This past June Honda Federal Credit Union passed a new milestone - $500,000,000 in assets. That’s a half a billion dollars!
Out of over 8,100 Credit Unions in the United States, we are now in the top 350 in size.
The journey has been exciting. When I became an HFCU member in 1985, there was one office and 4,473 members, with
assets of $10,500,000. By 1988, when our third branch office was opened in Anna, OH, HFCU boasted a membership of
11,000 with assets of $32,000,000. When the fourth HFCU office was opened in East Liberty, OH, 14,000 members held
just over $42,700,000 in assets.
We’ve come a long way in a short time. Just seven short years ago, we closed our business year with five branch offices,
34,951 members and $226,600,000 in assets . . . just half of what they are today. We now provide a myriad of quality financial
products and industry leading service to nearly 55,000 members, serviced through nine convenient HFCU branches nationwide,
with assets of over a half billion dollars.
And I’d like for you to know that we’ve done this without a single sub-prime loan on our books. While many banks and
brokerages -– and, yes, some credit unions – struggle to recover from a downturn in the housing market and underperforming
mortgage portfolios, HFCU mortgage loans grew by a remarkable 12.5%. And while nationwide loan defaults exceeded 2%,
- Carl Coe, Chairman HFCU ended the year with a default ratio of just 0.3%.
We are in business to “provide quality financial products and services to members of the Honda family.” Not only is this our
official mission statement, it is a philosophy and an attitude that permeates every aspect of our business. From the MSR who
greets you on the phone, to our directors at board meetings, it is the prevailing thought in all that we do. Honda Federal
Credit Union continues to provide quality products and services to meet our members’ needs.
Another important milestone was reached this July when we opened our ninth HFCU office in Greensburg, IN. Through this
branch we are able to provide associates at this new Honda production facility and their family members a convenient way
to utilize the same great credit union products and services that the rest of us have enjoyed. Opened just two months, the new
HMIN branch is already home to 800 HFCU members.
During the year, Honda FCU grew to serve 54,848 members worldwide; an increase of 4.2 % from this time last year.
Our assets increased 10.7 % from the prior year; an impressive gain in a challenging financial market place. Member
shares alone grew by 8.3%, speaking well of the confidence our members have in HFCU as other financial institutions
have been rattled by risky investments and poor performance.
Other numbers are equally impressive. Income during the year reached a record $26,274,994, a 10.9% increase over
the previous year; $10,415,847 was paid in member dividends. Member loans reached $424,978,492, a 7.4% increase
from the prior year. Member shares were at $415,164,179. Of the 625 credit unions in the United States with assets over
$250,000,000, Honda Federal Credit Union is now ranked tenth in return on equity.
Table of Contents
In summary, we have experienced yet another solid year, in both financial performance and member service. Commitment to
Chairman’s Report ....................................................... 2 sound financial principals, operating at a high level of integrity, and keeping members’ needs at the forefront, have been the
hallmarks not only of the business year just completed, but of our overall operating philosophy. Through Bull and Bear markets,
Treasurer’s Report........................................................... 3 weak and strong economies, HFCU continues to remain stable and financially sound.
Supervisory Committee Report ......................................... 3
Independent Auditor’s Report ........................................... 4 On behalf of the Board of Directors and the Honda FCU Management Team, thank you for allowing us to continue to serve
your financial needs.
Financial Statements .................................................... 5-6
Notes to Financial Statements ..................................... 7-14 Carl R. Coe, Chairman
Honda Federal Credit Union
Supervisory Committee Report Independent Auditor’s Report
The Supervisory Committee is an essential part of the credit union’s management. Under the Federal Board of Directors and Supervisory Committee
Credit Union Act and Bylaws, the Supervisory Committee’s major responsibilities are to ensure that Honda Federal Credit Union
internal and annual audits are performed and that any findings are resolved in an appropriate and Torrance, California
timely manner, and that member accounts are verified at least once every 2 years. The committee
is also responsible for reviewing the performance of the officials and employees, and making We have audited the accompanying statements of financial condition of
“Here’s to the
recommendations to the Board of Directors for improvement in the safety and soundness of the Honda Federal Credit Union as of June 30, 2008 and 2007, and the related
credit union. statements of income, members’ equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Credit Union’s
In short, the Supervisory Committee is responsible for ensuring that practices and procedures are Management. Our responsibility is to express an opinion on these financial
in place, which safeguard and protect the interest of the members and the assets and financial statements based on our audits.
diversity of our
soundness of the credit union.
