2016 Annual Report

Powering Financial Lives

APCO Employees Credit Union63rd Annual Membership MeetingApril 6, 2017

Meeting Called to Order Mr. John ValekisAscertain a Quorum Mr. Greg ShippInvocation Mr. Alan RussellPledge of Allegiance Mr. Michael ConleyMinutes of the Last Meeting Mr. Bob RoyReport of the Directors Mr. John ValekisReport of the Treasurer Mr. Mark WilkinsonReport of the President Mr. Derrick RaglandReport of the Credit Committee Mr. Jim MooreReport of the Supervisory Committee Ms. Ann Wilkinson Unfinished Business Mr. John ValekisNew Business Mr. John ValekisElections Mr. Greg ShippResolution Ms. Melinda LopezDrawing For Door Prizes Ms. Melinda LopezAdjournment Mr. John Valekis

Report of the Directors

The year 2016 was one of growth and transition for our Credit Union. Throughout the last year we main-tained our commit-ment to stability while

putting in place strategic changes that will enable us to introduce innovative and in-demand services to our members.

Our objective was to advance the Credit Union’s capacity to support every aspect of our members’ lives. As a Credit Union, we re-evaluated lending strategies while investing in advanced technology to support the growing needs of our membership. We also hosted financial education seminars and added the Member Security Center, an identity-theft protection system. These addi-tions to service were integrated to enhance the member experience while offering peace of mind.

APCO Employees Credit Union remains a competitive financial institution while preparing for the future. Sound investment strategies combined with low operating costs have established our foundation and will be a key for a bright future. Your Credit Union now has more than 71,000 members with over $2.7 billion in total assets. We continued to pay an industry lead-ing dividend rate of 1.00% APY on Share Accounts throughout the year while simul-taneously increasing our capital adequacy ratio to 10.96% - an increase of 1.83%.

Your Credit Union’s member service chan-nels highlight an important relationship. Our Call Center handled a record number of calls from our members—total call volume was over 130,000 for 2016. Members con-tinue to view the Call Center as an essential base for service and we are confident you’ll see further growth in this area in 2017.

Along with offering sound member service throughout 2016, we reviewed our lending strategies so our members are better able to attain major life goals. We worked to in-crease our members’ borrowing capacity to assist in giving members the tools to achieve their goals. Despite national increases in home prices, over 500 members purchased new homes this past year, and we expect that number to rise in 2017.

The next several years will be of upmost importance for APCO Employees Credit Union. We are implementing new ap-proaches to foster member growth and interest in our ever-changing financial land-scape. New products and services are be-ing integrated to further enhance our mem-bers’ ability to access their funds anytime, anywhere. We’re positioning our strategies and operational development to focus on providing reliable, efficient and competitive products while delivering strong returns to our members.

On behalf of the Board of Directors, I would like to thank our President, Derrick Ragland, our dedicated volunteers and employees. Especially, I would also like to thank our members for their loyalty and continued support. This is an exceptional time to be a member of APCO Employees Credit Union and we’re working every day to serve you even better in the years to come.

John ValekisChairman

“Our objective was to advance the Credit Union’s capacity to support every aspect of our members’ lives.”

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2016 2015 Increase or (Decrease) %

Total Assets 2,736,929,668 2,599,286,233 137,643,435 5.30%

Member Loans 754,959,522 739,743,067 15,216,455 2.06%

Shares 1,931,431,398 1,830,528,681 100,902,717 5.51%

Certificates of Deposit 396,227,033 373,630,535 22,596,498 6.05%

Chek-Plus 139,103,019 119,152,556 19,950,463 16.74%

Reserves 283,455,455 264,046,219 19,409,236 7.35%

Undivided Earnings 16,400,000 15,600,000 800,000 5.13%

Number of Members 71,700 71,361 339 .48%

Report of the Treasurer

APCO Employees Credit Union under-stands the importance and value to members in remaining finan-cially strong. In 2016, APCO continued to

demonstrate its member-focused culture with financial returns and growth that benefited members. As a result of our members’ ongo-ing loyalty and support, APCO Employees Credit Union was able to invest in personnel, technology, and equipment while remaining focused on delivering sound returns through-out the year.

APCO Employees Credit Union has posi-tioned itself as an industry leader in savings deposit rates and loan rates, and remained a favorite in 2016. Your Credit Union paid well above market rates on deposits, re-turning 1.00% APY on Share Accounts and 1.51% APY on IRA Share Accounts through-out the year. Due to a practice of low op-erating expenses and a well-built capital base, your Credit Union paid deposit rates well above competitors.

