Kern River, Kern County

ANNUALREPORT2018

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Over the last 72 years, with its beginnings as the NOTS credit union, AltaOne has served its members in realizing their dreams and those of their families. Over the past 13 years, it has been my sincere pleasure to be part of the AltaOne Federal Credit Union story, where after our annual meeting, I will step down to focus on multiple community pursuits and my new position as Superintendent of the Sierra

Sands Unified School District.

2018 was a banner year for your Board of Directors. We worked throughout the year with federal regulators and industry trade groups to ensure that your credit union was governed effectively. In June, your Board of Directors represented the credit union at the National Association of Federal Credit Unions’ Annual Meeting (NAFCU) where we expanded our knowledge in multiple areas including regulatory changes, effective governance, credit union best practices and more. During 2019, your Board of Directors will continue its governance efforts in earning national certifications as National Certified Volunteer Experts (NCVE).

Financial health continued to be a main focus for AltaOne. Under our new CEO’s, Pam Easley’s, leadership, the credit union’s income doubled in 2018 from 2017 along with its return on assets. The credit union, as a result, continued to receive a “Well Capitalized” designation by its regulators. However, our work did not stop there. Focus on safeguarding our members’ information assets continued to be a top priority at AltaOne. Additionally, your Board continued to take steps to increase reserves for certain loan programs in the credit union’s portfolio.

As the credit union moves into 2019, governance, risk and compliance management will continue to be major areas of focus for the Board and for management as the economy continues to evolve. The Board of Directors remains confident in management’s direction and plans for the future.

David Ostash, Chair, Board of Directors

The Board Chair’s Report

David OstashChair, Board of Directors

ANNUAL REPORT − 2018

Member and Community Service were the themes for 2018 and beyond. A return to our roots created a renewed excitement for service within AltaOne. In every community we serve, AltaOne got involved. Within 2018, we raised money for our veterans, we trained youths in financial literacy, we volunteered for numerous community projects and activities, and we supported education by offering school supplies to schools

while offering our time at school career days and more. We even partnered with one of our local credit unions to teach high school students about money management and budgeting! More than ever, AltaOne continues to be a community partner.

Financial Wellness is a key goal for our credit union members. In 2018, we launched the Member Financial Health Diagnostic where members and AltaOne representatives work together to define important financial goals and how to get there. Additionally, we are partnering with a first-rate education platform offering financial education to members and communities. We tripled our Wealth Management assets under management to help members

plan for the future or, even, retirement. For our children, more events are planned at our Member Service Centers that promote saving and understanding money better. Ensuring our CUB Club remains strong for our children is a main goal for AltaOne.

As many of our members know, information security is critical to financial health. AltaOne continued this mission distributing much anticipated EMV cards to our members. During 2019 and into 2020, our mission for ATM safety continues as we work to upgrade our ATM network. Additional projects on the horizon include taking our website to the next level, and focusing on our on-line banking offering to our members.

AltaOne is focused on Service, our Communities and our Members’ Futures. Our work is not finished and I want to thank our members for their feedback throughout the year. Since our last annual meeting, we created a special ombudsman role focused on member service and addressing member feedback.

As with most financial institutions, complying with important laws and regulations continues to be at the forefront of our important work as well. As regulations evolve, AltaOne is serious about its mission to comply.

The result of our efforts in 2018 is that the credit union remains strong and focused on what’s important – meeting your needs while working to sustain financial health compliant with important laws and regulations. Continuing to work on enhancing your member experience is core to our goals and objectives in 2019.

While our work continues and is not finished, the AltaOne family and staff want to thank you for your continued support of the credit union.

Pam Easley, President / CEO

Pamela EasleyPresident / CEO

Chief Executive Officer’s

3 ANNUAL REPORT − 2018

Your credit union’s financial performance improved in 2018. Net income for 2018 was $2,377,000 compared to $1,177,000 in 2017 while maintaining a well-capitalized Net Worth ratio of 10.02%, a Return on Average Assets of 0.38%, and total assets at $627.6 million. The improvement over 2017 was related to an increase in interest income on loans and investments as well as a reduction in operating expenses. These

improvements were slightly offset by an increase in the provision for loan losses. Please see enclosed financial statements for more specifics of the overall 2018 and prior years’ results.

