Mission. Values. As stakeholders in the ongoing success of the Los Angeles Police Federal Credit Union, we value:

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2 Mission To enhance the quality of life for the Los Angeles Police family by serving as a trusted partner providing rewarding financial solutions through exceptional service Values As stakeholders in the ongoing success of the Los Angeles Police Federal Credit Union, we value: Honesty, trust, respect and integrity Acting on our members behalf and safeguarding their assets Fair play and good fellowship Loyalty and allegiance Partners In A Proud Tradition SM

3 At Los Angeles Police Federal Credit Union, our singular focus is to serve as the number one banking choice for the sworn and civilian employees of the Los Angeles Police, their families and select police-related groups. As a nonprofit, member-owned organization founded by the Police family for the Police family, we are truly partners in a proud tradition SM. For 76 years, LAPFCU has helped members and their families build and safeguard strong financial foundations. We remain passionate and steadfast in our pursuit of: Honesty, trust, respect and integrity Recognizing the value of each member and the importance of every transaction. Loyalty and allegiance Honoring and celebrating the Los Angles Police s strong sense of family, community and the brotherhood of officers and civilian staff in our business practices. Education and financial planning Helping our members to fully understand and benefit from LAPFCU membership; develop solid financial goals and investment strategies; and utilize LAPFCU for financial solutions that help build wealth, create long-term financial security and enhance their quality of life. As a federal Credit Union exclusively serving the Los Angeles Police family, LAPFCU proudly gives back to members and our police family. Whether it s an-officer-in-need BBQ, fund raising drive or even debt counseling services, we re here for you. In 2011, LAPFCU gave $90,000 back to its membership in the form of sponsorships for Los Angeles Police organizations and causes, and in support of officers and civilian police employees in need. A commitment to long-term member partnership, exceptional products and services, and giving back it s all part of our mission Mission and unbreakable pledge to be there for the Los Angeles Police family in 2012, throughout the twenty-first century and beyond. Sincerely, Lorie Taylor Chair, Board of Directors G. Michael Padgett President & CEO

4 2011 Board of Directors Lorie A. Taylor Chair Andre Plummer Vice Chair Cliff Ruff Secretary Warren D. Spayth Treasurer Tyler E. Izen Director Michel R. Moore Director Sean Goulden Director Executive Management G. Michael Padgett President/CEO Carol Martin Senior VP Operations & Member Relations Ed Hada Senior VP Finance & Administration / CFO Velia Medina Vice President Finance & Card Services Hanny Swart Vice President Information Services / Security Officer Norma Feder-Dong Vice President HR, Planning & Support Services Manny Padilla, Jr. Vice President Marketing LuAnn Smith Vice President Risk Management Ron Guzman Vice President Loan Services

5 This annual report marks the culmination of Los Angeles Police Federal Credit Union s 75 th anniversary year, a time which saw continued economic challenges, as well as continued growth within Credit Union programs. Despite the prevailing troubled times, we emerged safe, sound and secure our capital reserves remain well-above the industry average. In 2011, we also introduced some new products and services to members, including: A comprehensive Business Services suite of savings and lending tools The addition of free Purchase Rewards to PATROL Online Banking which gives you cash back on your every day purchases FHA, VA, Jumbo and Reverse Mortgages A year-long 75th anniversary celebration that featured special member programs The addition of account-to-account transfers between financial institutions and POPmoney (Pay Other People) A Wills & Trust Program that has already served over 300 members A Rate Rewards Pilot Program that provides interest rate reductions to members who continuously pay their loans on time $90,000 in support given to activities programs and organizations which benefit the police family A remote deposit application, My Deposits, that allows you to scan and make deposits using your personal scanner and PATROL Online Banking The creation of a Fraud Team designed to prevent fraudulent activities from affecting the Credit Union and its members. As you can see, we were able to maintain our focus on serving our members despite the economic obstacles. In looking forward to 2012, there are a number of programs we are developing to continue to serve you even better. First and foremost is our continued commitment to financial safety. We will remain vigilant in protecting the relationship you have entrusted to us. Cost-cutting programs we executed in 2011 have positioned us well to retain a strong financial position in As a member-owned organization, we realize how important this safety net is for our members. We also understand that we must remain current with enhancements within the industry, so in 2012, we will implement: A new mobile banking application for Apple and Android smart phones A program that will provide additional benefits for members based upon their participation in the Credit Union An automated pre-approval process that will provide you with faster access to lending dollars Electronic signature tools which will eliminate the need for visiting a branch for certain activities. These are just a few of the improvements we look forward to sharing with members. In thinking back to our 75 th anniversary year, we realize we have a lot to be proud of we were able to make it through the worst of the economic times with the safety, security and strength of the Credit Union intact. We thank you for your support in our 75 th year, and we look forward to another 75 years and beyond of service as partners in a proud tradition SM. Lorie Taylor Chair, Board of Directors G. Michael Padgett President & CEO

