2003 Annual Report. Touching Our Community, One Family at a Time.

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1 2003 Annual Report Touching Our Community, One Family at a Time.

2 One Military Family at a Time. Your credit union s roots go back to 1938 when a group of local pioneers decided to address the saving and borrowing needs of the military families at the Aberdeen Proving Ground. All these years later, their vision remains intact. APGFCU maintains a full presence on the Post with an active branch office and four ATMs serving the financial needs of military and civilian families. The branch opens at 8:30a.m. each weekday and provides extra long hours on paydays to meet the special circumstances of these APG members. For young soldiers single or married this is a time of learning as they look for their first car loan, checking account, or credit card and they wrestle with the challenges of household budgeting and saving. The credit union s Online Banking and Bill Pay services fit well with the fast and often unpredictable lifestyle of these members. We have worked with the APG administration to provide money management training for young recruits and we offer a free financial counseling service for any family that could use a helping hand to meet its day to day financial commitments. Your credit union s goal is to improve the financial wellness of all members and to empower them to meet life s challenges with confidence and knowledge. The military family has been our focus from the very beginning and will remain a top priority. By sharing our financial experience and providing valuable products and services, we work to build stability and financial independence for these members one family at a time. Touching Our Community Sponsored and participated in the 3-day APG Family Symposium Event Participated in the quarterly APG Newcomer Orientations Fully supported and aided in the administration of the Service Members Civil Relief Act Eliminated ATM fees for our troops at APG during deployment period Sent care packages to family members of staff stationed overseas

3 One Young Family at a Time. For young families, these are exciting days as babies become toddlers and then future movie stars or presidents! But these times can be really challenging as the demands of a growing family put pressure on household earnings that may not yet be big enough to meet the needs. For new parents, this is a time when an APGFCU Visa card or a loan for that much needed minivan can make such a difference. It may even be a quick loan to meet that income tax they owe. As they build their credit, these families are also looking to save for the future, whether it s for a home of their own or for their children s education. We work with them to ensure a solid savings program and a balanced approach to their money management needs. Our imaginative Moola program reaches out to young children and provides all the basics of early financial awareness in a lively and fun fashion. We have over 5,900 children enrolled in this program. Our newly formed Education Department made 174 presentations last year to local area schools, touching 5,100 young minds. The credit union s website at is a huge help for new families. Not only can they do their online banking from home, but they can glean so much from informative features on mortgages, car buying tips, money management skills, or interactive children s programs. There s even a variety of financial calculators to help figure out monthly savings goals, loan payments, or education costs. Your credit union is touching and helping these young members in every way possible. And always one family at a time. Touching Our Community Sponsored and participated in the Harford County Education Expo Added AUTO CENTER to website to assist in making first and larger auto purchases Added Financial Fitness Program to help new families start and maintain a budget, prepare for children, and save for first home purchases. Maintained our vibrant MOOLA program for young children

4 One Growing Family at a Time. It s always a full house for the growing family with teens and turmoil! It s a time when the high cost of college education looms closer; when student Visa cards and APGFCU college scholarships make the headlines; and when our STARSS program for teenagers really focuses on the savings and credit knowledge they will need going forward. For parents, it s often a question of borrowing for a home improvement; a bigger car for the family s needs; a move up to a Platinum Visa card; setting aside retirement dollars; or tapping into their home s equity to meet a growing family s demands. program on our Classic and Gold cards. And for those in the market for a new home, we have mortgage experts on call every day to help with a loan that will fit your budget and get you into your new neighborhood. Our car loans couldn t be easier. You can apply in person, on the phone, and on our website at And growing families with little time to spare can even get an APGFCU loan directly at the car dealership thanks to our partnership with scores of dealers throughout our local communities. Your credit union is well armed to serve all these needs. Our new Home Renovation Equity Loan can fund a major home improvement, even for a home with little or no equity. Our range of Visa credit cards runs from Classic, through Gold, and into Platinum with benefits to meet every stage of one s financial lifestyle. There s even a cash rebate Once again, your credit union has recognized the special needs of this group of members and is working hard to create services and products to bring value to their relationship with us always one family at a time. Touching Our Community Sponsored the Harford County Kids Summer Activities & Camp Fair Sponsored the annual STARSS scholarship competition Supported the Harford County Boys & Girls Clubs with our 2003 calendar fundraiser Organized the Financial Fitness & Wellness Fair Offered first Home Buying seminar in Spanish