We conducted our audits in accordance with auditing standards generally
In order to carry out its responsibilities, the Supervisory Committee employs certified public accepted in the United States of America. Those standards require that we
accountants, and other qualified persons to perform audits and account verifications. plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
The Supervisory Committee is pleased to report that the results of audits performed, and reviews of examining, on a test basis, evidence supporting the amounts and disclosures
Honda Federal Credit Union’s practices and procedures during the 2008 fiscal year, would support in the financial statements. An audit also includes assessing the accounting
that the credit union is being managed and operated in a financially safe and sound manner. principles used and significant estimates made by Management, as well as
- Sheri Bullock, Treasurer evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all
material respects, the financial condition of the Honda Federal Credit Union
as of June 30, 2008 and 2007, and the results of its operations and its
Treasurer’s Report cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
The management team and the Board of Directors for the Honda Federal Credit Union accomplished
the results illustrated in the financial statements by concentrating on the fundamentals: controlling
operating expenses, managing risk effectively, and managing capital in a disciplined manner. Respectfully,
“ I’ve neverbebeen
RICHARDS & ASSOCIATES
These positive financial results along with Member value are the governing reasons for the longevity
Certified Public Accountants
and success of your credit union. Honda Federal Credit Union strives to meet an immense range of
Member needs as our field of membership continues to grow, as well as to provide favorable loan Michael E. Richards, CPA
and deposit rates. Maintaining superb Member service is crucial because of the unique structure of
a credit union. Rather than a “banking” standard with customers and shareholders, Members of a so proud to a Yorba Linda, California
September 24, 2008
credit union are part of the family, members, and shareholders. The credit union staff strives to meet
the needs of the entire membership in the most efficient and effective manner. member of Honda FCU!
In summary, Honda Federal Credit Union recognizes that the diversity of our growing membership - Jill Carlton, Supervisory Committee Chair
will be reflected in the diversity of their choices. The Credit Union is determined to provide an open
and user-friendly system to allow for those choices, while, simultaneously achieving the financial
results needed to support enhanced services to meet the needs of our members.
“The numbers Statement of Members’ Equity
APPROPRIATED - REGULAR RESERVE 2008 2007
Statement of Cash Flows (cont.)
CASH FLOWS FROM FINANCING ACTIVITIES 2008 2007
say it all!”
Beginning / Ending Balance $8,322,208 $8,322,208 Net increase in members’ share
and savings accounts 33,306,711 18,498,402
UNAPPROPRIATED - UNDIVIDED EARNINGS
Net decrease in borrowed funds (2,400,000) (900,000)
Beginning Balance 27,357,682 25,613,547
Net cash used financing activities 30,906,711 17,598,402
Prior period adjustment (95,015) —
NET INCREASE IN CASH AND
Adjusted beginning balance 27,262,667 25,613,547
CASH EQUIVALENTS 17,818,509 12,219,007
- Jim Updike, President/CEO Net income 3,808,300 1,744,135
CASH AND CASH EQUIVALENTS AT
Ending Balance 31,070,967 27,357,682 BEGINNING OF YEAR 40,785,167 28,566,160
TOTAL MEMBERS’ EQUITY $39,393,175 $35,679,890 CASH AND CASH EQUIVALENTS AT
Statement of Financial Condition Statement of Income END OF YEAR $58,603,676 $40,785,167
ASSETS 2008 2007 INTEREST INCOME 2008 2007 SUPPLEMENTAL DISCLOSURES:
Cash and cash equivalents (Note 2) $58,603,676 $40,785,167 Loans $26,952,061 $24,944,577 Statement of Cash Flows Cash paid during the year for dividends $10,415,811 $9,448,067
Investments (Note 3) 4,933,150 4,465,371 Investments 1,178,869 1,335,312 Cash received during the year from
CASH FLOWS FROM OPERATING ACTIVITIES 2008 2007 interest on loans and investments $27,947,487 $26,078,642
Loans receivable, net of TOTAL INTEREST INCOME 28,130,930 26,279,889
allowance for loan losses (Note 4) 422,828,630 393,968,766 Net Income $3,808,300 $1,744,135 Cash paid during the year for
operating expenses $19,761,566 $18,701,984
Property & equipment (Note 5) 7,097,647 7,609,127 INTEREST EXPENSE Adjustments to reconcile net income to
net cash provided by operating activities:
Accrued interest receivable 1,026,043 930,383 Members’ share and savings accounts 10,415,811 9,448,067