6 Financial management continued to be a key component of our fiscal responsibilities at Los Angeles Police Federal Credit Union during We were faced with many ongoing economic challenges caused by the slow economic recovery from the worst recession since the Great Depression. Another year of record-low interest rates challenged us to equitably reward depositors, while earning the income on loans and investments needed to balance the Credit Union s financial performance. Despite this difficult environment, we effectively managed to preserve the capital of the credit union by reducing expenses, employing new technologies and greater internal efficiencies, and are pleased to report that we had a very good year. We experienced growth in deposits, substantial levels of lending activity, and overall, we distributed $4.1 million in dividends to our members. Loan delinquencies and charge offs tied to members who have been impacted by the economic recession increased during the year to record levels. However, our loan losses have been lower than the overall financial services industry due to our adherence to conservative, safe lending standards and our avoidance of activity in risky lending markets. In 2011, year-end total assets were at $742 million, down slightly from the previous year. Members continued to use LAPFCU as their safe haven as total savings deposits increased by $1.6 million or 0.2%. This savings growth was attributable to increases in regular share, money market and checking accounts. Total loans outstanding decreased by $5.8 million or 1.2% to end the year at $465 million. During 2011, we continued to adhere to safe lending practices and as a result, $221 million in new loans were disbursed to members. The changes in both savings and loans caused our net investment portfolio to increase by $3 million to end the year at $265 million. We invest only in high quality investments that emphasize safety first, then liquidity, and then finally, yield. With regard to our investment portfolio, all of our term investments are housed in United States Government Agency Securities that have the guarantee of the United States government. We are proud of our 2011 net income performance of $1.0 million during this continued difficult economic environment. We added a record $5.9 million to loan loss reserves, which was 11% higher than This action was intended to maintain a cushion for future loan losses caused by the continued fallout from the economic recession, and to position our balance sheet for the future. The $1.0 million in net income increased our net worth to $86.2 million, and we ended the year with a net worth ratio of 11.6%, well in excess of the 7.0% level required by the National Credit Union Administration to earn their classification of being well-capitalized. We feel our financial performance in 2011 was a success. We ensured our members financial well-being while maintaining the financial strength of the Credit Union during another challenging year. We also remained a safe haven for our members finances while maintaining a commitment to provide them with the best products and services. As we enter the new year, we look for greater successes and rewards in 2012 and beyond. Warren D. Spayth Treasurer, Board of Directors Edwin W. Hada Senior Vice President, Finance & Administration / Chief Financial Officer

7 The Supervisory Committee is appointed by the Board of Directors and is comprised of three volunteer members who function as the Credit Union s audit committee. The Committee s responsibilities include: ensuring that internal controls are effectively maintained; verifying that accounting records and reports are promptly prepared and accurately reflect the results of operations; monitoring that the operations of the Credit Union are in accordance with laws, regulations, and policies and procedures established by the Board of Directors; selecting an external CPA firm to perform the annual audit of the Credit Union s financial records and books; conducting annual member account verifications; and ensuring member account inquiries are promptly and fairly considered. The Supervisory Committee fulfilled these responsibilities in 2011 by: Retaining a national certified public accounting firm, to conduct the Credit Union s annual audit in accordance with generally accepted accounting principles; Attending monthly Board of Directors meetings; Reviewing management reports; Attending relevant educational seminars; Working closely with the Credit Union s Internal Audit Department, which reviews in detail the financial and operational components of the Credit Union, to ensure that internal controls are in place and policies and procedures are followed; Meeting with Credit Union management to evaluate the Credit Union s position on emerging risks in the credit union environment, covering such topics as, Credit Risk, Accounting Risk, Finance Risk and Compliance Risk; Meeting periodically with regulatory examiners from the National Credit Union Administration (NCUA) and the financial statement auditors to review their exams and audits; Meeting regularly as required to consider matters within the Supervisory Committee s area of responsibility. We are pleased to report that again in 2011, reports from the outside auditors and examiners gave Los Angeles Police Federal Credit Union a clean bill of health. Your Credit Union continues to maintain the highest levels of financial safety and soundness along with quality member service. Members are encouraged to send any comments or inquiries regarding your concerns or the financial condition of the Credit Union to the Supervisory Committee. You may address your correspondence to: Supervisory Committee P.O. Box Van Nuys, CA We would like to thank our Board of Directors, the management team and the employees for their dedication, and the membership for your continued support. The Committee members are proud to volunteer our time to serve the members of LAPFCU and to be associated with such an outstanding organization. Tyler E. Izen, Chairman, Supervisory Committee LuAnn Smith Vice President, Risk Management