Throughout 2016, your Credit Union’s lead-ership remained diligent in preparing for the future of APCO Employees Credit Union. The Board of Directors, along with Credit

Union management, examined interest rate changes, demographic transitions, and the ever-changing landscape of retail banking. While making investments and planning strategically, Credit Union leaders concen-trated on the evolving needs of the member.

The Credit Union’s growth reflects its com-mitment to member service and its continued efforts to offer rates and fees that are among the most attractive in the industry. APCO Employees Credit Union members received another remarkable year in returns as divi-dends and interest paid to members totaled nearly $27 million for the year; $6.5 million more than was retained in capital. The cap-ital base was increased over $20 million. Your Credit Union remains stronger than ever due to your support and loyalty.

As Treasurer, I would like to thank our President, Mr. Derrick Ragland, and his ded-icated staff for their assistance in making my job a pleasure this year. Most importantly, I would like to thank our members for making 2016 another very successful year for your Credit Union.

Mark WilkinsonTreasurer

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Dividends and InterestPaid to Members

41.6%

Salaries and Benefits

14.2%

Retained Earnings

31.3%

Operating Expense

12.9%

Gross Income

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Report of the President

Whether investing in a new home, up-coming retirement, or a new car, in 2016 APCO Employees Credit Union mem-bers turned to their

institution for direction and financing. The Credit Union also used 2016 to invest in you the members, and the future of APCO Employees Credit Union.

At APCO, we understand members have a choice of financial institutions. Our growth throughout 2016 is a direct reflection of the confidence and support you chose to grant to us. The unique benefit of being a Credit Union member is the Credit Union actually belongs to you. APCO is member owned and operated and its only reason for exis-tence is to help its members do better finan-cially. Our ambition this year was to make your member experience more valuable, convenient and enjoyable than ever before.

Over the last year, we offered industry-lead-ing savings options, strong loan rates and member-conscious investment services. We reached hundreds with financial education seminars and community service, while helping members reach their goals through products and services.

The last year brought technology and in-novation to the Credit Union member. We launched a brand new Mobile App that saw enrollment of more than 7,000 members. The new app focuses on ease of use and Remote Deposit Capture, which is a popular feature for our busy members. Your Credit Union also premiered a new Bill Pay platform that gave members more control and options than ever before. These upgrades are small steps in the continued development of your Credit Union’s “Online Branch”. In 2017, we will continue our advances in technology to offer products and services to help make managing your money more convenient and efficient in the future.

In 2016, APCO Employees Credit Union updated its VISA credit and debit card pro-gram by upgrading our members’ cards with the new EMV technology. Your new debit and credit cards offer an added level of security and fraud protection when used at chip-activated terminals. The new technolo-gy should help obstruct more types of card fraud. This project continued into the first quarter of 2017 as we worked to get new cards with the added security feature into members’ hands.

We work thoughtfully every day to main-tain the safety and soundness of APCO Employees Credit Union. Whether it’s im-plementing the latest security features or simply making solid lending and investment decisions, the Credit Union functions to do what is best for the member. As we continue to advance our products and services with greater accessibility, maintaining the safety and soundness of this institution will continue to be a top priority.

In conclusion, I would like to thank the Board of Directors, our various Committee mem-bers and our staff for their dedicated efforts in helping make 2016 a year for investment and growth towards the future of APCO Employees Credit Union. Most of all, I would like to thank you, our Members, for allowing us to serve your financial needs.

Derrick E. Ragland, Jr.President / CEO

“Our ambition this year was to make your member experience more valuable, convenient and enjoyable than ever before.”

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Assets 2016 2015 Increase or (Decrease)

Member Loans 754,959,522 739,743,067 15,216,455

Accrued Income on Loans 1,352,750 1,395,465 (42,715)

Allowance For Loan Losses (2,490,089) (2,535,841) 45,752

Cash 117,650,553 119,912,428 (2,261,875)

Corporate Credit Union 154,025,946 277,823,858 (123,797,912)

CUSO Investments 668,941 911,529 (242,588)

Federal Agency Securities 1,222,217,008 940,579,847 281,637,161

Federal Reserve Account 352,000,000 390,000,000 (38,000,000)

Trust for Credit Union Funds 55,909,151 55,645,757 263,394

NCUA Insurance Deposit 21,740,266 21,092,505 647,761

Furniture and Equipment 1,386,068 1,447,750 (61,682)

Land and Building 17,754,805 18,035,068 (280,263)

Other Assets 39,754,747 35,234,800 4,519,947

TOTAL ASSETS $2,736,929,668 $2,599,286,233 $137,643,435

Liabilities and Capital 2016 2015 Increase or (Decrease)

