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Partners Federal Credit Union

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									  Partners
Addison Avenue Federal Credit Union
               2008 Annual Report
Partners
   listen
Partners in prosperity.
And opportunity.
Charles Dickens opened his classic A Tale of Two Cities with, “It was the best
of times, it was the worst of times.” Although this often-quoted phrase was
written nearly 200 years ago, many would say it is an apt description of the
unsettling period we are experiencing right now. In fact, the more negative
among us might dwell entirely on the second part of Mr. Dickens’ statement.

We disagree. While the economic challenges our nation faces shouldn’t be
minimized, for Addison Avenue—and the members we serve—the “best of
times” remains what we strive to deliver.

Rarely quoted are the next 12 words in Dickens’ classic: “It was the age
of wisdom, it was the age of foolishness.” We have certainly seen how
foolishness—in decisions made, in how some organizations conducted
business—has seriously affected many financial companies. Even the credit
union industry has been indirectly impacted by the economic downturn
as demonstrated by the industry-wide assessment levied by the NCUA, our
federal regulator. While dismayed not to be able to use those funds to provide
future value to you--our member-owners--we recognize the importance of
healthy institutions like ourselves to be able to help provide broader system-
wide stability. Despite this assessment, Addison Avenue remains strong and
secure; one of the most successful financial institutions in the nation. We
like to think wisdom had something to do with it, but know that you are at
the heart of any success.

In the best of times, the worst of times, or any time for that matter, the
partners we choose will affect our success in life. In our report for 2008,
we’d like to explore our partnership with you. Our commitment is to be the
most trusted financial partner you could have…a partner you can rely upon
to learn, to listen, and to help you prosper.

At all times.




John Weidert
Chairman of the Board




Benson Porter
President/CEO
Partners
    trust
Choose your partners wisely,
and they will make you prosperous.

Across the course of our lives, we choose partners. Some are momentary,
some are strictly business, some are for life. Chosen wisely, a partner will
bring us prosperity—emotional, spiritual and material—that more than likely
we would never attain on our own.

What makes a good partner? A definition could fill several pages. Perhaps
most of all, though, it is trust. Trust that is earned, trust that is never broken,
and over the years, trust that need not be analyzed. It just is.

Being the keeper of that trust is quite a responsibility, especially when it
relates to money. We long ago decided that Addison Avenue would never
have a single “customer.” Only partners. As a financial cooperative, owned
by you, our members, we all share the same goals. Quite simply, when you
succeed, so do we.

Today, we serve nearly 150,000 members throughout the United States
and Puerto Rico. Our promise is to be a trusted partner in the prosperity of
each one. Financial prosperity, yes. And also the prosperity that comes with
peace of mind, a secure future, and trust.

The prosperity that comes with a good partner.


An unusual position: strength
In 2008, Addison Avenue found itself in an unusual position, compared with
much of the financial industry…a position of continued growth and stability. For
over a decade, we have maintained a capitalization ratio of 10% or higher—
nearly 40% greater than the 7% ratio required by the NCUA, our federal
regulator. This is one source of our exceptional financial strength that has
allowed us to absorb the assessment levied on the entire industry by the
NCUA as part of the plan to stabilize other portions of the industry that have
come under strain in the current economic climate.

While questionable practices in the mortgage business proved to be the
downfall of so many financial companies, during 2008 Addison Avenue in-
creased new home mortgage originations by over 40%—from $301 million in
2007 to $422 million. While the so-called “credit crunch” makes headlines,
Addison Avenue continues to help members buy and refinance homes—in
greater numbers than ever before.
Partners
innovate
More services, more convenience

Constantly improving Addison Avenue service and products remained a primary
focus during 2008. We compiled the results of 3,500 member surveys, and
are turning this input into tangible services. These include Dividend Rewards
Checking, which allows the use of any ATM in the U.S. absolutely free and
pays a highly competitive rate; several new online banking enhancements;
and expanded hours in our Call Center. We also recently opened the Addison
Café, a website and blog created especially for young adults.


More partners in more places.

In 2008 we opened a new community branch in Loveland, Colorado. We
also relocated our Houston branch onto the HP site, to make things more
convenient for area employees.

We continue to have—and to help—key business and community partners.
Last year we sponsored a number of events that serve good causes, such
as charity golf tournaments and Earth Day fairs. We partnered with HP
Shopping, promoting electronics like digital photo frames, mini-laptops and
TouchSmart PCs at several of our branch locations. Also, every year seems
to bring us a new partner that simply needs help. That was the case with
the disaster support we provided after a devastating tornado in Colorado
and Hurricane Ike in Houston.


