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					Leading.
  the way



     Founders Federal Credit Union
               2008 Annual Report
Leadingby example.
 Our strength stems from over 50 years of sound financial
 management and responsible lending. In an economy
 where achieving financial success is becoming increasingly
 difficult, Founders Federal Credit Union is setting the example.
 The strategic decisions made by our Management Team and
 Board of Directors have allowed Founders to prosper and
 maintain our focus of providing the best service to our
 members. Founders is positioned for advancement in the future.
Leading
through expansion.
Founders’ growth in recent years has allowed us to expand our
reach and improve products and services. We endlessly strive
to be the most convenient financial institution for our members.
In 2008, we opened two new locations in South Carolina and
installed several ATMs with cash deposit capability. Our
members continually benefit from product improvements and
enhancements. The 2008 implementations of Founders Debit
Rewards Program and eStatements have allowed our members
to make the most of their money and time.
Leading
with experience.
  The knowledge and experience of our 500 employees is our
  most valuable asset and the force behind Founders’ success.
  We have invested time, energy and resources to provide the
  best training programs for Founders employees, equipping
  every employee with the capabilities to better serve Founders
  members. Our members trust Founders employees to help them
  make some of the most important decisions of their lives and it is
  our duty to ensure they are qualified to handle that responsibility.
Leading       with innovation.
Technological innovation is one of our highest priorities. We
remain focused on safety while providing Founders
members with breakthrough technology that allows faster,
more convenient account access. We continually explore
options for system enhancements to meet the changing
needs of our members. As convenience becomes increasingly
important, Founders’ online services such as Online Banking,
Bill Pay, eLending, eMortgage and eStatements are gaining
popularity. Our members demand the most current products
and services and Founders is positioned to meet those demands.
Leading
with compassion.
   Founders corporate giving reinforces our connection to our
   communities and our compassion for the people we serve.
   Our goal is to strengthen our communities through financial
   support and volunteerism with our focus on programs inspiring
   education. In 2008, we expanded Founders’ In-School Credit
   Union Program to include 11 local schools. This program has
   given us the opportunity to witness Founders impact on the lives
   of the children involved and our communities as a whole.
Message
                                                                                                                      CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                                                                                                                                                  (condensed)                                                                      Capital Reserves
                                                                                               Bruce A. Brumfield                                                    Assets                                                                                                                       201.9
                                                                                                                                                                                                   As of December 31,
                                                                                                                                                                                                                                                                                              $

                                                                                                    President & CEO
                                                                                                                                                                                                   2008         2007
     from the President
                                                                                                                                                                                                                                                                                  189.3
                                                                                                                                                                                                                                                                                  $



                                                                                                                                                                                                                                                                    167.6
                                                                                                                                                                                                                                                                    $

                                                                                                                                                                                                    (dollars in thousands)                           $
                                                                                                                                                                                                                                                         158.4

                                                                                                                      Cash                                                                       $39,793            $40,390
At Founders Federal Credit Union, success is measured by how well we serve our more than 185,000                                                                                                                                             145.3
                                                                                                                                                                                                                                         $


                                                                                                                      Investments                                                                214,724            165,896
members. We have never swayed from our philosophy of building lifetime partnerships based on mutual
trust and commitment with our members.
                                                                                                                      Loans to members, net of allowance for loan losses of
                                                                                                                           $19,486 and $11,959 for 2008 and 2007, respectively                 1,162,615          1,143,862                      04 05 06 07                                  08
In a year full of challenges, 2008 illustrates Founders Federal Credit Union’s commitment to that philosophy.         Accrued interest receivable                                                  5,857              6,120
We protected our members’ money while providing greater access to products and services that allowed                  Prepaid and other assets                                                    23,605             17,755
our members to reach their financial goals.                                                                           Property and equipment                                                      36,581             28,952                                  Net Loans
Our successes in 2008 affirm our members’ trust and confidence in Founders Federal Credit Union. We                                                                                                                                                                                       $
                                                                                                                                                                                                                                                                                            1,162.6
achieved significant asset growth of 5.7% increasing our total assets to over $1.4 billion. During a time
                                                                                                                                Total assets                                                  $1,483,175         $1,402,975
when other financial institutions were forced to close their doors, we not only thrived, but were able to                                                                                                                                                                     1,143.9
                                                                                                                                                                                                                                                                              $

                                                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                                                 1,017.6
return $6 million to our membership as a bonus dividend. Even after this bonus dividend, we maintained                                          Liabilities and Members’ Equity
a net income of $2.2 million proving Founders to be one of the strongest, most well capitalized financial                                                                                                                                            $
                                                                                                                                                                                                                                                      858.2

institutions in the nation.                                                                                                                                                                                                              793.8
                                                                                                                                                                                                                                         $


                                                                                                                                                                                                   As of December 31,
We entered 2009 with the drive and commitment to bring positive financial results for the future and meet
                                                                                                                                                                                                   2008         2007
the changing needs of our members. Founders Federal Credit Union is and will remain safe, secure and                                                                                                                                         04 05 06 07                                      08
rock solid.                                                                                                                                                                                         (dollars in thousands)
                                                                                                                      LIABILITIES:
                                                                                                                          Members’ deposits                                                   $1,247,559         $1,207,732
                                                                                                                          Borrowed Funds                                                          40,000              -------                            Net Income




Supervisory
                                                                                                                          All other liabilities                                                   13,225             17,865                  15.5
                                                                                                                                                                                                                                             $

                                                                                                                                                                                                                                                         13.7
                                                                                                                                                                                                                                                         $



                                                                                                                      MEMBERS’ EQUITY:                                                                                                                                  9.1
                                                                                                                                                                                                                                                                        $

                                                                                                                         Accumulated other comprehensive income/(loss)                             2,066              (172)                                                           8.8
                                                                                                                                                                                                                                                                                      $


                                                                                              Robert E. Matthews
                                                                                                                         All other members’ equity                                               180,325            177,550

                    Committee Report
                                                                                                         Chairman
                                                                                             Robert M. McBurney                                                                                                                                                                                   2.2
                                                                                                                                                                                                                                                                                                  $


                                                                                                     Roy A. Hunt                Total liabilities and members’ equity                         $1,483,175         $1,402,975
                                                                                                                                                                                                                                                 04 05 06 07                                  08
The Supervisory Committee is appointed by the Board of Directors in accordance with the Federal Credit Union
Act. Its primary responsibilities to the membership are to ensure the effectiveness of the system of Internal
Control, adherence to established policies and procedures, and the overall safety and soundness of Founders                     CONSOLIDATED STATEMENTS OF INCOME
Federal Credit Union.                                                                                                                                            (condensed)                                                                             Total Assets
                                                                                                                                                                                                   For the years ended                                                                        1,483.2
                                                                                                                                                                                                                                                                                              $