Accounts Payable 4,688,677 3,497,182 1,191,495

Taxes Payable 48,460 128,305 (79,845)

Unposted Transactions 1,833,149 255,592 1,577,557

Accrued Interest Payable 2,434 1,786 648

Chek-Plus 139,103,019 119,152,556 19,950,463

Time Deposit Certificates 396,227,033 373,630,535 22,596,498

Shares 1,931,431,399 1,830,528,681 100,902,718

Regular Reserve 42,778,577 42,778,577 0

Other Reserves 204,416,920 213,713,019 (9,296,099)

Retained Earnings 16,400,000 15,600,000 800,000

TOTAL LIABILITIESAND CAPITAL $2,736,929,668 $2,599,286,233 $137,643,435

Comparative Balance SheetDecember 31, 2016 and December 31, 2015

Income 2016 2015 Increase or (Decrease)

Interest on Loans 33,932,274 32,991,753 940,521

Income from Investments 27,100,292 26,830,091 270,201

Other Income 3,619,959 3,701,036 (81,077)

GROSS INCOME $64,652,525 $63,522,880 $1,129,645

Expenses 2016 2015 Increase or (Decrease)

Salaries 6,308,607 6,665,902 (357,295)

Borrower’s Insurance 0 15,000 (15,000)

Provisions for Loan Losses 3,000,000 2,375,469 624,531

Association Dues 156,426 130,249 26,177

Federal Income Tax 22,567 20,000 2,567

Surety Bond Premium 94,531 93,659 872

NCUA Deposit Insurance Expense 0 0 0

Examination Fees 291,274 280,015 11,259

Professional Services 1,292,393 1,094,277 198,116

Interest on Borrowed Money 0 0 0

Stationery and Supplies 117,415 110,643 6,772

Cost of Space Occupied 704,888 742,540 (37,652)

Educational Expense 83,060 83,273 (213)

Loan Servicing Expense 646,184 653,659 (7,475)

Depreciation - Furniture 344,208 315,955 28,253

Social Security Taxes 439,024 447,352 (8,328)

Other Insurance 110,480 104,432 6,048

Communication 594,252 480,054 114,198

Bank Service Charge 87,226 84,931 2,295

Unemployment Compensation Tax (1,370) 27,672 (29,042)

APCO CUSO Expense 33,750 38,550 (4,800)

Conventions and Conferences 255,641 236,040 19,601

Supervisory Committee Expense 54,867 55,288 (421)

Cash Over and Short 4,755 1,122 3,633

Annual Meeting Expense 11,324 13,928 (2,604)

Maintenance to Equipment 304,967 227,513 77,454

Employee Benefits 2,481,958 2,357,673 124,285

Interest on Deposits 6,794,376 6,462,040 332,336

Dividends to Members 20,088,490 19,208,981 879,509

Miscellaneous General Expense 121,996 114,051 7,945

TOTAL EXPENSES $44,443,289 $42,440,268 $2,003,021

NET INCOME $20,209,236 $21,082,612 ($873,376)

To Regular Reserve 0 0 0

To Other Reserves 19,409,236 20,282,612 (873,376)

To Undivided Earnings 800,000 800,000 0

Comparative Statement of Income and Expense

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2016 Credit Committee

Jim Moore (Chairman) Alabama Power Company, RetiredJoe Shannon (Secretary) Alabama Power Company, RetiredMelinda Hurd Alabama Power CompanyEd Nesmith Alabama Power Company, RetiredJohn Ohlson Alabama Power CompanyVicki Page Alabama Power CompanyCarlton Stephens Alabama Power CompanyC.L. Little (Emeritus) Alabama Power Company, Retired

Loan Officers for 2016

Stephanie BrownMichael BrunoMarissa CameronSarah CarterChristopher ChapmanMorgan ChurchwellLaura CulversonRachael Dawson

Brenda DunaganMyron FreemanRus FullerMatt GillardJason JonesNashika KiddMark KirklandTaylor Knox

Jamerial LarkinMimi MercerRussell MooreJane NortonAmanda RayCatherine ReidAndrea RichardsRoy Sims

Ashley TindleAlex WallsJonathan WalterJohn WhelessAndrew Wilson

Report of the Credit Committee

In accordance with the bylaws of your Credit Union, all loan applications submit-ted by members (ex-cluding real estate and indirect) were re-

viewed by the Credit Committee. Our job was made easier due to the comprehen-sive job the loan officers performed in pre-senting the applications for consideration.