In 2018, we saw a slow and calculated increase in rates from the Federal Reserve, however that increase is not expected to continue through 2019. Continued improvement in the labor market is expected to keep inflation around 2 percent. AltaOne leadership will continue to closely monitor economic indicators and market developments at the global, regional, and local levels to anticipate and mitigate potential risks to AltaOne’s financial performance.

For 2018, Members’ share/deposit levels decreased approximately by about 1.5% and loan balances decreased by approximately 8.9%. Deposit and loan rates at AltaOne continued to be competitive with local and regional markets. The decline in the loan portfolio was due to the efforts of management in reducing the amount of indirect lending on the books, as your credit union remains committed to making prudent and productive loans to best serve the membership.

Your credit union continues to actively manage and monitor long term interest rate risks while seeking to improve financial performance through investment activities. The investment portfolio ended the year at $96.3 million. This increase will allow AltaOne to begin a renewed strategy of making prudent investments to benefit from the increase in investment market rates.

The combined loan delinquency and net charge off ratio as a percentage of total loans increased to 2.44% in 2018 from 1.97% in 2017. The Credit Union will continue to diligently manage the loan performance throughout 2019 to continue to reduce overall loan delinquency. AltaOne remains well reserved with over $7.8 million being held in the loan loss reserve account.

AltaOne’s Net Worth position is healthy. Your credit union remains firmly committed to continued financial safety and soundness while seeking to enhance the value of AltaOne membership.

Don Cortichiato, Treasurer, Board of Directors

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Treasurer’s Report

Don CortichiatoTreasurer, Board of Directors

Financial PerformanceDollars in Thousands 2013 2014 2015 2016 2017

Total Assets

Total Shares

Total Loans

Net Income

Return on Average Assets

Net Worth Ratio

$566,397

510,091

475,439

4,390

0.78%

9.63%

$586,411

527,282

511,232

2,332

0.40%

9.70%

$617,014

550,209

550,622

2,347

0.39%

9.60%

$640,549

578,468

550,658

130

0.02%

9.26%

$628,452

566,112

531,667

1,185

0.19%

9.63%

2018

$627,576

557,386

477,583

2,377

0.38%

10.02%

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The Board of Directors appoints a group of up to five volunteers to the Supervisory Committee each year. These volunteers are AltaOne members from your community who have professional experiences, personal convictions, and overall qualities that will help ensure the decisions and actions of the Board of Directors and the Management adequately safeguard the membership’s assets. By attending monthly business

meetings, and ensuring the proper performance of internal and external audits, the Committee provides an ongoing independent assessment of AltaOne’s operations to verify that your credit union sufficiently protects itself from all types of risk, fully complies with all regulatory mandates, adheres to the governing policies of the Board, and conducts credit union business with the highest level of ethical practices. The Supervisory Committee also serves as your advocate in critical matters to ensure a timely and satisfactory response from Management, the Board of Directors, and/or the Committee itself to member-owners.

In 2018, the Supervisory Committee reviewed the management of AltaOne by engaging an external firm to conduct an enterprise-wide risk assessment to identify established risk controls. Additionally, they commissioned independent external audits in key areas of: financial performance and accounting practices; access and network security; and regulatory and legislative compliance. Supervisory Committee members directly reported the results of their supervision to the Board of Directors, noting any resolving of concerns.

During 2018, the Supervisory Committee observed an overall sound business strategy as observed through constant monitoring, and the external auditing of AltaOne’s activities. The “well capitalized” position, as determined by the National Credit Union Administration (NCUA) federal regulatory examination, is a direct result of consistent performance management and expense controls. This consistent oversight helps ensure your Credit Union’s ability to weather future economic, regulatory or environmental challenges while maintaining sound internal controls and, of course, to better serve our member-owners and the communities AltaOne serves.