The Internal Audit Department reviews credit union operations and annually updates a formalized risk                                                                                                 December 31,                                                                 $
                                                                                                                                                                                                                                                                                      1,403.0
assessment of all products and services. In addition, numerous audits were conducted to determine the                                                                                              2008           2007                                             1,263.6
                                                                                                                                                                                                                                                                  $


effectiveness and efficiency of operation, reliability of financial reporting and compliance with respective                                                                                                                                             $
                                                                                                                                                                                                                                                             1,110.7
policies and procedures.                                                                                                                                                                            (dollars in thousands)                   $
                                                                                                                                                                                                                                                 1,028.3
                                                                                                                      Interest Income                                                            $99,572            $95,468
Audit findings, recommendations and management’s responses to audit reports were presented to the                     Interest and dividend expense                                               48,744             45,908
Supervisory Committee and management.                                                                                           Net interest income                                               50,828             49,560
                                                                                                                                                                                                                                                 04 05 06 07                                      08
To accomplish our annual goals, the Committee engages an independent public accounting firm to audit                  Provision for loan losses                                                   22,015             13,231
the consolidated financial statements as well as management practices and procedures to ensure they are                       Net interest income after
sufficient to safeguard members’ assets. To assist in fulfilling our responsibilities, the Supervisory Committee
retained the services of the certified public accounting firm of Orth, Chakler, Murnane & Company to perform
                                                                                                                                  provision for loan losses                                       28,813             36,329
                                                                                                                                                                                                                                        Capital to Assets Ratio
an audit in accordance with auditing standards generally accepted in the United States of America and to
                                                                                                                      Non-interest income                                                         26,597             23,405
express an opinion on the fairness of the consolidated financial statements. Their audit report, which contained                                                                                                                         14.1%
                                                                                                                                                                                                                                                     14.3%
an unqualified opinion dated April 14, 2009, confirmed the credit union’s consolidated financial statements                                                                                                                                                                                   13.6%
                                                                                                                      Non-interest expense                                                         53,246            50,907
for 2008 and 2007 were materially correct and presented in conformity with accounting principles generally                                                                                                                                                                        13.5%

accepted in the United States.                                                                                                       Net income                                                    $2,164            $8,827
                                                                                                                                                                                                                                                                    13.3%


The 2008 and 2007 audited consolidated financial statements of Founders Federal Credit Union and
related independent auditors’ report can be obtained on-line at www.foundersfcu.com or by contacting us               Note: During 2009, Founders Federal Credit Union will incur signficant charges resulting from actions taken by
at 1-800-845-1614. Based upon the reports of the certified public accounting firm and a thorough review of the        the National Credit Union Administration in cooperative effort to stabilize the corporate credit union system.
credit union’s operations, we believe Founders Federal Credit Union is well managed and financially sound.            Further details regarding these actions are noted on page 21 (Note 14: Subsequent Events) of our 2008 and 2007         04 05 06 07                                      08
                                                                                                                      audited consolidated financial statements which are available online at www.foundersfcu.com or by contacting us
                                                                                                                      at 1-800-845-1614.
                                                                                                                                                                   MANAGEMENT
DIRECTORS
         Joseph C. Keenan, Ph.D           S. Marvin Waldrep            Dexter Lee Cook,Jr. MD                  J.C. Rainey                  Ron Gray, DDS                           Bruce Brumfield                   Nicki Amos                      Mike Bragg                    Phyllis Bunkley                Scott Garbett
                 Chairman                   Vice-Chairman                 Secretary/Treasurer                  Consultant,                  Doctor of Dental                        President & CEO              Senior Vice President             Chief Operations              Senior Vice President            Chief Information
            Principal, Lancaster           Agent, Waldrep                  Rock Hill Pediatric              The Springs Close                  Surgery                                                          Marketing & Community               Officer, Branch              Human Resources &                     Officer
                High School                Allstate Insurance                 Associates                      Foundation                    Rucker Dentistry                                                           Relations                    Administration                      Training




             Richard A. Hall                    Roy Hunt                     Janie L. Mines                Taylor Stephens                  Don A. Worley                                           Tony Gilreath                   Larry Higgins                  Joe McCain                    Jennifer Parker
          Owner, Richard Hall               Vice President,                 Senior Advisor,             Director of Real Estate &          Vice President,                                          Chief Financial              Senior Vice President           Chief Purchasing               Senior Vice President
         Real Estate Company             The Springs Company               Business Process             Commodity Purchasing,           Matrix Engineering, Inc.                                       Officer                     General Counsel                   Officer                   Product Development
                                                                         Secretary of the Navy           Springs Global US Inc.




        Products
                      ATMs                                                                                    eLending                                                         IRNet VIGO                                                                        Safe Deposit Boxes
                Auto Equity Loan                                                                             eMortgage                                                         MoneyLine                                                                        Servicios en Español
                     Bill Pay                                                                                eStatements                                                    Money Market Plus                                                                     Share Certificates
                     Call 24                                                                           Financial Counseling                                                  Mortgage Loans                                                                       Springtimers Club
                Cashier’s Checks                                                                           Founders Online                                              New & Used Vehicle Loans                                                                  Student Accounts
                 Christmas Club                                                                      Free Checking Accounts2                                                Overdraft Options                                                                       Student Loans
      Coverdell Education Savings Account                                                            Home Equity Line of Credit                                             Payroll Deduction                                                                  Platinum Business Visa
            Daniel the Spaniel Club                                                                      Insurance Services3                                                 Personal Loans                                                                        Visa Debit Card
                 Debit Rewards1                                                                         Investment Services4                                         Platinum Visa® and MasterCard®                                                                 Visa Gift Card
                 Direct Deposit                                                                                  IRAs                                                   Regular Savings Accounts                                                                 Visa Prepaid Card


                1
                 Points earned for signature based purchases. No points earned for purchases that require the use of a personal identification number.                    Requires credit evaluation. Teens under the age of 18 are required to have an adult sign as joint owner.
                                                                                                                                                                          2

