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Mapping a Path to

Your Dreams2019 ANNUAL REPORT

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Board of DirectorsReportAs your volunteer Board of Directors, we take seriously our responsibility to ensure that USE Credit Union is always here for you and your family, so we’re pleased to report that 2019 was another good year, with solid financial performance. We also recognize that for USECU to be here for you in the long-term, we have to stay competitive as a financial institution, and deliver value to you. During 2019, we took major strides forward in those areas as we continued the important, strategic process of evolving the USE Credit Union brand.

You saw the visual side of this brand evolution, as we adopted a fresh and modern new look in ourmarketing campaigns and in our branches. In the coming year, you’ll see this attractive new look and feelreflected across all mediums.

It’s important to emphasize, though, that this process is about far more than how we look. It’s also about who we are, what our brand stands for, and what makes our Credit Union different and special. This past year, we reaffirmed and rededicated ourselves to our mission “to transform lives by making dreams happen” which made it easy to choose the theme for this year’s annual report: Mapping a Path to Your Dreams.

On behalf of your Board of Directors, I want to thank you for your membership and for the trust you’ve placed in us. As you read through this annual report, I hope you are encouraged to continue to rely on USECU as your financial partner — by your side with smart advice and the products you need to step forward, confidently, into your future!

Sincerely,

Beverly Randez Chair, Board of Directors

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from the CEOLetter

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The past year at USE Credit Union was packed with milestones and highlights, as we worked together to help members map a path to their dreams.

To make it easier for you to do your banking with us, we made significant infrastructure and technology investments to ensure you enjoy best-in-class experiences – whether you do your banking with us in-person at a branch, over the phone via our Contact Center, or digitally through our secure chat, online banking or mobile banking platforms.

You responded enthusiastically to these improvements, and to the attractive new deposit products we offered, by investing more than ever in your Credit Union. Before we were even halfway through the year, we’d topped $1 billion in assets!

You also expressed your approval through the surveys we perform to gauge member loyalty. Over the course of 2019, those survey scores increased steadily and surpassed our year-end goal. In fact, our current score is better than twice the average score for those in the “banking” sector.

Dedicated employees, who consistently go the extra mile, deserve the credit for those high ratings, so we do our best to provide an outstanding workplace that’s inclusive, rewarding and fun! In 2019, our efforts were recognized with the Peter Barron Stark Companies’ Award for Workplace Excellence. We also were named a Top Workplace in San Diego by the Union Tribune newspaper. It is our second consecutive year receiving both these awards.

This annual report touches on many of the ways our employees – we call them Dream Makers – helped members reach their savings goals, get into a dream home or dream ride, and turn all kinds of other dreams into reality. It also shares some of the many important causes we supported this year, and our efforts to help make our communities better places to live.

In 2020, you can expect even more from your Credit Union. All of us at USECU are honored to have such a supportive and loyal family of members, and I want you to know that we are all committed to empowering you with quality financial services that enable you to dream bigger and build a better future.

Sincerely,

Jim Harris President and Chief Executive Officer

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Supervisory CommitteeReport

Credit Manager’sReport

The volunteer Supervisory Committee represents member interests by upholding policies and procedures and ensuring regulatory requirements are met. To that end, the Committee met regularly throughout the year to review internal and external audit reports. In keeping with its annual financial statements audit responsibilities, the Committee retained Moss Adams, LLP to review USE Credit Union’s books and records as of December 31, 2019. Moss Adams’ resulting opinion states the Credit Union’s financial statements present fairly, in all material respects, the financial position and results of operations in conformity with U.S. Generally Accepted Accounting Standards. A condensed version of the audited financial statements is attached. A full copy of Moss Adams’ 2019 audit report has been provided to the Board of Directors, and the State of California’s Department of Business Oversight, and will be made available to members, upon request.

Sincerely,

Kimberly Floyd Chair, Supervisory Committee

USE Credit Union offers its members loan products, at competitive rates, through a team of talented and committed team members who work with external partners, such as auto dealers and other credit unions. In 2019, USECU’s loan portfolio increased 2.3% or $17,297,490 versus growth of 18.4% or $116,323,591 in 2018. We continued to review and adjust the portfolio mix to ensure we meet our member, financial and strategic needs. In 2019, our delinquency rate increased to 0.37%, from 0.36% in 2018, and our loan losses decreased from 0.52% to 0.29%.