Provision for loan losses 1,650,000 1,633,548
Share insurance deposit 3,829,361 1,634,587 Borrowed Funds 387,813 464,704
Depreciation and amortization 1,310,718 1,370,649
Prepaid expenses and other assets 5,052,754 5,195,730 TOTAL INTEREST EXPENSE 10,803,624 9,912,771
Stock dividends added to investments (87,783) (82,954)
TOTAL ASSETS $503,371,261 $454,589,131
NET INTEREST INCOME 17,327,306 16,367,118 Prior period adjustment (95,105) —
LIABILITIES AND EQUITY Provision for loan losses 1,650,000 1,633,548 Changes in operating assets and liabilities:
Members’ share and savings accounts (Note 6) $434,859,814 $401,553,103 Net interest income after (Increase) decrease in share insurance deposit (2,194,774) 2,591,632
Provision for loan losses 15,677,306 14,733,570
Accounts payable and other liabilities 21,618,272 7,456,138 Increase in accrued interest receivable (95,660) (118,293)
Borrowed funds (Note 7) 7,500,000 9,900,000 Decrease (increase) in prepaid expenses
and other assets 142,976 (2,291,825)
TOTAL LIABILITIES 463,978,086 418,909,241
Service charges and other income 8,947,714 7,333,698
Increase (decrease) in accounts payable
Gain on sale of interest earning assets 708,563 — and other liabilities 14,162,134 (804,051)
Commitments and contingent
liabilities (Note 8) — — Adjustments to pension liability — 178,503 Total adjustments 14,792,596 2,298,706
Members’ equity, substantially restricted TOTAL NON- INTEREST INCOME 9,656,277 7,512,201 Net cash provided by operating activities 18,600,896 4,042,841
Appropriated (Regular Reserve) 8,322,208 8,322,208
Unappropriated (Undivided Earnings) 31,070,967 27,357,682 CASH FLOWS FROM INVESTING ACTIVITIES
General and administrative expenses
TOTAL MEMBERS’ EQUITY 39,393,175 35,679,890 Loans granted, net of principal collection (30,509,864) (8,109,226)
Compensation and benefits 10,460,680 10,347,306
TOTAL LIABILITIES AND Increase in deposits in financial institutions (379,996) (445,957)
MEMBERS’ EQUITY $503,371,261 $454,589,131 Office operations 6,958,141 6,604,556
Purchase of property and equipment,
Other expenses 4,106,462 3,549,774 net of disposals (799,238) (867,053)
TOTAL NON-INTEREST EXPENSES 21,525,283 20,501,636 Net cash used in investing activities (31,689,098) (9,422,236)
NET INCOME $3,808,300 $1,744,135
“ It’sbe agreat time
Notes To Financial Statements
Note 1: Organization And Significant Accounting Policies
Organization: Honda Federal Credit Union (Credit Union) is organized under Loans receivable and allowance for loan losses: Loans receivable are stated at Property and equipment: Land is carried at cost. Other fixed assets are carried at
a great time to join, too! the Federal Credit Union Act. 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 bylaws.
unpaid principal balance and loan origination costs net of fees, less an allowance
for loan losses. Interest on loans is recognized over the term of the loan and is
calculated using the simple interest method on principal amounts outstanding.
cost, less accumulated depreciation and amortization. Fixed assets 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 lesser of
- Steve Brandon, COO Nature of business: The Credit Union provides a variety of financial services to its Loan fees and certain direct loan-origination costs are deferred, and the net fee
the terms of the related leases or their useful lives.
members, most of whom are employees or former employees at Honda companies, is recognized as an adjustment to interest income using the interest method over Share insurance deposit: Each member’s share and savings account is insured up
including American Honda Motor Co., Inc (AHM), Honda of America Manufacturing, the contractual life of the loans adjusted for estimated prepayments based on the to $100,000 and certain individual retirement and Keogh account is insured up to
Inc (HAM), Honda Manufacturing of Alabama, LLC (HMA), Honda South Carolina Credit Union’s historical prepayment experience. $250,000 by the National Credit Union Share Insurance Fund (NCUSIF). The deposit
(HSC), and their qualifying family members. The Credit Union’s primary source of in the NCUSIF is in accordance with regulations set forth by the National Credit
revenue is interest from loans and investments. The Credit Union’s allowance for credit losses is the sum of various components Union Administration (NCUA), which require the maintenance of a deposit by each
recognized pursuant to SFAS No. 5 (for pools of loans) and SFAS No. 114 (for insured credit union in an amount equal to one percent of its insured shares.