                3
                 These products offered through Founders Financial Group, Inc. doing business as Founders Insurance Services. Insurance products not                      Securities and investment advisory services offered through Financial Network Investment Corporation, Member SIPC - Founders Federal Credit Union
                                                                                                                                                                          4


                underwritten by Founders Financial Group, Inc. or any affiliated company.                                                                                 and Financial Network are not affiliated. A Financial Network Registered Sales Branch is located at 607 North Main Street, Lancaster, SC 29720.
                Not NCUA Insured - No Credit Union Guarantee - May Lose Value - Not Deposits - Not Insured by any Federal Government Agency.                              Not NCUA Insured - No Credit Union Guarantee - May Lose Value - Not Deposits - Not Insured by any Federal Government Agency.
               Orth, Chakler, Murnane and Company, CPAs
                                         A Professional Association
                th
    12060 SW 129 Ct. Suite 201, Miami, Florida 33186-4582 ! Telephone 305-232-8272 ! Fax 305-232-8388
                                        Web site: www.ocmcpa.com

Douglas J. Orth, CPA, CFE, Managing Partner                                       James A. Griner, CPA
Hugh S. Chakler, CPA, CFE, CITP, CISA                                             Lori J. Carmichael, CPA
John J. Murnane, CPA                                                              Daniel C. Moulton, CPA



                            INDEPENDENT AUDITORS’ REPORT

April 14, 2009

To the Supervisory Committee of
Founders Federal Credit Union

We have audited the accompanying consolidated statements of financial condition of Founders
Federal Credit Union, as of December 31, 2008 and 2007, and the related consolidated
statements of income, comprehensive income, members’ equity, and cash flows for the years
then ended. These consolidated financial statements are the responsibility of the Credit Union’s
management. Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating
the overall consolidated financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Founders Federal Credit Union as of
December 31, 2008 and 2007, and the results of its consolidated operations and its consolidated
cash flows for the years then ended in conformity with accounting principles generally accepted
in the United States of America.

Orth, Chakler, Murnane & Co.
Orth, Chakler, Murnane & Company
Certified Public Accountants
             FOUNDERS FEDERAL CREDIT UNION
     CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                               ASSETS
                                                                                    As of December 31,
                                                                                   2008             2007
                                                                                   (dollars in thousands)

Cash                                                                              $39,793         $40,390
Investments:
   Available-for-sale                                                              201,000        121,999
   Other                                                                            13,724         43,897
Loans to members, net of allowance for loan losses                               1,162,615      1,143,862
Accrued interest receivable:
   Loans                                                                            4,769           4,796
   Investments                                                                      1,088           1,324
Prepaid and other assets                                                           11,296           7,647
Other real estate owned                                                             1,806             501
Property and equipment                                                             36,581          28,952
NCUSIF deposit                                                                     10,503           9,607
               Total assets                                                 $1,483,175         $1,402,975

                       LIABILITIES AND MEMBERS’ EQUITY
                                                     As of December 31,
                                                    2008              2007
                                                    (dollars in thousands)
LIABILITIES:
   Members’ share and savings accounts                                     $1,247,559          $1,207,732
   Accrued interest payable                                                     6,404               8,389
   Accounts payable and other liabilities                                       6,821               9,476
   Borrowed funds                                                              40,000                  —
         Total liabilities                                                  1,300,784           1,225,597

    Commitments and contingent liabilities                                          —               —

MEMBERS’ EQUITY:
  Regular reserve                                                                 26,333           26,075
  Undivided earnings                                                             153,992          151,475
  Accumulated other comprehensive income/(loss)                                    2,066             (172)
        Total members’ equity                                                    182,391          177,378
               Total liabilities and members’ equity                       $1,483,175          $1,402,975




                                 The accompanying notes are an integral
                              part of these consolidated financial statements.
                                                     2
                 FOUNDERS FEDERAL CREDIT UNION
               CONSOLIDATED STATEMENTS OF INCOME

                                                                                 For the years ended
                                                                                    December 31,
                                                                                2008             2007
                                                                                (dollars in thousands)
INTEREST INCOME:
   Loans to members                                                            $90,574         $87,249
   Investments                                                                   8,998           8,219
          Total interest income                                                 99,572          95,468
INTEREST EXPENSE:
   Members’ accounts and borrowed funds                                         48,744          45,908
        Net interest income                                                     50,828          49,560
PROVISION FOR LOAN LOSSES                                                       22,015          13,231
        Net interest income after
           provision for loan losses                                            28,813          36,329
NON-INTEREST INCOME:
  Fees and service charges                                                      26,378          23,161
  Gain on sale of available-for-sale investments                                   219             244
         Total non-interest income                                              26,597          23,405
                                                                                55,410          59,734
NON-INTEREST EXPENSE:
  Compensation and employee benefits                                            28,594          26,165
  Office operating costs                                                         8,602           8,673
  Other expenses                                                                 7,097           8,236
  Loan and customer servicing expenses                                           5,467           4,945
  Occupancy expense                                                              3,352           2,850
  Loss on other real estate owned                                                  134              38
          Total non-interest expense                                            53,246          50,907
              Net income                                                       $2,164           $8,827




                               The accompanying notes are an integral
                            part of these consolidated financial statements.
                                                   3
           FOUNDERS FEDERAL CREDIT UNION
  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                                                                                 For the years ended
                                                                                    December 31,
                                                                                 2008            2007
                                                                                (dollars in thousands)

NET INCOME                                                                      $2,164         $8,827

OTHER COMPREHENSIVE INCOME:
  Unrealized gains/(losses) on available-for-sale investments:
      Unrealized holding gains arising during
          the period                                                            2,457           1,251
      Reclassification adjustment for gains
          included in net income                                                 (219)           (244)
               Other comprehensive income                                       2,238           1,007

                     Comprehensive income                                       $4,402         $9,834




                                The accompanying notes are an integral
                             part of these consolidated financial statements.
                                                    4
              FOUNDERS FEDERAL CREDIT UNION
        CONSOLIDATED STATEMENTS OF MEMBERS’ EQUITY

                                                 For the years ended
                                             December 31, 2008 and 2007
                                                             Accumulated
                                                                Other
                        Regular             Undivided      Comprehensive
                        Reserve             Earnings        (Loss)/Income             Total
                                               (dollars in thousands)
Balance,
    December 31, 2006   $24,460               $137,199                 ($1,179)     $160,480
Net income                —                      8,827                   —             8,827
Mergers
                           1,615                   5,449                    —          7,064
Other comprehensive
    income                  —                      —                       1,007       1,007
Balance,
    December 31, 2007     26,075              151,475                       (172)    177,378
Net income                 —                    2,164                       —          2,164
Merger                       258                  353                       —            611
Other comprehensive
    income                  —                      —                       2,238       2,238
Balance,
    December 31, 2008   $26,333              $153,992                      $2,066   $182,391




