ANNUAL REPORT

2016

UNITED TELETECH FINANCIALFEDERAL CREDIT UNION

RICHER FOR KNOWING US

22

1967Inaugural Superbowl is held

1967B.T.L. (Holmdel) Federal Credit Union is formed by employees of Bell Labs in Holmdel

1975President Nixon resigns; Gerald Ford assumes office

1969U.S. lands men on the moon

1967Sgt. Pepper’s Lonely Hearts Club Band, The Beatles

1969Richard Nixon becomes 37th U.S. President

1970Charter is amended to grant membership to employees in Piscataway

1970Internet is launched using UNIX technology developed by AT&T Bell Labs Family

1970Credit union reaches $1,000,000 in assets

1970Bell Labs Family develops Picturephone technology

1973Charter is amended to grant membership to contractors and retirees

2017 marks the 50th anniversary of our credit union’s founding. We are excited to have reached this milestone.

Though this report and its accompanying pages reflect on the accomplishments of our 49th year, we would be remiss if we did not acknowledge this achievement and recognize the efforts of the membership that have brought us this far.

MEMBER JOURNEYSince our inception, we have remained true to our commitment to serve members as the good neighbors they are. The people we hire, the programs we offer, and the approach we take when working with you are each driven by that cooperative principle of “people helping people.” We call this experience our member journey.

STEADY GROWTHWe have come a long way since our founding with eight members and $40 back in 1967. Our 49th year was one of important achievements and opportunities for us to expand what we do for our members. Your credit union now serves

more than 22,600 families in central New Jersey, and our assets are over $339 million. Since our founding, between member equity and loan loss allowance, our reserves have grown to more than $36 million.

MORE VALUEHaving completed the data processing conversion that brought us UTF 2.0, 2016 saw us begin to expand the capabilities of the new software to help improve service. Mobile banking usage has skyrocketed, and each day more and more members are using the time-saving convenience of making their deposits by picture instead of driving to a branch.

United Value™, another one of our new smartphone apps, has had nearly 700 downloads since it was offered in December. We’re delighted that so many of you have looked to the credit union for the special savings that members are now finding with affiliated merchants in our communities. It’s just another way that people across our trade area are Richer For Knowing Us™.

CHAIRMAN’S MESSAGE

Ruth Ann Kluin,CHAIRMAN OF THE BOARD

3

CHAIRMAN’S MESSAGE cont’d

WELCOMING OF THE IFF EMPLOYEES FEDERAL CREDIT UNIONAs of this writing, we are in the process of completing a merger with the former IFF Employees Federal Credit Union. We are honored that this long time Hazlet-based institution looked to us when seeking a merger partner. We warmly welcome its 1,600 members and look forward to sharing the UTF member journey with them.

LOOKING FORWARDAs we move through our 50th year, we expect to create more value for you. In addition to the new United Value™ savings app, expect to see additional member conveniences, including our new Member Direct phone branch. In 2017 we will continue our efforts to strengthen our reserves.

THANK YOUI’ve been privileged to be your Board Chair for the past several years and am repeatedly impressed by the stories I hear of how we have helped you, our members. In addition to our dedicated team, our Board and Supervisory Committee members consistently volunteer their time and expertise to make a difference with the credit union. We give them a well-deserved thank you.

Continuing a 50-year tradition of “neighbors helping neighbors” is both humbling and gratifying. Thank you for allowing us to share in your lives and help you achieve the milestones that matter most to you.

Ruth Ann Kluin Chairman of the Board

1976Bell Labs Family unveils digital electronic switching

1977Bell Labs Family develops fiber optic technology

1983United Teletech Federal Credit Union is adopted as new name

1983Bell Labs Family develops cellular phone technology and C++ programming language

1977Jimmy Carter becomes 39th U.S. President

1977Membership and assets continue to reach new milestones

1980Bell Labs Family introduces digital signal processor chip

1977Star Wars is released

1981Ronald Reagan becomes 40th U.S. President

1980National prime rate reaches high of 21.5%

1980Monmouth County population exceeds 500,000 for first time

BOARD OF DIRECTORS

Robert Hodges, BOARD MEMBER

Ann Weingartner,TREASURER

Michael Hou, 1ST VICE CHAIR

Derek Mahoney, 2ND VICE CHAIR

Gilbert B. Harris, SECRETARY

Randall F. Weihs, BOARD MEMBER

44

1984First checking account is offered

1984Bell Labs Family divestiture begins

1993Bill Clinton becomes 42nd U.S. President

1986New York Mets win World Series

1984Charter is expanded to include employees in multiple locations

1987“Black Monday” stock market crash

1987ATMs begin to be deployed

1990George H. Bush orders Operation Desert Shield in response to Iraq’s invasion of Kuwait sparking the Gulf War

