VISA PLATINUM VISA PLATINUM REWARDS AND VISA

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     I I I I I I I I I I I I I I I
I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I III

2 | CEO’s Letter
5 | Independent Auditor’s Report

5 | Supervisory Committee Report

6 | Statements of Financial Condition

6 | Statements of Income

7 | Statements of Members’ Equity and Comprehensive Income

8 | Statements of Cash Flows

9 | Management Staff

9 | Board of Directors




                                                                                                                       1
I I I I I I I I I I I
I IIII IIII IIII IIII IIII IIII IIII IIII IIII IIII I
                                                       ceo’s letter

       Safe, sound and growing
                      echnological innovation, desirable products and a                                  made it possible for 1,131 member-owners to own homes and 12,731
                      strong bottom line are crucial to any financial business.                          drivers to take home a new or used automobile. By year-end, our total
                      But we realize that without membership growth, these                               assets had surpassed $5.9 billion.
                      important components don’t always add up to success.                                  Additionally, we were able to once again offer monthly dividend
                         In 2011, AA Credit Union added more than 7,500 net                              rates that surpassed the national average. We were also excited to
       new members, bringing our total membership population to more than                                close out the year by offering a nearly $10 million bonus dividend to
       232,000. Specifically, our Trade, Industry or Professional (TIP) segment                          our member-owners, which included a special bonus for multiple prod-
       grew by nearly 24 percent and the family segment by 5.6 percent.                                  uct owners. It brought our total dividends returned to members in 2011
          And those new member-owners wasted no time in taking advantage                                 to approximately $64.9 million. It was another example of the rewards
       of the many benefits of Credit Union participation. Last year alone, we                           that come from Credit Union participation.




             2011 SHARE CERTIFICATE (SC)                                                  2011 CHECKING                                                                                                                         2004

             RATES                                                                        AND SAVINGS RATES                                              2011 MORTGAGE RATES                                                    2005

                                                                                                                                                                                                                         AACU
                                                                                                                                                                                                                         BANK   2006
       3.0                                                               2.83%                     1.0                                       5
                                                                                   AACU                                                                                                                                4.61%    2007
                                                                                                                 0.83%                                                                                         4.44%
                                                                                   BANK
       2.5                                                                                                                  AACU                                                                 3.81% 3.91%
                                                         2.38%                                     0.8                                       4           3.66%                           3.67%
                                                                                                                            BANK                                         3.60%
                                          2.04%                                                                                                                                                                                 2008
       2.0
                                                                                 1.68%             0.6                                       3   2.94%           2.94%           2.94%
                              1.60%                                                                                                                                                                                             2009
       1.5                                                                                               0.50%
                                                                 1.36%
              1.16%                              1.14%                                             0.4                                       2                                                                                  2010
       1.0                            0.86%
                      0.57%                                                                        0.2                   0.19%               1
       0.5                                                                                                    0.14%                                                                                                              2011

        0      1-Year          2-Year         3-Year      4-Year          5-Year                    0     Interest    Savings                0    1/1 ARM        3/1 ARM          5/1 ARM        15-Year Fixed 30-Year Fixed            0
              SC-10K           SC-10K         SC-10K      SC-10K          SC-10K                         Checking


                 AA Credit Union share certificate dividend                               AA Credit Union checking dividend rate based                   AA Credit Union mortgage rates based on the
                 rates based on the average rate offered in                               on average Flagship Checking rates for 2011.                   average rate offered in 2011. Bank data sup-
                 2011. Bank data supplied by Datatrac Corpo-                              AA Credit Union Savings dividend rate based                    plied by Datatrac Corporation. Accurate as of
                 ration. Accurate as of December 2011.                                    on average rate paid in 2011 on regular savings.               December 2011.
                                                                                          Bank data supplied by Datatrac Corporation.
                                                                                          Accurate as of December 2011.



   2
                                            Keeping progress on the move
                                                            ew member-owners had a lot of new products and              Our Checking and Savings Business Services products were ex-
                                                            promotions to enjoy after joining the Credit Union      panded from Texas and Oklahoma to all 50 states, with the rest of the
                                                            family. As part of the yearlong celebration of our 75th suite of business products planned to go nationwide in 2012.
                                                            anniversary, we offered a number of successful prod-        In April, we celebrated the grand opening of our 41st branch loca-
                                                            ucts and services that helped put money in the pock-    tion in the Maintenance area of Miami International Airport, making
                                          ets of our member-owners. Within the first 90 days of membership,         it our fourth location in the bustling hub city.
                                          our newly launched Owner Rewards program made newcomers feel                  While several banks sparked outrage and lots of media attention for
                                    $343.5
                                          like longtime loyalists thanks to a variety of services and discounts.                                                    their
                                                                                                                    their plans to charge customers for using600 debit cards, AA Credit
                                          We
                                       $366.7 also doubled our member-friendly e-statement program through          Union stayed true to our commitment to member advocacy. Our
                                          a successful enrollment campaign in which new participants could          increasingly popular Priority Checking Account not only allowed
                                                                                                                                                           $532.6
                                            $391.4                                                                                               $517.6
                                          qualify for a $100 statement credit.                                      member-owners to use their card for free, it also offered a premium




                                                                                                                                                                                                                              $517.6
                                                                                                                                        $495.1                     500
04                                    $343.5 We never wavered in our commitment to provide our member-
                                               $407.0                                                               dividend rate of 2.27 Annual Percentage Yield (APY) and refunded up
                                                                                                                                                                      600
                                          owners with multiple channels to do business with us, whether through     to $20 of out-of-network ATM fees when other criteria were met.
05                                        $366.7 $419.8                                                                         $441.1
                                          our extensive CO-OP Network of more than 28,000 ATMs, CUAcce$$™               AA Credit Union took member service one step further with the in-
                                                                                                                       $419.8
                                                                                                                                                             $532.6
                                          online banking or the CALL-24 Automated Voice Response System.$407.0troduction of Bounce ProtectionPlus, a groundbreaking program that
06                                            $391.4 $441.1                                                                                         $517.6         400
                                          Popular new technology updates such as our smartphone apps,      $391.4   allowed members to reduce their overdraft fee to only a penny in many




                                                                                                                                                                                                                                       $517.6
                                                                                                                                          $495.1                      500
07                                        expanded-service ATM kiosks and CUAcce$$ Deposit $366.7
                                                   $407.0   $495.1                                 continued to at- situations instead of the standard $25 fee for accidental overdrafts.
                                          tract more participants.$532.6
                                                               $517.6
08                      2004                           $419.8                      $343.5                                                                                                         $441.1
                                                                                                                                                                                       $419.8                                                   300                            600

                                            2011 HOME EQUITY LINE OF CREDIT                                                                                                          NET WORTH (IN MILLIONS)
0
09              100        200        300              400$441.1                        500                 600                                                             $407.0
                        2005                                                             $366.7                                                                                                                                                     400

                                            80 PERCENT LOAN TO VALUE (LTV)
          AACU                                                                                                                                                    $391.4                                                                                            $532.6
010       BANK          2006                         $495.1 $391.4                                                                                                                                                                                         $517.6
                                                                         $366.7




                                                                                                                                                                                                                                                                      $517.6
                                                                                                                                                                                                                                                  $495.1
                                                                                                                                                                                                                                                200                            500
011   4.61%             2007                                                             $532.6
                                                                                        $517.6 $407.0
4.44%
                                            AACU                                                       4.50%                                                                                                                                        300
      0           100   2008 200        300
                                         BANK                  400                          500        $419.8
                                                                                                       4.77%600                                                                                                                $441.1
                                                                                                                                                                                                                     $419.8
                                                   0           1           2            3       4       5         6                                                                                        $407.0
                        2009                                                                                    $441.1                                                                                                                          100                            400
                                                                                                                                                                                                 $391.4
                        2010                                                                                                                                                                                                                        200
                                          AA Credit Union home equity line of credit rates based on the
                                                                                        $495.1                                                                                       $366.7
                                          average rate paid by borrowers with a top-tier credit standing
                                             AACU                              4.50%
                         2011             (A rating). Bank data supplied by Datatrac Corporation. Accu-
                                                                                              $532.6
                                                                                            $517.6
                                             BANK
                                          rate as of December 2011.             4.77%
                                                                                AACU                                                                                                                                                            0                              300
30-Year Fixed                   0       48-mo.
                                      100           0200 1     2 300
                                                               2.99% 3    4    400 6
                                                                                 5
                                                                                BANK           500
                                          Used                                                         20046002005                                                         2006      2007       2008       2009     2010      2011                  100
                                       Car Rate                         5.27%

                                        60-mo.
                                            2011 AUTO LENDING RATES
                                                                           2.49%
                                          New
                                       Car Rate            5.98%                                                                                                                                                                                                               200

                                                  0        1           2       3        4 5 6
                                                                                         AACU               7        8
                                                                                                                    AACU                             4.50%                                                                                          0
                                             48-mo.                                  2.99%
                                                                                         BANK                       BANK                             4.77%
                                               Used                                                                                                  2004         2005       2006      2007       2008       2009     2010         2011
                                            Car Rate                                                  5.27%
                                                                                                        0   1                2       3       4        5       6
                                             60-mo.                                                                                                                                                                                                                            100
                                                                                   2.49%
                                               New
                                            Car Rate                                                    5.98%

                                                       0           1       2        3       4     5     6           7    8


                                                                                                           AACU                                                                                                                                                                0
                                            AA Credit Union auto lending rates based on the average
                                                                      48-mo.                2.99%          BANK
                                            48-month used car rates and 60-month new car rates offered
                                                                        Used                                                                                                          2004       2005       2006     2007     2008                  2009   2010      2011
                                                                                                    5.27%
                                            in 2011 with 0 percent down payment. Bank data supplied by
                                                                     Car Rate
                                            Datatrac Corporation. Accurate as of December 2011.                                                                                       Accurate as of December 2011.
                                                                       60-mo.            2.49%
                                                                         New
                                                                      Car Rate                         5.98%

                                                                                                       0        1       2        3   4   5       6        7   8                                                                                                                      3
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIceo’s letter

        Opening our hearts
                                e at AA Credit Union understand that being part of a community means support-
                                ing organizations and worthwhile charities that are often the hardest hit during
                                tougher financial times. Our employees are not only member-owners, they’re also
                                members of these communities, and they’ve always proven to be generous with
                                their time and money. Through a number of company-wide fundraising events
        and activities, we’re proud to announce that the Credit Union and its staff raised more than $132,000 for
        organizations such as the Children’s Miracle Network, Something mAAgic/Wish Flight, American Cancer
        Society, American Heart Association, American Red Cross, Cystic Fibrosis Foundation, North Texas Food
        Bank, Texas State Guard, United Way of Tarrant County, Make-A-Wish of North Texas and other charities.