                           The accompanying notes are an integral
                        part of these consolidated financial statements.
                                               5
                FOUNDERS FEDERAL CREDIT UNION
            CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                 For the years ended
                                                                                    December 31,
                                                                                2008              2007
                                                                                (dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                    $2,164          $8,827
  Adjustments:
     Provision for loan losses                                                  22,015          13,231
     Depreciation and amortization                                               2,732           2,783
     Amortization/accretion of investment
         premiums/discounts                                                       (109)           (331)
     Gain on sale of available-for-sale investments                               (219)           (244)
     Loss on other real estate owned                                               134              38
  Changes in operating assets and liabilities:
     Prepaid and other assets                                                   (3,649)         (2,021)
     Accrued interest receivable                                                    263           (482)
     Accrued interest payable                                                   (1,985)            515
     Accounts payable and other liabilities                                      (2,655)           457
  Net cash provided by operating activities                                     18,691          22,773

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from maturities, sales and repayments of
     available-for-sale investments                                             106,587         93,270
  Purchase of available-for-sale investments                                   (183,022)       (79,005)
  Net change in other investments                                                30,173        (13,829)
  Net change in loans, net of charge-offs                                       (44,165)      (142,700)
  Purchase of property and equipment                                            (10,361)        (5,389)
  Recoveries on loans charged off                                                 1,095          1,146
  Proceeds from sale of other real estate owned                                     841            493
  Equity and allowance acquired through merger                                      633          8,533
  Change in NCUSIF deposit                                                         (896)        (1,237)
  Net cash used in investing activities                                         (99,115)      (138,718)




                               The accompanying notes are an integral
                            part of these consolidated financial statements.
                                                   6
                FOUNDERS FEDERAL CREDIT UNION
            CONSOLIDATED STATEMENTS OF CASH FLOWS

Cash Flows: (continued)
                                                                                  For the years ended
                                                                                     December 31,
                                                                                 2008              2007
                                                                                 (dollars in thousands)
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net change in members’ share and
    savings accounts                                                             39,827         121,489
  New borrowings                                                                 40,000            —
  Net cash provided by financing activities                                      79,827         121,489

         Net change in cash                                                        (597)          5,544
         Cash at beginning of year                                               40,390          34,846
         Cash at end of year                                                    $39,793         $40,390


SUPPLEMENTAL CASH FLOWS DISCLOSURE:
   Interest paid                                                                $50,729         $45,393


SCHEDULE OF NON-CASH TRANSACTIONS:
   Other comprehensive income                                                    $2,238          $1,007
     Transfer from loans to other real estate owned                              $3,028            $820
     Seller financed mortgages                                                     $748            $197




                                The accompanying notes are an integral
                             part of these consolidated financial statements.
                                                    7
               FOUNDERS FEDERAL CREDIT UNION
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                     NOTE 1: SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND NATURE OF OPERATIONS
Founders Federal Credit Union (the "Credit Union") is a cooperative association organized in
accordance with the provisions of the Federal Credit Union Act for the purpose of promoting
thrift among and creating a source of credit for its members.

Participation in the Credit Union is limited to those individuals who qualify for membership.
The field of membership is defined in the Credit Union’s Charter and Bylaws. The Credit Union
operates 28 branches and service centers principally concentrated in Cherokee, Chester,
Chesterfield, Lancaster, Laurens, Spartanburg, and York counties of South Carolina and
Mecklenburg county of North Carolina. The majority of loans to members are concentrated
within this geographic area.

CONSOLIDATED FINANCIAL STATEMENTS/USE OF ESTIMATES
The preparation of consolidated 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 the disclosure of
contingent assets and liabilities as of the dates of the consolidated financial statements and the
reported amounts of revenues and expenses for the periods then ended. Actual results could
differ from those estimates. The estimates that are particularly susceptible to change relate to the
determination of the allowance for loan losses and the fair value of financial instruments. The
significant accounting principles and policies used in the preparation of these consolidated
financial statements, together with certain related information, are summarized below.

PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the Credit Union
and its wholly owned subsidiary, Founders Financial Group, LLC (the CUSO), a credit union
service organization. All significant intercompany balances and transactions have been
eliminated.

CASH
Cash includes cash on hand and amounts due from banks and credit unions. Amounts due from
banks and credit unions may, at times, exceed federally insured limits.

INVESTMENTS
Investments are classified into the following categories: available-for-sale and other.
Investment securities classified as available-for-sale are measured at market value as of the
statement of financial condition date. Unrealized gains and losses for available-for-sale
investments are reported as a separate component of members' equity.

The Credit Union has elected to classify certain cash equivalents as other investments. This
election is available to the Credit Union according to the terms of SFAS No. 95, "Statement of
Cash Flows." Realized gains and losses on disposition, if any, are computed using the specific
identification method. Investments are adjusted for amortization of premiums and accretion of
discounts over the term of the investment by a method which approximates the interest method.


                                                 8
               FOUNDERS FEDERAL CREDIT UNION
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1: (continued)

FEDERAL HOME LOAN BANK (FHLB) STOCK
As a member of the FHLB, the Credit Union is required to make a minimum stock investment
with the FHLB based on a formula developed by the FHLB that considers the Credit Union’s
total assets and outstanding advances from the FHLB. The FHLB stock is carried at cost within
other investments and its disposition is restricted. No ready market exists for the FHLB stock
and it has no quoted market price.

LOANS TO MEMBERS AND ALLOWANCE FOR LOAN LOSSES
Loans are stated at the amount of unpaid principal, net of an allowance for loan losses. The
allowance for loan losses is increased by a provision for loan losses charged to expense and
decreased by charge-offs (net of recoveries). The allowance for loan losses is established and
maintained at a level management deems prudent and adequate to cover probable losses on loans
based upon a periodic evaluation of current information of the risks inherent in its loan portfolio.
Loss allowances are established for loans in accordance with Statement of Financial Accounting
Standards, (“SFAS”) No. 5, “Accounting for Contingencies.” The Credit Union does not
separately identify individual loans for impairment disclosures. There are several elements that
management evaluates to estimate the loan loss allowance for the Credit Union’s loan portfolio.
The elements evaluated, and how they are applied to each portion of the portfolio, are as follows:

   ♦ An allowance for estimated loan losses is based on the segmentation of the loan portfolio
     into large groups of small homogenous loans or pools of loans. The pools of loans are
     further segmented by rate classification, such as A, B, C, D, & E paper. The estimate
     measures impairment based on the historical charge off experience of each rate
     classification, adjusted by application of an estimated loss confirmation period.

