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ANNUAL REPORT

Mak ing You r L i f e ’s Jou rney Eas i e r

Embrace you r adven tu re .

R E P O R T O F T H E C H A I R M A N A N D P R E S I D E N T / C E O

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In 2016, we continued to push forth the initiatives that we launched the previous year. Our employees

identified more efficient ways for members to do business with us and we also completed our comprehensive 2020 strategic plan to help lead us into the future.

We embraced a new core purpose to guide our daily activities

and decision-making — “Making Life’s Journey Easier.”

As a member-owner, your opinion matters to us. We implemented

LiveSurvey, an online platform that gathers your opinions and

feedback regarding our service levels. All staff are also currently

undergoing a nationally-accredited service development program.

We aim to provide exemplary service at every interaction with

our members.

B U I L D I N G O N S U C C E S S

Members embraced our new online lending platforms and we experienced the highest consumer lending volume in recent history. Our electronic signature capability provided additional ease to obtain loan funds quickly. Due to this enhanced feature, over 95% of our loans were completed electronically. In addition, home equity loans were previously limited to California members only. In 2016, we expanded home equity loan offerings nationwide. We will continue to enhance our loan offerings and will be introducing a student loan program in 2017.

The Kasasa® Checking program introduced in early 2016 has been one of the most popular items the credit union has introduced. Growth in this product far exceeded growth rates in any other deposit product. Members appreciate the 3% interest rate and enjoy reimbursements of ATM surcharges incurred during the month. A new mobile app was introduced to allow peer-to-peer transfers. We also introduced a new financial planning program under CUSO Financial Services, L.P. This new program quickly amassed over $8 million in assets under management. This program was developedto help members plan for their retirement and align it with an investment strategy that fit their needs. The consultation with our expert financial advisor was provided to them at no cost.

This past year marked one of the most successful years in

Parsons FCU history.

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We also visited Parsons’ offices in Virginia, District of Columbia, Maryland, and Alabama. Additional field office visits are already underway for 2017. As a result of our outreach development, we experienced consecutive months’ growth in membership towards the end of 2016, which included family member referrals. These referrals are a true reflection of our members’ confidence in the credit union.

Parsons FCU is very unique in that it exclusively serves employees and their family members of a select group. This uniqueness allows us to identify and provide custom solutions to meet the needs of our members. To ensure that we have representation that reflects our diverse membership, we added two board of directors in 2016 who work remotely in states outside of California. We will continue to ensure that all of our members are adequately represented. Next year, we will begin to offer electronic voting so that all members, including even those overseas, can participate in voting for our board members. We want to encourage you to take advantage of what the credit union has to offer and embrace your role as a member-owner.

Thank you for being a member-owner and giving us the opportunity to make your life’s journey easier.

Bruce HennigChairman of the Board

K. Ray Crouse, President / CEO

In 2016, we produced two corporate

videos which featured some of our

members to help illustrate the positive

changes that have taken place and to

deliver our core value message to

everyone throughout the company.

D iscove r b r i gh t days .

Supervisory Committee Report

The Supervisory Committee is entrusted with the responsibility of ensuring that Parsons Federal Credit Union (Parsons FCU) activities are safe, sound, and in compliance with all applicable laws and regulations.

Parsons FCU employees are well prepared to face these challenges in order to protect our members’ accounts. Staff employees are trained on the latest compliance requirements through updated compliance manuals, newsletters, online webinars and conferences.

Independent CPA firms conduct regulatory compliance, financial statement and certification of member account audits throughout the year. In addition, the National Credit Union Administration (NCUA) performs an annual exam.

As a result, we are pleased to report that Parsons FCU remains safe, sound and in compliance with applicable laws and regulations.

