Federally Insured by NCUA

Annual Report

2012

Listening to Our Members

Listening to our MeMbersAs a financial cooperative, redwood Credit union is owned by our Members. Your voice

is important in helping us to serve you better by providing the products you need, and

improving our services to meet and exceed your expectations. We are always listening

to our Members—through frequent surveys, branch interactions, email, phone and social

media—and we truly value what you have to say!

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I can’t say enough about the service and all the money my family and I have saved with RCU!

– Alicia, Anthony & familyMembers since 1990

“ “

MessAge FroM tHe

boArD oF DireCtorsFor 63 years, Redwood Credit Union has provided Members with the tools and support to reach their financial goals. Whether buying your first home, investing for retirement, or just trying to get a handle on your monthly bills, RCU is here to listen to your needs, and help you thrive financially. Looking back on all we accomplished together in 2012, I am proud to say that our tradition of “people helping people” continues. On behalf of your Member-elected Board of Directors, I’m pleased to report that Redwood Credit Union continues to grow stronger and build capital. Your deposits are insured and backed by the full faith and credit of the United States government. Through a combination of careful planning, sensible lending practices and a commitment to the best interests of our Members, employees and communities, your Credit Union emerged from these challenging times stronger than ever.

This was a year of continued growth at RCU, as more people discovered the benefits of banking locally with a financial cooperative. By continuing to increase membership and grow our net worth, we have been able to expand services, improve technology and continue to provide exceptional overall value, ensuring a stronger cooperative for all our Members.

RCU was once again named “Best Credit Union” by the readers of NorthBay biz for the seventh year in a row, as well as receiving several other readers’ choice awards in the counties we serve. We believe these acknowledgments are a tribute to our passionate employees, who always strive to listen to Members’ needs and suggestions, create solutions to save you time and money, and make sure every interaction exceeds expectations.

Your feedback, provided through Member surveys, at our branches, and on our website and social media pages, allows us to focus our resources on the products and tools you need most. When you asked for the latest online and mobile banking tools, we made improving technology one of our top goals in 2012.

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““

Your Credit Union emerged from these challenging times

stronger than ever.– Robert Wieck, Board Chair

In 2013, we will introduce even more convenient options to save you time and keep your finances organized. We will continue to add products tailored to your unique needs, and provide money management tools to improve your financial well-being.

RCU’s employees and volunteer Board and Supervisory Committee will also continue to play a positive role in the communities where we work and live, showing our support for local non-profits and community groups through on-site volunteering, fundraising, sponsorships and leadership. Highlights of our community giving in 2012 included contributions of more than $305,000 to local non-profits, and over 2,700 volunteer hours at nearly 470 non-profit and community events, as well as hosting holiday food and toy drives at all locations.

On behalf of your volunteer Board of Directors, I thank you for trusting Redwood Credit Union with your financial needs. With your continued loyalty and participation, we look forward to listening, helping and being your trusted financial partner for many years to come.

Robert WieckBoard Chair

Robert WieckBoard Chair

Volunteer since 1976

Dave ImotoBoard Vice Chair

Volunteer since 1989

Rod DoleBoard Secretary

Volunteer since 1978

Greg McGuirkBoard Treasurer

Volunteer since 1980

Robert EylerVolunteer since 2009

Jim OlmstedVolunteer since 1993

Debra WattsVolunteer since 1976

Lisa Wittke SchaffnerVolunteer since 2012

Robert SteeleVolunteer since 1999

VoLunteer boArD oF DireCtors

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One thing that sets credit unions apart from other financial institutions is that our Board of Directors and Supervisory Committee are comprised of Members who volunteer their time to provide guidance and leadership to the cooperative. Redwood Credit Union would like to recognize and thank our volunteer Officials shown below and on pages 7-8 for their service.

MessAge FroM tHe

PresiDent & CeoAs a not-for-profit, Member-owned financial institution, Redwood Credit Union succeeds only when our Members do. That’s why each time we help a Member achieve a financial milestone, consolidate debt, begin saving toward a goal, or expand a business, our cooperative and our community grow stronger. By valuing people over profit, we have remained passionately focused on our core mission of helping Members achieve their financial goals.

