EXECUTIVE MANAGEMENT BOARD OF DIRECTORS

Transcription

1 BOARD OF DIRECTORS Gail S. Miner, Chairperson Gale C. Scott, Vice Chairperson Nicholas Benyo, Treasurer Stephen G. Doran, Secretary Mary Beth Drake, Director Tyler Hicks, Director Del Johnson, Director Rebecca Sant, Director Susan Young, Director EXECUTIVE MANAGEMENT Shawn Gilfedder President/Chief Executive Officer Michael Sullivan EVP/Chief Operating Officer

2 CORPORATE HEADQUARTERS McGraw-Hill Federal Credit Union 120 Windsor Center Drive East Windsor, NJ Phone: (800) BRANCH LOCATIONS 1221 Ave. of the Americas, 2nd Floor New York, NY S&P Building 55 Water Street, Concourse Level New York, NY Penn Plaza, 12th Floor New York, NY TELEPHONE BANKING 24 Hours a Day, 7 Days a Week (609) WEB SITE mcgrawhillefcu.org McGraw-Hill Federal Credit Union

3 2008 :: ANNUAL REPORT McGraw-Hill Federal Credit Union

4 MESSAGE FROM THE PRESIDENT For more than 74 years, McGraw-Hill Federal Credit Union has been and will continue to be a responsible, conservatively managed financial organization. You will be pleased to know that despite the banking and mortgage crisis, your credit union is in sound financial condition. Our strong capital base with reserves nearly three times the federally required minimum and the quality of our invested assets has enabled us to grow during Last year we opened a new branch at 55 Water Street in New York City, improved our online services, and increased our financial education offerings. Our work has helped members save for the future, improve their personal finance management, increase credit scores, invest prudently, and plan wisely for retirement. As a financial co-operative focused on promoting thrift among our members, we returned 32% of our gross revenue to membership dividends on savings products. Our lending activities continue to reward those that are fiscally responsible and our loan volume grew by $12.2MM for the year. Our delinquency rates and asset quality continue to outperform industry peers and reserves for loan losses remain adequate. For the first time in our history, your credit union finished the year at $202MM in total assets, up 12% over last year. Members have found solace in knowing their funds are safe as we continue to offer competitive market returns. We have high levels of liquidity and recognize that the current economic environment requires flexibility to create solutions to fit your needs. In order to enhance your membership opportunity, we have introduced Shared Branching, a service that provides access to more than 3,600 U.S. credit union branches. This, along with over 28,000 surcharge-free ATMs located throughout the U.S., has made us a truly convenient banking option. Some members have asked us about the challenges within the financial service sector and our participation in those markets. In 2008, we experienced some extraordinary expenses associated within the credit union industry. Our regulatory insurance fund balance and the capital investment we maintained in a corporate credit union were impaired by the economic conditions. We consider the majority of the related expense a one time, non-operating event and details are provided in the financials. Prudent management of the credit union in 2008 has allowed us to absorb the expense with current income and our capital reserves. As we look forward, we anticipate a strengthened U.S. economy, lead by innovation, a stronger financial system, and the resolve of the American consumer. We are expanding our product offerings to better suit your needs in a changing economy and we will apply the principles of sound financial management in the interests of the more than 15,000 members we serve. On behalf of the Board of Directors and the staff at MHFCU, we thank you for your participation. Sincerely, Shawn Gilfedder President and Chief Executive Officer

