ASCEND FEDERAL CREDIT UNION

2012 ANNUAL REPORT

connectedrespected

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THE DIFFERENCE IS CLEAR

They say less is more.

That’s the attitude of some financial institutions. Less service, more fees. Fewer products, more profit.

If you’re tired of business as usual, expect business unusual at Ascend Federal Credit Union.

Ascend has checking and savings accounts. We also have mortgage and vehicle loans, credit cards, ATMs – basically the same products you’ll find anywhere.

BUT, ASCEND IS DIFFERENT.

We are a non-profit financial cooperative mutually owned and governed by you – the members we serve. We have better rates and fewer fees than the other guys. We also have a variety of free services like Mobile Account Access, electronic bill payment, a health

savings account, youth accounts, financial education seminars, and much more.

We appreciate your membership and the opportunity to serve you. If you appreciate the credit union difference, encourage your friends and family to experience the difference for themselves.

On Nov. 16, 2012, long-time Ascend Federal Credit Union Board member Robert H. (Bob) Burt passed away. Mr. Burt was always a passionate advocate for Ascend, our members, and the entire credit union movement. He served in many capacities on our Board, including chairman. He was also chairman of the Tennessee Credit Union League in the late 1980s. We are very appreciative of his 31 years of dedicated service to this credit union.

PHILOSOPHy: The core philosophy of credit unions is “People Helping People.”

BETTER RATES & LOWER FEES: Credit unions almost always offer better rates and lower fees than their competitors.

ACCOUNTABILITy: A credit union has a volunteer Board of Directors that focuses on the products and services offered to credit union members. All credit union members are shareholders, so the success of the credit union is shared equally.

differenceTHE ASCEND

NOT-FOR-PROFIT: We are a not-for-profit financial cooperative existing to serve our members, not to make a profit. Once reserves are met, earnings are returned to our members in the form of lower loan rates, higher dividends on deposits, lower fees and convenient services.

TAxATION: Credit unions do pay taxes – payroll and property taxes. However, Congress exempts credit unions from federal income taxes, which allows credit unions to charge lower fees than other financial institutions.

OWNERSHIP: Credit unions are democratically owned and operated. Each credit union member has equal ownership and one vote – regardless of how much money he has on deposit. At a credit union, every customer is both a member and owner.

In 2012, Ascend helped you stay connected to your credit union accounts like never before.

As part of our growing suite of convenient, free and secure Mobile Account Access products, we introduced SMS/text messaging and a dedicated smartphone app to help you monitor and manage your credit union accounts at your convenience.

We updated ascendfcu.org to a true mobile Web site when viewed from a smartphone or tablet, resulting in the pages sizing appropriately and allowing members to obtain information more quickly. We also made security enhancements to E-BRANCH to help keep your financial information secure.

Last year, we gained the ability to instantly issue the Freedom Card, the Health Savings Account card, and some cards associated with our youth accounts. This greatly improved member convenience by removing the wait time for these products to be mailed. Ascend dramatically increased convenient, fee-free ATM access by joining the Allpoint network. You can now use your credit union ATM card or Freedom Card to make fee-free transactions at more than 50,000 ATMs worldwide, with hundreds of those right here in Tennessee.

PRESIDENT AND CEO’SREPORTCAREN gABRIEL

And speaking of ATMs, we increased the convenience for members wanting to make a deposit at an Ascend ATM. Our ATMs with deposit capabilities now accept cash and checks with no deposit envelope required. You can confirm the deposit on screen before completing the transaction, and you can receive an image of your cash or check deposit printed on your receipt.

Ascend not only helps members stay connected to their accounts, but we also stay connected to the community. Over the past decade, we have awarded a total of $120,000 to 108 credit union members as part of the Ascend Federal Credit Union Scholarship Program. Last year, we donated $7,560 to the Susan G. Komen Foundation through our participation in the “Passionately Pink for the Cure” program. Credit union employees raised a total of $3,036 for the Leukemia & Lymphoma Society through their participation in “Costumed for a Cure.” Ascend’s support of “Warm Coats from Warm Hearts” resulted in the collection and distribution of more than 5,200 coats. And, through participation in two golf tournaments, we donated more than $35,000 to the Children’s Miracle Network.

Most importantly, we value the connection we have with our loyal members. Without your support of this credit union and using the products and services available to you, our success would not be possible. Thank you for your membership with Ascend.

connected

Ascend Federal Credit Union continues to be your respected source of financial stability and dependability in an increasingly unpredictable economy.

