2012 ANNUAL REPORT a Word from Our Chairman of the Board of Directors

2012 ANNUAL REPORT A Word from Our Chairman of the Board of Directors

Looking back at 2012, members, staff and volunteers can be proud of all that was accomplished. While it was another year of challenges, there were also opportunities for our fi nancial institution. The year began with the replacement of our Chief Executive Offi cer. Kevin Ralofsky resigned his position, and we replaced him with Bryan Myers. Bryan had left our organization for a brief period of time at the end of 2011 only to return as our CEO at the end of March. Since then, he has done an excellent job. His ability to build consensus among staff, his member-centric focus, attention to detail and his transparent approach to leadership are some of the reasons why the Board believes Bryan will continue to lead the credit union down the path of success. We experienced our strongest fi nancial success in several years in 2012, growing to nearly $150 million in assets while improving our fi nancial position. Our capitalization rate is now just under 10%. This achievement, which doesn’t happen by accident, is attributable to our hardworking, dedicated employees who strive to improve member services every day. And of course, our members are the key component to all our successes. Jude T. Hammond In 2012, we also lost one of our Board members, entirely too soon. Chuck Renwand passed after a brief illness in June. I have not found anyone who did not love Chuck. His easy-going manner and his willingness to speak his mind made Chuck a great asset to the Board. Incredibly, this is the second consecutive year in which we experienced the loss of a Board member during their term. In June of 2011, we lost Dave Zoliniak. But, there is an old saying that goes when the Lord closes one door, He opens another. And so, we welcomed Christine Giardina who graciously took Chuck’s place on the Board. Christine brings a fresh, new perspective to her duties. Like Chuck, she is always willing to ask questions and speak her mind, and she has been a perfect fi t to our Board meetings. In 2012, we saw some major changes take shape at our branches in Vermilion and on Perkins Avenue. We hope you all like the new look and feel of these offi ces with their upgrades which were designed to better focus on serving you, the membership. We are now considering updating our longest serving branch on Hayes Avenue. We will be rolling out renditions of what we have in mind for Hayes, plans which will provide much needed capacity and room for future growth. I hope you will give us feedback on our ideas. Moving the Annual Meeting to after-hours, in that way encouraging greater participation from the membership, is another new idea we hope is successful. Our sincere wish is for members to take the time to fi nd out more about the fi nancial institution they own. We always want to hear from you. In closing, we wish all our members the best for 2013! We are here to serve you! Sincerely yours, Jude T. Hammond Chairman of the Board of Directors

A Word from Our Chief Executive Ofﬁ cer

In 1956 VacationLand Federal Credit Union was born from the vision of several key employees of Sandusky, Ohio’s General Motors plant with a commitment to help each other with affordable loans and competitive deposit rates and to assist fellow employees in times of need. Over the past 56 years, the credit union has expanded its fi eld of membership to include any person that lives, works, and worships or attends school in Erie County plus certain SEG groups in Huron County. Although consumers have not always been aware of what credit unions are, individuals, families and small businesses are discovering the credit union difference as they seek alternatives to “big banking” in Erie County. Today, VLFCU continues with the cooperative vision our founders had in 1956. The credit union remains solidly committed to providing affordable, responsible fi nancial services to every one of our members. This is possible because we are a not-for-profi t corporation that doesn’t have shareholders to pay. And, we have a very dedicated group of unpaid volunteers serving as our board of directors and supervisory committee who have a common goal to continue the vision established in the 1950s. Bryan P. Myers I am proud to report that 2012 was another successful year at VLFCU. We continued with our branch renovation project fi nalizing the upgrades of our Vermilion and Perkins offi ces. Our membership expanded and topped the 16,000 mark for the fi rst time. Financially, the credit union remains strong and our capital position is moving in the right direction. 2013 will bring additional challenges that include a long-term commitment in rebuilding the Hayes offi ce, continued regulatory pressures and very thin interest rate margins. We look forward to taking on these challenges and we remain committed to providing affordable and responsible fi nancial services to all whom we serve. Sincerely, Bryan P. Myers Chief Executive Offi cer The Governing Bodies of Our Credit Union

