branch relocations and additions. During the year we completed We are all the Watchdog, as we share our experiences inside and outside of branch relocations to improve service in Port St. John, Vero Beach, Miami the credit union. The value our member-owners perceive is not one of the Springs, Doral, and new branches were added in Viera and Vero Beach. things we focus on, it is THE thing we focus on. Protecting our members’ Non-branch Service Expansion best interests is our only focus, and it was our greatest accomplishment. We were very excited to implement improvements to our mobile banking application which enabled mobile bill payment and mobile check deposits. We were particularly pleased with the rapid adoption of Mobile Deposit, which rolled out in August. Since that time, we have had approximately Dr. Karen O. Palladino Douglas R. Samuels Chairman President, CEO

Space Coast Credit Union funded $296 million in first mortgage loans in Credit Manager’s Report 2013 compared to $298 million in 2012, even as the market experienced In 2013, Space Coast Credit Union continued to make every attempt a decline in refinancing activity due to increased rates. Purchase to stay true to our commitment to improving our members’ lives by money mortgage and construction lending grew substantially in 2013 providing convenient, well-priced, and reputable loan products. As a to make up the difference as a result of our competitive rates, fees, and result, SCCU had a record year for vehicle and mortgage loans. on-time closing guarantee. In 2013, we instituted new processes and We originated $563 million in automobile loans in 2013, compared to management structures to ensure consistent mortgage loan closings $474 million in 2012. Members continued to take advantage of the within weeks of receiving the needed documentation from members. excellent rates and service available from the credit union. SCCU currently services $1.7 billion in first mortgage loans. We continued to build strong relationships with our participating vehicle Space Coast Credit Union is also committed to providing competitive dealers during the year. In 2013, we originated $279 million in loans for loan products to the small- and medium-sized businesses in the your convenience right at the dealership, compared to $252 million in communities we serve. We funded $24 million in business loans for our 2012. members in 2013 compared to $22 million in 2012. As in previous years, many of our members were also able to improve In 2014, we will continue to improve our operational efficiencies so we can their financial situation by refinancing vehicle loans originated elsewhere provide our members with convenient, fast, and low-cost loan products. with SCCU. In 2013, SCCU refinanced over $134 million in automobile loans compared to $86 million in 2012. Our efficient lending processes will allow us to continue to provide our membership with fast loan Thomas R. Baldwin decisions and competitive rates. Executive Vice President, CFO Audit Committee Report Condensed Financial Information*

The Audit Committee is appointed by the Board of Directors of Space Coast Credit Union (SCCU). The Audit Committee CONSOLIDATED STATEMENT OF FINANCIAL CONDITION operates under the rules and regulations of the Florida Office As of December 31, 2013 As of December 31, 2012 of Financial Regulation, Division of Financial Institutions, ASSETS and the National Credit Union Administration (NCUA) and is charged with the responsibility of determining that the Cash $24,763,584 $22,347,893 financial condition of SCCU is accurately and fairly presented Investments in the financial statements, and that management practices are in place to safeguard members’ assets. Available-for-sale 412,528,598 445,514,940 Held-to-maturity - - The primary functions of the Audit Committee are (1) to Other 322,017,820 339,975,146 direct the Internal Audit Department, which monitors credit union operations through the development of a risk-based Loans held for sale - - Audit Plan; scheduling and conducting a continuing program Loans to members - net of allowance for loan losses 2,104,736,996 1,964,828,884 of reviews of credit union processes and procedures, and (2) contracting for an independent, external audit of the credit Accrued interest receivable 6,543,999 6,872,465 union’s financial statements. Prepaid and other assets 34,477,363 35,923,228 Property and equipment - net of accumulated depreciation 85,262,686 82,630,355 The combined skills of the Certified Public Accounting firm of CliftonLarsonAllen LLP, with that of our in-house Internal Other Real Estate Owned 25,166,463 16,790,440 Audit staff, has proven to be effective in maintaining an Goodwill 64,592,670 64,592,670 efficient and effective internal audit function for the credit Core deposit intangible 2,171,789 3,863,215 union. The Internal Audit Department has unlimited access to all credit union employees and operations and has developed National Credit Union Share Insurance Fund deposit 26,189,677 27,055,841 a risk-based audit plan for the credit union, which is revised TOTAL ASSETS $3,108,451,645 $3,010,395,077 as credit union operations and controls change during the year. The Audit Plan is updated during the year as processes, LIABILITIES AND MEMBERS' EQUITY controls, and events change and all updates are approved by As of December 31, 2013 As of December 31, 2012 the Audit Committee and the Board of Directors. All audits on LIABILITIES: the updated 2013 Audit Plan were successfully completed by the end of the calendar year. Members' shares and savings accounts $2,674,168,244 $2,626,654,896 Borrowed funds 40,000,000 40,000,000 The Certified Public Accounting firm of Hutto & Carver, P.A., was retained for the purpose of conducting the annual Accounts payable 7,299,184 13,735,509 external audit of financial condition. In February 2013, Hutto Other accrued liabilities 37,672,364 37,243,569 & Carver’s audit of the 2012 Financial Statements for SCCU Total liabilities 2,759,139,792 2,717,633,974 resulted in an “unqualified opinion,” which, in layman’s terms, means everything went well and no irregularities were MEMBERS' EQUITY 349,311,853 292,761,103 discovered. The financial information presented in this report TOTAL LIABILITIES AND MEMBERS' EQUITY $3,108,451,645 $3,010,395,077 for 2013 is unaudited, as the annual audit was not completed at the time of printing. CONSOLIDATED STATEMENT OF INCOME For the year ending For the year ending The Audit Committee reports the results of all internal and December 31, 2013 December 31, 2012 external audits to the Board of Directors. INTEREST INCOME:

Based on the results of the above-referenced activities and Loans $94,636,993 $99,411,060 related reports, it is the opinion of the Audit Committee that Investments 7,781,371 9,876,341 the books and records of Space Coast Credit Union are in order. The Audit Committee would like to thank the Board of Total interest income 102,418,364 109,287,401 Directors, Management, and the entire staff for their support INTEREST EXPENSE: and cooperation during this past year. Members' share and savings accounts 11,141,868 14,092,685 Respectfully submitted by, Notes payable 1,615,885 1,620,312 Total interest expense 12,757,753 15,712,997 Net interest income 89,660,611 93,574,404 The Audit Committee PROVISION FOR LOAN LOSSES 17,847,349 24,250,244 Net interest income after provision for loan losses 71,813,262 69,324,160 NON-INTEREST INCOME: Herbert A. Fisher, Chairman Fees and service charges 39,073,379 41,808,434 Audit Committee Members Other 36,630,192 41,369,082 A. Desmond Almarales Total non-interest income 75,703,571 83,177,516 Stephen J. Bailey NON-INTEREST EXPENSE: Kevin R. McKeown Julie O. Robbins Office operating and occupancy costs 32,072,548 31,531,887 Compensation and employee benefits 49,032,201 45,533,162 Other 13,668,470 20,813,938 Total non-interest expense 94,773,219 97,878,987 Net income $52,743,614 $54,622,689

*Unaudited *Audited 2013 ANNU A L REPOR T

Board of Directors Management Team Audit Committee Branch Locations

Executive Committee Douglas R. Samuels Herbert A. Fisher, Chairman Brevard County (19) Dr. Karen O. Palladino President, CEO A. Desmond Almarales Broward County (11) Chairman Stephen J. Bailey Flagler County (1) Timothy M. Antonition Kevin R. McKeown Indian River County (4) Martha E. Frasier Executive Vice President, COO Julie O. Robbins Miami Dade County (12) Vice Chairman Palm Beach County (1) Thomas R. Baldwin Volusia County (9) Executive Vice President, CFO Willie Howard, Jr. General Information Treasurer Headquarters Address Heather E. Hickman S.V.P. Retail Delivery 8045 N. Wickham Road John G. Oertel Melbourne, FL 32940-7920 Secretary Dottie M. Bourlier V.P. Finance and Accounting E-mail Board Members [email protected] Julie O. Robbins Thomas G. Decker Thomas J. Myers V.P. Investment Services Web Address Dale B. Neubert www.SCCU.com Suzanne E. Kirk Director Emeritus V.P. Operations William G. Thoms J. Alan Lewis William H. Paine, Sr. V.P. Information Systems

In Memoriam Laura L. Richard Dr. William “Jack” Sidoran V.P. Marketing

Karen M. Sack V.P. Human Resources