   ♦ Historical losses on Other Real Estate Owned (OREO) as well as current economic
     conditions are considered in the estimated allowance for loan losses.

Interest on loans is calculated on principal amounts outstanding. The accrual of interest is
discontinued when a loan exceeds 90 days delinquent or when management believes that
collection of interest is doubtful. Generally, loan fees are recognized in income when received
and direct loan origination costs are recognized in expense when incurred. This is not materially
different from fees and expenses that would have been recognized under the provisions of
Statement of Financial Accounting Standards (SFAS) No. 91, “Accounting for Nonrefundable
Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of
Leases.”

OTHER REAL ESTATE OWNED
Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded
at fair value at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure,
valuations are periodically performed by management and the assets are carried at the lower of
carrying amount or fair value less cost to sell.




                                                 9
               FOUNDERS FEDERAL CREDIT UNION
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1: (continued)

PROPERTY AND EQUIPMENT
Land is carried at cost. Property and equipment are carried at cost less accumulated
depreciation. Buildings and furniture and equipment are depreciated using the straight-line
method over the estimated useful lives of the assets. The cost of leasehold improvements is
amortized using the straight-line method over the term of the lease, or the estimated life of the
asset, whichever is less. The Credit Union reviews property and equipment (long-lived assets)
for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable.

NCUSIF DEPOSIT
The deposit in the National Credit Union Share Insurance Fund (NCUSIF) is in accordance with
National Credit Union Administration (NCUA) regulations, which require the maintenance of a
deposit by each insured credit union in an amount equal to 1% of its insured members’ shares.
The deposit would be refunded to the Credit Union if its insurance coverage is terminated, it
converts to insurance coverage from another source, or the operations of the fund are transferred
from the NCUA Board. (See Note 14)

NCUSIF INSURANCE PREMIUMS
Credit unions are required to pay an annual insurance premium equal to one-twelfth of one
percent of its total insured shares, unless the payment is waived or reduced by the NCUA Board.
The NCUA Board waived the 2008 and 2007 insurance premiums. (See Note 14)

MEMBERS' SHARE AND SAVINGS ACCOUNTS
Members' shares are subordinated to all other liabilities of the Credit Union upon liquidation.
Interest on members' share and savings accounts is based on available earnings at the end of an
interest period and is not guaranteed by the Credit Union. Interest rates on members' share
accounts are set by the Board of Directors, based on an evaluation of current and future market
conditions.

REGULAR RESERVE
The Credit Union is required to maintain a statutory reserve (regular reserve) in accordance with
the Federal Credit Union Act. This statutory reserve represents a regulatory restriction and is not
available for the payment of interest.

FEDERAL AND STATE TAX EXEMPTION
The Credit Union is exempt from most federal, state, and local taxes. The CUSO, however, was
subject to federal and state income taxes for the year ended December 31, 2007, but the
operations of the CUSO resulted in no income taxes for that year. During 2008, the CUSO
converted to an LLC. The tax status of an LLC reverts to the parent’s status, thus, the CUSO is
exempt from most federal, state, and local taxes beginning with the year ended December 31,
2008.




                                                10
               FOUNDERS FEDERAL CREDIT UNION
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


                                 NOTE 2: INVESTMENTS

 The amortized cost and estimated market value of investments are as follows:
                                              As of December 31, 2008
                                                Gross             Gross
 Available–for-sale:        Amortized        Unrealized        Unrealized         Market
                               Cost             Gains            Losses           Value
                                                 (dollars in thousands)
 Federal agency
   securities                $198,934           $2,147            ($81)          $201,000

                                               As of December 31, 2007
                                                Gross             Gross
 Available–for-sale:         Amortized        Unrealized       Unrealized         Market
                               Cost             Gains            Losses           Value
                                                 (dollars in thousands)
 Federal agency
   securities                 $122,171             $400          ($572)          $121,999

Proceeds from the sales of investments classified as available-for-sale securities approximated
$19,855,000 and $17,651,000 for the years ended December 31, 2008 and 2007, respectively.
Gross gains of approximately $219,000 and $244,000 were realized during the years ended
December 31, 2008 and 2007, respectively.

                                                                    As of December 31,
 Other investments:                                                2008              2007
                                                                   (dollars in thousands)
 Corporate credit unions                                           $9,035         $26,155
 FHLB stock                                                         4,325           2,275
 FHLB money market                                                    138             207
 Fed funds sold                                                       126           2,482
 Certificates of deposit                                              100          12,778
                                                                  $13,724         $43,897

The Credit Union maintains deposits at First Carolina Corporate Credit Union and Western
Corporate (WesCorp) Federal Credit Union which normally exceed federally insured limits.
Included in these deposits are membership capital shares and paid-in-capital amounts that are
uninsured and subject to certain withdrawal requirements. These amounts approximated
$4,402,000 and $4,302,000 as of December 31, 2008 and 2007, respectively. (See Note 14)

As of December 31, 2008, securities carried at fair market value of approximately $12,302,000
were pledged for various purposes including the payment of taxes and for public funds.



                                              11
               FOUNDERS FEDERAL CREDIT UNION
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 2: (continued)

The amortized cost and estimated market value of investments by contractual maturity are shown
below. Expected maturities may differ from contractual maturities because issuers may have the
right to call or prepay certain obligations without call or prepayment penalties.

                                                                   As of December 31, 2008
                                                                      Available-for-sale
                                                                   Amortized         Market
                                                                     Cost             Value
                                                                     (dollars in thousands)
 Within 1 year                                                      $66,935          $67,349
 1 to 5 years                                                        23,091           23,337
 Mortgage-backed
    securities                                                       108,908         110,314
                                                                    $198,934        $201,000

The following table shows the gross unrealized losses and fair value of investments, aggregated
by length of time that individual securities have been in a continuous unrealized loss position.

                                           As of December 31, 2008
                                              Available-for-sale
                   Less than 12 Months        12 Months or Longer                  Total
                               Gross                        Gross                       Gross
                  Fair       Unrealized       Fair       Unrealized       Fair        Unrealized
                  Value       Losses         Value         Losses         Value        Losses
                                             (dollars in thousands)
 Federal
   agency
   securities    $20,437         $41         $5,069         $40          $25,506           $81


                                           As of December 31, 2007
                                              Available-for-sale
                   Less than 12 Months        12 Months or Longer                  Total
                               Gross                        Gross                       Gross
                  Fair       Unrealized       Fair       Unrealized       Fair        Unrealized
                  Value       Losses         Value         Losses         Value        Losses
                                             (dollars in thousands)
 Federal
   agency
   securities    $25,274        $185        $26,929         $387         $52,203           $572




                                              12
               FOUNDERS FEDERAL CREDIT UNION
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 2: (continued)

Unrealized losses on securities issued by the U.S. Government and its Agencies have not been
recognized into income because the principal balances of these securities are guaranteed by the
U.S. Government. Additionally, the decline in these fair values is largely due to an increase in
market interest rates and the fair values of the securities are expected to be recovered as these
securities approach their maturity date and/or market rates decline.