1992Johnny Carson retires from the Tonight Show

1989Bell Labs Family develops high definition television

1992United Teletech celebrates 25th Anniversary

2016 marked United Teletech Financial Federal Credit Union’s 49th year of operation. It was a year of stable growth and of positioning the credit union’s balance sheet for future strength.

Assets grew modestly in 2016 to $339.7 million, or 1.5% over the prior year. Loan balances increased by $14.2 million or 5.4% over the prior year. Deposits rose by $16.6 million or 5.9% over the prior year. Membership decreased modestly to 22,680 as dormant memberships were closed.

Despite ongoing efforts to strengthen reserves, earnings, prior to extraordinary reserving, were approximately $1.01 million or 0.29% ROA. After transfers to bolster reserves, the credit union showed negative earnings of $1.64 million or -0.49% ROA.

Expenses remained essentially the same as in 2015 at $14.571 million as the benefits of sharing services through the Member Support Services, LLC subsidiary began to take hold.

Net worth to assets decreased slightly from the prior year to 9.32% or $31.657 million. Total reserves, including reserves for loan losses, were $36.221 million or 10.66% of assets.

Loan delinquency continued to remain high at 3.95% of the loan portfolio as the credit union continues to

work out various consumer, mortgage and member business loan assets. The credit union continued to assess and reserve capital for any exposure it may have to loan participations for taxi medallions in New York City, given their decline in value amidst competition from ride-sharing services.

The credit union remains well capitalized and generates significant earnings from its loan and investment portfolios. These factors, combined with expense reductions managed through cost sharing agreements, provide the credit union with a stable earnings base for future growth.

As the credit union enters its 50th year of operation, it continues to enjoy a stable brand reputation with high usage of its products and services. These factors, combined with its stable earnings base, position it for ongoing success in its communities.

The credit union is served by a dedicated group of volunteers and a team that seeks to help the membership in many capacities Were it not for their efforts we would not be as well positioned for the future as we are.

Thanks to this team for their work and to the membership for choosing a small, locally controlled organization to help with their financial needs.

Sincerely, Leo Ardine President/CEO

PRESIDENT’S MESSAGE

Management group: Back row-left to right: Ruth Imbro, Leon Maganza, Leo Ardine, Francis James, Pat Finaldi and Schwabie Alli; Front row-left to right: Cliff Auld, Liz Walsh, Connie Cinko, Ruth Nono, Hiren Amin and Kathy Wandras

Executive team: Connie Cinko, Director of Talent and Organizational Development; Leo Ardine, President/CEO; Francis James, EVP of Administration/CFO

5

STATEMENT OF FINANCIAL CONDITION For the years ended December 31, 2016 and 2015

Assets 2016 2015Loans $277,989,565 $263,818,091Allowance for Loan Losses -$4,871,294 -$2,319,250Loans Held for Sale $409,750 $1,050,400Net Loans $273,528,021 $262,549,241Cash & Cash Equivalent $2,774,695 $3,093,336Investments $54,360,573 $58,584,532Fixed Assets $3,363,558 $3,803,490Other Assets $5,675,035 $6,572,341Total Assets $339,701,881 $334,602,941

Liabilities & Members’ SharesAccrued Dividends $84,727 $70,563Other Liabilities $9,493,418 $19,267,636Total Liabilities $9,578,145 $19,338,199Members’ Shares $298,977,904 $282,217,728Total Liabilities & Members’ Shares $308,556,049 $301,555,927

Members’ EquityReserves $11,360,836 $11,360,836Retained Earnings $19,784,996 $21,686,178Total Equity $31,145,832 $33,047,014Total Liabilities, Shares & Equity $339,701,881 $334,602,941

STATEMENT OF INCOME AND EXPENSES For the years ended December 31, 2016 and 2015

Operating Income 2016 2015Income From Loans $13,579,457 $12,421,130Income From Investments $771,365 $894,643Fees & Charges $2,537,528 $2,677,718Other Operating Income $1,441,384 $1,211,224Total Income $18,329,735 $17,204,715