While the economy continued its steady climb out of the recession, 2012 was a year of exciting change and growth at Redwood Credit Union. I am pleased to report that RCU experienced growth in all areas, including loans, shares, assets, equity and membership last year. We are the largest credit union in the North Bay, with a membership of over 225,000, and we are now the 64th largest credit union out of 7,000 in the nation.

As we grow, we are determined to maintain the high standards of service you have come to expect. In 2012, we were honored to be named “Best Credit Union” by the readers of several North Bay publications including the

Press Democrat and the Petaluma Argus-Courier. We were also chosen “Best Company to Do Business With in Sonoma County” by the readers of NorthBay biz magazine for

the third year in a row. We appreciate the trust you place in us as your financial services provider, and your referrals of friends and family members.

We believe the key to our success is listening to our Members, and we continually use your feedback to bring you the tools, services and information you need and want most. The Member surveys we send out regularly throughout the year are

one of our most powerful means of listening to our Members’ suggestions, but we also listen to what Members are saying in our branches, by phone, in letters and

e-mails, and through social media. However you choose to contact us, we want you to know we welcome your input and take your suggestions seriously.

This year we challenged ourselves to bring the very best financial tools and resources to our Members, to provide an amazing work environment for our employees, and to show continued leadership in our communities. Following are a few highlights of the last year, as well as some of the ways Redwood Credit Union has turned the tools you asked for into the expanded services you can depend on.

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“ “We believe the key to our success

is listening to our Members.– Brett Martinez, President & CEO

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tHe teCHnoLogY You AskeD ForWe listened when you told us you wanted access to your funds and account information as quickly and easily as possible. That’s why one of our primary goals in 2012 was improving our website and bringing Members the best banking technology available. In response to your suggestions, our website has been redesigned with a cleaner, more modern look and feel that is easier to use. We’ve created a helpful online “Life Planning & Education” center where you can learn about budgeting, money management, buying a car or home, and other financial tips to help you navigate your finances throughout the changes in your life. An improved “Ask RCU” feature allows Members and other site visitors to quickly find answers to their most common questions.

We’ve improved access to online banking as well. You can now view all your RCU account balances on a single screen. We’ve made it easier than ever to manage your accounts, transfer funds and make payments online. We’ve also included money management tools that can help you track spending, create a budget, manage debt and achieve financial wellness.

We’re excited to announce that Members can now access their accounts from their mobile devices, including smartphones and tablets, with our new RCU mobile banking application. Along with the recent roll-out of our new state-of- the-art ATMs, we’ve placed additional ATMs in San Rafael, Ukiah and on Mendocino Avenue in Santa Rosa. All of these changes will allow us to provide superior service whenever and wherever it’s most convenient for you.

tHe tooLs You neeDRCU continues to offer a wide range of products and services to help you be successful through every stage of life. Our low-rate credit cards, home and auto loans help Members keep more money in their pockets every month. Car buyers take advantage of RCU Auto Services’ wide selection of pre-owned cars at low, no-haggle prices, as well as finding great everyday deals on our auto loans. We assist those purchasing or refinancing homes, and work closely with Members who need help regaining their financial footing. For those looking for the peace of mind that comes from prudent investment and insurance coverage, our financial advisors provide options and advice to serve Members’ investment and retirement planning needs.

While other institutions pulled back on lending in the last few years, we’re proud to say that we continued to lend to local businesses, providing the resources and support needed to weather tough economic times, and to expand or start new business ventures. In 2012, we partnered with more than 6,500 businesses, providing more than $55 million in funding. RCU has continued to be ranked among the top Small Business Administration (SBA) lenders in the North Bay since we introduced SBA lending in 2008.

Financial education has always been a cornerstone of our mission, and in 2012 over 1,100 Members participated in free educational seminars and events offered by RCU, covering topics such as home buying and saving for retirement. In March and June, we held sessions of our popular Youth Financial Literacy Academy, where teens learn budgeting, saving and credit management—critical life skills that will benefit them long into their future. And with the expanded educational tools available through our website, Members can now find information they need whenever it’s most convenient for them.

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“ ”The tellers know who you are, remember the things

that you do, smile and wave when you walk in.