5 One Retired Family at a Time. As the famous baby boom cycle moves closer to the retirement years, there are greater expectations of your credit union to provide the kind of support and expertise that will bring true value to this important segment of our membership. We offer free seminars covering topics such as the selling of one s home; estate planning; investment principles; and the wise use of home equity. Members of our PrimePartners program gain the advantage of additional interest on a longer term savings selection and the benefit of discounts or promotional offers from a variety of retailers in the local community. focus was on earning a living and nurturing a growing family. Today s retirees are going on long cruises, exploring the country in a new recreational vehicle, or treating themselves to that boat they have always dreamed of owning. Naturally, the credit union is ready to meet these special needs with loan packages that cater to the new initiatives of our senior members. Your credit union continues to serve as a safe haven for your savings. Our retired or soon to be retired members take great comfort from their insured savings and from our range of short and long term deposit alternatives. The credit union also partners with outside professionals to provide timely investment advice and opportunities to purchase long term care insurance, securities, mutual funds, and annuities. The retirement years bring opportunities for adventures that could not easily be taken when the Across all life cycles from the very young to the not quite so young APGFCU reaches out with services and products that precisely fit the needs of each particular group. Our members are assured that no matter what special needs they have, we can meet them. And, as always, we meet them one family at a time. Touching Our Community Sponsored and facilitated Geriatric Caregiver s Conference Sponsored Rebuilding Together initiative Maintained active PrimePartners program The Community Involvement Committee donates a portion of our net income to support charitable causes within our community

6 A Message from the Chairman David H. Gilbert, Chairman, Board of Directors I believe the most important single word is.... Service. It s the one word that captures the essence of your credit union. From our early days working out of a drawer in a small office at the Aberdeen Proving Ground to today s $500+ million institution, our goal has always been service to our members and to our community. With that service philosophy at the forefront, this past year has been one of the most notable in our history. Leading the way is our new community charter granted by the National Credit Union Administration (NCUA). We can now bring our service to a population of over 325,000 local residents in Harford and Cecil Counties. This broadening of our market brings with it some awesome responsibilities for your Board of Directors and the credit union staff. The volunteers who serve on your Board are to be congratulated for their commitment to service. Their mission is to provide strategic guidance for the credit union and to ensure that the best interests of the overall membership are served at all times. Our volunteers do an outstanding job in this area and our members can take pride that the professional staff of the credit union performs with equal dedication and skill. This Annual Report details the excellent financial accomplishments of Our record deposits and a strong capital position bode well for the challenges ahead serving our new community. Reaching the landmark $500+ million in assets is a remarkable achievement, as well as, ending the year with record membership growth. The Board and staff are dedicated to the continuing safety and soundness of your credit union. We are especially vigilant in protecting the rights and privacy of our members. Many cases of identity theft across the country have put us on a constant alert, using modern technology and high-level security procedures to reduce the likelihood of the personal information of our members reaching the wrong hands. All of us associated with this proud institution are dedicated to the mission of service. Equally disquieting are the cases of corporate fraud that hit the headlines so often. I am pleased to report that your elected Board and the executive management work collaboratively to ensure the total integrity of our operation. External independent auditors as well as the NCUA regulators examine our practices and procedures on a frequent basis. The volunteer directors and staff adhere to a code of ethics that sets a high standard in corporate values and performance. Once again, it all comes down to that single word Service! All of us associated with this proud institution are dedicated to the mission of service and we are committed to performance that constantly protects the interests of our membership. As your Chairman, I offer my gratitude to the men and women who make this credit union such a strong community asset. I encourage you as a member of APGFCU to step up and consider joining the volunteer corps that helps guide our passage into so many new and exciting challenges.