Use of estimates: The preparation of financial statements, in conformity with individually impaired loans). The allowance for loan losses is increased by charges
generally accepted accounting principles, requires Management to make estimates to income and decreased by charge-offs (net of recoveries). Loans are charged The deposit would be refunded to the Credit Union if its insurance coverage is
and assumptions that affect the reported amounts of assets and liabilities and against the allowance when management believes that the collectability of the terminated, it converts to insurance coverage from another source, or the operations
disclosure of contingent assets and liabilities at the date of financial statements principal is unlikely. The allowance is an amount that management believes will be of the fund are transferred from the NCUA Board. The Credit Union is required to
and the reported amounts of revenue and expenses during the reporting period. adequate to absorb possible losses on existing loans that may become uncollectible. pay an annual insurance premium equal to one-twelfth of one percent of its total
Actual results could differ from those estimates. A material estimate that is particularly Management’s periodic evaluation of the adequacy of the allowance is based on the insured shares, unless the premium is waived or reduced by the NCUA Board.
susceptible to significant change in the near term relates to the determination of Credit Union’s past loan-loss experience, known and inherent risks in the portfolio,
the allowance for loan losses. specific impaired loans, adverse situations that may affect the borrower’s ability to Individual deposits in excess of the NCUSIF insured limit are insured by a private
repay, estimated value of any underlying collateral, and current economic conditions. insurance company, American Share Insurance Corporation (ASI), subject to their
Cash equivalents: For purposes of the statements of financial condition and cash policy limit of $250,000. There is no limitation as to the number of accounts a
flows, the Credit Union considers investments with original maturity of three months The Credit Union considers a loan impaired when, based on current information or member can have under ASI’s coverage. ASI requires the maintenance of a deposit
or less to be cash equivalents. factors, it is probable that the Credit Union will not collect the principal and interest by each insured credit union in an amount equal to 1% to 1.3% of a credit union’s
payments according to the loan agreement. Management considers many factors in total shares, depending upon the credit union’s rating with state regulators.
Investments: Certificates of deposit are generally non-negotiable and non-transferable, determining whether a loan is impaired, such as payment history, value of collateral,
and may incur substantial penalties for withdrawal prior to maturity. Included in and changes in the employment of the member. Past due status is determined based Members’ share and savings accounts: Members’ shares are subordinated to all
certificates of deposit are member capital accounts in a corporate credit union. on contractual terms. Loans that are delinquent less than two months are generally other liabilities of the Credit Union in the event of liquidation. Interest on share
These accounts are uninsured equity capital that may be redeemed with a not considered impaired, unless the member has claimed bankruptcy or the Credit and savings accounts is based on available earnings at the end of an interest period
three-year notice. Union has received specific information concerning the loan impairment. Since the and is not guaranteed by the Credit Union. Interest rates on share and savings
Credit Union issues primarily consumer loans, it does not receive updated financial accounts are set by the Board of Directors, based on an evaluation of current and
Negotiable securities are classified in accordance with the Credit Union’s asset/
data on its borrowers on an ongoing basis over the life of the loan. Therefore, the future market conditions.
liability management and investment policies. The following is a description of
the accounting procedures used for investments: Credit Union reviews delinquent loans to determine impaired accounts. The credit
Restricted members’ equity: The Credit Union is required by regulation to maintain a
union measures impairment on a loan-by-loan basis by either using the fair value of
statutory reserve. This reserve, which represents a regulatory restriction of retained
Available for sale: Investments that are not purchased principally to be sold in collateral or the present value of expected cash flows. Substantially all of the Credit
earnings, is not available for the payment of interest.