8 Los Angeles Police Federal Credit Union and Subsidiary Consolidated Statements of Financial Condition December 31, 2011 and 2010 Assets Cash and Cash equivalents $ 91,847,635 $ 51,074,752 Available-for-Sale Investments 175,054, ,406,539 Loans, net 456,614, ,496,975 Accrued Interest Receivable 2,240,753 2,506,650 Premises and Equipment, net 4,885,887 5,327,393 Share Insurance Deposits 6,519,580 6,615,063 Other Assets 5,225,635 2,365,483 Total Assets $ 742,388,761 $ 744,792,855 Liabilities and Members Equity Liabilities Members shares $ 650,985,784 $ 649,411,571 Accrued expenses and other liabilities 2,766,092 8,545,395 Total liabilities 653,751, ,956,966 Commitments and Contingent Liabilities Members Equity Retained earnings 86,191,230 85,187,076 Accumulated other comprehensive income 2,445,655 1,648,813 Total members equity 88,636,885 86,835,889 Total Liabilities and Members Equity $ 742,388,761 $ 744,792,855 Please Note: The Consolidated Statements of Financial Condition and Income for 2011 are derived from unaudited figures.

9 Los Angeles Police Federal Credit Union and Subsidiary Consolidated Statements of Income December 31, 2011 and Interest Income Loans $ 25,961,624 $ 27,656,484 Investments and cash equivalents 4,020,537 4,439,028 Total Interest Income 29,982,161 32,095,512 Interest Expense Members shares 4,115,167 6,836,869 Net Interest Income 25,866,994 25,258,643 Provision for Loan Losses 5,932,863 5,350,695 Net Interest Income After Provision for Loan Losses 19,934,131 19,907,948 Non-Interest Income Service charges and other fees 3,462,809 3,260,920 Debit card interchange income 1,460,971 1,332,134 Credit card interchange income 662, ,340 Commissions 254, ,829 Gains from sale of loans 397, ,729 Other non-interest income 33,853 95,222 Total Non-Interest Income 6,271,902 6,189,174 Non-Interest Expense Compensation and benefits 13,870,959 13,523,368 Occupancy 791, ,905 Other general and administrative expenses 8,931,970 9,615,120 Total Non-Interest Expense 23,594,844 23,969,393 Net Income from Operations 2,611,549 2,127,729 Less NCUSIF Premium & NCUA Corporate Stabilization Fund Assessments 1,607,395 1,666,929 Net Income $ 1,004,154 $ 460,800

10 Branch Locations Academy Branch (ATM) 1880 N. Academy Dr. Los Angeles, CA a.m. - 5 p.m., Monday - Friday Jesse Brewer Branch (ATM) 5651 West Manchester Ave., Los Angeles, CA a.m. - 5 p.m., Monday - Friday Van Nuys Branch (ATM) Sherman Way Van Nuys, CA a.m. - 5 p.m., Monday - Friday 9 a.m. - 1 p.m., Saturday Police Station ATMs LAPFCU operates deposit-taking ATMs at all police stations. Communications Center P.O. Box Van Nuys, CA Hours a Day, 7 Days a Week 877-MY-LAPFCU ( ) 24-Hour Lending Center 877-MY-LAPFCU ( ), press 3 lapfcu.org mobile.lapfcu.org LAPFCU Convenience Services PATROL Online Banking lapfcu.org Effortlessly manage all aspects of your accounts online, pay bills and manage your finances. Mobile Banking mobile.lapfcu.org LAPFCU account management at your fingertips, and on the go. EZ-Deposit Make a deposit online or telephonically using our remote deposit system and get immediate credit. CODE 3 Telephonic Banking Call 877-MY-LAPFCU ( ) to access your accounts and conduct transactions via phone. Or, speak to a branch representative 24/7. My-Deposit Make a deposit online using your personal scanner and our remote deposit system. CU Service Centers Access your accounts and perform transactions at almost 5,000 shared branch locations including participating 7-Eleven stores. Make deposits, loan payments and more. Download iphone or Android mobile applications to access the CU Service Center nearest you. CO-OP ATM Network Enjoy access to 25,000 Surcharge-Free CO-OP Network ATMs. Online Loan Applications Fast, secure, convenient. For autos, mortgage, credit cards and more. E-Statements Never wait again for statements to arrive in the mail. Access and download 18 months of statements online. SM

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