Operating ExpensesCompensation & Benefits $6,674,549 $6,977,235Office Operation Expenses $7,835,186 $7,546,646Federal Operating Fee $60,891 $58,039Total Operating Expenses $14,570,626 $14,581,920

Non-Operating Gain/Loss*Gain/Loss On Disposed Assets $431,315 $501,166Inc/Loss Before Dividends & Provision $4,190,424 $3,123,961Dividends $930,272 $676,355Provision for Loan Losses $4,903,276 $2,068,540Net Income/Loss** -$1,643,124 $379,066

* Negative amount represents loss, Positive amount represents gain

1993Ruth Kluin is elected as Chairman, beginning the longest tenure of our history

1998UTF introduces its first website

1995Tinton Falls branch and headquarters officially opens

1994Investments are offered through Member Financial Services

1996Larry Page and Sergey Brin found Google

1995Windows 95 debut

1996Branches begin to distribute cash

1998Bell Labs Family develops a method for digital music download

1998Bell Labs Family develops PhoneWeb technology

1996United Teletech surpasses $100 million in assets

1996New York Yankees begin World Series dominance

400

300

200

100

0

2010 2011 2012 2013 2014 2015 2016

MIL

LIO

NS

40

30

20

10

0

Income from Loans

Operating Expenses

Reserve (Net Income/

Loss)

Return to Members

Other Operating Income

Fee Income

MIL

LIO

NS

15.43%

5.08%

79.49%

7.86%

Income from Investments

4.21%

13.84%

74.08%

2010 2011 2012 2013 2014 2015 2016

400

300

200

100

0

2010 2011 2012 2013 2014 2015 2016

MIL

LIO

NS

40

30

20

10

0

Income from Loans

Operating Expenses

Reserve (Net Income/

Loss)

Return to Members

Other Operating Income

Fee Income

MIL

LIO

NS

15.43%

5.08%

79.49%

7.86%

Income from Investments

4.21%

13.84%

74.08%

2010 2011 2012 2013 2014 2015 2016

400

300

200

100

0

2010 2011 2012 2013 2014 2015 2016

MIL

LIO

NS

40

30

20

10

0

Income from Loans

Operating Expenses

Reserve (Net Income/

Loss)

Return to Members

Other Operating Income

Fee Income

MIL

LIO

NS

15.43%

5.08%

79.49%

7.86%

Income from Investments

4.21%

13.84%

74.08%

2010 2011 2012 2013 2014 2015 2016

400

300

200

100

0

2010 2011 2012 2013 2014 2015 2016

MIL

LIO

NS

40

30

20

10

0

Income from Loans

Operating Expenses

Reserve (Net Income/

Loss)

Return to Members

Other Operating Income

Fee Income

MIL

LIO

NS

15.43%

5.08%

79.49%

7.86%

Income from Investments

4.21%

13.84%

74.08%

2010 2011 2012 2013 2014 2015 2016

ASSET GROWTH

EQUITY GROWTH

2016 SOURCES OF INCOME

2016 DISTRIBUTION OF INCOME

66

1999United Teletech surpasses $200 million in assets

2000Bell Labs Family develops telephone fraud prevention software

2005UTF unveils its new revamped website

2005YouTube is founded

2001Bell Labs Family develops intuitive interactive voice response technology

2000Monmouth County population exceeds 600,000 for first time

20119/11 Terror attacks

2001George W. Bush becomes 43rd U.S. President

2002American Idol makes USA debut

2004Mark Zuckerberg launches Facebook

2005Charter is changed to open membership to all residents of Monmouth, Ocean, and parts of Middlesex Counties

2002Updated logo is unveiled

2003North Brunswick branch opens

The credit union’s supervisory committee is appointed by the Board of Directors each year from the membership. Its mission is to provide an independent assessment of the credit union to ensure that the financial statements accurately reflect the financial condition of the credit union. To that end, the committee conducts independent reviews of various internal controls. Additionally it engages an audit of the credit union each year by a certified public accountant.

Our independent auditor, certified public accounting firm The Curchin Group, LLC, in Red Bank, NJ, confirmed the accuracy of our financial position and soundness of our operations as of September 30, 2016.

The Supervisory Committee consists of Chair Irene Kurc; members Lew Ackerman, Christine Coari, Nancy Miller; and Board Liaison Robert E. Hodges.