7 A Message to our Members Don W. Lewis, President/CEO I am delighted to report a year of significant milestones for your credit union, both in the field of financial services and in its increasingly active role in the community. Without question, the highlight of the year for APGFCU was our conversion to a community charter. In April, the National Credit Union Administration granted us a charter to serve anyone who lives or works in Harford or Cecil County or portions of Middle River. The positive impact was felt immediately as we began to offer the benefits of credit union services to a whole new audience. Always mindful of our 65 years of service to the military, our ties to Aberdeen Proving Ground remain of paramount importance. We worked especially hard in 2003 to ensure that the financial well-being of those serving our country would be in safe hands at such a difficult time for military families. As we touch the community one family at a time we have taken full advantage of these broader geographic horizons by establishing a formal Education Department. This is a unique initiative that spreads throughout all neighborhoods sharing the tools and tactics of good credit, wise investing habits, home buying, and family budgeting. The most noteworthy financial highlight of the year was our reaching the $500+ million asset landmark testimony to our growth and strength. We experienced record membership growth welcoming 8,162 new members; total share deposits were up 9.5% from $417.4 million to $457.1 million; and our loan portfolio rose from $303.1 million to $316.4 million. We also remained strong in capital earnings and in our liquidity positions. And once again, the auditors and federal regulators gave us a clean bill of health. This performance allows APGFCU to serve our members from a position of strength and financial stability. I see the key as controlled growth while continuing to improve the quality of our service and competitively priced products. We have created a sound foundation that delivers first class service to our membership. This means that our strategic outlook can embrace additional branches and ATMs; the smart use of technology for access anytime for our members; and the continued benefits of strategic outside alliances in areas such as car buying, tax preparation, discount brokerage, and your family s financial wellness. We have created a sound foundation that delivers first class service to our membership. I recognize that beyond the flurry of financial statistics, our employees will always be our greatest asset. Their sole focus is to bring you the highest quality service in a friendly and knowledgeable way. I also acknowledge the supportive direction of our volunteer Board of Directors and all the members of our credit union who give us the energy to make a contribution to their financial fitness one family at a time.

8 Balance Sheets As of December 31, 2003 and '99 '03 '02 '01 '00 Assets (in $millions) '99 '03 '02 '01 '00 Loans (in $millions) '99 '03 '02 '01 '00 Shares (in $millions) '99 '00 '01 '02 '03 Members (in thousands) Assets Cash and cash equivalents Investments Available-for-sale Held-to-maturity Other Loans held for sale Loans to members, net Accrued interest receivable Property and equipment, net National Credit Union Share Insurance Fund deposit Other assets Total Assets $9,037, ,492,358 53,575,521 1,097, , ,099,995 1,712,811 21,456,329 4,395,872 3,240,977 $509,729,202 $8,865, ,312,442 19,091, , , ,233,195 1,875,485 21,725,484 3,974,031 2,010,166 $469,406,937 Liabilities and Members Equity Liabilities Members shares Accrued expenses and other liabilities Total liabilities Members Equity Retained earnings, substantially restricted Accumulated other comprehensive income Total members equity Total Liabilities and Members Equity $457,054,781 $417,390,503 4,711,293 6,382, ,766, ,773,050 47,355,569 43,422, ,559 2,211,409 47,963,128 45,633,887 $509,729,202 $469,406,937

9 Statements of Income and Comprehensive Income For the years ended December 31, 2003 and Interest Income Interest on loans to members Interest on investments and cash equivalents Total Interest Income $23,156,835 4,434,432 27,591,267 $23,781,916 5,114,946 28,896,862 Sources of Income Interest Expense Dividends on members shares Net Interest Income 7,141,529 20,449,738 9,590,542 19,306, % 19.1% 67.9% Provision For Loan Losses 2,447,536 2,726,792 Net Interest Income After Provision For Loan Losses Non-Interest Income Service charges and other fees Other non-interest income Total Non-Interest Income General and Administrative Expenses Salaries and benefits Executive/senior management Other employees Office operations Occupancy expenses Members insurance Loan servicing Promotional Professional services Other expenses Total General and Administrative Expenses 18,002,202 3,939,367 2,581,088 6,520,455 1,411,489 9,606,464 3,730,867 1,599,890 49,600 1,462, ,580 1,545, ,604 20,589,566 16,579,528 3,456,104 2,193,525 5,649,629 1,332,897 8,175,197 3,173, , ,600 1,252, ,344 1,469, ,930 17,487,246 Interest on Loans Interest on Investments Other Distribution of Income 7.2% 11.5% 60.4% 20.9% Dividends Provision for Loan Losses Other Expenses Net Income 3,933,091 4,741,911 Reserves Other Comprehensive Income Unrealized holding gains / (losses) on investments classified as available-for-sale (1,603,850) 750,034 Comprehensive Income $2,329,241 $5,491,945 Supervisory Committee Our credit union s Supervisory Committee is responsible for ensuring the effectiveness of internal checks and balances, such as the system of internal control, adherence to established policies and procedures, and the overall safety and soundness of our credit union. By the Federal Credit Union Act, the Supervisory Committee is responsible for the annual external audit and the review and verification of member accounts. The Supervisory Committee assures that the credit union is healthy in all areas for which it has responsibility. An annual audit and all the work associated with it was conducted by our accounting firm, McGladrey & Pullen, LLP. Based on their report, the Supervisory Committee of APGFCU deems our credit union healthy and financially sound. The financial report as printed in this annual report is extracted from the audited financial statements. The financial statements in this report reflect the financial condition of the credit union.