Sincerely,

Matt G.M. Lyons Senior Vice President, Chief Lending Officer, Credit Manager

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Our deposit accounts help you reach your goals faster.Our checking accounts are your go-to choices for day-to-day banking, but we know you want more. So, in 2019, we went all-out to give you great new ways to build your savings. Whether you were focused on shorter-term or longer-term goals, you found a USE Credit Union account that was right for you.

Share Certificates: You showed us you loved the 13-month and 24-month promotional certificates we rolled out this year when you let your friends and family know about the great rates we offer. In fact, these two certificates alone brought nearly $50 million in new money to your Credit Union!

Money Market Advantage: We heard you when you told us you like your banking simple. So, in August of 2019, we consolidated all our money market accounts into a single, Money Market Advantage account. Now, you have both the easy access and flexibility you love in a money market, with competitive, tiered rates that reward you for saving more with us.

Dare to Dream: It’s never too early to nurture smart savings habits, so this year we launched our Dare to Dream youth savings account to encourage members to begin savings plans for their children. Designed specifically for members under 18, the account has no monthly fee and no minimum balance.

for the JourneySaving

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We have a loan to help you get there.Access to a full lineup of loans, offered at great rates, is one of the main reasons many members join USE Credit Union. This year, we were thrilled to be able to help members with more than $200 million in loans to purchase dream homes, finance new cars, and much more!

My Mortgage, My Way: Our promise of super-competitive rates, same-day credit decision, on-time closing, and great service helped members throughout California buy into their American dream. But we didn’t just offer financing. We also delivered practical and informative home buyer workshops to help members become smarter home shoppers.

Renewable Home Energy Loans: We made it easy for members to green-up their homes with solar power by offering 100% financing, no origination fees, and rates as low as 4.99%.

Auto and Credit Card Preapprovals: If you were in the market for a new ride or a rewarding new credit card this year, you found exactly what you were looking for at your Credit Union! Throughout the year, we preapproved members for loans so they could shop with confidence, knowing exactly how much they could borrow. And, when you took out an auto loan with us, we organized all the key details about your loan into a personalized, easy-to-understand video.

Promotions, Rewards and More: From our popular Skip-a-Pay program for auto loans, and double points Mastercard®

rewards campaigns, to discounts on home equity lines of credit and more, we had your back with a range of promotions that simplified your financial life and helped your money go farther.

You’re goingPlaces

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Our technology’s as mobile as you are.We love seeing members at our branches, but we know that you’re often too busy to do your banking in person. So, this year we stepped up in a big way with investments that make our digital banking platforms second-to-none.

Mobile Banking: We’re thrilled that you’ve rated our mobile app at 4.8 stars on the App Store and 4.5 on Google Play, out of a maximum of 5 stars! But even without the ratings, we had a pretty good idea you liked the app, because usage skyrocketed in 2019. We’d expected around 5% growth, and it ended up being three times that!

Money Management: You also let us know that you’re a big fan of the free personal financial management app available in online banking, as usage grew 22% over 2018—more than five times faster than expected.

New Digital Features: With all things digital, 2019 was about more, easier and better. We gave our mobile app a much-needed facelift and upgraded our online applications to make it easier for you to open accounts and for new members to join. We also responded to your requests to make your financial life more seamless by enabling you to make loan payments from non-USECU accounts.

Social Engagement: We updated our status to engaged—very engaged—on social media this year, and we were delighted that you responded positively to so many of our fun, informative and occasionally off-beat posts.

on the goBanking

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We’re ready whenever and wherever you are.As much as you like digital banking, we know that sometimes you want a real live human being to help you sort out a situation or get a question answered. In 2019, we made sure we were always there for you when you needed us, no matter how or when you reached out.

24/7 Card Support: Things like a declined transaction or a lost or stolen card can derail an otherwise fantastic vacation or evening out, so we expanded phone support so you can get credit and debit card help outside of regular business hours.

Contact Center Call-backs: Waiting on hold isn’t our idea of fun either, so we launched a slick new feature that allows you to have a Contact Center agent call you back, holding your place in the phone queue without having to stay on hold.

Online Chat & Secure Messaging: Since you’re doing so much more of your banking online, we rolled out another easy and convenient way for you to get your questions answered. Simply initiate an online chat with us when you’re logged in, and message away!

