Governance Guidelines

Financial 21 Community Credit Union believes in the importance of strong corporate governance based on integrity, trust, responsibility, and accountability. Our Board of Directors, Supervisory Committee, and Volunteers have long adhered to the letter and spirit of these values in the performance of their duties.

While our business is providing competitive financial products and services, our success is predicated on our ethics, sound judgment and trusting member relationships. As such, these Governance Guidelines, developed by the Administrative Committee, and formally adopted by the Board, guide our actions.

1. Board Membership and Leadership
1.1 Board Membership and Credit Union Officers

Financial 21 Community Credit Union's Board of Directors is comprised of volunteer members who represent the membership. Each Director is elected to a term as prescribed in the bylaws. The Board of Directors provides governance and strategic direction for the credit union, while management implements the strategies. All members have the opportunity to apply for nomination to the Board of Directors.

The Board of Directors elects from among their membership Credit Union Board Officers, according to the bylaws, consisting of a Chairman, Vice Chairman, Treasurer, and Secretary. When Directors meet without the presence of the Chairman or Vice Chairman, the Directors select the Chairman of the meeting. The Director so selected is normally another member of the Executive Committee - Treasurer or Secretary.

1.2 Number of Directors

The Board believes that the current number of Directors is appropriate. As specified in the bylaws and augmented in these guidelines, all Directors:

Are required to be a member in good standing of this credit union in his or her own right and at least eighteen (18) years of age.
May not serve as a member of the Supervisory Committee, be a paid employee nor contractor of the credit union, nor have any other relationship that could be considered a conflict of interest
May not receive compensation for his or her services as a Director.

Unless suspended or removed prior to completion of an elected term, as provided for in the California Credit Union Law or the Credit Union's bylaws, members of the Board of Directors serve from the time of their election for a period as designated until their successors are elected.

1.3 Election of Directors

Once a year, the Board of Directors provides notice to the members of the credit union of the number of vacancies, the terms of office on the Board that will be open for election at the annual meeting, and the method of petitioning for nomination. Such notification occurs in the quarter preceding the one in which the annual meeting will be held. Petitions for nomination must be delivered to the Secretary or postmarked by the date set for the close of nominations.

The Board of Directors appoints a Nominating Committee from the membership at large, consisting of one member of the Board, whose term is not expiring, and at least two members "at large." The committee assembles a slate of candidates to fill vacant positions from among those who have petitioned. Eligibility requirements are described in Section 6.

In addition, members may seek a Board position by petition. As stated in the bylaws, such petition(s) must be signed by the greater of 100 members or 1/20 of 1% of the membership entitled to vote and delivered to the Secretary or postmarked by the date set for the close of nominations.

Once elected, each new Director receives an orientation and education program related to the history, operation, management, and regulatory requirements of Financial 21 Community Credit Union.

Any vacancy on the Board of Directors prior to a completion of the elected term, caused by any reason other than suspension by the Supervisory Committee, is filled by vote of a majority of the remaining Directors. Any Director so elected holds office until the next annual meeting, at which time a Director is elected to complete the unexpired term.

Regarding suspension of any member or members of the Board of Directors by the Supervisory Committee, it is the duty of the remaining Board members to temporarily fill such vacancies, pending a meeting of the members to determine whether to affirm such suspension and vacate the office, or to reinstate such member or members.

1.4 Changes in Responsibilities

Directors whose employment responsibilities substantially change from those held when they were elected to the Board of Directors should advise the rest of the Board as soon as practical. Also, a Director should provide notification prior to accepting membership on other Boards. Changes that suggest reconsideration of Board service also include conflicts of interest or changes in the level of other commitments.

2. Board Committee Structure and Function
2.1 Committees

The Board of Directors currently maintains Asset/Liability Management, Administrative, Budget and Salary, Executive, Historical, Legislative, and Strategic Planning Committees operating under the auspices of the Board. From time to time, the Board Chairman may find it desirable to form new committees or combine or disband existing ones, consistent with legal and other obligations or needs.

Except for certain required interim decisions/actions of the Executive Committee, committee decisions/actions are subject to approval by the entire Board unless previously determined that their decision is final.

Duties of the various Board committees are:

Executive: Deals with major, special/emergency issues requiring interim decision/action on behalf of the full Board. Deals with any potential merger issues.

Administrative (Ad Hoc): Sets and monitors compliance with policy matters, primarily administrative in nature, not falling under the purview of other Committees.

Budget and Salary: Each Fall, develops guidelines and gives preliminary approval to the proposed budget for the following year in order to support the strategic planning objectives. Reviews goals for the coming year, monitors progress. Sets President's salary/remuneration, and prepares President's performance review.

Asset/Liability Management (ALCO): Sets and monitors compliance with policy primarily financial in nature: capital, liquidity, investments, loans, insurance, delinquency.

Strategic Planning: Reviews and approves the strategic planning for the year, suggests alternative strategic plans for Board review at the retreat, provides an overview to guide the annual budget.

Historical: Researches the history of the credit union and develops materials for posterity.