THE BOARD OF DIRECTORS The 2013 Board of Directors is comprised of seven elected volunteers who are responsible for the governance, direction and control of the affairs of VacationLand Federal Credit Union in accordance with National Credit Union Administration rules and regulations and sound business practices. The Board delegates the day-to-day activities through policies to Senior Management of the credit union. Directors serve for a term of three years with an equal number of terms expiring at the end of each annual meeting. Monthly meetings are held by the Board to conduct the business of the credit union by reviewing its performance and policies. Once per year the Board also meets with Senior Management for a full day session to develop the annual strategic plan. The Board of Directors members are: Jude Hammond: Chairman, 1, 2 Don Bayer: Director, 1, 2 Jan Sadoski: Vice Chairman, 1, 5, 6 Christine Giardina: Director Marcia Renande: Secretary, 2, 4 Martha Thompson: Director, 3, 5 Tracy Luc: Treasurer, 1, 5

Board of Director Committee Membership (1) Asset/Liability Management (4) Marketing (2) By-Laws (5) Nominating (3) Insurance (6) Policy

THE SUPERVISORY COMMITTEE The Supervisory Committee consists of volunteers who are responsible for monitoring VacationLand FCU’s fi nancial security and soundness and its compliance with various fi nancial and regulatory requirements. In fulfi lling these responsibilities, the Supervisory Committee recommends to the Board for ratifi cation, the appointment of an independent audit fi rm to annually examine the fi nancial statements of the credit union. Just like the Board of Directors, the Supervisory Committee also holds monthly meetings to, among other things, review internal audit services, internal controls and risk management processes, and examinations by regulatory agencies. A representative of the Supervisory Committee attends the monthly Board of Directors meetings and reports on their fi ndings. To date, the Committee has reported that in their opinion VacationLand Federal Credit Union has operated in a fi scally sound manner and, in all material aspects, in accordance with applicable accounting, federal and state regulations. 2012 Supervisory Committee members include: William Stauder, Chairman Theresa Barylski Christopher Palmer Lynn Sartor Bill Wood

CORE VALUES & BELIEFS Resourcefulness: Finding solutions Excellence: Achieving the best possible outcome Strategy: Thoughtful execution Passion: Heartfelt action Empowerment: Invest authority to succeed Commitment: Dedicated service Trust: Serving with integrity Financial Highlights A Word from Our Chief Financial Ofﬁ cer

