2016 ANNUAL REPORT

Framed on our CEO’s desk, and referred to daily, is a

quote in big bold letters from the book, “Good to Great”

by Jim Collins. The quote in short says, “If we can’t be the

best at it, then why are we doing it at all?” This is the

driving philosophy behind our commitment to our

membership: our promise to provide you with superior

values in the products we offer, as well as unsurpassed

service, safety and security.

By every definition of success, we have unfailingly

kept this promise. 2016 was yet another exceptional year

at CEFCU, demonstrating gains in every category and

surpassing even our own expectations. Assets exceeded

$1.5 billion (an increase of 8.5% for the year). Loans

swelled to over $406 million (an increase of 14.21%).

Shares rose above $1.36 billion (an increase of 9.38%

for the year). And our net worth grew to well over

$148.6 million (a gain of more than 6.6%).

As a result, at year end, we were able to pay our

members a Loyalty Bonus dividend — an additional 50

basis point APY (Annual Percentage Yield) on every tier

for the month of December that totaled almost $600,000.

Beyond these impressive statistics, we continued to

implement strategies to improve convenience, efficiency and

cybersecurity. Membership grew to 35,684 accounts. Usage of eBranch was at an all-time

high level. And we expanded our facilities to make real estate borrowing easier than ever.

But perhaps the most impressive statistic was reflected in our annual Member

Satisfaction Survey: a satisfaction rate of 98.3%. This is what we continue to strive for.

This is our definition of success.

RAISINGTHE BAR,YEAR AFTERYEAR

BOARD OF DIRECTORS(Sitting L to R):DLORAH GONZALES, Retired, Director of Employment and Employee Services, Caltech;Treasurer RICH HARRIS,CEO/President, CEFCU; ANN MARTIN, Associate General Counsel, Caltech;

(Standing L to R):RICHARD O’TOOLE, Executive Manager, Office of Legislative Affairs, JPL;STEVE PROIA, Retired, CFO/Director for Business Operations, JPL;Vice Chairman GARY GRAY, Leased Facilities Administrator, JPL;Secretary MIKE MIRANDA, Division Administrator for Biology & Biological Engineering, Caltech;WILLIS CHAPMAN, Logistics & Technical Information Division Manager, JPL;Chairman JOHN PATTERSON, Senior Finance Analyst for the County of Los Angeles, Treasurer & Tax Collector.

“What can we potentially do better than any other company, and, equally important, what can we not do better than any other company?

AND, IF WE CAN’T BE THE BEST AT IT, THEN WHY ARE WE DOING IT AT ALL?”

– Jim CollinsAuthor, “Good to Great”

Every year, we continue to challenge ourselves toprovide increasingly better value, service and safety to ourmembership. But in 2016, we redefined even our own highstandards. Driven by continued loan growth and responsibleexpense management, CEFCU realized some $9.2 millionof net income in 2016. Our loan balances grew by morethan $50.5 million. Deposit balances grew by more than$116.8 million. We added 1,444 new accounts. And wefunded $94.7 million in residential home loans, helpingmore than 212 families buy or refinance a home.

EXCEEDING OUR GOALSReaffirming our members’ confidence in our strength and security, assets topped $1.5 billion. Concurrently, our

efficiency enabled us to keep our operating expense ratio way below the industry average — an advantage reflectedin our superior rates and lower fees.

Dividends remained steady for the entire year, typically surpassing the competition. While other financial institutionslowered dividends, CEFCU was committed to paying the highest possible rate for each tier. . . totaling more than$13.2 million. A new tier category for accounts over $250,000 was added in January 2016. In addition, nearly $600,000was paid as a Loyalty Bonus on December 31, 2016, by adding a 50 basis point APY bonus dividend to each tier levelfor the month of December.

Our loan products were equally outstanding. Unlike many lenders who advertise a low interest rate but offer a higher rate if you don’t have optimum credit, we offered the same low rate to all borrowers. At CEFCU, if you qualify for a loan, you qualify for our best available rate and term. Not surprisingly, our loan portfolio boasted

record growth, ending the year at close to$406.5 million.