A new year brings new partners and new opportunities.

2009 will see the introduction of one of the most exciting technologies to
emerge in many years: our e-Deposit service, which will allow you to deposit
checks electronically if you have a computer and a scanner.

We are planning major enhancements to our core banking system, which
will result in faster, smoother, easier transactions for customers at every
Addison Avenue location.

Our popular Webinar series—informative, educational and dynamic interactive
online events, covering a variety of hot topics—is expanding to become a
monthly event.

We’re going increasingly mobile, providing more and more services through
today’s smart phones. We’re even introducing Security Tokens, a simple,
personal electronic device that provides the ultimate in online security.

All in all, it will be a very good year to partner with Addison Avenue.
 Partners
volunteer
Partnering at home.

“The Coming Charity Crisis” is how business columnist Daniel Gross
headlined his 2008 article in Newsweek, predicting lean times ahead for
nonprofit groups. Substantial reductions in charitable giving, combined with
cuts in federal, state and local budgets, are stretching nonprofits and volunteer
organizations to the breaking point.

While we can’t solve every crisis, Addison Avenue continues to support the
communities we serve—both corporately and through the extraordinary efforts
of our extraordinary employees. Our partnerships in 2008 alone included:

The Family Giving Tree, whose mission is quite simply to offer assistance to
as many people as possible, by creating a simple and effective way for indi-
viduals to help others. We support their annual Back to School and Holiday
Wish Drives, both of which directly help children.

Making Strides Against Breast Cancer walks—not a race, a celebration of
survivorship and hope. Addison Avenue was a bronze sponsor, with many
staff members participating in the walks.

Run to Feed the Hungry, an annual holiday tradition for Sacramento Valley
families and Addison Avenue. In 2008, 24 staff members represented us
and we provided 400 jump ropes for participants. The event raised over
$750,000 for Sacramento Food Bank & Family Services.

We partnered with three other credit unions in creating a $100,000 zero
interest certificate and donated $35,000 in startup funds to create the East
Palo Alto Credit Union. This is an ongoing project for us, designed to make
community credit unions available to all people, regardless of their socio-
economic status.

We supported the Lucille Packard Children’s Hospital’s Teen Health Van,
in conjunction with the annual Hewlett-Packard Bill & Dave Golf Classic. In
2008 the event raised $30,000 for the hospital’s Teen Health Van.

A group of Addison Avenue employees again donated their time, with resources
made available through the credit union, in building and rehabilitating homes
for families through Habitat for Humanity.
 Partners
give back
It’s not only about money.

It would be easy to write a check, hand it to a deserving organization, and be
done with it, feeling proud of our “good deed.” That is not how we do things.
Yes, we are proud of being financially sound. Being ethically sound, though,
has nothing to do with economic conditions.

We believe in a partnership between Addison Avenue, our employees, and
our members as the basis for our Corporate Giving Program. Over the years
we have found that this creates a synergy, a dynamism, an involvement far
beyond what any mere philanthropic program can accomplish. It is based
upon a commitment to:

• Live our values of thoughtfulness, respect, understanding and financial
  soundness and service to the community.

• Show a commitment to give back to our communities regularly and con-
  sistently.

• Offer employees the opportunity to give back to organizations that matter
  most to them.

• Help our members to become a part of our culture and see it live through
  their actions as well.

• Make it easy for employees and members to support charitable organizations.

• Encourage consistent, steady volunteerism and leadership.

• Simplify the experience of giving and make it compelling to employees
  and members.

• Support people of modest means who are trying to improve their financial lives.

We put these principles into practice by providing dollar-for-dollar gift matching
on employee donations to charities of their choice…and we give up to 12 hours
of paid time off per year for volunteer work. Our Dollars for Doers program can
provide an additional $500 in support relative to employee volunteer hours.

It is not mandatory for any Addison Avenue employee to participate. But, the
numbers that do are substantial. Our people invested over 200 volunteer hours
and generated $25,000 in donations during 2008.