– Ammee & family Members since 1999

tHe CreDit union You trustRedwood Credit Union continues to take your privacy and financial security seriously. In August, we held our popular Shred-A-Thon at our Santa Rosa Administrative offices, allowing Members and the community to shred sensitive documents for free. The event also included an educational seminar about ID theft prevention. We believe in taking every precaution to keep your financial information safe and secure.

In the past year, we have represented our Members through a variety of sponsorships and donations to local nonprofit and community groups, including county volunteer centers and other groups that have the ability to make the greatest impact in our local communities, particularly those that support safety-net services such as food, housing and family support. RCU employees took part in events like the Human Race in May, Make a Difference Day in October, and our annual holiday food and toy drives in December, as well as volunteering their time to serve on a variety of local community and non-profit boards.

Looking AHeADIn the coming months, we’ll add even more ways to make your financial life more convenient with technology solutions such as mobile check deposit which allows Members to deposit checks using their smart phone, and mobile bill pay. In addition to being able to open accounts online, Members will be able to apply for loans and get approved online more easily. We will also support green technologies by offering solar loans to Members interested in bringing solar power to their homes.

I encourage you to take advantage of all the products and services your Credit Union has to offer. We understand that your financial goals—whether you are saving for a new appliance, a child’s education or your own retirement—rarely happen one at a time, and it’s important to talk with someone who can help you map out your short- and long-term goals, and create a plan that works for you. RCU exists for this reason—to help Members with all your financial needs.

I’d like to thank our dedicated volunteer Board and Supervisory Committee, our passionate hard-working staff, and our loyal Members, whose feedback and participation have helped make our Credit Union strong and successful. We are honored to work with you to find the personalized solutions you need to make your financial dreams a reality.

Brett MartinezPresident & CEO

We have been long time Members of the credit union, always believing in the credit union concept long before many others took advantage of the benefits of being a credit union Member. The personalized service we received on the phone, email, or at the branch office is always warm and individualized. Two wonderful reasons for being Members of RCU: keeping our money local and working with a not-for-profit financial institution!

– DiAnn O.

I just wanted to write a quick note professing my gratitude and thanks for your services and especially for your great employees. Your staff managed to comply with a tricky request on my part. They never said no, they used common sense, and they made it work—something a big corporate bank would have never done. I can’t tell you how much I appreciate their willingness to help me and how proud I am to be a Member. Both of my children have accounts with RCU and they have heard plenty about why credit unions are the best!

– Meredith P.

It is so rare these days to find a company that really shows that it cares about its Members and is dedicated to providing exceptional customer service. I am happy to be a Member of this credit union and plan on keeping my business with you guys for many years to come. I would recommend you to anyone! I just wanted to pass along my thoughts and express my gratitude for what RCU represents.

– Amber L.

My husband and I felt like we received personal attention that we would never have gotten at a big bank. We are so happy that we came to RCU several years ago, and we feel so grateful that you offer personal assistance to your Members.

– Trish T.

Dear RCU,

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Martin GroveCommittee Chair

Volunteer since 2003

Steve SharpeCommittee Vice ChairVolunteer since 1992

David GouinCommittee SecretaryVolunteer since 2008

Brian ElliotVolunteer since 2010

Lou FunkVolunteer since 1978

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MessAge FroM tHe

suPerVisorY CoMMitteeIt is my pleasure to report that Redwood Credit Union remains financially strong and sound, thanks to the steady vision of RCU’s management team and volunteer Officials, the hard work and dedication of the staff, and the ongoing loyalty and participation of our Member-Owners.

The Member-elected Supervisory Committee is responsible for overseeing the safety and stability of your Credit Union, focusing on the integrity of RCU’s financial statements and the safety of Members’ assets. Our duties include engaging an independent Certified Public Accounting (CPA) firm to perform an annual opinion audit of the Credit Union’s financial statements and a verification of Member accounts, to ensure that we maintain our high standards of accuracy and reliability.

In 2012, a joint examination conducted by the Department of Financial Institutions (DFI) and the National Credit Union Administration (NCUA) concluded that Redwood Credit Union maintains a solid and responsible core business model, which allows us to provide dependable, quality service to our 225,000 Members.