While real estate lending remained ourleading loan product, members also enjoyed all-time low rates on new and used auto loans,driving our vehicle loan portfolio up to $36.7million. And CEFCU said “thank you” to ourexisting credit card holders with a reducedfixed-rate promotion of 4.75% APR on allCEFCU Platinum MasterCard purchases andbalance transfers posted prior to April 15,2016, resulting in $32 million in credit cardtransactions in 2016.

ABOVE AND BEYOND INDUSTRY STANDARDSEven as we achieved across-the-board success in 2016, we continued to prepare for the future. To this end,

we invested in our infrastructure, relocating our Real Estate Loan Center to a new facility, just two blocks from ourLa Cañada branch office. Real estate lending has long been our leading loan product. Last year, we generated nearly $95million in new First Trust Deeds, and extended more than $11.8 million of credit with our two fee-free Home Equity Linesof Credit (Traditional and Interest Only). Our total real estate portfolio accounted for more than $305 million of our$406 million in loans.

RICHARD HARRIS,

President/Treasurer (left), andJOHN PATTERSON,

Chairman, Board of Directors

OUR NEW REAL ESTATE LOAN CENTER

CHAIRMAN & PRESIDENT’S REPORT

With this in mind, the new 4,500 square-foot building is dedicated to real estate services, allowing us to expandour operations while continuing to fund and service all our real estate loans in-house. This cost-effective strategy isdesigned to generate more revenue for dividends while keeping costs down for borrowers.

Less visible but no less important, we continued to invest in our remote capabilities by making transactions faster, easier, safer and more customizable. We now have almost 16,000 digital members, and in 2016, over $106 million was moved, in and out, by electronic transfers.Nearly $4 million was deposited using mobile devices. External Accounts Funds Transfer also remained among the most popular features on eBranch, enabling members to transfer funds between their accounts at CEFCU and other financial institutions.

With increased electronic usage, CEFCU has made significant investments in technological infrastructure to protect, discover and block sophisticated cybersecurity threats and to better position CEFCU to provide our members with more advanced electronic services in the future.

STRATEGIES FOR UNSURPASSED SERVICEAs always, CEFCU continues to adhere to its unique business model: serving an exclusive group of members

and their specific financial needs with select, “first choice” products. Our strategy of not trying to be all things to allpeople has allowed us to enjoy enviable growth, attract more members, and earn a 98.3% member satisfaction rating —all without resorting to mergers, adding new employer groups, or changing our charter.

But our efforts do not end there. We live in an increasingly complex and interconnected world, and our investmentin pro-active technology is never-ending. Protecting confidential information is ingrained in our everyday activities.Not only does CEFCU continuously review and update our policies related to personal information, in 2016 we introduced a free web-based program, “Financial Wellness,” designed to educate members about data security, ID theftand fraud as well as other core finance-related topics.

Guided by one aim — to do what is right for our members — we look forward to the coming year with confidence

and optimism as we aspire to the defining words of 2016: “above” and “beyond.”

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02012 2013 2014 2015 2016

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1 Billion

1.25 Billion

1.50 Billion

2015 201620142012 2013

NET WORTH(Year end, in millions of dollars)

ASSETS, SHARES & LOANS(Year end, in millions of dollars)

Net Worth excludes unrealized gains/losses on investment securities.

assets

shares

loans

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275

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02012 2013 2014 2015 2016

REAL ESTATE LOANS(Year end, in millions of dollars)

MOBILE DEPOSIT

STATEMENTS

FINANCIAL CONDITIONDecember 31, 2016 2015

ASSETSLoans, net of allowance for loan losses $ 403,795,866 $ 352,748,742Cash on hand and demand accounts 55,754,594 39,115,276Investments, net 1,042,266,542 986,686,248Accrued income 3,527,344 3,408,738Fixed assets, net 10,058,246 10,150,150Other assets 1,951,720 5,840,175

$ 1,517,354,312 $ 1,397,949,329

LIABILITIES AND MEMBERS' EQUITYAccounts payable and accrued expenses $ 2,413,281 $ 4,910,134Members’ shares 1,362,739,606 1,245,881,696Capital, net 152,201,425 147,157,499