the near term nor with the positive intent and ability to hold until maturity and Union loans that are identified as impaired have been measured using the fair value
those without a defined maturity and could be sold in response to rate changes, of the collateral. Income taxes: The Credit Union is exempt, by statute, from federal and state
prepayment risk, liquidity, availability of and the yield on alternative investments income taxes. Presentation of comparative financial statements: To more clearly
Accrual of interest on a loan is discontinued when Management believes, after
and other market and economic factors are classified as available for sale. illustrate the financial condition of the Credit Union and the results of its operations,
considering economics, business conditions, and collection efforts that the borrower’s
These securities are marked to market, with unrealized gains or losses not the current year financial information is presented along with the previous year.
financial condition is such that collection of interest is doubtful. Uncollectible interest
affecting earnings but shown as a separate component of the equity portion Financial information presented for the previous year may be classified differently
previously accrued is charged off directly to interest income. Income is subsequently
of the balance sheet. than originally disclosed. These reclassifications, which do not affect the auditor’s
recognized only to the extent cash payments are received until, in Management’s
judgment, the borrower’s ability to make periodic interest and principal payments is report on those financial statements, were made for purposes of comparison.
The Credit Union does not maintain a trading portfolio.
back to normal, in which case the loan is returned to accrual status.
Note 2: Cash And Cash Equivalents Negotiable Securities June 30, 2007 Note 4: Loans Receivable Allowance for Loan Losses
Cash and cash equivalents, investments with original maturity The composition of loans receivable is as follows: The Credit Union estimates the amount of losses that will be sustained on
of three months or less are as follows: Gross Gross loans receivable. The allowance for loan losses represents Management’s
Amortized Unrealized Unrealized Fair June 30, 2008 June 30, 2007
June 30, 2008 June 30, 2007
estimate of losses not yet sustained on loans currently outstanding. A
Cost Gains Losses Value Real estate $178,075,837 $150,180,708 summary of the activity in the allowance for loan losses is as follows:
Cash on hand and in banks $8,052,041 $5,160,242
Available Automobile 139,948,421 147,064,960
Deposits in federally insured June 30, 2008 June 30, 2007
for sale: Credit cards 49,378,670 43,353,287
financial institutions 50,551,635 35,624,925 Beginning balance $1,836,182 $1,204,003
Capital stock in Federal Home equity lines of credit 41,538,886 39,798,046
$58,603,676 $40,785,167 Provision for loan losses 1,650,000 1,633,548
Home Loan Bank $1,607,944 $ — $ — $1,607,944 Consumer type 15,604,120 14,918,187
Loans charged off (1,557,316) (1,221,757)
The Credit Union administers a dealer incentive program for the Loan origination costs, net of fees 432,562 489,760
sponsor company. Cash equivalents totaling $14.3 million are Recoveries from charged off loans 221,000 220,388
credit union 424,978,496 395,804,948
designated for the payment of benefits under that program. Ending balance $2,149,866 $1,836,182
Less: Allowance for loan losses 2,149,866 1,836,182
corporation 30,000 $ — $ — 30,000
Note 3: Investments $1,637,944 $ — $ — $1,637,944
The carrying and estimated fair values of investments are as follows: Accrued interest receivable on loans amounted to $1,026,043 and
All investments accounts have no contractual maturity as of $930,383 at June 30, 2008 and 2007, respectively. The credit union
June 30, 2008 June 30, 2007
June 30, 2008 and 2007. There is no accrued interest had non-accrual loans of $1,537,723 and $1,255,120 at June 30, 2008
receivable on investments as of June 30, 2008 and 2007. and 2007, respectively. If interest on these loans had been recognized at
As part of the initial public offering by VISA, Inc. the Credit Union the original interest rates, interest income would have increased by $42,661
CERTIFICATES OF DEPOSIT $3,207,423 $2,827,427 was issued 42,852 shares of common stock. Shortly thereafter and $65,902 for the years ended June 30, 2008 and 2007, respectively.
16,567 shares were redeemed for $708,563. Since the Credit
Union had a zero cost basis for these shares the entire amount Participation loans sold consist of residential real estate loans. The Credit
was recognized as an investment gain. The remaining 26,285 Union is the lead lender and responsible for the administration of these
Negotiable Securities June 30, 2008 shares are recorded at zero historical cost. As a condition of the loans, including the collection of payments, record keeping, and collection
stock issuance there is a three year restriction on the sale or procedures, if necessary. The Credit Union holds a security interest in the
Gross Gross underlying collateral. In the past participation loans were sold through
Amortized Unrealized Unrealized Fair
redemption of those remaining shares.