The Supervisory Committee is committed to ensuring that Redwood Credit Union is financially safe, sound and secure, so that we can continue the tradition of serving our Members, employees and communities. Thank you for allowing us to serve the Members of this Credit Union, and for choosing Redwood Credit Union as your trusted financial partner.

Martin GroveSupervisory Committee Chair

VoLunteer suPerVisorY CoMMittee

tOtAL depOsits undeR MAnAgeMent

Credit union portfolio deposits

non-insured investments Offered through CFs*

Credit union portfolio Loans

Mortgage Loans servicing portfolio

sBA Loans servicing portfolio

tOtAL LOAns undeR MAnAgeMent

2010 2011 2012 2010 2011 2012

$0.50

$1.00

$1.50

$2.00

$2.50

$1.88B

Bill

ion

s

0

$1.97B $2.04B

$0.50

$1.00

$1.50

$2.00

$2.50

$1.77BB

illio

ns

0

$2.00B$2.21B

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rCu serViCes grouP

Redwood Credit Union’s wholly-owned subsidiary provides full-service auto sales and brokering through RCU Auto Services and a comprehensive selection of insurance offerings through RCU Insurance Services.

Bobbi BeehlerExecutive Director

Debra WattsBoard Chair

Greg McGuirkBoard Vice Chair

Brett MartinezBoard Member

Robert SteeleBoard Member

Robert WieckBoard Member

rCusg boArD & eXeCutiVe DireCtor

LoAns AnD DePosits unDer MAnAgeMent

*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/ SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Redwood Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union Members.

RCU provides services to Members in a variety of ways, including loans and deposits under management. The Total Loans Under Management chart shows all the loans RCU services including non-portfolio mortgage loans and SBA loans. The Total Deposits Under Management chart shows traditional savings growth, as well as how we have helped Members with financial planning through our non-insured CFS* investment program.

$1,423,489,577 606,613,683

33,916,052 4,436,758

18,249,18215,575,847

$2,102,281,099

$1,900,429,865 17,074,422

1,917,504,287

184,726,491 50,321

184,776,812 $2,102,281,099

$72,003,681 2,559,878

74,563,559

5,638,384

68,925,175 11,719,985 57,205,190 35,269,410 58,733,41533,741,185

1,733,672 $32,007,513

2012

Assets Loans to Members, net of Allowance for Loan Losses Cash and investments property and equipment Accrued interest Receivable national Credit union share insurance Fund deposit Other Assets total Assets Liabilities Members’ shares Accrued expenses and Other Liabilities total Liabilities Members’ Equity Retained earnings Accumulated Other Comprehensive income total Members’ equity total Liabilities and Members’ equity Consolidated Statement of Operations (unaudited) Interest Income interest on Loans to Members interest on investments and Cash equivalents total interest income Cost of Funds dividends on Members’ shares Net Interest Income Provision for Loan Losses Net Interest Income After Provision for Loan Losses Non-Interest Income Non-Interest Expense Income from Operations NCUSIF Assessment*Net Income

Consolidated Statement of Financial Condition (unaudited) December 31, 2012

For the Year Ended December 31, 2012

*Federal deposit insurance premium and corporate credit union stabilization assessment.

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2012

2010 2011 2012$0

$400

$800

$1.2 Billion

$1.6 Billion

Assets

$2.0 Billion

$2.4 Billion

$1,728

$1,928$2,102

2010 2011 2012$0

$400

$800

$1.2 Billion

$1.6 Billion

sHARes

$2.0 Billion

$1,561

$1,762$1,900

2010 2011 2012$0

$400

$800

$1.2 Billion

$1.6 Billion

$2.0 Billion

LOAns*

2010 2011 2012$0

$25

$50

$75

$100

$125

$150

$175

$200

equity

$137$153

$185

Above charts shown in millions. * Excludes allowance for loan losses and loans held for sale.

$1,345$1,402 $1,458

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2010 2011 2012

50,000

100,000

150,000

200,000

250,000

MeMBeRsHip

185,000214,000

224,000

0

Thanks to our business line of credit from RCU, we have been

able to expand our business.– Rodney, CFO, stevenson supply

Business Member since 2009(Pictured with Al, Vallejo store manager)

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Eco-FriendlyP R I N T I N G

Printed with soy-based inks on paper from a responsible source

55%

Listening to Our Members