                                                                                                                    We’re growing with you
                                                                                                                                             ith new member-owners and the
                                                                                                                                             ever-changing technology land-
                                                                                                                                             scape come new demands and a
                                                                                                                                             greater need to invest in innova-
                                                                                                                                             tion. We have a number of excit-
                                                                                                                    ing changes ahead, including the recent announcement
                                                                                                                    of our partnership with Jack Henry & Associates for
                                                                                                                    conversion to the Episys Core Processing System in mid-
                                                                                                                    2013. This is a big investment in our future that promises
                                                                                                                    increased efficiency and better overall service for our
                                                                                                                    member-owners.
                                                                                                                       Other innovations on the horizon include a website
                                                                                                                    refresh, mobile deposit capabilities, new online lending
                                                                                                                    and account-opening solutions, web document delivery
                                                                                                                    and the availability of the entire Business Services line
                                                                                                                    across the country.
                                                                                                                       As more people discover the benefits of membership in
                                                                                                                    AA Credit Union, we’ll continue to provide solutions that
                                                                                                                    have meaningful value to our member-owners while help-
                                                                                                                    ing them realize their financial dreams.




                                                                                                                    Angie Owens, President and CEO

    4
independent auditor’s report &
supervisory committee report
    I I I I I I I I I I I I I I I I I
I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I IIII III

To the Supervisory Committee                                    Supervisory Committee Report
American Airlines Federal Credit Union                          American Airlines Federal Credit Union
Fort Worth, Texas                                               Year ended December 31, 2011
                         e have audited the accompa-                    n accordance with the Federal Credit Union Act
                         nying statements of financial                  and American Airlines Federal Credit Union’s
                         condition of American Airlines                 bylaws, the Supervisory Committee exercised its
                         Federal Credit Union (a feder-                 independent Credit Union oversight responsibili-
                         ally chartered credit union) as of             ties through the engagement of an external finan-
December 31, 2011 and 2010, and the related statements          cial auditor, supervision of the internal audit function
of income, members’ equity and comprehensive income             and review of the National Credit Union Administration’s
and cash flows for the years then ended. These financial        (NCUA) recent examination results and related matters.
statements are the responsibility of the Credit Union’s            At the conclusion of the December 31, 2011 external
management. Our responsibility is to express an opinion         financial audit, the Committee met with McGladrey &
on these financial statements based on our audits.              Pullen, LLP representatives to discuss the audit and other
   We conducted our audits in accordance with audit-            matters of significance. The Supervisory Committee is
ing standards generally accepted in the United States           not aware of any matter that would be considered a mate-
of America. Those standards require that we plan and            rial weakness or significant deficiency in internal control
perform the audit to obtain reasonable assurance about          over financial reporting.
whether the financial statements are free of material mis-         The Committee also reviewed the results of the Credit
statement. An audit includes examining, on a test basis,        Union’s most recent examination, conducted by the
evidence supporting the amounts and disclosures in the          NCUA, the Credit Union’s regulator. Results of the NCUA
financial statements. An audit also includes assessing          examination indicate that the Credit Union is financially
the accounting principles used and significant estimates        sound. Examination results, NCUA recommendations
made by management, as well as evaluating the overall           and regulatory guidance are reviewed and acted upon by
financial statement presentation. We believe our audits         management in a timely and appropriate manner.
provide a reasonable basis for our opinion.                        The Committee is pleased to report that AA Credit
   In our opinion, the financial statements referred to         Union continues to be well-managed and in strong
above present fairly, in all material respects, the financial   financial condition. If the Committee can be of assistance
position of American Airlines Federal Credit Union as of        to you, we encourage you to contact the Committee. We
December 31, 2011 and 2010, and the results of its opera-       respond to letters received from you, and we are here to
tions and its cash flows for the years then ended, in con-      be of service to you.
formity with accounting principles generally accepted in
the United States of America.                                   Robert D. Bagley
                                                                Chairman



Dallas, Texas                                                   Joseph de la Cruz
April 20, 2012                                                  Patricia Delgadillo
                                                                Carolyn Gibson
                                                                Kathryn Koorenny




                                                                                                                              5
                                                                                                   statements of
                                                                                                   income
                                                                                                   I I I I I I I I I I I I
                                                                                                     III IIII IIII IIII IIII IIII III IIII IIII IIII IIII IIII

                                                                                                                                                                (in thousands)

                                                                                                                    Years Ended December 31                      2011               2010

                                                                                                    INTEREST INCOME
                                                                                                   Loans                                                   $135,046              $142,156
                                                                       statements of
                              financial condition
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
                                                                                                   Investments and cash equivalents

                                                                                                   Total interest income
                                                                                                                                                              19,439

                                                                                                                                                            154,485
                                                                                                                                                                                  27,539

                                                                                                                                                                                 169,695


                                                                                                    INTEREST EXPENSE
                                                                        (in thousands)
                                                                                                   Dividends on members’ shares                               64,895              66,801
                                            December 31                 2011               2010    Interest on borrowed funds                                      –                  13

         ASSETS                                                                                    Total interest income                                      64,895              66,814

        Cash and cash equivalents                                 $680,042           $49,609       Net interest income                                       89,590              102,881

        Investments                                                                                Provision for loan losses                                   17,989             26,279
          Available-for-sale                                      2,675,702         2,572,900      Net interest income after
          Other                                                       3,934             3,658      provision for loan losses                                  71,601              76,602
        Loans, net                                                2,470,279         2,480,714

        Accrued interest receivable                                    11,555            14,850     NON-INTEREST INCOME
        Share insurance fund deposit                                 46,022              44,379    Fee income                                                  21,159             20,594
                                                                                                   Other operating income                                      5,204                5,191
        Property and equipment,
                                                                                                   Gain on sale of investments                                  2,193              2,488
        net of accumulated depreciation                               18,277             20,385
                                                                                                   Loss on sale of OREO                                        (108)                    –
        Other real estate owned (OREO)                                 2,009              2,536    Non-operating gains                                             191                74
                                                                                                   Loss on corporate credit union capital                            –             (270)
        Other assets                                                   4,384               3,713
                                                                                                   (Loss) gain on disposition of assets                           (3)                   7
         TOTal assETs                                           $5,912,204        $5,192,744
                                                                                                   Total non-interest income                                  28,636              28,084

                                                                                                   Income before operating expenses                         100,237              104,686
         LIABILITIES AND MEMBERS’ EQUITY
        Liabilities
          Members’ shares                                        $5,343,811       $4,639,929
                                                                                                    OPERATING EXPENSES
          Dividends payable                                           8,071             8,074      Employee compensation and benefits                         35,245              34,318
          Accrued expenses and other liabilities                    28,827             26,841      Travel and conference                                          707                  710
        Total liabilities                                        5,380,709         4,674,844       Office occupancy                                             5,635                5,811
                                                                                                   Office operations                                          19,657              18,867
        Commitments and contingent liabilities
                                                                                                   Education and promotional                                     6,118             5,473
        Members’ equity
                                                                                                   Loan servicing                                                1,416               1,166
          Retained earnings                                         532,583              517,635
                                                                                                   Professional and outside services                             2,713              2,779
          Accumulated other comprehensive
                                                                                                   Insurance premium and assessment                            11,505              11,269
           (loss) income                                             (1,088)              265
                                                                                                   Miscellaneous operating                                      2,293               1,753
        Total members’ equity                                       531,495           517,900
                                                                                                   Total operating expenses                                   85,289              82,146
         TOTal lIabIlITIEs aND
         MEMbErs’ EquITY                                        $5,912,204        $5,192,744        NET INCOME                                              $14,948          $22,540
        For complete notes to the Financial Statements, visit us at www.AACreditUnion.org and      For complete notes to the Financial Statements, visit us at www.AACreditUnion.org and
        click on “Annual Reports” in the “About Us” menu.                                          click on “Annual Reports” in the “About Us” menu.

    6
                          statements of
                          members’ equity and Comprehensive inCome
                          I I I I                            I I I I I I I I I I I I I I I I
                            I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I III IIIII IIII IIII IIII

                                                                                                                       (in thousands)

                                                                                                                                            accumulated
                                                                                                                                                  Other
                                                                                    regular                    undivided                  Comprehensive
                                                                                    reserve                     Earnings                   Income (loss)        Total

                          balance at December 31, 2009                              $61,769                     $433,326                         $6,925     $502,020

 COMPREhENSIvE INCOME
Net Income                                                                                   –                      22,540                             –      22,540
Net change in unrealized gains/loss on available-for-
  sale investments                                                                           –                             –                      (4,172)     (4,172)
Less reclassification adjustment for realized gains
  included in net income                                                                     –                             –                     (2,488)      (2,488)

Total comprehensive income                                                                   –                             –                           –      15,880

 balaNCE aT DECEMbEr 31, 2010                                                       $61,769                     $455,866                           $265     $517,900


 COMPREhENSIvE INCOME
Net Income                                                                                   –                      14,948                             –      14,948
Net change in unrealized gains/loss on available-for-
  sale investments                                                                           –                             –                        840          840
Less reclassification adjustment for realized gains
  included in net income                                                                     –                             –                      (2,193)     (2,193)

Total comprehensive income                                                                   –                             –                           –      13,595

 balaNCE aT DECEMbEr 31, 2011                                                       $61,769                      $470,814                       $(1,088)    $531,495
For complete notes to the Financial Statements, visit us at www.AACreditUnion.org and click on “Annual Reports” in the “About Us” menu.