Western Corporate Federal Credit Union although the Credit Union did not
Cost Gains Losses Value
sell any participation loans for the years ended June 30, 2008 and 2007.
Capital Stock in Federal
Home Loan Bank $1,695,727 $ — $ — $1,695,727
corporation 30,000 $ — $ — 30,000
$1,725,727 $ — $ — $1,725,727
That’s all I have to say.”
- Jim Aley, CFO
Notes To Financial
Note 5: Property And Equipment Note 6: Members’ Share And Savings Accounts Note 8: Commitments And Contingent Liabilities Financial instruments with 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
Property and equipment are summarized as follows: Share and savings accounts are summarized as follows: The Credit Union is a party to various legal actions normally associated with
financing needs of its members and to reduce its own exposure to fluctuations in interest
financial institutions, the aggregate effect of which, in management’s and legal
rates. These financial instruments are commitments to extend credit. Those instruments
June 30, 2008 June 30, 2007 June 30, 2008 June 30, 2007 counsel’s opinion, would not be material to the financial condition or results of
involve, to varying degrees, elements of credit and market risk in excess of the amount
operations of the Credit Union.
Land $150,207 $150,207 Share drafts $71,352,545 $77,638,726 recognized in the statement of financial condition. The contract or notional amounts
Share savings 111,044,139 110,129,001 The principal commitments of the Credit Union are as follows: of those instruments reflect the extent of involvement the Credit Union has in particular
Building and improvements 5,744,824 5,744,824
classes of financial instruments.
Furniture, fixtures, and equipment 10,339,131 9,590,914 Other deposits 252,463,130 213,785,376 Lease agreement: At June 30, 2008 the Credit Union is obligated under a non-
cancelable operating lease for office space. This lease contains an escalation The Credit Union’s exposure to credit loss in the event of non-performance by the other
Leasehold Improvements 720,237 680,079 $434,859,814 $401,553,103
clause providing for increased rental based primarily on an index described party to the financial instrument for commitments to extend credit is represented by the
Subtotal 16,954,399 16,166,024
The aggregate amount on uninsured members’ share and savings in the lease agreement. Net rent expense under this operating lease totaled contractual notional amount of those instruments. The Credit Union uses the same credit
Less: Accumulated depreciation and amortization 9,856,752 8,556,897 accounts in excess of both coverages was approximately $25.6 million $358,631 and $322,131 for the years ended June 30, 2008 and 2007, policies in making commitments as it does for on-balance sheet instruments.
and $21.0 million as of June 30, 2008 and 2007, respectively. respectively.
$7,097,647 $7,609,127 These financial instruments include commitments for home equity and unsecured lines
A summary by maturity of members’ share and savings The required minimum rental payments under the terms of the leases at of credit. The contractual amount of commitments to extend credit is approximately
Depreciation and amortization expenses amounted to June 30, 2008 are as follows: $187.9 million. Commitments to extend credit are agreements to lend to a member as
accounts is as follows:
$1,310,718 and $1,370,649 for the years ending long as there is no violation of any condition established in the contract. Commitments
Minimum Payments, Amount
June 30, 2008 and 2007, respectively. generally have fixed expiration dates.
June 30, 2008 June 30, 2007
No contractual maturity $263,115,175 $250,747,999 Financial instruments with off-balance sheet risk - continued: Since many of the
commitments are expected to expire without being drawn upon, the total commitments
Within one year 143,682,959 123,360,223
2011 313,278 do not necessarily represent future cash requirements. To minimize credit risk, the Credit
One to three years 21,434,985 19,996,045
Union evaluates each member’s credit worthiness on a case-by-case basis. The amount
of collateral obtained, if deemed necessary by the Credit Union upon extension of
Over three years 6,626,695 7,448,836
$980,107 credit, is based on management’s credit evaluation of the counter party. Interest rate
$434,859,814 $401,553,103 risk associated with loan commitments is addressed in the Credit Union’s asset/liability
Loan commitments: At June 30, 2008 and 2007, the Credit Union had management policies.
Interest rates are set by the Board of Directors, based on an outstanding commitments for unused lines of credit totaling approximately
$187.9 million and $167.5 million, respectively that are not reflected in the Financial instruments with concentration of credit risk: The Credit Union’s lending
evaluation of current and future market conditions.
accompanying financial statements. activity is with its members, most of whom are employees or former employees at
Honda companies, including American Honda Motor Co., Inc (AHM), Honda of
Note 7: Borrowed Funds America Manufacturing, Inc (HAM), Honda Manufacturing of Alabama, LLC (HMA),
Honda South Carolina (HSC), and their qualifying family members.