Dec. 31, 2010 Dec. 31, 2011 Dec. 31, 2012 VacationLand Federal Credit Assets Union’s Net Income surpassed the Cash and Equivalents 14,151,624 7,302,811 5,779,006 $1 million mark in 2012 reaching Loans 80,501,240 91,510,205 94,013,481 $1,143,398, an increase of 39.7% (Less) Allowance for Loan Loss (954,031) (1,056,579) (1,047,636) Investments 41,906,168 38,698,945 46,170,275 compared to Net Income of $818,488 Land, Building and Equipment 585,675 892,742 1,315,274 in 2011. 2012 Return On Assets Other Assets 1,593,512 1,905,695 1,489,036 was .80%, up 21 basis points from Total Assets 137,784,188 139,253,819 147,719,436 one year ago. Net Interest Margin climbed to 3.89% compared with Liabilities 3.60% in 2011. 2012 Net Interest Other Liabilities 399,254 1,658,871 1,010,564 Margin was driven by a 2.7% increase Mitchell J. Fallis, CPA Notes and Interest Payable ------5,866,737 in interest income along with a 29.3% Total Liabilities 124,704,358 124,095,885 6,877,301 decrease in dividend expense resulting from lower market rates. Revenues for 2012 totaled $9,121,878, up from $8,916,482 Share Drafts 13,866,738 15,212,637 15,600,683 in 2011. Contributing factors included increases in loan income of Shares 68,441,973 73,895,928 80,619,755 7.7%, offset in part by decreases in investment income and non- Certificates 42,395,646 34,987,320 29,979,236 Total Shares 124,704,358 124,095,885 126,199,674 interest income of 2.7% and 1.7%, respectively. Loan Totals grew by $2,503,276 from increases in consumer indirect, Member Business, and Visa loans which were offset in Owners Equity (Capital) part by decreases in mortgages and consumer direct loans. Regular Reserves 2,870,959 2,870,959 2,870,959 Investments rose by $7,471,330 reaching $46,170,275 on Undivided Earnings 9,809,617 10,628,104 11,771,502 Total Equity 12,680,576 13,499,063 14,642,461 December 31, 2012. Investment Income for 2012 decreased to Total Liabilities 137,784,188 139,253,819 147,719,436 $916,077 resulting from lower interest rates on the reinvestment & Owners Equity of maturing securities. Non-interest Income decreased slightly in 2012. Expenses decreased by $119,514 in 2012 to $7,978,480, Income Loan Interest 4,703,698 5,049,310 5,437,885 supported by decreases in dividends of $326,441 from a Investment Interest 982,856 1,052,562 916,077 lower interest rate environment and decreases in the NCUISF Other Income 2,636,814 2,814,610 2,799,596 stabilization assessment of $189,386. These decreases were Total Income 8,323,368 8,916,482 9,153,558 offset in part by increases in Marketing expenses of $37,994, professional and outside services of $59,494 and provision for Expenses loan losses of $364,532. Staffing 3,014,947 3,444,217 3,366,253 Member Deposits increased by $2,103,789 during 2012, Dividends 1,647,036 1,110,888 801,532 ending the year at $126,199,674. VacationLand Federal Credit Allowance for Loan Losses 799,639 329,415 693,947 Union’s Equity position surpassed the $14 million mark reaching Operating 2,693,154 2,905,284 3,029,623 $14,642,461 as of December 31, 2012. NCUA Stabilization Expense 326,766 308,190 118,804 As of December 31, 2012 the Capital Ratio of VacationLand Total Expenses 8,481,542 8,097,994 8,010,159 Federal Credit Union once again remained strong at 9.91%, well above the 7.00% ratio required to be categorized as “Well Net income (loss) (158,174) 818,488 1,143,399 Capitalized” under National Credit Union Administration regulations for prompt corrective action. Financial Ratios We are anticipating an interest rate environment in 2013 that will Return on Average Assets (ROA) -0.12% 0.59% 0.80% mirror the rate environment of the last half of 2012. VacationLand Net Interest Margin 3.02% 3.60% 3.89% Federal Credit Union’s fi nancial mix of earning assets, member Operating Expenses to Avg. assets 4.48% 4.80% 4.54% deposits and capital coupled with its fi nancial plan positions us for Efficiency Ratio 72.51% 74.58% 71.04% continued success in 2013 and beyond. Loans to Shares 64.55% 73.74% 74.50% For 2013 we have developed a solid fi nancial plan to increase Allowance for Loan Loss 1.19% 1.15% 1.11% loan volume supported by funding from member deposits and the to Total Loans Federal Home Loan Bank of Cincinnati. Our strategic plan calls for Net Charge-offs to Average Loans 7.20% 0.20% 0.82% minimizing our long-term interest rate risk by funding fi xed long- Delinquent Loans to Total Loans 1.70% 1.47% 0.96% term mortgages and Member Business loans with fi xed long-term Capital to Assets 9.20% 9.69% 9.91% borrowings from the Federal Home Loan Bank of Cincinnati. Additionally, our plan is supported with a viable marketing Distribution of 2012 Income strategy coupled with education and training for our employees. Operating Expenses 71% 6,514,680 And of course, we will continue to focus on building relationships Dividends 9% 801,532 with existing and new members to assist them in meeting their Capital 13% 1,837,346 fi nancial goals. We thank our employees for their dedication and you, our Number of Members 15,276 15,555 16,009 members, for your continued support. We look forward to a solid and prosperous 2013.