                                                                                                                                                                        7
                                                                                                                                         (in thousands)

                                                                                     Years Ended December 31                             2011                   2010

                                              CASh fLOwS fROM OPERATING ACTIvITIES
                                             Net income                                                                              $14,948                $22,540

                                             Adjustments to reconcile net income to net cash
                                             provided by operating activities:
                                                Amortization of mortgage servicing rights                                                    11                     35
                                                Loss (gain) on disposition of assets                                                         3                     (7)
                                                Loss on corporate credit union capital                                                        –                   270
                          statements of         Amortization (accretion) of premium (discount) of

                    cash flows                   investment securities, net
                                                Provision for loan losses
                                                                                                                                         1,174
                                                                                                                                       17,989
                                                                                                                                                                3,555
                                                                                                                                                               26,279
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII      Depreciation and amortization                                                          3,504                    3,595
                                                Gain on sale of investments                                                           (2,193)                 (2,488)
                                                Loss on sale of OREO                                                                      108                       –
                                                Net change in:
                                                   Accrued interest receivable                                                         3,295                    1,986
                                                  Other assets                                                                         (549)                      546
                                                   Accrued expenses, dividends payable and other liabilities                            1,983                    440

                                             Net cash provided by operating activities                                                40,273                   56,751


                                              CASh fLOwS fROM INvESTING ACTIvITIES
                                             Purchases of available-for-sale investments                                         (2,327,556)              (3,231,623)
                                             Proceeds from maturities of available-for-sale investments                              567,457                 1,137,377
                                             Proceeds from sales of available-for-sale investments                                 1,656,963               1,569,089
                                             Net change in other investments                                                            (276)                 179,935
                                             Net change in loans to members                                                          (10,742)                  55,354
                                             Increase in the share insurance fund deposits                                            (1,643)                    (655)
                                             Disposal of property and equipment                                                              2                      14
                                             Proceeds from sale of OREO                                                                 3,474                        –
                                             Purchases of property and equipment                                                       (1,401)                (4,247)

                                             Net cash (used in) investing activities                                               (113,722)              (294,756)


                                              CASh fLOwS fROM fINANCING ACTIvITIES
                                             Net increase in members’ shares                                                        703,882                 214,906
                                             Net (decrease) in borrowings                                                                 –               (100,000)

                                             Net cash provided by financing activities                                              703,882                  114,906

                                             Increase (decrease) in cash and cash equivalents                                       630,433                (123,099)

                                             Cash and cash equivalents at beginning of year                                          49,609                  172,708

                                              Cash aND Cash EquIvalENTs aT END Of YEar                                            $680,042                  $49,609


                                              SUPPLEMENTAL CASh fLOw INfORMATION
                                             Dividends paid on members’ shares and interest
                                             paid on borrowed funds                                                                 $64,898                 $65,809

                                             loans transferred to OrEO                                                               $4,790                   $2,403
                                             For complete notes to the Financial Statements, visit us at www.AACreditUnion.org and click on “Annual Reports” in the
                                             “About Us” menu.

   8
                   ManageMent staff
                   & BOaRD Of DIReCtORs
                    I I I I I I I I I I I I I I I I I I I I
                   I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I IIII IIII IIII IIII I

                                                        MANAGEMENT STAFF                              BOARD OF DIRECTORS
                                                                                                      OFFICERS
                                                                                                      Douglas G. Herring, Chairman of the Board
                                                                                                      William F. Quinn, Vice Chairman
                                                                                                      Patrick C. Hancock Jr., Secretary
                                                                                                      Thomas J. Kiernan, Treasurer

                                                                                                      DIRECTORS
                                                                                                      Nancy Adams-Chapman
                    ANGIE OWENS               ELI VAzQUEz          FAITH L. ANDERSON                  Robert A. Britton
                      President            Senior Vice President Senior Vice President                David Campbell
                      and CEO              Chief Financial Officer and General Counsel                Bruce T. Chemel
                                                                                                      John DeLeeuw
                                                                                                      Pedro Fabregas
                                                                                                      Robert J. Friedman
                                                                                                      Beverly K. Goulet
                                                                                                      Denise Lynn
                                                                                                      Debra Valtman
                                                                                                      Andrew Watson

                                                                                                      SUPERVISORY COMMITTEE
                                                                                                      Robert D. Bagley, Chairman
SEAN GAVEN         BRAD ASPGREN               GAIL K. ENDA               LORI W. HALL                 Joseph de la Cruz
General Auditor   Senior Vice President     Senior Vice President     Senior Vice President           Patricia Delgadillo
                    Technology and          Lending and Product          Marketing and                Carolyn Gibson
                       Innovation              Management                  Operations                 Kathryn Koorenny




                                                                                                                                                         9
                                                                                                                   for more than 75 years, the
                                                                                                                   dedicated staff at American
                                                                                                                        Airlines federal Credit
                                                                                                                    Union has been committed
                                                                                                                    to helping you realize your
                                                                                                                         goals and enrich your
                                                                                                                financial welfare through your
                                                                                                                   participation. Building on a
                                                                                                                solid foundation of core ideals,
                                                                                                                   including integrity, respect,
                                                                                                                   creativity, competence and
                                                                                                                        compassion, our sound
                                                                                                                  business practices have kept
                                                                                                                   us solid and dependable for
                                                                                                                 more than three quarters of a
                                                                                                                  century. with our successful
                                                                                                                       combination of product

                     Boston                                                     Miami              St. Louis
                                                                                                                        variety, education and
                    Chicago                                                   Nashville       San Francisco
                                                                                                                    innovation, we continue to
          Dallas/Fort Worth                                                    Newark             San Juan
            Fort Lauderdale                                              New York City              Tucson            work tirelessly to ensure
                  Honolulu                                              Orange County                  Tulsa
                Los Angeles                                            Raleigh/Durham       Washington, D.C.       that everyone gets the most

                                                                                    MD 2100 P.O. Box 619001       out of their relationship with
                                                                                DFW Airport, Texas 75261-9001
                                                                                                                the Credit Union. It’s a goal we
      For the branch locations nearest you, call our Member Contact Center
        at (800) 533-0035 or visit our website at www.AACreditUnion.org.                                          all share, for as a member of
                                                                                                                  AA Credit Union, you’re also
                                                                                                                   an owner, which means you
AA Credit Union is a registered trademark of American Airlines, Inc.
                                                                                                                          share in our success.
American Airlines Federal
Credit Union
Financial Statements
December 31, 2011 and 2010
Contents

Independent Auditor’s Report                             1

Statements of Financial Condition                        2

Statements of Income                                     3

Statements of Members’ Equity and Comprehensive Income   4

Statements of Cash Flows                                 5

Notes to Financial Statements                            6-27
Independent Auditor’s Report


To the Supervisory Committee
American Airlines Federal Credit Union
Fort Worth, Texas


We have audited the accompanying statements of financial condition of American Airlines Federal Credit
Union (a federally chartered credit union) as of December 31, 2011 and 2010, and the related statements
of income, members’ equity and comprehensive income and cash flows for the years then ended. These
financial statements are the responsibility of the Credit Union’s management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States
of America. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of American Airlines Federal Credit Union as of December 31, 2011 and 2010, and the
results of its operations and its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.




Dallas, Texas
April 20, 2012




                                                    1
American Airlines Federal Credit Union

Statements of Financial Condition
December 31, 2011 and 2010
(In thousands)


ASSETS                                                                  2011            2010

Cash and cash equivalents                                          $    680,042    $     49,609
Investments:
  Available for sale                                                   2,675,702       2,572,900
  Other                                                                    3,934           3,658
Loans, net                                                             2,470,279       2,480,714
Accrued interest receivable                                               11,555          14,850
Share insurance fund deposit                                              46,022          44,379
Property and equipment, net of accumulated depreciation                   18,277          20,385
Other real estate owned (OREO)                                             2,009           2,536
Other assets                                                               4,384           3,713

         Total assets                                              $   5,912,204   $   5,192,744

LIABILITIES AND MEMBERS' EQUITY

Liabilities:
  Members' shares                                                  $   5,343,811   $   4,639,929
  Dividends payable                                                        8,071           8,074
  Accrued expenses and other liabilities                                  28,827          26,841

         Total liabilities                                             5,380,709       4,674,844

Commitments and contingent liabilities

Members' equity:
 Retained earnings                                                      532,583         517,635
 Accumulated other comprehensive income                                  (1,088)            265

         Total members' equity                                          531,495         517,900

         Total liabilities and members' equity                     $   5,912,204   $   5,192,744

The accompanying notes are an integral part of these statements.




                                                  2
American Airlines Federal Credit Union

Statements of Income
Years Ended December 31, 2011 and 2010
(In thousands)


                                                                       2011           2010

Interest income:
  Loans                                                            $   135,046    $   142,156
  Investments and cash equivalents                                      19,439         27,539
                                                                       154,485        169,695

Interest expense:
  Dividends on members' shares                                          64,895         66,801
  Interest on borrowed funds                                                -              13
                                                                        64,895         66,814

         Net interest income                                            89,590        102,881

Provision for loan losses                                               17,989         26,279

         Net interest income after provision for loan losses            71,601         76,602

Non-interest income:
 Fee income                                                             21,159         20,594
 Other operating income                                                  5,204          5,191
 Gain on sale of investments                                             2,193          2,488
 Loss on sale of OREO                                                     (108)            -
 Non-operating gains                                                       191             74
 Loss on corporate credit union capital                                     -            (270)
 (Loss) gain on disposition of assets                                       (3)              7
                                                                        28,636         28,084

         Income before operating expenses                              100,237        104,686

Operating expenses:
 Employee compensation and benefits                                     35,245         34,318
 Travel and conference                                                     707            710
 Office occupancy                                                        5,635          5,811
 Office operations                                                      19,657         18,867
 Education and promotional                                               6,118          5,473
 Loan servicing                                                          1,416          1,166
 Professional and outside services                                       2,713          2,779
 Insurance premium and assessment                                       11,505         11,269
 Miscellaneous operating                                                 2,293          1,753
                                                                        85,289         82,146

         Net income                                                $    14,948    $    22,540

The accompanying notes are an integral part of these statements.




                                                  3
American Airlines Federal Credit Union

Statements of Members’ Equity and Comprehensive Income
Years Ended December 31, 2011 and 2010
(In thousands)


                                                                                    Accumulated
                                                                                       Other
                                                   Regular             Undivided   Comprehensive
                                                   Reserve             Earnings    Income (Loss)       Total

Balance, December 31, 2009                     $     61,769        $     433,326   $     6,925     $   502,020

  Comprehensive income:
   Net income                                              -              22,540             -          22,540
   Net change in unrealized gain/loss on
     available for sale investments                        -                  -          (4,172)        (4,172)
   Less reclassification adjustment for
     realized gains included in net income                 -                  -          (2,488)        (2,488)
          Total comprehensive income                                                                    15,880

Balance, December 31, 2010                           61,769              455,866           265         517,900

  Comprehensive income:
   Net income                                              -              14,948             -          14,948
   Net change in unrealized gain/loss on
     available for sale investments                        -                  -            840             840
   Less reclassification adjustment for
     realized gains included in net income                 -                  -          (2,193)        (2,193)
          Total comprehensive income                                                                    13,595

Balance, December 31, 2011                     $     61,769        $     470,814   $     (1,088)   $   531,495

The accompanying notes are an integral part of these statements.