Theresa Laws Chair, Supervisory Committee

2 0 1 6 R E P O R T S

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Treasurer’s Report

2016 was a phenomenal year for Parsons Federal Credit Union. We exceeded budgeted net income and earned $941,804 while building a solid foundation for 2017. In our lending department, we implemented an online loan application and approval system and offered competitive rates, which helped increase our loan volume. Additionally, we began focusing on expanding our loan participations in various categories. In 2015, we focused on investing in auto loan participations. In 2016, we began investing in member business loan participations and mortgages, which generated an impressive income stream for the credit union. The key indicators below demonstrate some of the successes in 2016:

Loans $75M an increase of $19M

Capital (Net Worth) $27M an increase of $1M

Yield on Investments 1.82% an increase from 1.60%

Lowering our investment portfolio by $23 million primarily in certificates enabled us to allocate funds toward organic loan growth as well as new investment instruments. As a result, investment income and yield on investments were both higher in 2016 than in 2015. Our goal for 2017 is to enhance our loan participations by entering into government guaranteed loans.

We are delighted to announce that Bauer Financial has once again awarded us with their highest five-star rating for our financial performance.

M = million

With every decision we make, we stand committed to our core mission, which is to uniquely partner with our members to make their lives easier.

Derek Mau Treasurer

Kasasa

Our Kasasa Checking is still in high-demand among our young, financially-savvy members. They know there is nothing quite like unlimited ATM fee refunds and high interest returns on a no-strings-attached checking account.

A C H I E V E M E N T S & H I G H L I G H T S

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New Customer Onboarding

We are a unique financial institution that caters to a specific group of employees. We launched a pilot video series that was shared with all newly on-boarded employees only. Our goal was to introduce ourselves to them through these videos—creating a meaningful first impression and sharing our story of the credit union difference.

CORPORATE

V IDEO SER IES

A brand new two-part corporate video series

was �lmed, produced, and distributed among all Parsons employees

in October of 2016. Its purpose was to reiterate Parsons FCU’s values

and its commitment to servicing members. It was used in conjunction

with �eld of�ce visits throughout Washington D.C. area and Parsons’

bene�t fairs.

Se r v i ng w i t h Pass i on .

We blew out forty-one candles in 2016!

We finished the year off with a 5-Star Bauer

Financial Rating and celebrated our big day

by giving away hundreds of free cupcakes to

everyone in the Parsons Pasadena building.

4 1 S T A N N I V E R S A R Y

Halloween + Year-end

We are proud to have an amazing team of people who are passionate about helping others and have fun doing it!

Bene�t Fair

We toured the East Coast with the benefit fair crew during the month of October, visiting field offices in D.C., Centreville, Huntsville, and Columbia. With our membership spanning across the globe, we are committed to enhancing our remote offerings and making it even easier for employees to become members no matter where they are located. It was great meeting everyone and we look forward to coming out again in 2017!

A T E A M W O R K S P I R I T

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CUSO Financial Services, L.P. (CFS)Together with CUSO Financial Services, Parsons FCU launched a new investment program and Tiffany Yee was introduced as the new CFS Financial Advisor. Prior to joining us in 2016, she worked at the Financial Planning Division of MetLife and Ameriprise Financial. Tiffany fulfills her role as an investment manager and fiduciary by using a holistic financial planning approach to help clients achieve their unique retirement and investment goals.

Ce leb ra te you r accomp l i shmen ts

C E L E B R AT I N G O U R N E W L O C AT I O N

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2017 New Branch Sneak Peek

In April of 2017, we plan to be at our new location in our new, state-of-the-art facility—with a sleek interior design, private meeting rooms, and new technology to better serve our members.

The space design reflects our brand philosophy—bold, innovative, and member-focused.

Pictured from Top Clockwise:

Rendering of lobby, blueprint of the new floorplan,

financial planning area, and front entrance.

As of December 31, 2016 As of December 31, 2015

Assets

Loans $74,844,500 $56,263,417 Allowance for Loan Losses (217,374) (137,449)Cash 17,570,028 23,721,538 Investments 110,224,827 132,365,146 Prepaid & Deferred Expenses 248,344 179,548 Net Fixed Assets 635,045 161,816 Accrued Income 437,091 472,975Other Assets 13,517,034 8,911,443Accounts Receivable 721,837 132,945

Total Assets $217,981,332 $222,071,380 Liabilities

Accounts Payable $261,863 $75,480Accrued Expenses 198,479 287,740 All Other Liabilities 175,167 91,766Member Share Accounts 189,569,901 193,900,131