Best regards, Mitchell J. Fallis, CPA Chief Financial Ofﬁ cer A Word from Our Treasurer of the Board of Directors

Thanks to the loyalty of our long-term members and new members, I am pleased to report another strong year for VacationLand Federal Credit Union with Net Income rising by $324,911 from one year ago to $1,143,399 in 2012. On another very positive note, the effi ciency ratio, which is the measure of cost to generate revenue, decreased 354 basis points to 71.04% in 2012. Over the past 56 years, we have managed the Credit Union with integrity, protecting its fi nancial soundness and thereby fostering the confi dence of our members and community at large. More and more individuals, families and small local businesses are discovering the benefi ts of a not-for-profi t cooperative and are moving their money to credit unions. By year end 2012, our deposits grew to over $126 million. All depository accounts, including yours, are insured up to $500,000. The fi rst $250,000 of insurance is provided by the National Credit Union Administration while the second $250,000 is underwritten by Excess Share Insurance Company. VLFCU’s decisions are made with you, our members’ best interests in mind. We will continue our long history of giving back to our members in the form of better rates, lower fees and more affordable fi nancial services. As 2013 unfolds, we will continue to deliver member-driven service while safeguarding your assets. Thank you for your confi dence and loyalty in our credit union. On behalf of the Board of Directors, we wish to extend our thanks to the staff and management for meeting the fi nancial needs of our members with great care and commitment. I would also like to take this opportunity to welcome Bryan Myers back to our organization as CEO. We look forward to the much needed renovations of the Hayes Branch and continued success in 2013.

Sincerely, Tracy Luc Treasurer of the Board of Directors

We Are Here to Serve You

MANAGEMENT Bryan Myers — Chief Executive Offi cer Mitchell Fallis — Chief Financial Offi cer Marla Troike — Chief Operations Offi cer & Compliance Manager Katja Rall-Koepke — Director, Human Resources Brett Gerber — Senior Vice President, Business Lending Jami Andres — Vice President, Lending Manager Tracie Dahlke — Vice President, Collections Hayes Branch Manager Peggy Day — Vice President, Norwalk/Vermilion Branch Management & Business Development Barbara Yost — Vice President, Perkins Branch Facilities Manager Brian Barker — Credit Analyst Evie Bonzar — Training Manager Derek Callin — IT Coordinator Heather Gilchrist — Marketing Coordinator Davida Sosa — Executive Assistant

STAFF Heather Baer Ann Hermes Jan Roberts Kate Bogard G. Elaine Hines Adam Rohrbacher Deb Booth Lisa Howerton Julie Rufﬁ ng Lynne Brownell Mary Jackson Keily Ruggles Heather Cantu Carol Lawrence Samantha Savage Charlie Conway-Johnson Sheri Leber Kathy Slusher Annette Crum Mandi Leddy Jill Stokes Sandy Cummings Amy Leroux Debra Todd Trisha Dauch Shelly Luipold Wendy Warren Patti Deneweth Jill Mercer Amy Wasem Jen Enzor Julie Musick Deb Weaver Marilyn Finnen Kathy Old Shelli Wilhelm Thomas Gosser Abbie Picciuto Christy Wohlever Debra Graves Barb Pickering Nancy Hart Stephanie Prieur

INDEPENDENTLY CONTRACTED Dave Karikas – Financial Planner

MISSION Guided by our core values, we exist as a not-for-proﬁ t cooperative to serve and surpass by providing value and ﬁ nancial freedom. Improving Our Communities for Generations to Come