The Credit Union has a line of credit agreement with Western Corporate
Federal Credit Union, a corporate credit union, which permits the Credit A substantial portion of the investment portfolio is comprised of deposits in Western
Union to borrow funds up to $58 million at an interest rate determined Corporate Federal Credit Union. Deposits in Western Corporate Federal Credit Union
by the lender’s board of directors. Under this agreement the Credit are insured up to $100,000 by an agency of the federal government. Currently, the
Union had an outstanding balance of $7.5 million and $9.9 million deposit exceeds the insured amount by approximately $47.7 million.
at June 30, 2008 and 2007, respectively.
Notes To Financial Statements
Loans to members, net of allowance for loan losses: For variable-rate loans Balance Sheet Financial Instruments: Note 11: Regulatory Capital
Note 9: Related-party Transactions that reprice frequently and with no significant change in credit risk, fair values June 30, 2008 June 30, 2008
are based on carrying amounts. Fair values of fixed-rate real estate loans are Carrying Fair The Credit Union is subject to various regulatory net worth requirements administered
Loans to Credit Union officials were made with interest rates, terms and collateral estimated using quoted market prices where available, or quoted market Amount Value by the National Credit Union Administration. Failure to meet minimum net worth
requirements comparable to those required of other members. The outstanding loan prices of comparable instruments. Certificates of deposit $3,207,423 $3,207,423 requirements can initiate certain mandatory (and possibly additional discretionary)
balance to Credit Union officials and senior management amounted to approximately actions by regulators that, if undertaken, could have a direct material effect on
$83,000 and $102,000 as of June 30, 2008 and 2007, respectively. The aggregate The fair values for other loans are estimated using discounted cash flow analysis, Loans receivable 422,828,630 423,130,964
the Credit Union’s financial statements. Under capital adequacy guidelines and
amount of these loans is not significant to the financial statements. Officials of the based on interest rates currently being offered for loans with similar terms to Members’ share and savings account 434,859,814 408,020,447 the regulatory framework for prompt corrective action, the Credit Union must meet
Credit Union provide management and consulting services on a voluntary basis. borrowers of similar credit quality. Loan fair value estimates include judgments
specific net worth guidelines that involve quantitative measures of the Credit Union’s
regarding future expected loss experience and risk characteristics. The carrying
Balance Sheet Financial Instruments: assets and liabilities, as calculated under generally accepted accounting principles.
American Honda Motor Company, Inc and Honda of America Manufacturing, Inc. amount of accrued interest receivable approximates fair value.
provided financial support and services, including office space at reduced rates, to June 30, 2007 June 30, 2007
Quantitative measures established by regulation to ensure capital adequacy require
offset the cost of the Credit Union operation. Members’ share and savings accounts: The fair values disclosed for demand deposits, Carrying Fair
the Credit Union to maintain minimum ratios (set forth in the table below) of net worth
including regular shares, share drafts and money market accounts, are by definition,
(as defined in the regulations) to assets (as defined). Management believes that as of
Some employees of the Credit Union are compensated by American Honda Motor equal to the amount payable on demand at the reporting date (that is, their carrying Certificates of deposit $2,827,427 $2,827,427 June 30, 2008, the Credit Union meets all capital adequacy requirements to which it
Company, Inc. and Honda of America Manufacturing, Inc. Benefits including retirement amounts). The fair values for share certificates are estimated using a discounted cash
Loans receivable 393,968,766 392,735,000 is subject.