                                                       4
American Airlines Federal Credit Union

Statements of Cash Flows
Years Ended December 31, 2011 and 2010
(In thousands)


                                                                         2011              2010

Cash flows from operating activities:
 Net income                                                         $      14,948     $      22,540
 Adjustments to reconcile net income to net cash provided by
   operating activities:
     Amortization of mortgage servicing rights                                  11                 35
     Loss (gain) on disposition of fixed assets                                   3                (7)
     Loss on corporate credit union capital                                     -                 270
     Amortization (accretion) of premium (discount) of investment
        securities, net                                                     1,174             3,555
     Provision for loan losses                                             17,989            26,279
     Depreciation and amortization                                          3,504             3,595
     Gain on sale of investments                                           (2,193)           (2,488)
     Loss on sale of OREO                                                     108                -
     Net change in:
        Accrued interest receivable                                         3,295             1,986
        Other assets                                                         (549)              546
        Accrued expenses, dividends payable and other liabilities           1,983               440
          Net cash provided by operating activities                        40,273            56,751

Cash flows from investing activities:
 Purchases of available for sale investments                            (2,327,556)       (3,231,623)
 Proceeds from maturities of available for sale investments                567,457         1,137,377
 Proceeds from sales of available for sale investments                   1,656,963         1,569,089
 Net change in other investments                                              (276)          179,935
 Net change in loans to members                                            (10,742)           55,354
 Increase in the share insurance fund deposits                              (1,643)             (655)
 Disposal of property and equipment                                              2                14
 Proceeds from sale of OREO                                                  3,474                -
 Purchases of property and equipment                                        (1,401)           (4,247)
         Net cash (used in) investing activities                          (113,722)         (294,756)

Cash flows from financing activities:
 Net increase in members' shares                                          703,882           214,906
 Net decrease in borrowings                                                    -           (100,000)
         Net cash provided by financing activities                        703,882           114,906

Increase (decrease) in cash and cash equivalents                          630,433          (123,099)

Cash and cash equivalents, beginning of year                               49,609           172,708

Cash and cash equivalents, end of year                              $     680,042     $      49,609

Supplemental cash flow information:
 Dividends paid on members' shares and interest paid on borrowed
   funds                                                            $      64,898     $      65,809
 Loans transferred to other real estate owned                       $       4,790     $       2,403

The accompanying notes are an integral part of these statements.




                                                        5
American Airlines Federal Credit Union

Notes to Financial Statements


Note 1.   Nature of Operations and Significant Accounting Policies

Nature of Operations

American Airlines Federal Credit Union (the Credit Union) is a cooperative association holding a
corporate charter under the provisions of the Federal Credit Union Act.

Significant Accounting Policies

The Credit Union follows the accounting standards set by the Financial Accounting Standards Board
(FASB). The FASB establishes generally accepted accounting principles (GAAP) that are followed to
ensure consistent reporting of the financial condition, results of operations, and cash flows of the Credit
Union. References to GAAP issued by the FASB in these footnotes are to The FASB Accounting
Standards Codification™ commonly referred to as the Codification or ASC.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of income and expense during the reporting period.
Actual results could differ from those estimates. Material estimates that are particularly susceptible to
significant changes in the near term relate to the determination of the allowance for loan losses and the
fair value of financial instruments.

Subsequent Events

The Credit Union has evaluated subsequent events through April 20, 2012, the date on which the
financial statements were available to be issued.

Concentrations of Credit Risk

Most of the Credit Union’s business activity is with its members who are current or former employees of
AMR Corporation. The Credit Union may be exposed to credit risk from a regional economic standpoint
since a significant concentration of its borrowers reside in Texas. Although the Credit Union has a
diversified loan portfolio, borrowers’ ability to repay loans may be affected by the economic climate of
either the air transportation industry or the overall geographic region in which they reside.

Fair Value

The Codification defines fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurement. Fair value is a market-based measurement, not an entity-
specific measurement, and the fair value hierarchy gives the highest priority to quoted prices in active
markets. Fair value measurements are disclosed by level within the hierarchy. A summary of the Credit
Union’s financial instruments and other accounts subject to fair value, including methodologies and
resulting values, is presented in Note 11 to these financial statements.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and non-term share deposits in various financial
institutions. Amounts may exceed the federally insured limits.




                                                      6
American Airlines Federal Credit Union

Notes to Financial Statements


Reclassifications

Certain account reclassifications have been made to the 2010 financial statements in order to conform to
classifications used in the current year.

Investments

Investments that the Credit Union intends to hold for an indefinite period of time, but not necessarily to
maturity, are classified as available for sale and are carried at fair value. Unrealized gains and losses on
investments classified as available for sale have been accounted for as accumulated other
comprehensive income. Gains and losses on the sale of available for sale investments are determined
using the specific identification method. Amortization of premiums and accretion of discounts are
recognized in interest income over the period to maturity or until sold. Declines in the fair value of
individual available for sale investments below their costs that are other than temporary would result in
write-downs of the individual investments to their fair value. Factors affecting the determination of
whether an other than temporary impairment has occurred include a downgrading of the investment by a
rating agency, a significant deterioration in the financial condition of the issuer, or a determination that
management would not have the ability to hold the investment for a period of time sufficient to allow for
any anticipated recovery in fair value. Other investments are classified separately and are stated at cost.

Loans

The Credit Union grants mortgage, consumer and business loans to members. The ability of members to
honor their contracts may be impacted by the real estate and/or general economic conditions of their
particular area of residence.

Loans are stated at the amount of unpaid principal balances, reduced by an allowance for loan losses
and net deferred fees and costs. Purchased loans are stated net of unamortized premiums and
unaccreted discounts. Interest on loans is recognized over the terms of the loans and is calculated on
principal amounts outstanding.

Accrual of interest on loans is discontinued when management believes that, after considering economics
and collection efforts, the borrower’s financial condition is such that collection of interest is doubtful. The
Credit Union’s policy is to stop accruing interest income when the loan becomes 90 days delinquent or
when loans have been identified as a bankruptcy. Income is subsequently recognized on a cash basis
until the loan’s delinquency status is less than 90 days while the accrual of interest income for bankrupt
loans will be reinstated if the member is discharged or dismissed from bankruptcy protection, or if the
member reaffirms the loan with the Credit Union and it is approved by the bankruptcy court. All interest
accrued but not collected for loans that are subsequently charged off is reversed against interest income.

Certain loan fees and origination costs are deferred, and the net fee is recognized as an adjustment to
interest income over the expected lives of the related loans or until such loans are paid in full.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a
provision for loan losses charged to earnings. Loan losses are charged against the allowance when
management believes the collectability of a loan balance is unlikely. Subsequent recoveries, if any, are
credited to the allowance.




                                                       7
American Airlines Federal Credit Union

Notes to Financial Statements


The allowance for loan losses is evaluated on a regular basis by management and is based on
management’s periodic review of the collectibility of the loans in light of historical experience, the nature
and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay,
estimated value of the underlying collateral, and prevailing economic conditions. This evaluation is
inherently subjective, as it requires estimates that are susceptible to significant revision as more
information becomes available. While management uses the best information available to make its
evaluations, further adjustments to the allowance may be necessary if there are significant changes to the
economic conditions.

The Credit Union’s allowance for loan losses is that amount considered adequate to absorb probable
losses in the portfolio based on management’s evaluations of the size and current risk characteristics of
the loan portfolio. General allowances are established for loans that can be grouped into pools based on
similar characteristics in compliance with GAAP and regulatory guidelines. In this process, general
allowance factors are based on an analysis of historical charge-off experience and expected losses given
default ratios derived from the Credit Union’s internal risk rating process. These factors are developed
and applied to the portfolio by loan type. The qualitative factors associated with the allowance are
subjective and require a high degree of management judgment. These factors include the credit quality
statistics, recent economic uncertainty, losses incurred from recent events, and lagging data.

Mortgage Servicing Rights

The Credit Union retains the right to service mortgage loans sold to others. The cost allocated to the
mortgage servicing rights retained has been recognized as a separate asset and is being amortized in
proportion to, and over the period of, the estimated life of the related loans. Mortgage servicing rights are
periodically evaluated for impairment based on the fair value of those rights.

Property and Equipment

Land is carried at cost. Buildings, leasehold improvements, and furniture and equipment are carried at
cost, less accumulated depreciation and amortization. Buildings and furniture and equipment are
depreciated using the straight-line method over the estimated useful life of the asset. The cost of
leasehold improvements is amortized using the straight-line method over the lesser of five years or the
term of the related lease.

Other Real Estate Owned and Foreclosed Assets

Other real estate owned is recorded at fair value less the estimated costs to sell the property at the date
of transfer to other real estate owned. At the time a loan is transferred to other real estate owned, any
carrying amount in excess of the fair value less estimated costs to sell the property is charged off to the
allowance for loan losses. Subsequently, should the fair value of an asset, less the estimated costs to
sell, decline to less than the carrying amount of the asset, the deficiency is recognized in the period in
which it becomes known and is included in non-interest expense. Maintenance costs of properties are
also included in non-interest expense. Gains and losses realized from sales of other real estate owned
are recorded in non-interest income. Other real estate owned is reported separately in the accompanying
balance sheets.




                                                      8
American Airlines Federal Credit Union

Notes to Financial Statements


Transfers of Financial Assets

Transfers of financial assets are accounted for as sales when control over the assets has been
surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have
been isolated from the Credit Union, (2) the transferee obtains the right (free of conditions that constrain it
from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Credit
Union does not maintain effective control over the transferred assets through an agreement to repurchase
them before their maturity or the ability to unilaterally cause the holder to return specific assets. In
addition, for transfers of a portion of financial assets (for example, participants of loans receivable), the
transfer must meet the definition of ―participating interest‖ in order to account for the transfer as a sale.

National Credit Union Share Insurance Fund (NCUSIF) Deposit and Insurance Premium

The deposit in the NCUSIF is in accordance with National Credit Union Administration (NCUA)
regulations, which requires the maintenance of a deposit by each federally insured Credit Union in an
amount equal to 1 percent of its insured members’ shares. The deposit would be refunded to the Credit
Union if its insurance coverage was terminated, if it converted its insurance coverage to another source,
or if management of the fund was transferred from the NCUA Board. The Credit Union is also required to
pay an annual insurance premium equal to one-twelfth of 1 percent of total insured members’ shares,
unless the payment is waived or reduced by the NCUA Board.

On September 1, 2011, the NCUA approved an assessment of 0.25 percent of credit unions’ insured
shares for reimbursement to the Temporary Corporate Credit Union Stabilization Fund. As a result of the
assessment and premium, the Credit Union recorded an expense of $11,505,000 included in non-interest
expense in the accompanying statement of income for the year ended December 31, 2011. Such
expense for 2010 was $11,269,000.

Members’ Shares

Members’ shares are the savings deposit accounts of the owners of the Credit Union. Share ownership
entitles the members to vote in the annual election of the Board of Directors. Irrespective of the amount
of shares owned, no member has more than one vote. Members’ shares are subordinated to all other
liabilities of the Credit Union upon liquidation. Dividends on members’ shares, excluding share
certificates, are based on available earnings at the end of a dividend period and are not guaranteed by
the Credit Union. Dividend rates are approved by the Credit Union’s Board of Directors.