$ 1,517,354,312 $ 1,397,949,329

INCOME AND EXPENSE

For the years ended December 31, 2016 2015

INTEREST INCOMEInterest on loans $ 14,628,740 $ 13,623,590Interest on investments 20,315,011 18,695,103

$ 34,943,751 $ 32,318,693COST OF FUNDSInterest on borrowed funds 1,418,667 504,481Members’ dividends 13,202,588 10,514,123

Net interest income $ 20,322,496 $ 21,300,089

Provision for loan loss expense $ –0– $ –0–

Other operating income $ 1,550,491 $ 1,475,512Other non-operating income (expense) 874,347 364,782

$ 22,747,334 $ 23,140,383

OPERATING EXPENSESCompensation $ 5,483,329 $ 5,180,386Employee benefits 2,758,730 2,777,797Education and conference 324,321 355,204Association dues 85,950 121,438Office occupancy 546,011 465,305Office operations 1,962,422 1,822,705Marketing and promotion 391,591 364,301Loan servicing 779,648 814,860Professional and outside services 885,996 817,435NCUA operating fee 238,568 229,411Miscellaneous 9,619 4,733

$ 13,466,185 $ 12,953,575

NET INCOME $ 9,281,149 $ 10,186,808

The 2016 Statements above are unaudited. An independent, certified opinion audit is currently in process.

EQUAL HOUSINGLENDER

The Supervisory Committee is an audit committee composed of three CreditUnion members who are appointed by the Board of Directors. Our primary responsibility is to ensure that member funds and interests are protected.

In pursuit of this goal, the Supervisory Committee’s activities include: participation in the monthly Board of Directors’ meetings; bi-monthly meetings ofthe Supervisory Committee to review financial performance and overall financialhealth of the Credit Union; and periodic audits of accounts, policies, procedures andinternal controls.

To assist in our review of the Credit Union and in accordance with regulatory requirements, the Supervisory Committee engaged the independent accountingfirm of Richards & Associates, CPA’s, to perform the annual certified audits. An Opinion audit was completed in 2016 for the year of 2015. The 2016 audit iscurrently in process. The Committee has also engaged the accounting firm of Turner,Warren, Hwang & Conrad, CPA’s, to provide the Internal Audit function on a regular ongoing basis. In addition to these reviews, the National Credit Union Administration (NCUA) performs a regulatory examination every 12 months. The results of all reviews to date give us confidence that the Credit Union is in compliance with applicable regulations, safeguarding members’ assets, and following policies and procedures approved by the Credit Union Board of Directors.

SUPERVISORY COMMITTEE (L to R):THERESA SLOWSKEI WALTER BOYDLAURICE BALIAN, Chair

MISSION stateMent CEFCU provides superior value with unsurpassed service through

selected financial products while maintaining our tradition of stability, security, and trust.

VISION stateMent CEFCU will be the “First Choice” provider of financial services.

CORE ValUes

MeMbers First— We always place the best interests and welfare of our members first.

Financial strength — We never compromise the financial strength and security of the organization.

ethics — We conduct all activities with honesty and integrity.

iMportance oF people — We promote the well-being of our members, volunteers, and employees.

ATM LOCATIONSLa Cañada OfficeCaltech Campus (2 Locations) Winnett Center Keith Spalding BuildingThe Huntington Library & Botanical GardensJPL (2 Locations) Building 303 Building 291

WEBSITEwww.cefcu.org

REAL ESTATE LOAN CTR.801 Foothill BoulevardP.O. Box 11001La Cañada Flintridge, CA 91012-6001800/592-3328 ext. 404

LA CAÑADA OFFICE528 Foothill BoulevardP.O. Box 11001La Cañada Flintridge, CA 91012-6001800/592-3328 • 818/952-4444FAX 818/952-4382

CAMPUS OFFICE1200 East California BoulevardPasadena, CA 91125CIT 100-63626/395-6300

JPL OFFICE4800 Oak Grove DriveBuilding 291Pasadena, CA 91109818/354-3280

SUPERVISORY COMMITTEE REPORT