Total Liabilities $190,205,410 $194,355,118 Equity

Reserves $6,000,000 $6,000,000 Undivided Earnings 21,405,547 20,452,367Unrealized Investment Gains/Losses 370,376 1,263,895

Total Equity $27,775,922 $27,716,262 Total Liabilities & Equity $217,981,332 $222,071,380

Statement of Financial Condition

As of December 31, 2016 As of December 31, 2015

Income

Interest on Loans $2,621,942 $2,340,430 Income from Investments 2,572,543 2,434,514 Other Income 652,482 639,020

Total Income $5,846,967 $5,413,965 Expenses

Employee Compensation & Benefits $1,977,870 $1,745,458 Professional & Outside Services 271,449 221,543 Provision for Loan Losses 154,228 (23,817) Office Operations 909,345 806,393Other Expenses 747,005 672,316

Total Expenses $4,059,897 $3,421,893 Income Before Dividends $1,787,070 $1,992,072 Dividends 845,266 882,031 Gain/Loss on Investments 0 0 Net Income 941,804 1,110,041 NCUSIF Stabilization Expense $0 $0

Net Income $941,804 $1,110,041

Income Statement

NET LOAN GROWTH NET LOAN BALANCE GROWTH RATE

CAPITAL (NET WORTH - MILLIONS) YIELDS ON INVESTMENTS

$8.0$7.0$6.0$5.0$4.0$3.0$2.0$1.0$

2013 2014 2015 2016

35.00%

30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%2014 2015 2016

7.05%

10.92%

33.02%

2013 2014 2015 2016

$25.4$24.0

$26.5

$27.4

2013 2014 2015 2016

1.62%

1.52%1.60%

1.82%

En joythe momen ts .

“ I am truly thankful for all of you at Parsons Federal Credit Union. Everyone there has been extremely helpful and very personable. It’s nice to do my business with an institution that even though is across the country, can still maintain a relationship with its members!”

“ All of you at Parsons FCU are the greatest for making my auto loan process such a painless experience for my wife and I. Car shopping will be way more enjoyable without all the haggling!

“ I would like to start off by saying that I have never had great customer at a financial institution before. This is the second time I experienced fraud on my account and your fraud department contacted me both times to verify whether I these transactions belonged to me. I was very impressed with how quickly you guys were able to resolve the issues. I’m very happy I choose your financial institution to bank with.”

“ I just want to thank you all for the excellent service you provided on the processing of my loan. I could have taken offers from other financial institutions but still went with Parsons FCU because I knew I would be given more personal attention by the officers and staff who always show willingness to help. I appreciate all your support. Good job!”

“ Absolutely love banking with Parsons FCU. Wish I had found this banking institution a long time ago. Thank you!”

“ Service levels are simply outstanding…after 16 years, I can say I am still very happy with Parsons FCU.”

“ Very prompt, friendly, attentive and professional service from start to finish. Couldn’t have been a better experience.”

W H Y W E D O W H AT W E D O

M A N A G E M E N T T E A M

Richard WendtChief Lending Officer

Linda GuruleVice President of Member Services

Melinda LeungVice President of Marketing

Ray CrousePresident and Chief Executive Officer

Kathie CordovaExecutive Development Coordinator

Jeffrey HomChief Information Officer

Bruce Hennig, Chairman

Brent Harvey, Director

Derek Mau, Treasurer Joe Piotrowski, Secretary

Francisco Aguayo, Director

Teresa Friederichs, Director

Farzin Torbati, Director

Richard Enriquez, Director

B O A R D O F D I R E C T O R SM A N A G E M E N T T E A M

Donna Williams, Director

100 W. Walnut Street,Pasadena, CA 91124 626.440.7000

EQUAL HOUSINGOPPORTUNITY

Mak ing You r L i f e ’s Jou rney Eas i e r

EXECUTIVE COMMITTEE

Bruce Hennig, Chair Richard Enriquez Teresa Friederichs

SUPERVISORY COMMITTEE

Theresa Laws, Chair Krista WoodleyFarzin Torbati