Ascend has consistently earned a financial strength rating of “A” or “Excellent” from Weiss Ratings. This rating recognizes Ascend as an outstanding credit union offering excellent financial stability to its members.

That stability is evident in the fact that over the past eight years, we’ve returned more than $44 million to members in bonus dividends and loan interest refunds.

Last year, your credit union garnered positive publicity when it was recognized on a national scale. President and CEO Caren Gabriel was selected as a “Woman to Watch” by the Credit Union Times for “challenging the status quo and pushing creative solutions” within the industry. Also, for the second consecutive year, our Card Services Department was recognized by Visa with two Service Quality Performance Awards.

CHAIRMAN’SREPORTLOU DEkEN

A little closer to home, Ascend was recognized as a trusted resource for financial information. Caren, Vice President of Business Solutions and Mortgage Lending Nancy Parker, and MEMBERS Financial Services representative Randall Harris appeared in three separate interviews on a Nashville afternoon talk show. Topics discussed included the differences between credit unions and banks, advice on saving for retirement, and home buying tips.

The respect that Ascend enjoys is earned daily through effective leadership, dedicated employees and loyal members. Thank you for your membership.

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You trust Ascend Federal Credit Union’s Board of Directors to keep the credit union financially stable and moving forward.

The Supervisory Committee works independently to ensure the Board and management team of your credit union meet required financial reporting objectives and establish internal controls sufficient to protect the assets of the credit union’s membership.

To assist us with carrying out our responsibilities, we work closely with the credit union’s internal auditors as well as the external audit firm of Orth, Chakler, Murnane and Company, CPA’s (OCM). OCM has performed an audit of our financial statements and determined that our financial statements present fairly, in all material aspects, Ascend’s financial position.

On a yearly basis, the National Credit Union Administration (NCUA) conducts an examination of Ascend and documents the financial condition, quality of management, and risk of loss to member capital and the National Credit Union Share Insurance Fund (NCUSIF).

Based upon the work of our internal auditors and our own observations, we can report to the members that Ascend continues to uphold a high level of safety and soundness.

Protecting the integrity of Ascend’s operations is key to earning your trust. Thank you for the opportunity to be of service, and thank you for your membership.

SUPERvISORy COMMITTEE’SREPORTPAT EAgAN

JIM SMITH

gREg CARTER

SUPERvISORy COMMITTEE

TREASURER’SREPORTLEE PARkER

Ascend’s positive direction of growth was reflected in numerous ways last year.

Our membership continued to grow through the addition of select employee groups (SEGs) and through our partnership with The Nature Conservancy (TNC). Through this partnership, people get access to a low-cost financial alternative while contributing to an organization that is working to protect our natural resources. The Ascend/TNC partnership is one in which everybody truly wins.

In an ongoing effort to enhance member access, last year we broke ground on a new financial center in Mt. Juliet. Located at 300 Pleasant Grove Road, Suite 510, this facility will be Ascend’s 16th Middle Tennessee financial center and our first location in Wilson County. We hope to begin serving members from this financial center later this year.

Additional signs of growth last year included a $5 million member return and the introduction of a feature-rich alternative to our standard checking account called Preferred checking. Preferred checking offers a host of features that add value to your membership – features like a monthly dividend, identity theft insurance, rebate rewards, and more. Thanks to the excellent effort

of staff and management, we exceeded goals for equity loans, credit cards and youth accounts. Ascend’s Business Solutions Department more than doubled the number of business deposit relationships and grew the business loan portfolio 62.43 percent over the previous year.

Last year, 6,028 members chose to receive an electronic statement (or e-statement) in lieu of a traditional paper monthly statement. E-statements have a number of advantages. For one, they are very secure because you access them from within password-protected E-BRANCH, as opposed to paper statements, which sit in an unsecure, unguarded mailbox. Also, e-statements can be saved to a CD or DVD for convenient storage, which means you don’t have notebooks of paper statements lying around your home. We always encourage members to take advantage of the free services offered to them, and e-statements are a great example of why: Our 24,089 total e-statement users helped Ascend to offer last year’s $5 million member return.

For more financial details, please review the “Statement of Condition” and “Statement of Income and Expense” following this report. These statements are included to substantiate the progress of your credit union and reflect its financial soundness and stability.