Legislative: Works with the Chapter, CCUL, CUNA, and NAFCU to respond to existing and proposed legislation. Makes contacts with legislators to further the credit union's interests and member needs.

The Chairman of the Board serves as an Ex Officio voting member on all committees, except the Supervisory Committee. The President, with approval from the Chairman, may invite appropriate staff (non-voting) to attend, as the subject under consideration warrants.

2.2 Assignment and Rotation of Committee Members

The Chairman of the Board annually appoints members and respective Chairmen of Committees of the Board, subject to the approval of the full Board of Directors, taking into account the desires and expertise of individual Directors. Directors indicate their committee preferences prior to annual appointments.

The Chairman of the Board chairs the Executive Committee and the members include the Vice Chairman, Secretary, and Treasurer. The Executive Committee deals with major, special/emergency issues requiring interim decision/action on behalf of the full Board.

The Board of Directors believes in periodically rotating committee membership. Such rotation, however, is not mandatory since, from time to time, there may be compelling reasons to lengthen or shorten an individual Director's committee membership tenure.

2.3 Committee Meetings

The Chairman of each Committee of the Board, in consultation with the Committee's members, determines the frequency and length of the meetings of the Committee, and in consultation with the Chairman of the Board, develops the Committee's agenda. Each member of a Committee is free to suggest the inclusion of agenda items and to raise additional subjects at any meeting.

3. Board Meetings
3.1 Selection of Agenda Items

The President, with approval of the Chairman of the Board, establishes the agenda for each meeting of the Board of Directors. Each Director is free to suggest the inclusion of items on the agenda and to raise additional subjects at any meeting.

3.2 Advance Distribution of Board materials

A Board packet consisting of an agenda and information relevant to understanding the business to be conducted at a Board of Director's meeting is distributed in advance. Directors are expected to review and devote appropriate time to studying such materials prior to each meeting. In certain circumstance, materials for some presentations are not provided in advance of a Board or Committee meeting.

3.3 Regular Attendance of Non-Directors

The President and senior management regularly attend meetings of the Board of Directors. Additional personnel necessary for informed discussion and response to agenda items also attend when appropriate. Members at large may also attend.

4. Other Board Communications and Activities
4.1 Strategic and Financial Planning

At least once each year, the Board of Directors in conjunction with senior management, reviews the Credit Union's long-term strategic direction and financial plans.

4.2 Board Access to Senior Management, Independent Auditors, and Counsel

Members of the Board of Directors have complete access to Financial 21 Community Credit Union's senior management and independent auditors, and direct access to other credit union personnel, the latter normally coordinated with senior management. The Board also has complete access to counsel of its choice with respect to any issue relating to the discharge of the Director duties.

It is assumed that members of the Board of Directors use judgment ensuring that contacts with management are not distracting to the business operations of Financial 21 Community Credit Union and advise the Chairman of the Board of any contacts of substance.

Furthermore, the Board encourages senior management to invite to Board meetings other members of management who can provide additional insight into the items to be discussed, as well as those having sufficient executive potential to benefit from exposure to the Board.

4.3 Board Compensation

Members of the Board of Directors are volunteers who receive no direct compensation for their services. Directors are reimbursed for business related expenses incurred in performing their duties consistent with credit union policies.

4.4 Evaluation of the President

The Budget and Salary Committee, subject to the approval of the Board of Directors, annually formally evaluates the President.

The Chairman of the Budget and Salary Committee and/or the Chairman of the Board communicates these evaluations to the President. Such evaluations are an essential component of the President's compensation. The evaluation is based principally upon objective criteria, including business performance, accomplishment of strategic objectives, development of management and other matters relevant to the short and long- term success of Financial 21 Community Credit Union and the creation of member value.

4.5 Succession Planning and Management Development

The Board of Directors and senior management of Financial 21 Community Credit Union recognize that a realistic succession plan is critical to the future of a strong organization. To insure that committed, capable and experienced management continues to occupy leadership positions, Financial 21 has a President/CEO succession plan designed to:

Insure continuity in the level of service provided to members
Encourage good hiring practices
Identify and prepare interested, capable team members for advancement opportunities
Fill vacancies using internal candidates when possible
Hire and train future leadership

In addition, the Board and Supervisory Committees each have separate plans designed to maintain continuity in the event of a vacancy and to provide an environment for the recruitment and training of potential members.

4.6 Board Interaction with Customers, Media, and Others

Senior management speaks for Financial 21 Community Credit Union. Nevertheless, individual Directors may, from time to time, be called upon to meet or otherwise communicate with various constituencies. It is expected that, absent unusual circumstances, Directors do so only in consultation with the President or Chairman of the Board and advise the Chairman of the Board of substantive communications.

5. Supervisory Committee Membership and Leadership
5.1 Supervisory Committee Membership and Credit Union Officers

Financial 21 Community Credit Union's Supervisory Committee, with specific oversight responsibilities, is comprised of volunteer members who represent the membership. Each member is elected to a three-year term or to a term to fulfill a vacancy.