Everybody at Your Service: When you visit a USECU branch, we want to be 100% focused on listening and helping you, so we’re always exploring new technology to make that happen better. This year, we saw more of you enjoy the convenient self-service machines at our La Mesa branch, but we also added mobile docking stations to make sure our team members are always accessible if you want personal assistance.

Spread the Love: USECU membership is just too good to keep to yourself, and in 2019 we really made it worth your while to spread the word with a new referral program that rewards members and those they refer with a generous financial bonus.

Making ThingsHappen

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BetterTogetherWe’re transforming lives and building communities.

For us and a lot of USECU members, health, wellness and inclusiveness are all part of what makes our communities great places to live, work and pursue our dreams. In 2019, we demonstrated some of the ways we’re “better together” by putting our volunteer time and fundraising efforts to work for causes, events and organizations that support and advance those principles.

Feeding San Diego: Throughout 2019, our employees volunteered at four different events, helping to organize and sort food for those in need. In one night alone, our volunteers provided the equivalent work of 25 full time staff!

Movember: In November, USECU employees took up the challenge to grow “mo’s” to support Movember – a month dedicated to raising awareness of men’s health issues. Together, they raised thousands for the cause.

Susan G. Komen Race for the Cure: For the third consecutive year, we fielded a team of employees, family members and friends who ran and walked to raise money to help find a cure for breast cancer.

Pride Month: We upped our involvement in this year’s San Diego Pride Parade by adding a float and raised the Pride flag in June to show USECU’s commitment to inclusion.

San Diego Blood Bank: We set a record with 12 first time donors at our blood drive. Our total of 36 donors touched the lives of 102 people.

Take Our Daughters & Sons to Work Day: On April 25, we hosted 17 kids and provided a fun and educational day for our employees’ children to learn more about what mom and dad do during the day.

International Credit Union Day: On October 17, we joined with our sister credit unions around the world to celebrate all that’s special about cooperative financial institutions, hosting member appreciation events in all of our branches.

Veteran Career Fair: We’re always looking for motivated employees with a heart for service, and this event was a great opportunity to reach out to veterans and let them know about careers with our Credit Union.

Rady’s Walk: On May 4, employees, family members and friends raised funds for Children’s Miracle Network Hospitals – the credit union movement’s charity of choice – by participating in Rady Children’s Dream Big Walk..

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ASSETSCash and cash equivalents $ 65,571,016

Available-for-sale investments 96,751,921

Federal Home Loan Bank (FHLB) stock 4,616,700

Loans, net 760,442,356

Accrued interest receivable 3,017,712

Premises and equipment, net 24,267,398

National Credit Union Share Insurance Fund (NCUSIF) deposit 7,962,480

Insurance contracts 21,026,452

Other assets 40,040,016

Total assets $ 1,023,696,051

Financials AS OF DECEMBER 31, 2019

LIABILITIESMembers’ shares $ 865,251,940

Borrowed funds 45,000,000

Accrued expenses and other liabilities 10,982,845

Total liabilities 921,234,785

Members’ Equity

Retained earnings 102,030,727

Accumulated other comprehensive income (loss) 430,539

Total members’ equity 102,461,266

Total liabilities and members’ equity $ 1,023,696,051

INTEREST INCOMELoans $ 33,502,961

Investments and cash equivalents 4,185,777

Total interest income 37,688,738

Interest Expense:

Members’ shares 3,359,668

Borrowed funds 1,093,199

Total interest expense 4,452,867

Net interest income 33,235,871

Provision for Loan Losses 1 ,721,434

Net interest income after provision for loan losses 31,514,437

NONINTEREST INCOMEInterchange income, net of fees $ 2,424,243

Service charges and other fees 2,956,116

Gain on sales of loans -

Courtesy pay fees 1 ,125,121

Gain on sale of available-for-sale investments -

Loss on disposition of assets -

Sale of Visa Class B shares 2 ,705,797

Other noninterest income 1,451,884

Total noninterest income 10,663,161

NONINTEREST EXPENSE:Compensation and benefits 17,557,120

General and administrative expenses 13,632,311

Occupancy 3,315,631

Total noninterest expense 34,505,062

Net Income $ 7,672,536

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Leadership

Jim Harris, President & Chief Executive Officer

Paris Chevalier, Senior Vice President, Chief Experience Officer

Steve Ewers, Senior Vice President, Chief Information Officer

Matt G.M. Lyons, Senior Vice President, Chief Lending Officer

Todd Tharp, Senior Vice President, Chief Financial Officer

Laura Young, Senior Vice President, Chief Human Resources Officer

Kimberly Floyd, Supervisory Committee Chair

Carolynn Winship, Committee Member

Nancy Herbst, Committee Member

SUPERVISORY COMMITTEE

Beverly Randez, Board Chair

Joshua Lawrence, Board Vice Chair

Matthew Adams, Director

Antony C. Cherin, Director

Scot Eisendrath, Director

David P. Ely, Director

Yvonne L. Marsh, Director

Leslie Overman, Director

Steve St. Marie, Director

Harry Le Grande, Associate Director

Steven Lei, Associate Director

BOARD OF DIRECTORS

EXECUTIVE TEAM

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1. CALL TO ORDER The Annual Meeting of the Membership was held in the Corporate Office Boardroom of University & State Employees Credit Union, located at 10120 Pacific Heights Blvd., Suite 100, San Diego, CA 92121 on May 23, 2019. The meeting was called to order by Chair Overman at 5:00 p.m.

2. WELCOME AND INTRODUCTIONS Chair Overman welcomed everyone to the 83rd Annual Meeting of the Membership and introduced attending Corporate Officers, Board of Directors and Supervisory Committee Members.

3. ROLL CALL Corporate Secretary Tharp called roll. He stated a quorum is 10% of total active members, or 50 members, whichever is less, present in person or by proxy. A quorum was present.

4. APPROVAL OF THE MINUTES Chair Overman noted Minutes of the May 24, 2018 Annual Meeting of the Membership were distributed in the meeting packets to all members present. Hearing no questions or discussion, on a motion by Marsh and second by Winship the Minutes were approved as distributed, and ordered filed.

5. REPORTSA Board of Directors Report: Chair Overman noted the Board’s report was included in the meeting packet.

B. President’s Report: Harris welcomed and thanked everyone in attendance. He then gave a brief presentation highlighting a variety of 2018’s strategic objectives accomplishments. Harris was pleased to report we received both the Union Tribune’s “Top Workplaces” award as well as achieved “Best of the Best” status on our employee opinion survey. He noted this supports our commitment to a people-focused organization and cultural attributes. Harris went on to review two important financial metrics – Net Worth and Assets, noting both are trending better than our set goals. Next he highlighted the new tablet based loan application technology launched during 2018, which created efficiency for both our members and employees. Harris explained how we’ve worked to increase our Net Promoter Score (NPS), demonstrating our commitment to providing excellent member service. Harris extended his appreciation to the Board, Supervisory Committee and staff for another successful year and he looks forward to continued success in 2019.

C. Credit Manager’s Report: Lyons presented the Credit Manager’s report, noting a copy was included in the meeting packet. He offered the report for questions and discussion; there were none.

D. Supervisory Committee Report: On behalf of the Committee, Chair Floyd reported a copy of the Committee’s report was included in the meeting packet distributed to all members present. She stated a summarization of RSM’s 2018 year-end audit was also in the packet and that we have received good reports from all external regulators and auditors. She offered the report for questions and discussion; there were none.

Annual Meeting of the MembershipMinutes

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Annual Meeting of the MembershipMinutes6. UNFINISHED BUSINESS

Chair Overman called for unfinished business; none was raised.

7. NEW BUSINESS Chair Overman called for new business; none was raised.

8. ELECTION OF OFFICIALSA. Report of Nominations by Petition: Corporate Secretary Tharp reported no nominations by petition were

received.

B. Election of Officials: On behalf of the Nominating Committee, Committee Chair Eisendrath placed the following members in nomination for Volunteer Positions:

Supervisory CommitteeKimberly Floyd, 3-year term expiring 2022

Board of DirectorsDavid Ely, 3-year term expiring 2022Joshua Lawrence, 3-year term expiring 2022Steve St. Marie, 3-year term expiring 2022

There being no nominations by petition, Chair Overman declared the nominees elected by acclamation.

9. ADJOURNMENT There being no further business, the meeting was adjourned at 5:14 p.m.

Respectfully submitted,

Todd TharpSVP, Chief Financial Officer, Corporate Secretary

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