Memorandum on findings

BAYER

8400 Hawthorne Rd
Kansas City, MO 64120

STAR RATING: 3
Predictive Indicator neutral
As of December 31, 2012
Credit Union ID 63333

INTRODUCTION

A credit union is a nonprofit, cooperative financial institution, owned and administered by individual members, who must meet eligibility requirements to join. Credit unions pay no federal income tax. Community development credit union are chartered to serve the needs of low income members who reside in financially distressed or under-served communities. Seventeen corporate credit unions, located throughout the country, function as central banking facilities for the U.S. credit union industry.

The Bankrate proprietary credit union rating model analyzes capitalization, asset quality, earnings, and liquidity to produce composite and component "Star" ratings that can be used as a measure of the rated entity's financial safety and soundness. Additionally, early warning components of the model highlight operating characteristics of immediate concern and recommended follow-up actions. The analyses are not adjusted for TARP funding and those institutions receiving funds may receive ratings that would differ were the TARP funds adjusted out of the analyses. You can check whether or not this institution has received TARP funding and whether or not they have paid it back at http://bailout.propublica.org/main/list/index.

COMPONENT HIGHLIGHTS

Institution Commentary

OVERVIEW of Institution
BAYER is a state chartered credit union, which, as of December 31, 2012, reported total assets of approximately $7.0287 million. At that date, loans and deposits held by the institution amounted to $3.1110 million and $6.2166 million, respectively. Equity, the difference between a credit union's total assets and total liabilities, was determined to have been $769.78 thousand, which was 10.95% of total assets.

COMPOSITE SUMMARY
Bankrate believes that, as of December 31, 2012, this credit union exhibited a generally satisfactory condition, characterized by well below standard capitalization, good asset quality, lower than normal profitability, and seemingly ample liquidity.

CAPITAL ANALYSIS
For the one year period ended December 31, 2012, this credit union reported a well below normal rate growth in equity capital. Balance sheet structural changes, through the one year period of time ended December 31, 2012, have had little or no positive, and quite possibly a negative, impact upon the institution's capital position. Our analytical methodology does take into account the quantity, quality, durability, and direction of net worth, and, as set forth above, we have determined, based upon our series of tests, that this credit union demonstrates well below standard capitalization. Notwithstanding any of the information contained within this section, we believe, based on our analysis, that the institution should consider plans for enhancing reported capitalization.

ASSET QUALITY ANALYSIS
The institution reveals, as previously stated, good asset quality. That conclusion incorporates our analysis of data depicting regional economic conditions as well as our computations of a relatively low December 31, 2012 nonperforming asset ratio and well below normal reserve coverage for nonperforming loans.

Credit card lending activities should not, based on our analysis of asset quality trends and conditions, have a substantial negative impact upon future results.

EARNINGS ANALYSIS
For the year ended December 31, 2012, this institution recorded a net profit of $2.14 thousand, which represented a return on average assets (ROA) of 0.03%. Year earlier four quarter results amounted to a net loss of -$25,119, or a -0.36% ROA. ROA is the key measurement of profitability within the credit union industry, and the industry's ROA, for the twelve months ended December 31, 2012, approximated 0.86%.

We have concluded that, for the four quarters ending December 31 2012, the institution achieved a below average return on average assets. A higher than average overhead ratio is in evidence. We have noted that the insitution's profitability performance, between the twelve months ending December 31 , 2011 and the twelve months ending December 31 , 2012 exceeded the industry peer comparison.

LIQUIDITY ANALYSIS
As of December 31, 2012, the institution displayed modest balance sheet liquidity.

Accounting principles require some securities to be categorized as "Available-for-Sale." Changes in market value of these securities are reflected through the GAAP (Generally Accepted Accounting Principles) net worth of the institution. Based upon the credit union's present balance sheet, changes in the value of the current level of securities reported as might not have a substantial impact upon future net worth of the credit union.

INSTITUTION SUMMARY
This credit union has been rated generally satisfactory.
Negative factors that impacted that rating follow:

• Capitalization
• Earnings

As noted previously, early warning indicators possibly requiring specific investigation include:

• Capital Adequacy
• Overhead

As stated, we have determined a Composite Star rating for this credit union of 3 , indicative of a generally satisfactory financial condition. At times, conditions of financial institutions change rapidly and significantly. Hence, our Safe & Sound Star ratings should not be deemed predictive of likely future ratings. However, in view of early warning indicators set forth within this report, in combination with the institution's financial data, we believe that the Star rating for this institution is unlikely to change within the ensuing twelve month period.