and medical insurance offered to employees of the sponsor are also provided to the flow analysis that applies to the portfolio interest rates currently being offered on new
Credit Union staff. The Credit Union reimburses the sponsor for these costs. share certificates of similar amounts and remaining maturity. The carrying amount of Members’ share and savings account 401,553,103 362,233,000 As of June 30, 2008, the Credit Union’s net worth is categorized as well-capitalized
accrued dividends payable approximates fair value. under the regulatory framework for prompt corrective action. To be categorized as
well-capitalized, the Credit Union must maintain a minimum net worth ratio at June
Other balance sheet financial instruments: The carrying amount of other balance
Note 10: Fair Value Of Financial Instruments sheet financial instruments such as the share insurance deposit, accounts receivable
30, 2008 as follows:
and accounts payable is reasonable estimation of fair value. Amount Ratio
Statement of Financial Accounting Standards No. 107, Disclosures about Fair Value
of Financial Instruments, requires disclosure of fair value information about financial Off-balance sheet financial instruments: The fair value of unused lines of credit with Actual $39,393,175 7.8%
instruments, whether or not recognized in the balance sheet, for which it is practicable members is the contractual amount of these commitments. Fair values of corporate For Capital
to estimate that value. In cases where quoted market prices are not available, fair lines of credit with other financial institutions used by the credit union for short term Adequacy Purposes $30,202,276 6.0%
values are based on estimates using present value or other valuation techniques. Those liquidity purposes is the maximum credit limit.
techniques are significantly affected by the assumptions used, including the discount To be Well Capitalized
rate and estimates of future cash flows. In that regard, the derived fair value estimates The estimated fair values of financial instruments where the estimated fair value is per Prompt Corrective
cannot be substantiated by comparison to independent markets and, in many cases, different from the carrying value and is not disclosed elsewhere in the Notes Action Provisions $35,235,988 7.0%
could not be realized in immediate settlement of the instruments. Statement No. 107 to Consolidated Financial Statements are as follows:
excludes certain financial instruments and all non-financial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented do not represent
the underlying value of the credit union.
“ Itteam that team effort.
The following methods and assumptions were used in estimating the fair value
disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the statement of financial was a
condition for cash and cash equivalents approximate the fair value of those instruments.
A includes every
Certificates of deposit: Fair values for certificates of deposit are estimated using a
discounted cash flow analysis that applies to the portfolio interest rates currently being
offered on new certificates of similar amounts and remaining maturities. The carrying
single one of our members!
amount of accrued interest receivable on certificates of deposit approximates fair value. - Mary Anawalt, VP Sales and Marketing
19701 Hamilton Avenue, Suite 130
Torrance, CA 90502-1352
FAX: (310) 217-8211
Branch Office Locations ATM Locations
Lincoln, AL ALABAMA
1-800-634-6632 Lincoln Kenton
FAX: (205) 355-5820 HMA – Northwest side of the office 350 S. Main St. (Village Pantry)
HMA – Line 2 at Associate Entrance
Torrance, CA HMA – Line 2 Upstairs at Associate Entrance Marysville
1-800-634-6632 HMA – Welcome Center HFCU Community Branch Lobby
FAX: (310) 781-6615 HFCU Community Branch Drive-Thru
CALIFORNIA HAM – Marysville North Cafeteria
Anna, OH Torrance HAM – HFCU Branch Lobby
1-800-634-6632 AHM – Torrance Building 100 HAM – HFCU Branch Drive- Thru
FAX: (937) 498-5618 Vending Core HAM – Marysville Main Auto Entrance
AHM – Torrance Branch Office HAM – Marysville South Cafeteria
East Liberty, OH
AHM – Torrance Building 300 Cafeteria HAM – Marysville Motorcycle South Entrance
303 E. Fifth St.
FAX: (937) 644-6768 INdIANA (Downtown Marysville – Village Pantry)
Greensburg 1301 W. Fifth St. (Village Pantry)
HFCU Lobby and Drive-Up – 700 Milford Rd. (Community Market)
2740 N. Michigan Ave.
FAX: (937) 642-5184
HMIN – 2755 N. Michigan Ave. Raymond
Marysville Community, OH HRA – Associate Entrance
Anna Russells Point
FAX: (937) 642-0064
HAM – Anna South Cafeteria HTM – Associate Entrance
Russells Point, OH 209 S.R. 708 (Indian Lake Plaza)
HAM – Anna West Cafeteria
1-800-634-6632 NORTH CAROLINA
FAX: (937) 843-4624 Bellefontaine
200 E. Sandusky Ave. (Village Pantry)
Greensburg, OH HPE – Associate Cafeteria
1138 N. Main St. (Village Pantry)
1-800-634-6632 SOUTH CAROLINA
FAX: (812) 222-6500 East Liberty
HAM – East Liberty Cafeteria
Timmonsville, SC HSC – Associate Entrance
HAM – East Liberty Plant Entrance
1-800-634-6632 HSC – NE Corner Cafeteria
FAX: (843) 346-6100