5 STATEMENT OF FINANCIAL CONDITION YEARS ENDED DECEMBER 31, 2008 (1) 2007 (1) ASSETS Cash and cash equivalents $ 7,118,580 $ 12,539,570 Certificates of deposit 790,000 14,290,000 Investment securities Securities available-for-sale 85,703,046 65,120,087 Securities held-to-maturity 9,465,404 - Other Investments 635, ,080 Members United Capital Shares (2) 0 1,500,000 Loans receivable, net 90,432,490 78,235,561 Accrued interest receivable 962,647 1,219,076 Prepaid expenses and other assets 261, ,149 Property and equipment, net 6,052,096 6,237,230 Deferred building costs - - NCUSIF deposit (3) 362,592 1,201,395 Total Assets $ 201,783,524 $ 180,745,148 LIABILITIES AND MEMBERS' EQUITY Members' shares $ 155,578,413 $ 143,410,203 Accrued expenses and other liabilities 809, ,788 Borrowed funds 10,039,238 - Total Liabilities $ 166,427,173 $ 143,830,991 Commitments and contingent liabilities Members' net equity, substantially restricted 35,356,351 36,914,157 Total Liabilities And Members' Equity $ 201,783,524 $ 180,745,148 (1) The amounts for the years ended December 31, 2007 and December 31, 2008 were subject to the procedures outlined in the Supervisory Committee Guide (appendix to NCUA Rules and Regulations, Part 715). In 2008, the Board decided to move the financial audit to a June 30th calendar year. The results of the audit will be made available to membership following the Board s approval. The following two footnotes are related to extraordinary and non-operating expenses due to insurance premium assessments generated by the National Credit Union Share Insurance Fund, which insures all credit union deposits. In addition, the capital investment with Member s United Corporate Credit Union, which remains active, is viewed as fully impaired. This is in anticipation of NCUA s corporate credit union stabilization plan to utilize the invested capital to pay down unrealized losses and restructure the corporate credit union system. The related charges in 2008 are considered one-time events for MHFCU absorbed by 2008 operating income and capital. (2) Members United Capital Shares Members United Corporate Federal Credit Union ( Members United ) requires that a capital share deposit be maintained for full participation as a member credit union. The deposit is based on the amount of each member credit union s total assets, and is not insured by the NCUSIF. Interest on the deposit is paid monthly based on available earnings at interest rates approved by Members United s board of directors. In the event a member credit union withdraws from Members United, the deposit would be repaid in full, three (3) years after receipt of notification of withdrawal, based upon a percentage of transaction accounts and non-personal time deposits. The total required reserve balance as of December 31, 2008 was $1,500,000. It is the belief of the Credit Union s management that the capital share deposit is impaired due to the deteriorating financial condition of Members United. The Credit Union has established a valuation allowance and recorded an impairment charge of $1,500,000 to reflect the other than temporary impairment of this asset. In addition, the Credit Union is seeking to withdraw from Members United and has provided a notification of withdrawal in March (3) NCUSIF Deposit and NCUSIF Insurance Premiums The deposit in the National Credit Union Share Insurance Fund (NCUSIF) is in accordance with NCUA regulations, which require the maintenance of a deposit by each insured credit union in an amount equal to one percent of its insured 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. The NCUA, in a Letter to Credit Unions (LTCU) No. 09-CU-02, dated January 2009, notified all credit unions of recent NCUA Board actions to stabilize the corporate credit union system. On March 19, 2009, the NCUA, in LTCU No. 09- LU-06, took additional actions to further stabilize the corporate credit union system. These actions affect the NCUSIF deposit and the expectation of future premium assessments. The March LTCU indicated that the expense of stabilizing the corporate credit union system will be a partial write-off (69%) of each credit union s existing 1% NCUSIF deposit and the expectation of future premium assessments. In accordance with the March LTCU, the Credit Union has recorded the impairment charge of $880,000 to record the write-off of 69% of its NCUSIF deposit at December 31, In addition, in 2009, the Credit Union will record an accrual of $382,000 in anticipation of the amount of NCUSIF insurance premiums that will be assessed in September As of March 31, 2009, $328,000 of this accrual has been recorded. This estimate is based on the most recent NCUA LTCU. It is reasonably possible that this assessment and accrual may change in the near term as conditions and circumstances change.

6 STATEMENT OF INCOME YEARS ENDED DECEMBER 31, 2008 (1) 2007 (1) INTEREST INCOME Interest on loans $ 5,256,900 $ 4,496,786 Interest on investments 4,773,650 5,261,319 Total Interest Income 10,030,550 9,758,105 INTEREST EXPENSE Dividends on share accounts 3,572,052 3,735,716 Borrowed funds 215, Total Interest Expense 3,787,560 3,735,797 Provision for loan losses 220,000 85,000 Net Interest Income, After Provision for Loan Losses 6,022,990 5,937,308 NON-INTEREST INCOME Misc. Operating Income 757, ,438 Other Non-Operating Income 16,200 - Gain on Sale of interest earning investment 237,464 62,344 Total Non-Interest Income 1,011, ,782 NON-INTEREST EXPENSE Compensation & Benefits 2,916,446 2,862,634 Travel & Conference 125,158 83,386 Office Occupancy 834, ,302 Office Operations 1,163,586 1,141,146 Educational & Promotional Expenses 402, ,642 Loan Servicing Expense 458, ,489 Professional & Outside Services 562, ,927 Operating Fees 49,813 38,283 Misc. Expenses 171, ,725 Total Operating Expense 6,683,750 6,122,534 Net Income Before Non-Operating Loss $ 350,257 $ 558,556 NON-OPERATING LOSSES Non-Operating Loss-Members United Capital Shares Impairment (2) (1,500,000) Non-Operating Loss-NCUSIF Deposit Impairment (3) (880,000) Total Non-Operating Losses (2,380,000) Net Income After Non-Operating Losses $ (2,029,743)