Thanks to the management team, staff and members of the Committee for their service to the credit union. Together we will continue to protect the interests of our members in the years to come.

SUPERVISORY COMMITTEE REPORT

Irene Kurc,SUPERVISORY COMMITTEE CHAIRMAN

Supervisory Committee: Christine Coari, Lew Ackerman and Irene Kurc (missing from photo is Nancy Miller)

7

2005Name is changed to United Teletech Financial and the New “U” brand is unveiled

2009195 nations agree to lower greenhouse gas emissions during the Paris Climate Accord

2009UTF’s Marlboro branch opens to the public

2007Consumer Reports ranks credit unions as best value among financial institutions

2008UTF is awarded for their participation in the JDRF Cure for Diabetes Annual Monmouth County Walk Fundraiser

2008Barack Obama is elected as the United States’ first African American president

2008UTF is awarded the “Others” award, recognizing its service and assistance to the vital work of the Salvation Army

CELEBRATING OUR MEMBER JOURNEYAs United Teletech Financial Federal Credit Union embarks on its 50th year, our team has been reflecting on our heritage of service to our membership. Since our early days, when we were chartered to serve the needs of Bell Labs employees, we have built a powerful tradition of neighbors and coworkers helping one another make better financial decisions.

Though we are larger and serve more members today, that legacy hasn’t changed. Our member journey is still about the friendly, customized experience members get when they work with our team or use our products or services. It drives every interaction, whether in person, on the phone or through electronic means.

Our member journey underlines the commitment we make to help those who choose to work with us. Often the path includes:

• Providing simple, secure and electronically accessible products and services that meet members’ needs;

• Gaining an understanding of a member’s entire financial picture to create a holistic solution with them;

• Helping members improve monthly cash flow through better budgeting or lending solutions;

• Providing savings programs that help a member build an emergency fund and investment programs to help maximize returns on long term savings nest eggs;

• Creating awareness around the ways in which members can protect themselves and their legacy for their loved ones; and

• Sharing our professional knowledge, as friends in the business, to help members make more informed financial decisions.

In all we do, we seek to approach every interaction as a friend seeking to help a friend. This approach has served us well the past 50 years and will inform what we do for you for decades to come.

Thank you for allowing us to serve you and to be part of your family these past 50 years. We deeply value your support and confidence in us. We are committed to helping you through the various stages of your journey no matter where your path leads.

Sincerely, The United Teletech Financial Team

2007Apple’s iconic iPhone is unveiled to the world

2007New Holmdel branch slated to open

2008Lehman Brothers declare bankruptcy

2006The “U” wins Best Financial Institution in Monmouth County for third year in a row

MARLBORO67 US Highway 9 South

Unit #4Morganville, NJ 07751

NORTH BRUNSWICKThe Shops at Commerce Place

2201 US Highway 1 SouthSuite 119-B

North Brunswick, NJ 08902

NEPTUNE3636 Highway 33

Neptune, NJ 07753

TINTON FALLS205 Hance Avenue

Tinton Falls, NJ 07724

MIDDLETOWN AT AT&T200 Laurel Avenue

Middletown, NJ 07748

HAZLET AT IFF600 State Highway 36

Hazlet, NJ 07730

CORPORATE CAMPUS BRANCHES

PUBLIC ACCESS BRANCHES

utfinancial.org 732.530.8100

2010Adele’s record breaking album 21 is released

2011UTF begins its 3-year long Million Dollar Challenge by refinancing loans from other financial institutions, saving the community over $3.6 million in interest and donating critical funds to local charities totaling over $31,000

2013UTF becomes a member of the Eastern Monmouth Area Chamber of Commerce

2014UTF is an awardee at the FoodBank of Monmouth County Hunger Challenge

2015NASA announces water is found on Mars

2016UTF completes major upgrade on its core banking system allowing them to serve their members with the most sophisticated and state-of-the-art technology

2017UTF receives the prestigious Humanitarian of the Year award from the Monmouth County FoodBank

2017United Teletech celebrates 50 years serving the community

2011Osama Bin Laden is killed in a raid by U.S. Navy Seals

2012Hurricane Sandy

2013Edward Snowden leaks NSA documents to journalists

2015UTF is an awardee at the LADACIN Network’s 13th Annual RAT Rock Charity Golf Classic

2016Donald Trump is elected as the 45th president of the United States

2017UTF merges with IFF Employee Federal Credit Union, increasing its member base and assets to new highs