It is not so much about the money as it is about fostering an attitude—an
attitude of realizing that we are all partners in a community, a nation, a planet—
and that when one life is bettered, we all prosper.
Partners
   grow
Statement of Financial Condition                                                         Statement of Income
(in $ thousands)                                                                         (in $ thousands)

Assets                                          12/31/08            12/31/07                                                               2008                  2007
                                                                                         Net Interest Margin
Consumer Loans                                    526,364            490,176             Interest Income
Real Estate Loans                               1,255,388          1,177,789
Other Loans/Deferrals                              12,650              5,435             Loan Interest Income                            98,591                 94,690
Loan Loss Allowance                                (9,773)            (3,677)            Investment Income                                9,737                 15,517
      Net Loans                                 1,784,630          1,669,723                   Total Interest Income                    108,329                110,207
Cash & Investments                                  362,900           360,639            Interest Expense:
Other Assets                                         23,052            33,237             Dividends                                      47,768                59,094
                                                                                          Other Interest Expense                          1,206                 1,124
Total Assets                                    2,170,582          2,063,599                   Total Interest Expense                    48,973                60,218
                                                                                         Provision for Loan Losses                        13,176                 4,520
Liabilities & Equity
Liabilities                                          68,059            27,121            Net Interest Margin                             46,180                45,469
Shares:
 Checking Accounts                                322,736             243,598            Operating Expenses:
 Savings Accounts                                 742,311             758,144             Compensation & Benefits                        27,773                25,853
 Savings Certificates                             611,727             619,697             Share Insurance Assessment                     11,528                     0
 IRA Accounts                                     208,659             191,003             Other Operating Expenses                       24,690                24,897
      Total Shares                              1,885,433           1,812,442                 Total Operating Expenses                   63,991                50,750
Net Worth                                           216,934           223,527            Non-Interest Income:
Unrealized Gain/Loss                                    156               510             Addison Avenue Financial Partners                1,159                   722
     Total Reserves                                 217,090           224,037             ENSI                                           (1,499)               (2,390)
                                                                                          Investment Services Division                     1,132                 2,441
Total Liabilities & Equity                      2,170,582          2,063,599
                                                                                          Other Non-Interest Income                      15,616                12,199
                                                                                               Total Non-Interest Income                 16,408                12,972
                                                                                         Gain/Loss on Wescorp Membership*                (5,046)                       0
                                                                                         Gain/Loss on Disposition of Assets*               (144)                       0
                                                                                         Net Income                                      (6,593)                 7,691



                                                                                                                                                                224
                                                                                                                                                        216            217
                                                                                                             2.17
                                                                                                      2.06                                       206
                                                                                               1.99
                                                                                        1.82                                              193
                                                                                 1.70
                                             141 148
                                      135
                         124 124




                                                              Credit
                                                              Union
                                                                                 2004
                                                                                        2005
                                                                                               2006


                                                                                                             2008
                        2004
                               2005
                                      2006


                                                    2008




                                                                                                      2007




                                                                                                                                          2004
                                                                                                                                                 2005
                                                                                                                                                        2006


                                                                                                                                                                       2008
                                             2007




                                                                                                                                                                2007

Members                                                       Assets                                                Net Worth
(in thousands)                                                (in $ billions)                                       (in $ millions)
                                                                                 4002
                                                                                        5002
                                                                                               6002
                                                                                                      7002
                                                                                                             8002
                        4002
                               5002
                                      6002
                                             7002
                                                    8002




                                                                                                                                          4002
                                                                                                                                                 5002
                                                                                                                                                        6002
                                                                                                                                                                7002
                                                                                                                                                                       8002




*
    The National Credit Union Administration (NCUA) announced in early 2009, two separate events that resulted in Addison Avenue to recognize impairment in the National
    Credit Union Share Insurance Fund (NCUSIF) and membership equity in Western Corporate Federal Credit Union of $11.53 million and $5.05 million respectively. The
    actual impairment took place in 2008, and as a result, Addison recognized those charges in 2008 through a reduction in earnings and subsequent capital reduction of
    $16.58 million.
Partners
   guide
Letter from the Supervisory Committee

The Supervisory Committee plays an integral part in independently evaluating
the performance of the officials and staff of Addison Avenue Federal Credit
Union. Comprised of eight volunteer members, the Committee meets through-
out the year and reports its findings to the Board of Directors.

The Committee accomplishes its objectives by:

• Reviewing the Credit Union Board of Directors, management and staff
  activities and programs, ensuring that appropriate safeguards and controls
  are in place to protect the organization’s assets and reputation.

• Ensuring that complete and accurate financial records are prepared in a
  timely manner.

• Determining that the Credit Union’s Board and management make decisions
  and take actions that are consistent with the best interests of the general
  membership.

In accomplishing its responsibilities, it uses the independent certified public
accounting firm of PriceWaterhouseCoopers, LLP, to perform internal audits
and report results directly to the Committee.

For the fiscal year ending December 31, 2008, the independent certified
public accounting firm of McGladrey & Pullen, LLP, conducted a compre-
hensive certified audit of the Credit Union and verified member accounts,
as prescribed by the National Credit Union Administration (NCUA). The
independent auditor’s report confirms that the Credit Union’s consolidated
financial statements were accurate, not requiring any adjustments, and that
results from its operations conformed with policies, regulations, and generally
accepted accounting principles.