                              NOTE 3: LOANS TO MEMBERS

The composition of loans to members is as follows:
                                                                      As of December 31,
                                                                     2008              2007
                                                                     (dollars in thousands)
Loans outstanding:
   Real estate                                                     $598,393        $581,913
   Vehicle                                                          328,208          331,527
   Unsecured                                                        211,560          198,748
   Other collateral                                                  33,363            32,151
   Business                                                          10,577            11,482
                                                                  1,182,101        1,155,821
    Less allowance for loan losses                                  (19,486)          (11,959)
                                                                 $1,162,615       $1,143,862

Loans on which the accrual of interest has been discontinued or reduced approximated
$8,696,000 and $5,831,000 as of December 31, 2008 and 2007, respectively. If interest on these
loans had been accrued, such income would have approximated $493,000 and $304,000 for the
years ended December 31, 2008 and 2007, respectively.

 A summary of the activity in the allowance for loan losses is as follows:

                                                                       For the years ended
                                                                          December 31,
                                                                       2008            2007
                                                                      (dollars in thousands)
 Balance, beginning of the year                                       $11,959           $7,169
 Provision for loan losses                                             22,015           13,231
 Recoveries                                                             1,095            1,146
 Loans charged off                                                    (15,605)         (11,056)
 Mergers                                                                   22            1,469
 Balance, end of year                                                 $19,486         $11,959




                                               13
               FOUNDERS FEDERAL CREDIT UNION
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                          NOTE 4: PROPERTY AND EQUIPMENT

 A summary of the Credit Union’s property and equipment is as follows:

                                                                       As of December 31,
                                                                       2008             2007
                                                                      (dollars in thousands)
 Land                                                                $14,169          $11,213
 Buildings and improvements                                           23,191           20,723
 Furniture and equipment                                              17,546           15,048
 Construction in progress                                              1,894              275
 Leasehold improvements                                                  437              156
                                                                      57,237           47,415
 Less accumulated depreciation and amortization                      (20,656)         (18,463)
                                                                     $36,581         $28,952


                        NOTE 5: MEMBERS' SHARE AND SAVINGS
                                    ACCOUNTS

 Members' share and savings accounts are summarized as follows:

                                                                      As of December 31,
                                                                     2008              2007
                                                                     (dollars in thousands)
 Share drafts                                                      $104,353         $107,070
 Money market accounts                                              206,441           186,245
 Shares                                                             150,262           139,319
 IRA shares                                                          45,628            41,436
 Share and IRA certificates                                         740,875           733,662
                                                                 $1,247,559        $1,207,732

The aggregate amount of members' time deposit accounts in denominations of $100,000 or more
was approximately $253,114,000 and $241,016,000 as of December 31, 2008 and 2007,
respectively.

Scheduled maturities of share and IRA certificates are as follows:
                                                                            As of December 31,
                                                                                    2008
                                                                           (dollars in thousands)
  Within 1 year                                                                  $420,146
  1 to 2 years                                                                    218,144
  2 to 3 years                                                                      57,335
  3 to 4 years                                                                      45,171
  4 to 5 years                                                                           79
                                                                                 $740,875

                                                14
               FOUNDERS FEDERAL CREDIT UNION
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 5: (continued)

SHARE INSURANCE
Members' shares are insured by the NCUSIF to a maximum of $250,000 for each member.
Individual Retirement Accounts carry an additional $250,000 of coverage.

                              NOTE 6: EMPLOYEE BENEFITS

Participation in the Credit Union’s Defined Contribution Plan is available to all employees who
meet certain age and service eligibility requirements. Effective January 1, 2007, the Credit
Union discontinued its matching contribution of up to 2% of an employee’s eligible
compensation and implemented a safe harbor provision. Under the new provision, the Credit
Union made: (1) safe harbor contributions equal to 3% of employee’s eligible compensation
which are immediately 100% vested, and (2) a discretionary contribution which vests at the rate
of 20% after two years, 40% after three years, 60% after four years and 100% after five years of
credited service. The Credit Union’s contributions to the Defined Contribution Plan
approximated $1,595,000 and $1,430,000 for the years ended December 31, 2008 and 2007,
respectively.

                               NOTE 7: BORROWED FUNDS

The Credit Union is a member of the Federal Home Loan Bank of Atlanta (FHLB). As of
December 31, 2008, the Credit Union had access to a pre-approved secured line-of-credit with
the capacity to borrow up to a certain percentage of the value of its eligible one-to-four-family
first mortgage loans, as defined in the FHLB Statement of Credit Policy. The following
advances were outstanding under this line-of-credit agreement as of December 31, 2008:
                                                                                     As of
              Interest    Interest             Final             Payment         December 31,
  Lender       Type         Rate          Maturity Date        Description            2008
  FHLB       Variable     0.4600%        March 17, 2009         At maturity      $4,000,000
  FHLB        Fixed       2.4888%        March 17, 2009         At maturity      12,000,000
  FHLB        Fixed       2.6600%        March 17, 2010         At maturity       8,000,000
  FHLB        Fixed       2.9850%        March 17, 2011         At maturity       8,000,000
  FHLB        Fixed       3.3250%        March 19, 2012         At maturity       4,000,000
  FHLB        Fixed       3.6090%        March 18, 2013         At maturity       4,000,000
                                                                                $40,000,000




                                               15
               FOUNDERS FEDERAL CREDIT UNION
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                               NOTE 8: COMMITMENTS AND
                                CONTINGENT LIABILITIES

As of December 31, 2008, the Credit Union maintained an unsecured line of credit with First
Carolina Corporate Credit Union of $12,000,000. No amounts were outstanding on this line of
credit agreement as of December 31, 2008. Additionally, as of December 31, 2008, the Credit
Union maintained a secure line of credit with First Carolina Corporate Credit Union for
approximately $122,625,000, which is secured by 90% of the marketable securities held in
safekeeping with First Carolina Corporate Credit Union. No amounts were outstanding on this
line of credit agreement as of December 31, 2008.