Norman Alexander, Chair, Supervisory Committee

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Norman AlexanderChair, Supervisory

Supervisory Committee Report

ANNUAL REPORT − 2018

Financials Unaudited Year Ending December 31, 2018

Dollars in Thousands

Statement of IncomeOPERATING INCOME

Income from Loans ................................................................................................$27,416Income from Investments. ......................................................................................... 1,798

Total Interest Income ....................................................................................... 29,214Dividend Expense ...................................................................................................... 1,586

Net Interest Income.......................................................................................... 27,628Non-Interest Income ................................................................................................. 8,519Provision for Loan Loss .............................................................................................. 6,963

Total Operating Income ..................................................................................$29,184

NON-INTEREST EXPENSESEmployee Compensation ......................................................................................... $9,682Employee Benefits .................................................................................................... 2,849Office Occupancy ...................................................................................................... 2,004Office Operations ...................................................................................................... 4,878Loan Servicing .......................................................................................................... 4,230Other Non-Interest Expenses ..................................................................................... 3,164Total Non-Interest Expenses .................................................................................. 26,807Net Income ............................................................................................................ $2,377

Statement of Financial ConditionASSETS

Loans to Members ...............................................................................................$485,343Allowance for Loan Losses ....................................................................................... (7,760)

Net Loans ....................................................................................................... 477,583Cash and Equivalents ........................................................................................ 91,407

Investments ........................................................................................................... 16,654Land & Buildings (Net of Depreciation) ..................................................................... 10,838Other Fixed Assets (Net of Depreciation) .................................................................... 3,983All Other Assets ....................................................................................................... 27,111

Total Assets ................................................................................................. $627,576

LIABILITIES & EQUITYLiability .................................................................................................................. $7,789Members Savings ..................................................................................................557,386Net Worth ............................................................................................................... 62,401Total Liabilities & Equity .................................................................................... $627,576

Statement of Changes in Retained EarningsEQUITY CAPITAL

Balance Beginning of Year .....................................................................................$60,311Net Income .............................................................................................................. 2,377Unrealized Investment Gain/(Loss) ............................................................................. (287)

Balance Year End ...........................................................................................$62,401

7 ANNUAL REPORT − 2018

Board of DirectorsDavid Ostash ...................................................................................................ChairElaine Janson ..........................................................................................Vice ChairDon Cortichiato ........................................................................................TreasurerMargie Hannon .........................................................................................SecretaryJay Chun ......................................................................................................MemberNancy Hodge ..............................................................................................MemberBill Farris .....................................................................................................Member

Supervisory CommitteeNorman Alexander .................................................................................. ChairmanJohn Little .................................................................................................SecretaryShirley Kennedy ..........................................................................................MemberJan McNiel ..................................................................................................MemberTerri Seyfi ....................................................................................................Member

Senior Management TeamPam Easley ......................................................................................President/CEOKelly Curtis ............................................................................Senior Vice PresidentMike Sisk .............................................................................Chief Financial Officer

Member Service Center LeadersColleen Bulgarelli .............................................................. Kernville, Lake IsabellaJessica Davidson .....................................................................................TehachapiJeremy Gregg ................................................................................Bakersfield-MingJanelle Hockenbrocht ............................................................................. CorporateCarol Hooks ..........................................................................Boron, California CityCorinna Korpi ................................................................................................ BishopChristopher Lowe ................................................................Bakersfield-RiverwalkValerie Diggs ............................................................................................ Lone Pine

Member Service CentersRidgecrest. .................................................................................... (760) 371-7000

Corporate: 701 South China Lake BoulevardChina Lake-Base: 1115 King Avenue

Bakersfield: 6501 Ming Avenue ................................................. (661) 397-2555Bakersfield: 11211 River Run Boulevard ................................... (661) 664-2515Bishop: 462 North Main Street ................................................... (760) 873-5626Boron: 27055 Twenty Mule Team Road ..................................... (760) 762-5650California City: 9601 California City Boulevard .......................... (760) 373-8472Kernville: 44 Big Blue Road ......................................................... (760) 371-7000Lake Isabella: 5946 Lake Isabella Boulevard ............................ (760) 379-4671Lone Pine: 111 Mt. View Road .................................................... (760) 876-4702Tehachapi: 775 South Tucker Road ............................................ (661) 823-9942

Call Center: Monday-Friday, 7 a.m. to 6 p.m., Saturday 9 a.m. to 2 p.m.(760) 371-7000 | TOLL-FREE (800) 433-9727 | AltaOne.org

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