When Supervisory Committee members meet without the presence of the Chairman or Vice Chairman, the members select the Chairman of the meeting. The member so selected is normally the Secretary or the senior member present in years of service.

5.2 Number of Members

The Board believes that the current number of members is appropriate. As specified in the bylaws, all Supervisory Committee members:

Are required to be a member of this credit union in his or her own right
May not serve as a member of the Board of Directors, nor be an employee or contractor of this credit union
May not receive compensation for his or her services

The Supervisory Committee elects from among their membership Supervisory Committee officers consisting of at least a Chairman, Vice Chairman and Secretary. The same person may hold the offices of Chairman and Secretary.

5.3 Election of Supervisory Committee Members

Once a year, the Board of Directors provides notice to the members of the credit union of the number of vacancies, the terms of office on the Supervisory Committee that will be open for election at the annual meeting, and the method of petitioning for nomination. Such notification occurs in the quarter preceding the one in which the annual meeting will be held. Petitions for nomination must be delivered to the Secretary or postmarked by the date set for the close of nominations.

In conjunction with election of Board members, the Board of Directors appoints a Nominating Committee from the membership at large, consisting of one member of the Board, whose term is not expiring, and at least two members "at large." The committee assembles a slate of candidates to fill vacant positions on the Supervisory Committee from among those who have petitioned. Eligibility requirements are described in Section 6.

In addition, members may seek a Supervisory Committee position by petition. As stated in the bylaws, such petition(s) must be signed by the greater of 100 members or 1/20 of 1% of the membership entitled to vote and delivered to the Secretary or postmarked by the date set for the close of nominations.

Once elected, every new Supervisory Committee member receives an orientation and education program related to the history, operation, management, and regulatory requirements of Financial 21 Community Credit Union.

Any vacancy on the Supervisory Committee prior to a completion of the elected term is filled by vote of a majority of the remaining Supervisory Committee members. Any person so elected holds office until the next annual meeting of the members, at which time a Supervisory Committee member is elected to complete the unexpired term.

5.4 Changes in responsibilities

Supervisory Committee members whose employment responsibilities substantially change from those held when they were elected to the Supervisory Committee should notify the Chairman, who in turn advises the Board of Directors. Also, a member should advise the Chairman and members of the Committee prior to accepting membership on other Boards of Directors or Supervisory Committees. Changes that suggest reconsideration of Supervisory Committee service also include conflicts of interest or changes in the level of other commitments.

5.5 Duties and Powers

As described in the bylaws, the Supervisory Committee has the power to:

Suspend at any time, by unanimous vote, at a meeting called for the purpose, the Board of Directors or any member thereof, or the Chief Lending Officer or any officer.
By a majority vote, to call a meeting of the members to consider any violation of the California Credit Union Law or any practices of the credit union which, in the opinion of the supervisory committee, are unsafe or unauthorized.
To inspect the securities, cash and accounts of the credit union at any time.

In addition, the Committee's prescribed duties consist of:

Once a year, making, or causing to be made by an independent auditor of their selection, an audit of the books and records and an examination of the business and affairs of this credit union for the year, and to making a full report of its assets and liabilities, receipts and disbursements to the Board of Directors;
Causing such report to be read at the annual meeting of members and filed with the records of the credit union;
Causing the accounts of members to be verified with the records of the credit union at least annually;
Reviewing the credit union's policies and control procedures to safeguard against fraud and self-dealing.

6. Board of Directors and Supervisory Committee Eligibility

The following are minimum eligibility requirements for members of the Board of Directors or Supervisory Committee as of date term begins or date of appointment, as applicable.

The person must:

Be a member for not less than twelve (12) months
Be in good standing with the Credit Union, as defined by the following criteria:
All business transactions with the Credit Union must be current during the preceding twelve (12) months. Current is defined as no unpaid NSF checks, not more than one (1) unpaid NSF incident - for example, a deposit being made too late to cover one or more checks, not more than one (1) thirty-day (30) late payment on any loan.
In the event of a history of bankruptcy, a minimum of ten (10) years after discharge is required before the individual is eligible to serve.
Commit to attend all meetings of the Board or Supervisory and/or any applicable Committee meetings unless excused.
Agree to participate in educational programs and/or meetings to advance his/her knowledge of the credit union movement.
Have, if formerly a member of senior management of Financial 21, ceased employment at least two (2) years prior to being eligible.
Be bondable under the credit union's policy.

7. Financial 21 Community Credit Union Member Voting Rights

All members of Financial 21 Community Credit Union, who are 18 years of age or older, have equal voting rights of one vote per member on any matter placed before the members for their vote.

8. Administration
8.1 Review and Amendments

The Administrative Committee of the Board of Directors is responsible for developing Financial 21 Community Credit Union's approach to governance issues, periodically reviewing compliance with these guidelines and, subject to the approval of the Board, amending them as necessary.

8.2 Availability to members

The Governance Guidelines are made available to the Financial 21 Community Credit Union's members by posting on the credit union's web site or upon a request submitted to the Corporate Secretary.