As of December 31, 2008, the Credit Union had a line of credit with the FHLB for 15% of the
Credit Union’s total assets. This line of credit is collateralized by qualifying one-to-four-family
residential mortgage loans. The Credit Union had $40,000,000 outstanding as of December 31,
2008.

During the year ended December 31, 2008, the Credit Union entered into an agreement to build a
new administration building. As of December 31, 2008, the unfunded commitment related to
this project approximated $23,932,000.

The Credit Union has entered into various property lease agreements. Rental expense was
approximately $140,000 and $78,000 for the years ended December 31, 2008 and 2007,
respectively. The minimum noncancellable lease obligations approximate the following as of
December 31, 2008:

                            Year ending
                            December 31,               Amount
                                                (dollars in thousands)
                                2009                     $213
                                2010                      208
                                2011                      182
                                2012                      141
                                2013                      121
                              Thereafter                   613
                                                       $1,478

The Credit Union is a party to various miscellaneous legal actions normally associated with
financial institutions, the aggregate effect of which, in management’s opinion, would not be
material to the Credit Union’s consolidated financial statements.




                                                16
               FOUNDERS FEDERAL CREDIT UNION
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 8: (continued)

CONTINGENT LIABILITIES AND GUARANTEES:
In October 2007, Visa completed a reorganization in which Visa USA, Visa International, Visa
Canada and Inovant became Visa Inc., in anticipation of its initial public offering (IPO), which
occurred during March 2008. As a result, the Credit Union, as a principal member of the Visa
network, became a 0.0131% owner in Class USA common stock, par value $0.0001, of Visa Inc.
The Credit Union does not have any value recognized in its financial statements for its
ownership interest in this stock. Some of these shares were redeemed by Visa Inc. during March
2008 as part of the IPO and resulted in a gain being recognized by the Credit Union. The
remaining shares will be converted to Class A shares on the third anniversary of the IPO or upon
Visa Inc.’s settlement of certain litigation matters, whichever is later.

On July 1, 2007, Visa Inc.’s member institutions entered into a Loss Sharing Agreement which
reaffirmed the obligation of Visa Inc.’s member institutions to indemnify Visa Inc. for certain
litigation judgments and settlements. The Credit Union’s indemnification obligation is limited to
its Visa U.S.A. membership proportion of 0.0131%. The covered litigation and plan for paying
litigation judgments and settlements is described in Visa Inc.’s “retrospective responsibility
plan.” In accordance with this plan, Visa Inc. applied a portion of the proceeds from the IPO to
fund an escrow account to cover certain litigation judgments and settlements. Should the amount
funded in the escrow account prove to be inadequate to cover litigation judgments and
settlements, Visa Inc.’s member institutions could have to settle the liabilities. In the aggregate,
management does not believe that its Visa membership will have a material adverse effect on its
consolidated financial condition, results of operations or liquidity.


                          NOTE 9: CONCENTRATIONS OF CREDIT
                          RISK AND OFF-BALANCE-SHEET RISK

CONCENTRATION OF CREDIT RISK
Participation in the Credit Union is limited to those who qualify for membership as defined in the
Credit Union’s Bylaws. A large portion of the Credit Union’s members are employed and reside
in South Carolina. Although the Credit Union has a diversified loan portfolio, borrowers’ ability
to repay loans may be affected by the economic climate of the overall geographical region in
which borrowers reside.

OFF-BALANCE-SHEET RISK
The Credit Union is a party to financial instruments with off-balance-sheet risk in the normal
course of business to meet the financing needs of its members and to reduce its own exposure to
fluctuations in interest rates. These financial instruments include commitments to fund loans and
to extend credit. These instruments involve, to varying degrees, elements of credit and interest-
rate risk in excess of the amount recognized in the consolidated financial statements.




                                                17
               FOUNDERS FEDERAL CREDIT UNION
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 9: (continued)

 Total commitments were as follows:
                                                                       As of December 31,
                                                                       2008             2007
                                                                      (dollars in thousands)
 Commitments to fund loans:
     Commercial real estate                                            $5,982            $—
 Unfunded commitments under lines of credit:
     Credit card                                                     120,590           111,701
     Consumer                                                         67,342            66,103
                                                                    $193,914          $177,804

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. Commitments generally have fixed
expiration dates or other termination clauses. Since many of the commitments may expire
without being fully drawn upon, the total commitment amounts do not necessarily represent
future cash requirements.

                        NOTE 10: RELATED PARTY TRANSACTIONS

In the normal course of business, certain officers, directors, and employees of the Credit Union,
including their immediate families, were granted loans at normal credit terms, including interest
rates and collateralization. These loans do not represent a more than normal risk of collection.

                             NOTE 11: REGULATORY CAPITAL

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 consolidated financial statements. Under capital adequacy
regulations and the regulatory framework for prompt corrective action, the Credit Union must
meet specific capital regulations that involve quantitative measures of the Credit Union's assets,
liabilities, and certain off-balance-sheet items as calculated under accounting standards generally
accepted in the United States of America. The Credit Union's capital amounts and net worth
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 (as
defined in NCUA’s Rules and Regulations) to total assets (as defined in NCUA’s Rules and
Regulations). Credit unions are also required to calculate a Risk-Based Net Worth Requirement
(RBNWR) which establishes whether or not the Credit Union will be considered “complex”
under the regulatory framework. The Credit Union’s RBNWR as of December 31, 2008 and
2007 was 4.88% and 4.93%, respectively. The minimum requirement to be considered complex

                                                18
               FOUNDERS FEDERAL CREDIT UNION
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 11: (continued)

under the regulatory framework is 6.0%. Management believes, as of December 31, 2008 and
2007, that the Credit Union meets all capital adequacy requirements to which it is subject.

As of December 31, 2008, the most recent call reporting period, the NCUA categorized the
Credit Union as “well capitalized” under the regulatory framework for prompt corrective action.
To be categorized as “well capitalized” the Credit Union must maintain a minimum net worth
ratio of 7.0% of assets. There are no conditions or events since that notification that
management believes have changed the Credit Union’s category.

The Credit Union’s actual and required net worth amounts and ratios are as follows:

                                        December 31, 2008              December 31, 2007
                                                    Ratio/                         Ratio/
                                     Amount     Requirement         Amount     Requirement
                                                    (dollars in thousands)
Actual net worth                     $180,325      12.16%           $177,550      12.66%
Amount needed to be classified
  as “adequately capitalized”         $88,991           6.00%            $84,179           6.00%
Amount needed to be classified
  as “well capitalized”              $103,822           7.00%            $98,208           7.00%

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

                                     NOTE 12: MERGERS

Effective May 1, 2008, Winthrop Credit Union merged into the continuing Founders Federal
Credit Union. The merger was accounted for under the pooling-of-interest method; however, the
consolidated financial statements were not restated as the balances relating to the merger were
deemed immaterial.