Income Taxes

By statute, the Credit Union is exempt from federal and state income taxes.

Commitments and Contingent Liabilities

The Credit Union is a party to various legal actions normally associated with the collection of loans and
other business activities of financial institutions, the aggregate effect of which, in management’s opinion,
would not have a material adverse effect on the financial condition or results of operations of the Credit
Union.

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, and gains and losses be
included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on
available for sale securities, are reported as a separate component of the members’ equity section of the
statements of financial condition.




                                                      9
American Airlines Federal Credit Union

Notes to Financial Statements


Recent Accounting Pronouncements

In July 2010, the FASB issued ASU 2010-20, Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses. This ASU requires a greater level of disaggregated
information about the allowance for credit losses and the credit quality of financing receivables. The
period-end balance disclosure requirements for loans and allowance for loan losses was effective for
reporting periods ending on or after December 15, 2011, while disclosures for activity during a reporting
period that occurs in the loan and allowance for loan losses accounts will be effective for reporting
periods beginning on or after December 15, 2011. The Credit Union adopted this ASU and disclosed the
allowance for loan losses using a greater level of disaggregation for the financial statements as of
December 31, 2011.

In April 2011, the FASB issued ASU 2011-02, Receivables (Topic 310) – A Creditor’s Determination of
Whether a Restructuring Is a Troubled Debt Restructuring. ASU 2011-02 sets forth certain criteria to
determine if a restructuring is a troubled debt restructuring. A creditor must separately conclude that both
of the following exist (i) the restructuring constitutes a concession and (ii) the debtor is experiencing
financial difficulties. The amendments to Topic 310 clarify the guidance on a creditor’s evaluation of
whether it has granted a concession and whether a debtor is experiencing financial difficulties.
ASU 2011-02 will become effective for annual periods ending on or after December 15, 2012.
Management is evaluating the impact of this standard.

In May 2011, the FASB issued Accounting Standards Update (ASU) 2011-04, Amendments to Achieve
Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The purpose
of this amendment is primarily to converge the definition of fair value and certain disclosure requirements
with IFRS. Some of the disclosures required by ASU 2011-04 are not required for nonpublic entities. For
nonpublic entities, the amendments are effective for annual periods beginning after December 15, 2011.
The amendments are to be applied prospectively. Early application by public entities is not permitted.
Nonpublic entities may apply the amendments in this ASU early, but no earlier than for interim periods
beginning after December 15, 2011. Management is assessing the impact of this standard.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income. This is an
amendment to ASC Topic 220, Comprehensive Income. Prior to this amendment, the majority of financial
institutions presented comprehensive income as part of the statement of changes in members’ equity,
which was one of three options for the presentation of comprehensive income. To improve the
comparability, consistency, and transparency of financial reporting and to increase the prominence of
items reported in other comprehensive income, the FASB decided to eliminate this option. Under
ASU 2011-05, an entity has the option to present the total of comprehensive income, the components of
net income, and the components of other comprehensive income either in a single continuous statement
of comprehensive income or in two separate but consecutive statements. For nonpublic entities, the
amendments are effective for fiscal years ending after December 15, 2012, and interim and annual
periods thereafter. The amendments are required to be applied retrospectively. Other Comprehensive
Income is reported consistent with this requirement in this report.

In November 2011, the FASB issued a proposed ASU that, if approved, would defer the provision in
ASU 2011-05 related to presentation of reclassification adjustments out of accumulated other
comprehensive income by component in both the statement in which net income is presented and the
statement in which other comprehensive income is presented. It should be noted that the FASB is not
proposing to defer the requirement to report comprehensive income either in a single continuous
statement or in two separate but consecutive financial statements.




                                                     10
American Airlines Federal Credit Union

Notes to Financial Statements


Note 2.   Investments

Investments classified as available for sale consist of the following (in thousands):

                                                Amortized       Unrealized      Unrealized           Fair
                                                  Cost            Gains          Losses             Value

December 31, 2011:
 Government agencies                           $1,429,199      $       832     $      (780)       $1,429,251
 Mortgage-backed securities                     1,247,592            1,729          (2,870)        1,246,451

                                               $2,676,791      $     2,561     $    (3,650)       $2,675,702

December 31, 2010:
 Government agencies                           $ 361,570       $       956     $      (128)       $ 362,398
 Negotiable certificates                        1,234,984            2,940            (138)        1,237,786
 Mortgage-backed securities                       976,081            2,460          (5,825)          972,716

                                               $2,572,635      $     6,356     $    (6,091)       $2,572,900

Mortgage-backed securities held by the Credit Union are issued by US government-sponsored
enterprises. The negotiable certificates in which the Credit Union has invested are issued by various
financial institutions. This sector concentration is mitigated by issuer diversification and credit risk
analysis.

Gross realized gains and losses on sales of investments available for sale were $2,455,000 and
$262,000 in 2011 and $2,490,000 and $2,000 in 2010, respectively.

Investments by maturity as of December 31, 2011, are summarized as follows (in thousands):

                                                               Available for Sale
                                                           Amortized           Fair
                                                             Cost             Value                Other

No contractual maturity                                $           -      $          -        $        3,484
Less than 1 year maturity                                      20,057            20,117                  350
1-5 years maturity                                          1,409,142         1,409,134                  100
Mortgage-backed securities                                  1,247,592         1,246,451                   -

                                                       $    2,676,791     $   2,675,702       $        3,934

As of December 31, 2011, Federal Home Loan Bank (FHLB) stock of $2,734,300 and Catalyst Corporate
Federal Credit Union Perpetual Contributed Capital of $750,000 are classified with no contractual
maturity.

As of December 31, 2011 and 2010, there were no securities loaned out under securities lending
agreements.




                                                     11
American Airlines Federal Credit Union

Notes to Financial Statements


Gross unrealized losses and fair value by length of time that the individual securities have been in a
continuous unrealized loss position at December 31, 2011 and 2010, are as follows (in thousands):

                                                                     Continuous Unrealized
                                                                       Losses Existing For          Total
                                                                    Less Than     More Than       Unrealized
Description of Securities                          Fair Value       12 Months     12 Months        Losses

Available for Sale

  December 31, 2011:
   Government agencies                         $     599,692    $         780   $       -         $       780
   Negotiable certificates                                -                -            -                  -
   Mortgage-backed securities                        679,073            2,241          629              2,870

                                               $ 1,278,765      $       3,021   $      629        $     3,650

  December 31, 2010:
   Government agencies                         $      19,806    $         128   $       -         $       128
   Negotiable certificates                           134,848              138           -                 138
   Mortgage-backed securities                        517,228            5,305          520              5,825

                                               $     671,882    $       5,571   $      520        $     6,091

As of December 31, 2011, the investment portfolio included 76 securities, 16 of which had unrealized
losses that existed for longer than one year. As of December 31, 2010, the investment portfolio included
74 securities, 10 of which had unrealized losses that existed for longer than one year. All of these
securities are considered to be acceptable credit risks. Based upon an evaluation of the available
evidence, including recent changes in market rates, credit rating information and information obtained
from regulatory filings, management believes the decline in fair value for these securities is temporary. In
addition, the Credit Union has the intent and ability to hold these investment securities for a period of time
sufficient to allow for an anticipated recovery.

Should the impairment of any of these securities become other than temporary, the cost basis of the
investment will be reduced and the resulting loss recognized in net income in the period in which the
other than temporary impairment is identified.

Other investments consist of the following (in thousands):

                                                                                2011                  2010

Share certificates in other credit unions                                   $         450     $           450
Member capital accounts in corporate credit unions                                    750                  -
Federal Home Loan Bank stock                                                        2,734               3,208

                                                                            $       3,934     $         3,658




                                                       12
American Airlines Federal Credit Union

Notes to Financial Statements


On January 28, 2009, the NCUA Board announced the Temporary Corporate Credit Union Share
Guarantee Program (TCCUSGP), which has been extended through June 30, 2012. The TCCUSGP
applies to all share amounts above $250,000, and the NCUSIF insurance coverage applies to all share
amounts of $250,000 or less. The net effect is that during the period of the guarantee, the entire share
certificate account will be treated by the NCUSIF as if it was insured.

The FHLB of Dallas’ stock’s value is determined by the ultimate recoverability of the par value rather than
by recognizing temporary declines. The determination of whether the par value will ultimately be
recovered is influenced by criteria such as the following: (a) the significance of the decline in net assets of
the FHLB of Dallas as compared to the capital stock amount and the length of time this situation has
persisted, (b) commitments by the FHLB of Dallas to make payments required by law or regulation and
the level of such payments in relation to the operating performance, (c) the impact of legislative and
regulatory changes on the customer base of the FHLB of Dallas, and (d) the liquidity position of the FHLB
of Dallas and (e) or redemptions. . The Credit Union does not believe that its investment in the FHLB of
Dallas was impaired at December 31, 2011 or 2010.


Note 3.   Loans and allowance for loan losses

Loans consist of the following (in thousands):

                                                                                2011               2010

Mortgage loans:
 Fixed rate                                                                $   1,137,273     $   1,137,637
 Adjustable rate                                                                 254,717           221,875
 Home equity line of credit, adjustable rate                                      71,829            72,853
 Home equity line of credit, fixed rate                                          101,440           119,100
        Total mortgage loans                                                   1,565,259         1,551,465

Consumer and business loans:
 Vehicle loans                                                                   403,327           419,514
 Purchased loans                                                                 191,087           186,507
 Government guaranteed student loans                                               2,522             2,753
 Credit card loans, primarily unsecured                                          123,268           111,091
 Other consumer loans, primarily unsecured                                       220,388           242,615
         Total consumer and business loans                                       940,592           962,480

Total loans receivable                                                         2,505,851         2,513,945
Deferred net loan origination fees                                                (1,620)           (2,443)
Allowance for loan losses                                                        (33,952)          (30,788)

                                                                           $   2,470,279     $   2,480,714

The Credit Union originates mortgage, consumer and business loans to its members. The loan balances,
interest rates, loan terms and collateral requirements vary according to the type of loan offered and credit
worthiness of the borrowing member.




                                                      13
American Airlines Federal Credit Union

Notes to Financial Statements


Mortgage

The Credit Union grants long-term mortgage loans secured by what is or will be a member’s principal
residence. Home equity fixed rate loans and home equity lines of credit may also be offered with
maturities up to 25 years. Acceptable property types may include: single-family detached or attached
housing, single condominium units, single units in a planned-unit-development (PUD), and 1-4 family
residences. The Credit Union requires an analysis of collateral value and credit worthiness to determine
the capacity of the borrower to repay the obligation.

Consumer

The Credit Union grants consumer loans which consist of vehicle, share secured, and unsecured
products. Potential risks are those products that are secured by rapidly depreciable assets, such as
vehicles. The Credit Union requires an analysis of credit worthiness to determine the capacity of the
borrower to repay the obligation.