10 Board of Directors Back Row - Left to Right *David H. Gilbert, Chairman Samuel A. Gilliam, SGM (Ret.) Barry D. Decker, CSM (Ret.) Windsor L. Jones *Dwight E. Hair, COL (Ret.), Treasurer Front Row - Left to Right *Sarah E. Standiford, Secretary Charles N. Alston, Sr. *John A. Blomquist, Vice Chairman *Antha W. Edwards, Assistant Treasurer *Executive Committee Executive Management Supervisory Committee Thomas T. Moxley, LTC (Ret.), Chairman George A. Freeman - Member Lee T. Hannah - Member Phillip B. Hunter - Member Marjorie E. Warfield - Member Sandra J. Sasser - Alternate Rosemary Logan, Senior Vice President - Administration William A. Schultheis, Jr., Senior Vice President - Finance Don W. Lewis, President/CEO Carol M. Thurlow, Senior Vice President - Operations Stuart Clode, Senior Vice President - Marketing Vice Presidents Katherine W. Blankenburg, Vice President - Marketing Robert L. Johnson, Vice President - Mortgage Lending Susan M. Kemen, Vice President - Branch Operations Genene E. LaCour, Vice President - Human Resources Patrick R. Mackesey, Vice President - Lending P. Robin Remines, Vice President - Information Systems Paul A. Slaby, Vice President - Accounting/Controller Other Volunteers Roger F. Brown, COL (Ret.) Christine T. Chambliss Deborah A. Dennis Doris B. Drennen Clinton Edmonds, Jr. Paul D. Eikenberg Clarence A. Fry Charles G. Hiob, Jr. Robert W. Kiely, LTC (Ret.) Nancy F. Kosko Dee Layman Michael J. Layman Earline Mango S. Scott Phillips Sarah Price Cheryl D. Rice Joyce Roberts John J. Salser Doris E. Sampson Joseph A. Traino, III, LTC (Ret.) Jean H. Weir

11 Our Mission is to empower our members to use and control their own money to improve their economic and social condition by operating our credit union as a membership-driven democratic cooperative, not-for-profit financial institution, encouraging thrift among our members and creating a source of credit at a fair and reasonable rate of interest. Our Values Our reputation for quality service is based on our commitment to you, our members. Your unique needs play a key role in every decision we make. The credit union spirit lives in our values and these values guide us in everything we do... Our members come first. We embrace change and evolve minute by minute because it benefits our members. We improve the quality of our members lives. We provide quality service that exceeds our members expectations. We employ, train, and develop credit unionists from the best and brightest the market can supply. We are a credit union movement leader.

12 Open to everyone who lives, works, worships, volunteers or attends school in Harford or Cecil County Our Family of Branches to Serve You Edgewood Branch & Operations Center 1321 Pulaski Highway Aberdeen 996 Beards Hill Road Aberdeen Proving Ground Chesapeake Avenue & Oakington Street Elkton 344 East Pulaski Highway Bel Air 321 South Main Street Havre de Grace 1016 Pulaski Highway Mailing Address P.O. Box 1176, Aberdeen, MD Member Service Center Representatives available by phone Mon-Fri 8:00am to 8:00pm (EST) Call: Option #4 Toll-free: TTY: ABBY the 24-hour Telephone Teller 24 Hours a Day Days a Year. From any number listed above, press option #2 for "ABBY" the telephone teller. Website and Online Banking Home Loan Center Representatives available Mon-Fri 8:30am to 5:00pm (EST) LOAN-391 ( ) Laurel Bush 2113 Laurel Bush Road, Bel Air