ASSETS

Cash andInvestments

The quality of a financial institution’s assets is one of the most important factors contributing to its financial soundness.As ofDecember31,2022,99percent ofVolCorp’s assets consisted of cash and uncollected cash items, loans to member credit unions, and high-quality, low credit-risk investments.Cash holdings are concentrated in theFederalReserveBank.

Furthermore, as ofDecember31,2022,99percent ofVolCorp’s marketable securities holdings were ratedAAA orAAbyS&P, and91percent were issued or guaranteed byU.S.GovernmentAgencies.VolCorp monitors the quality of its assets through extensive monthly credit analyses and portfolio modeling.As ofDecember31, 2022, the continued quality and structure ofVolCorp’s portfolio was illustrated in thatVolCorp had a marketable securities portfolio totaling $906million with a net unrealized loss of $19million.Due to the short-term nature ofVolCorp’s investment holdings and the425-basis point upward movement in theFederalReserveBank’s FederalFundsTargetRange over the course of2022, the mere2% net unrealized loss on marketable securities at year-end reflects the heavy concentration in floating rate instruments.

When making investment decisions, VolCorp has always prioritized safety, liquidity, and yield.In order to minimize credit risk,VolCorp’s policies allow funds to be placed only in limited government-sponsored enterprises and agencies, theFederalReserve Bank, or in other highly rated securities and top-rated banks and domestically chartered corporations. These policies further limit investments in banks, corporations, and securities individually and in aggregate, and require extensive analysis and monitoring.VolCorp’s approved-institution analysis considers size, capital adequacy, asset quality, management, earnings performance, and liquidity.The quality of assets held is ultimately reflected in theTier1risk-based capital ratio of 71.92% atDecember31,2022, which is much greater than its respective “well capitalized”threshold of6.00%.

MemberLoans

VolCorp has the responsibility of serving as the primary source of cash liquidity to meet the needs of its membership, while also protecting the deposits of its individual member credit unions.In response to these needs, as ofDecember31, 2022,VolCorp had extended255lines of credit to member credit unions totaling over $1.8billion of funding commitments.Further as of that date, outstanding loans and lines of credit to members totaled $54.7million, or3.5% of total assets, with all loans showing as current without exception. 4

The quality of the loan portfolio is governed by the loan policy established by theBoard ofDirectors and by the procedures established by management to effect full implementation of said policies to include strict adherence to consistent underwriting practices.Each line of credit is collateralized and secured byVolCorp filing a UCC1FinancingStatement to establish and perfect a first priority security interest in designated assets of the borrowing credit union.Aproactive credit review of all lines is performed quarterly by way of detailed tracking of select financial health ratios.Based on this review, it is determined which credit unions require monitoring on a more frequent basis and which credit unions may benefit fromVolCorp reaching out to offer additional assistance.Since its charter,VolCorp has never charged off a loan to a member credit union and has a perfect record of zero credit losses.

Investment Distribution

Earnings

Like all credit unions,VolCorp is a not-for-profit financial cooperative, existing solely for the benefit of its members.VolCorp strives to help members improve their financial position by providing superb yet costeffective services and attractive investment yields.VolCorp does not maximize earnings at the expense of its member owners.It is also not the policy ofVolCorp to increase earnings by jeopardizing the safety of the membership’s shares and capital through high risk investments or investment practices.Even so,VolCorp must maintain a stable earnings position in order to pay dividends, cover budgeted expenses, innovate, maintain capital adequacy, and meet statutory reserve requirements.

VolCorp’s earnings and member share rates both benefited during 2022 with the relatively rapid increases in overnight rates, resulting in 2022’s net interest income of $9.9million.U.S.Central distributions and growth in service-driven revenue bolstered non-interest operating income to $31.9million.After operating expenses of $14.9million and net non-operating expense of $234thousand, 2022’s net income rested at $26.6million for a 146-basis point return onMDANA.

Comparativeincome

Year ended December31,