We look forward to serving you in 2013. Thank you for your membership with Ascend.

directed

performance

TOTAL LOANS

778,

887,

045

2008

821,

499,

117

2009

813,

929,

481

2010

818,

563,

298

2011

852,741,397

2012

DIvIDENDS

27,8

73,5

8920

08

23,4

85,2

7020

09

18,7

31,1

3920

10

14,1

70,9

6320

11

9,304,506

2012

ASSETS

2008

1,14

8,83

3,44

3

2009

1,28

8,72

1,50

4

2010

1,39

1,59

9,79

2

2011

1,50

8,93

6,44

7

2012

1,575,232,832

FINANCIAL

SHARES

2008

933,

041,

820

2009

1,06

8,36

7,08

3

2010

1,16

1,96

1,08

9

2011

1,24

9,99

8,28

7

2012

1,296,420,304

56% operating expenses

27% undivided earnings

13% dividends

4% reserves

DISTRIBUTION OFINCOME DOLLAR

financialSTATEMENTS

STATEMENT OF INCOME AND EXPENSE

INCOME: Interest on Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40,145,687Income from Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,296,261Miscellaneous Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20,856,612 Non-Operating Gains (Losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .478,923 TOTAL INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,777,483

EXPENSES: Office Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37,239,146 Federal Supervision and Examination . . . . . . . . . . . . . . . . . . . . . . . . . . .266,652 Members’ Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,277,070 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,652 Provision for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,847,964 TOTAL OPERATING EXPENSES . . . . . . . . . . . . . . . . . . . . . . . 41,634,484

DISTRIBUTION OF INCOME: Operating Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38,786,520Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,847,964Dividend Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,304,506 Transfer to Undivided Earnings and Regular Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18,838,493 TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,777,483

STATEMENT OF CONDITION

ASSETS L O A N S :

Total Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 852,741,397 Less: Allowance for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,686,410 Net Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 847,054,987 Cash & Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,785,828 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 475,585,851 Accrued Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,947,613 Prepaid & Deferred Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,223,780 Fixed Assets (Net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65,096,247 NCUSIF Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12,567,545 Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21,970,981 TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,575,232,832

LIABILITIES AND EQUITY PAYABLES & ACCRUED EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . 11,662,390 SHARES:

Share Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 565,442,889 Share Draft Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,827,375 Health Savings Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,072,294 Share Certificate Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337,051,756 Money Market Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57,164,447 Individual Retirement Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 194,861,543 Regular Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,620,701 Undivided Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231,710,710Equity Acquired in Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,178,753 Accumulated Unrealized Gains (Losses) On Available-for-sale Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,639,974TOTAL EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,563,570,442

TOTAL LIABILITIES AND EQUITy . . . . 1,575,232,832

boardBOARD OF DIRECTORS

Peggy Gray, Vice Chairman Stephen Passarello

Jim WardCarolyn Stone

Anthony Taylor

Bruce Runyan

Randal Braker, Secretary

Lynn Brumfield

BOARD DEvELOPMENT COMMITTEE

promise

OUR BRAND PROMISE IS TO EDUCATE AND HELP yOU

BECOME AN EFFECTIvE FINANCIAL STEWARD. WE DELIvER

THIS PROMISE By ASkINg yOU QUESTIONS AND OFFERINg

OUR FULL, UNDIvIDED ATTENTION TO UNDERSTAND yOUR

CURRENT LIFE SITUATION AND FUTURE PLANS BEFORE

OFFERINg SOLUTIONS.

OUR TAgLINE IS “RAISINg POSSIBILITIES.” ALL THAT WE

DO TO DEFINE AND DIFFERENTIATE OURSELvES FROM

OTHER FINANCIAL INSTITUTIONS DERIvES FROM THIS.

WE WANT TO HELP yOU RECOgNIzE AND RAISE ALL

THE POSSIBILITIES AS WE ASSIST yOU WITH PERSONAL

FINANCIAL SOLUTIONS.

BRAND

P.O. Box 1210, 520 Airpark Dr., Tullahoma, TN 37388

452 N. Hap Arnold Dr.

981 W. James Campbell Blvd.

3150 Aspen Grove Dr.

1372 Rock Crusher Rd.

1929 McArthur St.

Three Star Mall, 1410 Sparta St.

1250 W. Clark Blvd., 750 S. Church St., 4051 Franklin Rd.

Coming Soon

6201 Centennial Blvd., 2600 Elm Hill Pike

1900 N. Main St.

769 Nissan Dr.

1611 N. Jackson St.

2459 Decherd Blvd.

CORPORATE HEADQUARTERS

ARNOLD AIR FORCE BASE

COLUMBIA

COOL SPRINgS

LEWISBURg

MANCHESTER

MCMINNvILLE

MURFREESBORO

MT. JULIET

NASHvILLE

SHELByvILLE

SMyRNA

TULLAHOMA

WINCHESTER

This credit union is federally insured by the National Credit Union Administration. Membership is limited. 0313 A2120

ascendfcu.org 800-342-3086