The total amount of all loans approved in 2016 was $173,516,259.22. On average, each loan officer approved $5,983,319.29 in loans. The average

amount per loan approved was $6,657.57. The Committee has continued to balance the risk of nonpayment with the financial needs of the membership.

In conclusion, the Committee wishes to express its appreciation for the excellent job Mr. Ragland, Mr. Mink, Mr. Rush and their staff do each year.

Jim MooreChairman

Throughout 2016, the Supervisory Committee represent-ed the membership of the Credit Union as an advocate for member interest. The

Committee, with the assistance of the Credit Union’s internal audit staff, worked to mon-itor the financial health of the Credit Union by performing a variety of audits to ensure that effective controls are in place to protect your assets.

As required by law, the APCO Employees Credit Union Supervisory Committee is re-sponsible for the annual audit of the Credit Union records. The Committee authorized the CPA firm Pearce, Bevill, Leesburg, Moore, P.C. to perform the audit for the pe-riod ending June 30, 2016. The audit was performed and the results were approved.

In addition to the CPA audit, the Alabama Credit Union Administration and the National Credit Union Administration performed their annual examinations for the period ending March 31, 2016. The Supervisory Committee reviewed the results of these audits with the Board of Directors and the Credit Union President when they were completed.

The Alabama Credit Union Administration and the National Credit Union Administration examinations, as well as the CPA audit, re-vealed that APCO Employees Credit Union was being managed in an efficient manner and its financial records were being main-tained with accuracy.

The operations of the Credit Union are under daily review by the internal audit staff working under the direction of the Supervisory Committee and the Board of Directors. The audit staff conducts internal audits and reviews the competence and suc-cess of policies and procedures within your Credit Union.

An additional function of the Supervisory Committee is the review of past due loans and uncollectible debts. During 2016, the Committee, with the assistance of the Credit Union President, reviewed outstanding loans and recommended to the Board of Directors that 2,396 loans totaling $3,334,181 be charged to the Allowance for Loan Losses Account. The Board took affirmative action on the Committee’s recommendation.

The Supervisory Committee appreciates the assistance provided by Mr. Ragland and his staff in helping the Committee carry out its responsibilities. The Committee would also like to thank you, the members, for support-ing APCO Employees Credit Union.

Ann WilkinsonChairperson

Allison Boone, MemberCelia Yates, Member

Report of the Supervisory Committee

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“The Supervisory Committee represented the membership of the Credit Union as an advocate for member interest.”

Officers Bob Roy, John Valekis, Mark Wilkinson, Wendell Pate

Directors Greg Shipp, Melinda Lopez

Directors Sal A. Marino, Billy Gober, Bill Bass

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Board of Directors

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(Front Row) Jim Moore (Chairman), Melinda Hurd, Carlton Stephens(Back Row) Vicki Page, John Ohlson, Joe Shannon (Secretary), Ed Nesmith

Allison Boone, Ann Wilkinson (Chairperson), Celia Yates

Credit Committee

Supervisory Committee

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Mission StatementMaking the Financial Difference for MEMBERS.

Vision StatementProvide value and help our Members do better financially.

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Locations

MAIN OFFICE750 17th Street NorthBirmingham, AL 35203(205) 226-68001-800-249-APCO (2726)

Chelsea370 Chelsea CrossroadsChelsea, AL 35043Phone: (205) 678-8406

Clanton1872 7th Street SouthClanton, AL 35045Phone: (205) 280-0366

Corporate Headquarters600 North 18th Street Birmingham, AL 35203 Phone: (205) 257-1592

Dothan2220 Montgomery HighwayDothan, AL 36303Phone: (334) 793-7226

Hoover4725 Chace CircleHoover, AL 35244Phone: (205) 823-7403

Hueytown2901 Allison-Bonnett DriveBirmingham, AL 35023Phone: (205) 257-3905

Inverness42 Inverness Center ParkwayBirmingham, AL 35242Phone: (205) 992-5030

Jasper706 20th Avenue EastJasper, AL 35501Phone: (205) 221-4238

Mobile150 St. Joseph StreetMobile, AL 36602Phone: (251) 694-2383

Montgomery244 Dexter AvenueMontgomery, AL 36104Phone: (334) 832-3822

Pelham101 Huntley ParkwayPelham, AL 35124Phone: (205) 664-7421

Trussville151 Main StreetTrussville, AL 35173Phone: (205) 661-2715

Tuscaloosa630 15th StreetTuscaloosa, AL 35401Phone: (205) 345-6550

West Mobile6396 Airport BoulevardMobile, AL 36608Phone: (251) 434-5634

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www.apcocu.org

Federally Insured by NCUAEqual Housing Opportunity Lender