Effective February 1, 2007, GT & R Employees NC Federal Credit Union merged into the
continuing Founders Federal Credit Union. Effective December 1, 2007, Torrco Employees
Federal Credit Union merged into the continuing Founders Federal Credit Union. The mergers
were accounted for under the pooling-of-interest method.




                                                19
               FOUNDERS FEDERAL CREDIT UNION
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                         NOTE 13: FAIR VALUES OF FINANCIAL
                                    INSTRUMENTS

The estimated fair value amounts have been determined using available market information and
appropriate valuation methodologies. However, considerable judgment is required to interpret
market data to develop the estimates of fair value. Accordingly, the estimates presented are not
necessarily indicative of amounts that could be realized in a market exchange. The use of
different assumptions and estimation methodologies may have a material effect on the estimated
fair value amounts. The following methods and assumptions were used to estimate fair value of
each of the financial instruments for which it was practicable to estimate.

CASH
The carrying amount is a reasonable estimation of fair value.
INVESTMENTS
Estimated fair values of investments are obtained from quoted market prices where available.
LOANS TO MEMBERS
The estimated fair value of variable-rate loans is the current carrying amount. The fair value of
fixed-rate loans was estimated by discounting the estimated cash flows using the current rate at
which similar loans would be issued. The impact of delinquent loans on the estimation of the
fair value is not considered to have a material effect and, accordingly, delinquent loans have
been disregarded in the valuation methodologies used.
ACCRUED INTEREST RECEIVABLE
The carrying amount is a reasonable estimation of fair value.
MEMBERS' SHARE AND SAVINGS ACCOUNTS
The estimated fair value of demand deposit accounts (regular share, share draft, and money
market accounts, etc.) is the carrying amount. The fair value of fixed-rate certificates was
estimated by discounting the estimated cash flows using the current rate at which similar
certificates would be issued.
BORROWED FUNDS
The fair value of borrowed funds was estimated by discounting the estimated future cash flows
using the current rate at which similar funds could be obtained.
ACCRUED INTEREST PAYABLE
The carrying amount of accrued interest payable approximates fair value.
COMMITMENTS TO EXTEND CREDIT
The fair value of commitments to extend credit is equivalent to the amount of credit extended
since the Credit Union does not charge fees to enter into these commitments and the
commitments are not stated at fixed rates.




                                               20
               FOUNDERS FEDERAL CREDIT UNION
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 13: (continued)

The carrying value and estimated fair value of the Credit Union’s financial instruments are as
follows:
                                 As of December 31, 2008           As of December 31, 2007
                                 Carrying            Fair          Carrying          Fair
                                 Amount             Value           Amount          Value
                                                    (dollars in thousands)
 Financial assets:
 Cash                             $39,793           $39,793          $40,390        $40,390
 Investments:
     Available-for-sale          $201,000          $201,000         $121,999       $121,999
     Other                        $13,724           $13,724          $43,897        $43,897
 Loans to members, net         $1,162,615        $1,163,051       $1,143,862     $1,144,344
 Accrued interest receivable:
     Loans                         $4,769            $4,769           $4,796         $4,796
     Investments                   $1,088            $1,088           $1,324         $1,324

 Financial liabilities:
 Members’ share and
    savings accounts            $1,247,559         $1,247,403     $1,207,732      $1,207,511
 Accrued interest payable           $6,404             $6,404         $8,389          $8,389
 Borrowed funds                    $40,000            $40,094        $—             $—

 Unrecognized financial
   instruments:
   Commitments to
      extend credit                  $—             $193,914            $—         $177,804


                             NOTE 14: SUBSEQUENT EVENTS

On January 28, 2009, all federally-insured credit unions were informed that actions taken by the
NCUA to enhance and support the corporate credit union system would result in a partial write-
down of the Credit Union’s 1 percent NCUSIF deposit. It was also determined that a premium
would be assessed sufficient to return the NCUSIF’s equity ratio to 1.30 percent. On March 10,
2009, the AICPA released Technical Practice Aid (TPA) 6995.01 to address the appropriate
periods in which credit unions should record the impairment of the NCUSIF deposit and the
premium assessment. In accordance with the TPA 6995.01, the Credit Union has elected to
recognize the 69% impairment of the NCUSIF deposit of approximately $7,113,000 and the
anticipated insurance premium assessment of approximately $3,093,000 during the year ending
December 31, 2009.




                                              21
               FOUNDERS FEDERAL CREDIT UNION
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 14: (continued)

Another action taken by the NCUA on January 28, 2009, was to provide a temporary guarantee
on all deposits in excess of insurable limits maintained at corporate credit unions, other than
membership capital and paid-in-capital, through February 28, 2009. Corporate credit unions
were given the ability to voluntarily extend this guarantee through December 31, 2010, on
condition that the Board of Directors of the corporate credit union sign a Letter of Understanding
and Agreement (LUA) with the NCUA. The Board of WesCorp Federal Credit Union signed
this LUA; however, the Board of Directors of First Carolina Corporate Credit Union did not.

On March 19, 2009, the NCUA placed U.S. Central Federal Credit Union and WesCorp Federal
Credit Union into conservatorship in an effort to stabilize the corporate credit union system. In
connection with this action, the NCUA announced that uninsured deposits maintained by credit
unions in membership capital shares and paid-in-capital at U.S. Central Federal Credit Union and
WesCorp Federal Credit Union were deemed to be worthless. As of December 31, 2008, the
Credit Union maintained approximately $1,893,000 in membership capital shares at WesCorp
Federal Credit Union. The Credit Union has elected to recognize the impairment of these shares
of approximately $1,893,000 during the year ending December 31, 2009.

As of December 31, 2008, the Credit Union maintained additional uninsured paid-in-capital of
approximately $1,279,000 and membership capital shares of approximately $1,230,000 with
First Carolina Corporate Credit Union. The impairment of these amounts, if any, has not yet
been determined; however, it could range from no impairment to 100% impairment.
Management is waiting for additional information, including the annual audited financial
statements of First Carolina Corporate Credit Union, before it can make a proper assessment of
impairment, if any, regarding its membership capital shares and paid-in-capital shares
maintained at First Carolina Corporate Credit Union.

                                         iiiiiii




                                               22

				
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