Impairment

A loan is considered impaired when, based on current information and events, it is probable that the
Credit Union will be unable to collect the scheduled payments of principal or interest when due according
to the contractual terms of the loan agreement. The Credit Union assesses real estate loans that are four
or more months past due for impairment. Impairment is considered to exist when the unpaid balance of
the loan exceeds the appraised property value less estimated costs to sell. Real estate loans considered
a troubled debt restructuring are also evaluated for impairment. Impairment is the greater of the
difference between the present value of future discounted cash flows of the original loan contract and the
present value of future discounted cash flows of the restructured loan contract versus the difference
between the outstanding loan balance and the market value of the property less costs to sell (assuming
the outstanding loan balance is higher). Additionally, all loan balances of $1 million or more are assessed
for impairment. Impairment is the difference between the outstanding loan balance & the market value of
the property (assuming the outstanding loan balance is higher). Consumer loans under a bankruptcy
court repayment plan are also assessed for impairment. Impairment exists when the total bankruptcy
court ordered repayment is less than the original loan principal.

A summary of impaired loans at December 31 follows (in thousands):

                                                                             2011              2010

Impaired loans without an allowance                                     $          -      $       4,339
Impaired loans with an allowance                                               50,165            49,692

Total impaired loans                                                    $      50,165     $      54,031

Allowance for impaired loans                                            $      10,100     $      11,674

Average recorded investment in impaired loans                           $      52,098     $      54,031




                                                    14
American Airlines Federal Credit Union

Notes to Financial Statements


The schedule below is impaired loans and nonperforming loans (in 000’s) by class at December 31, 2011:

                                                                           Unpaid                                Average     Interest
                                                       Recorded            Principal        Related             Recorded     Income
                                                      Investment           Balance         Allowance           Investment   Recognized

Impaired loans with no related allowance
  recorded                                        $           -        $           -   $            -      $           -    $           -

With an allowance recorded:
 Mortgage loans:
    Fixed rate                                           28,590              28,590              3,714            29,692           1,023
    Adjustable rate                                       6,249               6,249                923             6,489             180
    Home equity line of credit, adjustable rate           2,566               2,566                427             2,665              55
    Home equity line of credit, fixed rate                2,743               2,743                694             2,849             119
            Total mortgage loans                         40,148              40,148              5,758            41,695           1,377

  Consumer and business loans:
    Vehicle                                               6,455               6,455              2,790             6,704               366
    Other consumer loans                                  3,562               3,562              1,552             3,699               247
           Total consumer loans                          10,017              10,017              4,342            10,403               613

Impaired loans with an allowance recorded                50,165              50,165           10,100              52,098           1,990

Total impaired loans                              $      50,165        $     50,165    $      10,100       $      52,098    $      1,990

There were $14,884,000 and $17,614,000 in impaired loans that were also classified as troubled debt
restructurings as of the years ended December 31, 2011 and 2010, respectively.

The schedule below presents the recorded investment in non-accrual loans by loan category as of
December 31:

                                                                                                        2011                    2010

Mortgage loans:
 Fixed rate                                                                                  $           20,109        $         21,737
 Adjustable rate                                                                                          3,849                   4,748
 Home equity line of credit, adjustable rate                                                              1,673                   1,635
 Home equity line of credit, fixed rate                                                                   3,495                   3,496
Consumer and business loans:
 Vehicle loans                                                                                            3,763                   3,962
 Other consumer loans, primarily unsecured                                                                2,273                   2,893

                                                                                             $           35,162        $         38,471

For the years ended December 31, 2011 and 2010, interest collected on impaired loans for the period of
impairment was not significant. There were no loans greater than 90 days past due that continued to
accrue interest at December 31, 2011 and 2010.




                                                                  15
American Airlines Federal Credit Union

Notes to Financial Statements


The following table presents the aging of the recorded investment in past due loans as of December 31,
2011 by class of loans (in thousands):

                                                                                     Greater
                                                    30-59 Days       60-89 Days   Than 90 Days                  Loans Not       Total
                                                     Past Due         Past Due      Past Due         Total      Past Due        Loans

Mortgage loans:
  Fixed rate                                    $       12,771   $        4,657   $    13,460    $    30,888   $ 1,106,385   $ 1,137,273
  Adjustable rate                                        2,383              627         2,021          5,031       249,686       254,717
  Home equity line of credit, adjustable rate              244               39         2,272          2,555        69,274        71,829
  Home equity line of credit, fixed rate                 1,264              735         1,731          3,730        97,710       101,440
             Total mortgage loans                       16,662            6,058        19,484         42,204     1,523,055     1,565,259

Consumer and business loans:
  Vehicle                                                3,000              672         2,069          5,741       397,586       403,327
  Purchased                                                351              271           728          1,350       189,737       191,087
  Government guaranteed student loans                       -                -             -              -          2,522         2,522
  Credit card loans                                        674              565           835          2,074       121,194       123,268
  Other consumer loans                                   1,297              588         1,547          3,432       216,956       220,388
             Total consumer loans                        5,322            2,096         5,179         12,597       927,995       940,592

                                                $       21,984            8,154   $    24,663         54,801   $ 2,451,050   $ 2,505,851

The Credit Union generally recommends a charge-off when a loan has been past due for over 180 days,
with the exception of a few of the loan categories. Mortgage loans are charged off at four months past
due.

The Credit Union utilizes loan delinquency status to determine the grade classification for loans on an
individual loan basis. Loans not meeting the criteria described below are considered to be pass-rated
loans. The definitions used for grade classifications are:

           Special Mention – Loans that are delinquent between 30 and 89 days do not expose the Credit
           Union to risk sufficient to warrant classification in one of the categories below, but which possess
           potential weaknesses that deserve management’s close attention.
           Substandard – The majority of the loans that are delinquent between 90 and 120 days are
           inadequately protected by the current net worth of the obligor, paying capacity of the obligor, or of
           the collateral pledged by the obligor, if any. These loans include those characterized by the
           distinct possibility that the Credit Union will sustain some loss if the deficiencies are not corrected.
           Doubtful – Loans delinquent between 121 and 180 days are classified as doubtful and the
           majority of these loans have all of the weaknesses inherent in those classified substandard with
           the added characteristic that the weaknesses present make collection or liquidation in full, on the
           basis of currently existing facts, conditions and values, highly questionable and improbable.
           Loss – Loans delinquent greater than 180 days are classified as loss. These loans are those
           considered uncollectible and of such little value that their continuance is not warranted, therefore
           they are charged-off consistent with the CU policy.




                                                                         16
American Airlines Federal Credit Union

Notes to Financial Statements


The following table is a summary of loans by grade classification as of December 31, 2011 (in
thousands).

                                                                      Special
                                                    Pass              Mention    Substandard      Doubtful          Loss               Total

Mortgage loans:
  Fixed rate                                    $ 1,106,385   $         17,428   $       1,968        3,146     $      8,346       $ 1,137,273
  Adjustable rate                                   249,686              3,010              13          384            1,624           254,717
  Home equity line of credit, adjustable rate        69,274                283             307          217            1,748            71,829
  Home equity line of credit, fixed rate             97,710              1,999             352          295            1,084           101,440
             Total mortgage loans                 1,523,055             22,720           2,640        4,042           12,802         1,565,259

Consumer and business loans:
  Vehicle                                           397,586              3,673             636          752             680            403,327
  Purchased                                         189,737                622              77          431             220            191,087
  Government guaranteed student loans                 2,522                 -               -            -               -               2,522
  Credit card loans                                 121,194              1,239             435          390              10            123,268
  Other consumer loans                              216,956              1,886             614          922              11            220,389
             Total consumer loans                   927,995              7,420           1,762        2,495             921            940,593

                                                $ 2,451,050   $         30,140   $       4,402        6,537     $     13,723       $ 2,505,852

During the period ended December 31, 2011, the terms of certain loans were modified as troubled debt
restructurings. The modification of such loans was a reduction of the stated interest rate or extension of
the loan term. Real estate troubled debt restructures are included in the allowance as either the greater
of the difference between the present value of future discounted cash flows of the original loan contract
and the present value of future discounted cash flows of the restructured loan contract or the difference
between the outstanding loan balance and the market value of the property less costs to sell (assuming
the outstanding loan balance is higher). Consumer loan troubled debt restructures are included in the
allowance when the outstanding balance of the loan exceeds the total remaining bankruptcy court
ordered loan repayments. The troubled debt restructures are considered in default when the borrower
becomes two months past due under the new contract terms. At such time the loan is returned to its
original terms and is reserved in accordance with the Allowance for Loan Loss Policy.

The following is a summary of troubled debt restructurings during the twelve months ended December 31,
2011 and loans that have been restructured during the previous twelve months that subsequently
defaulted during the twelve months ended December 31, 2011 (dollar amount in thousands).

                                                                Troubled Debt Restructurings                  Troubled Debt Restructurings
                                                      During the 12 Months Ended December 31, 2011            During the Previous 12 Months
                                                                           Pre-               Post-            That Subsequently Defaulted
                                                                       Restructuring      Restructuring        During the 12 Months Ended
                                                                        Outstanding        Outstanding             December 31, 2011
                                                      Number of          Recorded           Recorded          Number of           Recorded
                                                      Contracts         Investment         Investment          Contracts         Investment

Mortgage:
 Fixed rate                                                       21     $       3,993    $      2,552                 38      $         7,207
 Adjustable rate                                                   1               736             734                  4                  645
 Home equity line of credit, adjustable rate                       5               265             154                 13                  546
 Home equity line of credit, fixed rate                           -                 -               -                   1                   85
Consumer and business loans:
 Vehicle                                                          -                  -             155                 35                  155
 Purchased                                                        -                  -              -                  -                    -
 Government student loans                                         -                  -              -                  -                    -
 Credit card                                                      -                  -              -                  -                    -
 Others                                                           -                  -              -                  -                    -

                                                                  27     $       4,994    $      3,595                 91      $         8,638




                                                                        17
American Airlines Federal Credit Union

Notes to Financial Statements


Allowance for Loan Losses

Management categorizes loans into risk categories based on class of loans (e.g., real estate, vehicle,
share secured, lines of credit, etc.). Loan risk categories are reserved based on historical loss ratios,
delinquency status, and legal status of the loan (bankruptcy).