Chances are you have seen our logo on we awarded scholarships to six student Kiwanis Club of Sandusky Board of a fundraising poster, one of our employees members graduating from high school. Directors, Erie County Family Initiative, helping at a charity event, or the ever Our very own Change Agent Squad hosted Firelands Positive People, Great Lakes popular cuBe truck at a football game. “Paws for a Cause” in June to help the Erie March of Dimes, Erie County/Sandusky VLFCU is committed to making a positive County Humane Society collect shelter Relay 4 Life, and Norwalk Library Board impact on our surrounding communities. supplies and food for the animals. When of Directors. This vision kept us heavily involved with football season came around, the VLFCU As we look forward in 2013, we will many efforts in 2012. cuBe truck showed up to several high continue to seek new opportunities Major sponsorships for the year school games, and we even sponsored a and partnerships that will best suit included the Bay Area Soccer League, Big mascot race between the Perkins Pirate, the communities we serve. Members Brothers Big Sisters Bowl 4 Kids’ Sake, the SMCC Panther, and our very own are welcome to contact the Marketing United Way of Erie County, Great Lakes Dollar Dog. During the holidays, VLFCU Committee with any suggestions or Chapter March of Dimes Walk, Cystic hosted a toy drive to benefi t the children feedback regarding our community Fibrosis Jail Break 5K, Stein Hospice & served by the Erie County Department of outreach. Rest assured, we will do all the Good Grief Camp, Teen Leadership Jobs & Family Services and the Sandusky that we can to improve the lives of our Corps, Sandusky State Theatre’s Children Salvation Army. members and the communities in which Matinee Series, Wightman Weiber/ Realizing that it takes many hands to they live! Firelands Regional Medical Center Hearts accomplish great things, VLFCU managers in Flight, and Girls’ Night Out Bras for a and staff also served on committees and CONTACT Cause. Contributions were also made boards in and around our community. VacationLand Federal Credit Union to the Foundation for Firelands and the You will fi nd us actively involved with the P.O. Box 2257 • Sandusky, OH 44871 NOMS Women’s Center to assist cancer area Chambers of Commerce, as well as Attn: Marketing Committee patients with treatment. within the following organizations: City of Email: [email protected] In the past year, VLFCU also partnered Norwalk Economic Development, Junior with other organizations to promote Achievement, Kinship Board of Directors, community fundraisers and events. Such partnerships included the United Way Stuff the Bus Campaign, the Norwalk Elementary PTO Fair, Sandusky Mall Fun Day, BAS Broadcasting Coats for Caring, Cedar Point Trick or Treat, and Double S Industries Halloween Happenings. We also provided fi nancial literacy presentations to students in grades 3-12 and Junior Achievement participants within several local school districts. VLFCU also contributed by sponsoring our own events throughout the year. In April, we invited the public to our 2nd Annual Easter Egg Hunt. In May, SANDUSKY 2911 S. Hayes Ave. Sandusky, OH 44870 T: 419.625.9025 T: 800.691.9299 Lobby Hours Monday – Friday: 9:00 am - 5:00 pm • Saturday: Closed Drive Through Hours Monday – Friday: 9:00 am - 5:00 pm • Saturday: Closed SANDUSKY 2409 E. Perkins Ave. Sandusky, OH 44870 T: 419.625.9025 T: 800.691.9299 Lobby Hours Monday – Friday: 9:00 am - 5:00 pm • Saturday: 8:30 am - 12:00 pm Drive Through Hours Monday – Thursday: 9:00 am - 5:00 pm • Friday: 9:00 am - 6:00 pm • Saturday: 8:30 am - 12:00 pm VERMILION 1607 State Route 60, Ste. 11 Vermilion, OH 44089 T: 440.967.5155 T: 800.691.9299 Lobby Hours Monday – Friday: 9:00 am - 5:00 pm • Saturday: 8:30 am - 12:00 pm Drive Through Hours Monday – Friday: 9:00 am - 5:00 pm • Saturday: 8:30 am - 12:00 pm NORWALK 295 Milan Ave., Ste. C Norwalk, OH 44857 T: 800.691.9299 Lobby Hours Monday – Friday: 9:00 am - 5:00 pm • Saturday: Closed Drive Through Hours Monday – Friday: 9:00 am - 5:00 pm • Saturday: 8:30 am - 12:00 pm

CU*Talk: 419.621.8328 or 877.256.3336 Website: www.vlfcu.org f Facebook: www.facebook.com/VacationLandFCU t Twitter: www.twitter.com/VacationLandFCU y Youtube: www.youtube.com/VacationLandFCU

Member of the Shared Branching Network