It is the Committee’s opinion that Addison Avenue Federal Credit Union is
operating effectively and is soundly managed, and that the members’ assets
are being safeguarded, consistent with the Addison Avenue tradition.




Dirk F. Dykson
Chairman
Supervisory Committee
     Partners
work together
Working partners.

It is understandable, we suppose, that every year in this report we are eager
to recount our successes and accomplishments, to let you know about
our new services, and to recap our never-ceasing emphasis on customer
service. So eager, in fact, that sometimes we overlook our most important
partners in these efforts—the people of Addison Avenue.

After all, “Addison Avenue” is just a name. It is not a product you can buy,
anything you can really see, or something you can hold in your hand. Addison
Avenue Federal Credit Union is nothing more—and nothing less—than the
sum total of the people who are Addison Avenue. The voice on the phone,
the individual who greets you at a branch, the specialist who works so hard
to address your needs, plus the many individuals behind the scenes in elec-
tronic banking and management—they are Addison Avenue.

In 2008 we began taking a look inward, as well as outward. We completed
an extensive employee survey, with a 99.5% response rate. This survey was
not designed to generate cold statistics; it is designed to identify trends,
to establish workable initiatives, to increase the retention of our most
important resource, and to glean the many good ideas that originate from
our people.

We also measured the satisfaction of our people with their jobs and with
the company they work for. After all, we can hardly expect an individual to
create customer satisfaction if they are not satisfied with their own career
path. Fortunately, over 84% say Addison Avenue is a good or even great place
to work. While it might be a lofty one, our goal is to hear every single one of
our people agree.

We realize that the face of Addison Avenue is in fact many faces…those of
the individuals who bring their skills, their talents, and their concern to the
office every day. Ultimately, they are the true partners in the success of Addison
Avenue and the prosperity of each member.

It is a partnership we appreciate. And one we will never take lightly.
    A good partner
is a strong partner
Addison Avenue Executive Staff
Benson Porter                                                                                   Bonnie Salem
President & Chief Executive Officer                                                    Chief Operations Officer

Mo-Lan Chan                                                                                      Derek Tynes
Chief Financial Officer                                               Senior Vice President, Human Resources

Blanca Guerrero                                                                                      Stu Fisher
Chief Information Officer                                                   Senior Vice President, e-Commerce

Scott Jenner                                                                                    Doug Marshall
CEO & President                                                                         Chief Marketing Officer
Addison Avenue Financial Partners, LLC                                   Senior Vice President, Retail Branches


Addison Avenue Board of Directors
John Weidert                                                                                       Eric E. Hill
Chairman                                                                                       Vice Chairman
Retired Senior Director                                                Retired Software Development Engineer
Agilent Technologies, Inc.                                                          Hewlett-Packard Company

Mark Plastino                                                                                   Kathy Farmer
Secretary                                                                  Global Operations, Americas Region
Finance Director                                                              Jenesis Management of Change
Hewlett-Packard Company                                                             Hewlett-Packard Company

Dotty Hayes                                                                                     Craig Nordland
Retired Vice President, Internal Audit                      Senior Vice President, General Counsel & Secretary
Intuit Inc.                                                                           Agilent Technologies, Inc.

Brian Shelton                                                                                      Greg Gillas
Vice President & Treasurer                                            Vice President, Compensation & Benefits
CH2M HILL                                                                            Hewlett-Packard Company

Jeff Hank
Vice President & Corporate Controller
Intuit Inc.


Addison Avenue Supervisory Committee
Dirk F. Dykson                                                                              Martin Ragnartz
Strategic Alliances Manager                                                               Associate Controller
Hewlett-Packard Company                                                      Kaiser Permanente Medical Office

Cynthia Klustner                                                                                Neil Dougherty
Finance Director, Real Estate & Workplace Services                                          Assistant Treasurer
Hewlett-Packard Company                                                               Agilent Technologies, Inc.

Ed Sanderson                                                                                      Ray Chau
Manager, Business Planning & Operations          Finance & Program Manager, Real Estate & Workplace Services
Hewlett-Packard Company                                                            Hewlett-Packard Company

Vipul Chitalia                                                                                      Rudd Little
Global Sourcing Director                                                             Director of Global Benefits
Agilent Technologies, Inc.                                                                          CH2M HILL



Addison Avenue Federal Credit Union Administrative Offices 3408 Hillview Avenue Palo Alto, California 94304
                                                                                www.addisonavenue.com
Your partners

								
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