The methodology for evaluating the adequacy of the allowance for loan losses consists of:

        A general reserve for non-delinquent loans believed to have inherent losses not yet realized
        A reserve for non-bankrupt delinquent consumer loans
        A reserve for delinquent real estate loans
        Reserves for bankruptcies
        Reserves for impaired loans
        A reserve for environmental factors that could shock the allowance
        A reserve for losses inherent in checking account balances not yet realized

The reserve for non-bankrupt delinquent consumer loans of the allowance for loan losses relates to loans
that are classified as 60 or more days past due. When the Credit Union restructures a real estate loan
there is an additional component to its allowance calculation. This component will be the greater of the
difference between the present value of the discounted future cash flows of the original loan contract and
the present value of the discounted future cash flows of the restructured loan contract versus the
difference between the market value less costs to sell of the impaired loan and the current balance of the
loan secured by the property. Factors considered by management in determining impairment include,
collateral value and the probability of collecting scheduled principal and interest payments when due.
Loans that experience insignificant payment delays and payment shortfalls are not classified as impaired.
Impairment is measured on a loan-by-loan basis for non-homogenous loans, and including one-to-four
family residential real estate loans with balances in excess of $1 million. Large groups of smaller balance
homogeneous loans are collectively evaluated for impairment. Accordingly, consumer and one-to-four
family residential real estate loans with balances less than $1 million are not separately identified for
impairment, unless such loans are the subject of a restructuring agreement. The general component of
the allowance for loan losses covers unimpaired loans and is based on the historical loss experience
adjusted for other qualitative factors. Some of the qualitative factors used by management are:
unemployment trends, primary sponsor status, delinquency trends and changes to lending policies and
underwriting standards. There was an increase in the reserve of $2.2 Million due to the bankruptcy filing
by AMR Corporation.

The following is an analysis of the allowance for loan losses at December 31, 2011 and 2010 (in
thousands):

                                                                               2011              2010

Balance, beginning of the year                                            $      30,788     $       22,180
 Provision for loan losses                                                       17,989             26,279
 Recoveries                                                                       1,726              1,964
 Loans charged-off                                                              (16,551)           (19,635)

Balance, end of the year                                                  $      33,952     $      30,788




                                                     18
American Airlines Federal Credit Union

Notes to Financial Statements


The table below presents the activity in the allowance for loan losses and the recorded investment in
loans by portfolio segment based on impairment method as of and for the year ended December 31, 2011
(in thousands).
                                                                          Mortgage-        Mortgage-                                         Government
                                         Mortgage         Mortgage         HELOC            HELOC           Vehicle         Purchased         Student         Credit
                                           Fix            Variable          Fixed           Variable        Loans             Loans            Loans          Cards            Others             Total


Allowance for loan losses:
    Balance, beginning of the year   $       9,890    $      1,810    $         851    $         585    $      5,172    $         886    $          -     $      4,498     $      7,096      $      30,788
       Provision for loan losses             1,145             952            1,870              970           3,029              264               -            3,102            6,657             17,989
       Loans charged to allowance           (1,990)           (677)          (1,757)            (914)         (2,171)            (429)              -           (2,756)          (5,857)           (16,551)
       Recoveries of loans
          previously charged-off              184               64              184               96             256              209               -               120            613              1,726

   Balance, end of the year          $      9,229     $      2,149    $       1,148    $         737    $      6,286    $         930    $          -     $      4,964     $     8,509       $     33,952

Period-ended amount allocated to:
   Individually evaluated for
       impairment                    $      3,714     $        923    $         694    $         427    $      2,790    $          -     $          -     $            -   $     1,552       $     10,100
   Collectively evaluated for
       impairment                           5,515            1,226              454              310           3,496              930               -            4,964           6,957             23,852

   Ending balance                    $      9,229     $      2,149    $       1,148    $         737    $      6,286    $         930    $          -     $      4,964     $     8,509       $     33,952

Loans:
   Individually evaluated for
       impairment                    $     14,936     $      3,940    $       1,572    $       1,123    $      1,136    $          -     $          -     $            -   $            3    $     22,710
   Collectively evaluated for
       impairment                        1,122,337         250,777           99,868           70,706         402,191          191,087            2,522         123,268         220,385           2,483,141

   Total ending loan balance         $ 1,137,273      $    254,717    $     101,440    $      71,829    $    403,327    $     191,087    $       2,522    $    123,268     $   220,388       $ 2,505,851




Note 4.           Loan Servicing

The Credit Union originates one-to-four family residential loans which are sold in the secondary market.
The Credit Union retains the servicing for residential mortgage loans that are sold to the Federal National
Mortgage Association (FNMA). Mortgage loans serviced for others are not included in the accompanying
statements of financial condition. The unpaid principal balances of these loans at December 31, 2011
and 2010 are summarized as follows (in thousands):

                                                                                                                                                  2011                              2010

Mortgage loan portfolios serviced for FNMA                                                                                               $              14,528             $                18,080

Custodial escrow balances maintained in connection with the foregoing loan servicing, and included in
deposits, were approximately $4,000 and $5,000 at December 31, 2011 and 2010, respectively.

A summary of the changes in the balance of mortgage servicing rights in 2011 and 2010, were as follows
(in thousands):

                                                                                                                                                  2011                              2010

Balance, beginning of the year                                                                                                           $                     18          $                       53
 Amortization of servicing assets                                                                                                                             (11)                                (35)

Balance, end of the year                                                                                                                 $                      7          $                       18

Fair value of mortgage servicing rights                                                                                                  $                      7          $                       18




                                                                                                19
American Airlines Federal Credit Union

Notes to Financial Statements


Note 5.   Property and Equipment

Property and equipment are summarized as follows (in thousands):

                                                                           2011             2010

Land                                                                  $       1,711    $        1,711
Building                                                                     17,982            17,982
Leasehold improvements                                                        9,568             9,193
Furniture and equipment                                                      21,892            21,362
Construction in process                                                          37             1,177
Capital lease                                                                    -                505
                                                                             51,190            51,930
Accumulated depreciation and amortization                                   (32,913)          (31,545)

                                                                      $      18,277    $      20,385

The Credit Union leases multiple offices. The operating leases contain renewal options and provisions
requiring the Credit Union to pay property taxes and operating expenses over base period amounts. All
rental payments are dependent only upon the lapse of time.

Minimum rental payments under operating leases with initial or remaining terms of one year or more at
December 31, 2011, are as follows (in thousands):

Years ending December 31:
 2012                                                                                  $        1,037
 2013                                                                                             826
 2014                                                                                             700
 2015                                                                                             424
 2016                                                                                             303
 Subsequent years                                                                                 618

                                                                                       $        3,908

Rental expense for the years ended December 31, 2011 and 2010, for all facilities leased under operating
leases totaled $1,194,000 and $1,089,000, respectively.




                                                   20
American Airlines Federal Credit Union

Notes to Financial Statements


Note 6.   Members’ Shares

Members’ shares are summarized as follows (in thousands):

                                                                             2011              2010

Regular shares                                                          $   2,471,094    $    2,390,993
Share draft accounts                                                          184,188           155,640
401(k) shares                                                               1,757,228         1,253,923
Individual retirement account shares                                          202,285           211,184
Certificates                                                                  729,016           628,189

                                                                        $   5,343,811    $    4,639,929

Shares by maturity as of December 31, 2011, are summarized as follows (in thousands):

No contractual maturity                                                                   $   4,614,795
0-1 year maturity                                                                               274,575
Greater than 1 year to 2 years maturity                                                         171,771
Greater than 2 years to 3 years maturity                                                        135,730
Greater than 3 years to 4 years maturity                                                         70,235
Greater than 4 years to 5 years maturity                                                         76,705

                                                                                          $   5,343,811

Regular, share draft, 401(k) and individual retirement account shares have no contractual maturity.
Certificate accounts have maturities of five years or less.

NCUSIF insures members’ shares and individual retirement accounts up to a maximum federal deposit
insurance level of $250,000. This includes all account types, such as regular share, share draft, share
certificates. 401(k) shares and individual retirement account coverage at $250,000 is separate from other
types of accounts owned.

Furthermore, pursuant to Section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection
Act, through December 31, 2012, all funds in non-interest-bearing transaction accounts are insured in full
by the NCUA. This unlimited coverage is in addition to, and separate from, the coverage of at least
$250,000 available to members under the NCUA’s general share insurance rules. The term ―non-
interest-bearing transaction account‖ includes only a traditional share draft account (or demand deposit
account) that allows for an unlimited number of deposits and withdrawals at any time, on which the
insured credit union pays no dividends.

The aggregate amount of certificates in denominations of $100,000 or more at December 31, 2011 and
2010 is approximately $154,119,000 and $146,604,000, respectively.


Note 7.   Borrowings

The Credit Union has an $880,800,000 and $892,125,000 committed line of credit with the Federal Home
Loan Bank at December 31, 2011 and 2010, respectively. The line of credit is secured by the general
assets of the Credit Union and accrues interest at variable interest rates, which depend on market interest
rates. As of December 31, 2011 and 2010, there were no amounts outstanding under this line of credit.
There is no expiration on this line of credit.



                                                    21
American Airlines Federal Credit Union

Notes to Financial Statements


The Credit Union has a $95,000,000 and $250,000,000 revolving line of credit with Catalyst Corporate
Federal Credit Union (formerly Southwest Corporate Federal Credit Union) at December 31, 2011 and
2010, respectively. This line of credit is secured by the general assets of the Credit Union with variable
interest rates, which depend on market interest rates and has an expiration date of December 31, 2011.
As of December 31, 2011 and 2010, there were no amounts outstanding under this line of credit.
Approximately $15,000 was pledged as a guarantee of payment for the Credit Union’s ATM concession in
Boston at December 31, 2011 and 2010.


Note 8.   Off-Balance Sheet Activities

The Credit Union is party to conditional commitments to lend funds in the normal course of business to
meet the financing needs of its members. These commitments represent financial instruments to extend
credit which include lines of credit, credit cards and home equity lines that involve, to varying degrees,
elements of credit and interest rate risk in excess of amounts recognized in the financial statements.
These commitments include, but are not limited to, member business loans.

The Credit Union follows the same credit policies in making commitments as it does for those loans
recorded in the financial statements.

Outstanding mortgage loan commitments at December 31, 2011 and 2010, total approximately
$67,803,000 and $54,552,000, respectively.

Unfunded loan commitments under lines of credit are summarized as follows (in thousands):

                                                                             2011              2010

Home equity                                                             $      45,026     $      52,394
Credit card                                                                   195,158           188,943
Other consumer                                                                389,592           383,749

                                                                        $     629,776     $     625,086

Commitments to extend credit are agreements to lend to a member as long as there is no violation of any
condition established in the contract. Certain commitments have fixed expiration dates or other
termination clauses. Because some of the commitments are expected to expire without being drawn
upon, the total commitment amount does not necessarily represent future cash requirements. The Credit
Union evaluates each member’s credit worthiness on a case-by-case basis. The amount of collateral
obtained to secure borrowing on the lines of credit is based on management’s credit evaluation of the
member.

Unfunded commitments under revolving credit lines and overdraft protection agreements are
commitments for possible future extensions of credit to existing customers. These lines of credit are
uncollateralized and usually do not contain a specified maturity date and ultimately may not be drawn
upon to the total extent to which the Credit Union is committed.




                                                    22
American Airlines Federal Credit Union

Notes to Financial Statements


Note 9.   Members’ Equity

The Credit Union is subject to various regulatory capital requirements administered by the NCUA. Failure
to meet minimum capital requirements can initiate certain mandatory—and possibly additional
discretionary—actions by regulators that, if undertaken, could have a direct material effect on the Credit
Union’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Credit Union must meet specific capital guidelines that involve quantitative
measures of the Credit Union’s assets, liabilities and certain off-balance sheet items as calculated under
accounting principles generally accepted in the United States of America. The Credit Union’s capital
amounts and classification are also subject to qualitative judgments by the regulators about components,
risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Credit Union to
maintain minimum amounts and ratios (set forth in the table below) of net worth to total assets. Further,
credit unions with over $10,000,000 in assets are also required to calculate a Risk-Based Net Worth
(RBNW) requirement which establishes whether or not the Credit Union will be considered ―complex‖
under the regulatory framework. The minimum requirement to be considered ―complex‖ under the
regulatory framework is 6 percent. The Credit Union’s RBNW requirements as of December 31, 2011
and 2010 were 4.00 percent and 4.28 percent, respectively. Management believes, as of December 31,
2011 and 2010, that the Credit Union meets all capital adequacy requirements to which it is subject.

Key aspects of the Credit Union’s minimum capital amounts and ratios are summarized as follows as of
December 31 (in thousands):

                                                            2011                             2010
                                                                  Ratio/                          Ratio/
                                                   Amount      Requirement         Amount      Requirement

Amount needed to be classified as
 "adequately capitalized"                      $    354,732           6.0%     $   311,565            6.0%
Amount needed to be classified as "well
 capitalized"                                       413,854           7.0%         363,492            7.0%
Actual net worth                                    532,583           9.0%         517,635           10.0%

Because the RBNW requirement is less than the net worth ratio, the Credit Union retains its original
category of ―well capitalized.‖ Further, in performing its calculation of total assets, the Credit Union used
the quarter-end balance option, as permitted by regulation.


Note 10. Related Party Transactions

Compensation and benefits of approximately $35,245,000 and $34,318,000 in 2011 and 2010,
respectively, represent costs of payroll, benefit plans, and employee health and life insurance that are
paid by American Airlines, a subsidiary of AMR Corporation, and reimbursed by the Credit Union. In
addition, American Airlines provides facilities at its headquarters and at various airports for the Credit
Union and provides other services to the Credit Union. Reimbursement to American Airlines for such
items was approximately $2,553,000 and $2,546,000 in 2011 and 2010, respectively.




                                                      23
American Airlines Federal Credit Union

Notes to Financial Statements


In the normal course of business, the Credit Union extends credit to directors, Supervisory Committee
members and executive officers on the same terms and conditions as to other Credit Union members,
with the exception of limited discounts offered to employees. The aggregate loans to related parties at
December 31, 2011 and 2010 were approximately $3,727,000 and $3,901,000, respectively. Deposits
from related parties at December 31, 2011 and 2010 amounted to approximately $5,560,000 and
$5,860,000, respectively.


Note 11. Fair Value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants. Valuation techniques are to be consistent with the market
approach, the income approach and/or the cost approach. Inputs to valuation techniques refer to the
assumptions that market participants would use in pricing the asset or liability. Inputs may be observable,
meaning those that reflect the assumptions market participants would use in pricing the asset or liability
developed based on market data obtained from independent sources, or unobservable, meaning those
that reflect the reporting entity's own assumptions about the assumptions market participants would use
in pricing the asset or liability developed based on the best information available in the circumstances. In
that regard, the fair value hierarchy establishes valuation inputs that give the highest priority to quoted
prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.
The fair value hierarchy is as follows:

        Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the
        entity has the ability to access as of the measurement date

        Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for
        similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are
        observable or can be corroborated by observable market data

        Level 3 – Significant unobservable inputs that reflect a reporting entity’s own assumptions about
        the assumptions that market participants would use in pricing an asset or liability

A description of the valuation methodologies used for assets and liabilities measured at fair value, as well
as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Investments Available for Sale

Where quoted prices are available in an active market, investments are classified within Level 1 of the
valuation hierarchy. Level 1 investments would include highly liquid government bonds and exchange
traded equities. If quoted market prices are not available, then fair values are estimated by using quoted
prices of investments with similar characteristics for Level 2 investments or using pricing models or
discounted cash flows for Level 3 investments. Level 2 would include U.S. agency securities, mortgage-
backed agency securities, obligations of states and political subdivisions and certain corporate, asset-
backed and other securities. In certain cases where there is limited activity or less transparency around
inputs to the valuation, investments are classified within Level 3 of the valuation hierarchy.

Mortgage Servicing Rights

Mortgage servicing rights (MSRs) do not trade in an active, open market with readily observable prices.
While sales of MSRs do occur, the precise terms and conditions typically are not readily available. The
Credit Union estimates the fair value of MSRs at the time of sale of the related mortgages and amortizes
the value of these rights in proportion to, and over the period of, the estimated life of the loans.
Management believes book value approximates fair value. Due to the nature of the valuation inputs,
MSRs are classified within Level 3 of the valuation hierarchy.


                                                     24
American Airlines Federal Credit Union

Notes to Financial Statements


Impaired Loans

Impaired loans represent certain loans for which an allowance for loan losses has been calculated as the
greater of the difference between the present value of the discounted future cash flows of the original loan
contract and the present value of the restructured loan contract or the difference between the market
value of the collateral less costs to sell of the impaired loan and the current balance of the loan secured
by the property.

Other Real Estate Owned (OREO)

OREO is initially recorded and subsequently carried at fair value and generally based on a current
independent third party appraisal. Those that have had significant unobservable inputs to adjust
appraised values of collateral are deemed to be Level 3. The input levels are not necessarily an
indication of the risk or liquidity associated with the asset at that level.

The following table represents assets and liabilities reported on the statement of financial condition at
their fair value as of December 31, 2011 by level within the fair value measurement hierarchy (in
thousands):

                                                                   Fair Value Measurements Using
                                                                   Quoted Prices     Significant
                                                                 in Active Markets      Other           Significant
                                                                    for Identical    Observable        Unobservable
                                                  December 31,         Assets          Inputs             Inputs
                                                     2011             (Level 1)       (Level 2)          (Level 3)

Measured on a recurring basis:
 Assets:
   Government agencies securities             $      1,429,251   $           -    $    1,429,251   $             -
   Mortgage-backed securities                        1,246,451               -         1,246,451                 -
   Mortgage servicing rights                                 7               -                -                   7
Measured on a non-recurring basis:
 Assets:
   Impaired loans                                       39,053                                               39,053
    OREO                                                 2,009               -                -               2,009




                                                       25
American Airlines Federal Credit Union

Notes to Financial Statements


The following table represents assets and liabilities reported on the statement of financial condition at
their fair value as of December 31, 2010, by level within the fair value measurement hierarchy (in
thousands):

                                                                   Fair Value Measurements Using
                                                                   Quoted Prices     Significant
                                                                 in Active Markets      Other           Significant
                                                                    for Identical    Observable        Unobservable
                                                  December 31,         Assets          Inputs             Inputs
                                                     2010             (Level 1)       (Level 2)          (Level 3)

Measured on a recurring basis:
 Assets:
   Government agencies securities             $        362,398   $           -    $      362,398   $            -
   Negotiable certificates securities                1,237,786               -         1,237,786                -
   Mortgage-backed securities                          972,716               -           972,716                -
   Mortgage servicing rights                                18               -                -                 18
Measured on a non-recurring basis:
 Assets:
   Impaired loans                                       36,811               -                -              36,811
   OREO                                                  2,536               -                -               2,536

The fair value of a financial instrument is the current amount that would be exchanged between willing
parties, other than in a forced liquidation. Fair value is best determined based on quoted market prices.
However, in many instances, there are no quoted market prices for the Credit Union’s various financial
instruments. In cases where quoted market prices are not available, fair values are based on estimates
using present value or other valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair
value estimates may not be realized in an immediate settlement of the instrument. The Fair Value
provision excludes certain financial instruments and all non-financial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent
the underlying fair value of the Credit Union. The following information presents estimated fair values of
the Credit Union’s financial instruments as of December 31, 2011 and 2010, and the methods and
assumptions used to estimate those fair values.

Cash and Cash Equivalents

The carrying amounts of cash and cash equivalents approximate their fair value.

Other Investments

The carrying value approximates fair value based on the redemption provisions of the underlying
investments.

Loans

For loans that reprice frequently and have no significant change in credit risk, fair values are based on
carrying values. Fair values for certain mortgage loans (for example, one-to-four family residential), credit
card loans, and other consumer loans are estimated using a discounted cash flow calculation that applies
interest rates currently being offered on similar loans to a schedule of aggregated expected monthly
maturities of these loans.




                                                       26
American Airlines Federal Credit Union

Notes to Financial Statements


Accrued Interest Receivable

Accrued interest receivable represents interest on loans and investments. The carrying amount of
accrued interest receivable approximates fair value.

Members’ Shares

The fair values disclosed for regular share, share draft and money market accounts are by definition,
equal to the amount payable on demand at the reporting date (that is, their carrying amounts). Fair
values for share certificates are estimated using a discounted cash flow calculation that applies interest
rates currently being offered on the Credit Union’s share certificates to a schedule of aggregated
expected monthly maturities on the Credit Union’s current share certificates.

Other Borrowings

The carrying amount of other borrowings approximates fair value.

Dividends Payable

The carrying amount of dividends payable approximates fair value.

The estimated fair value of the Credit Union’s financial instruments is summarized as follows (in
thousands):

                                                              2011                               2010
                                                  Carrying             Fair          Carrying             Fair
                                                  Amount              Value          Amount              Value

Financial assets:
  Cash and cash equivalents                   $     680,042     $      680,042   $      49,609     $       49,609
  Investments available for sale                  2,675,702          2,675,702       2,572,900          2,572,900
  Other investments                                   3,934              3,934           3,658              3,658
  Loans, net                                      2,470,279          2,496,324       2,480,714          2,485,267
  Accrued interest receivable                        11,555             11,555          14,850             14,850
  Mortgage servicing rights                               7                  7              18                 18

Financial liabilities:
  Members' shares                                 5,343,811          5,343,527       4,639,929          4,649,796
  Dividends payable                                   8,071              8,071           8,074              8,074




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