2009 Annual Report

2009Annual Report

As anticipated, 2009 proved to be quite challenging. The recession continued throughout the year as the ranks of the unemployed swelled to levels seen only one time since 1948. Consumer confidence was, and remains, alarmingly low, and at least in the near-term, slowing economic recovery. Retail sales were anemic, particularly big ticket items such as homes and automobiles. On a positive note, consumers started saving again, paying off debts, and trying to live within their means. The current recession is now on record as being the longest and deepest since the Great Depression. Credit, all types of credit, was harder to obtain because lenders feared increased credit risk as well as legislative and environmental uncertainty. Regulators scrambled to quantify the risk of their insured institutions. Reporting requirements increased along with compliance resulting from a long list of consumer-oriented protections recently enacted. Interest rates remained at historic lows with the Federal Reserve Bank doing all it could to stimulate the economy while keeping a watchful eye on inflation. And if all of this was not enough, there was the threat of a pandemic outbreak of the H1N1 virus. It now appears that the economy has bottomed out and is beginning its recovery. However, it

seems the consensus among economists is that this recovery will be hampered by high unemployment, tepid consumer confidence, and massive federal debt. As challenging as 2009 was, we were able to end the year with positive results and significant accomplishments.

Joint Report from Chairman and President/CEO

As indicated in the accompanying financial information, assets increased $28m, deposits increased $30m, loans decreased $380k, and net income was positive $581k. Loan delinquency was 1.36%, within tolerance and far better than the nation’s 100 largest banks. The Credit Union remained well capitalized, with net-worth above 8%. Strong financial results coupled with a clean supervisory audit and federal examination are further evidence of the Credit Union’s continued safety and soundness. Despite the challenging environment, volunteers and management continued to execute the strategic plan and further diversify the Credit Union’s business model. Freedom First Insurance, a wholly-owned subsidiary, had another impressive year with policies-in-force increasing by 250%. The vacuum created when competitors left the market or closed divisions created opportunities for Freedom First. As a result, the dealer finance program has been expanded to include nearly all local franchise dealers. Now, members can finance their next car purchase through the Credit Union at the dealership. Another example of environmental opportunity appeared in the area of home loans. Like dealer finance, many mortgage brokers

and mortgage lenders did not have the financial strength or desire to endure the down market. When these competitors were going out of business or leaving our area we poured additional resources into the mortgage lending division. We now have a full-time underwriter on staff and are in the final stages of obtaining lender approval from Virginia’s Housing Development Authority. Once completed, Freedom First will be one of the only locally-owned VHDA lenders in our area. Our ability to originate FHA, VA, and Conventional home loans through broker, correspondent, or portfolio programs while utilizing an in-house underwriter positions Freedom First as a premier mortgage lender in our region.

Over the past year, volunteers and management reaffirmed the Credit Union’s Core Values and commitment to Corporate Social Responsibility (CSR). CSR integrates social, environmental, and economic factors in business decision making, including corporate governance, business strategy, and ongoing operations. CSR is not an event, but rather a continuum along which the Credit Union will increasingly integrate CSR decision filters and activities into its day-to-day operations. One element of CSR is the process whereby volunteers and employees

identify community needs and develop programs to address those needs, either directly or through community partners. We call it Impact Banking, and it includes everything from our yearly community workday to community grants, scholarships, and a host of customized financial products. The newest program, Responsible Rides, is a collaborative program pooling the time and talents of Freedom First, Total Action Against Poverty, New River Valley Community Action, and Enterprise Car Sales. This program offers the opportunity for low-income residents to obtain quality affordable transportation upon completion of financial counseling, a car-care maintenance class, and a thorough qualification process. Also, with respect to environmental impact, we are happy to report that nearly all paper waste is collected throughout the branch network, shredded and recycled. These are just two examples of sustainable CSR programs with many more having been developed and more are yet to come.

Fortunately, extreme business cycles, such as the one we are in now, do not happen very often. And, as painful and frustrating as they are, those that endure benefit by receiving an education only available during such trying times. Deep

and long recessions purify business plans by forcing business leaders to honestly consider why it is they exist and what matters most when making critical operational and strategic decisions. We have taken this opportunity to assess every aspect of our operation. We have gained both insights and efficiencies that have made us stronger as we move into the new era of cooperative banking.

On behalf of the volunteers and employees of Freedom First, thank you for being a member.

Nelson ShibleyChairman

Paul PhillipsPresident / CEO

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Credit Union PhilosophyWe support the cooperative principles of self-help, self-responsibility, democracy, equality, equity, and solidarity.

Integrity and RespectIntegrity and respect guide our business practices and our relationships with our employees, our members, our business partners, and our community.

Social ResponsibilityWe strive to be a leader in corporate social responsibility through business practices, products and services that serve our members well while contributing to the well-being of local communities.

AccountabilityWe build trust that fosters organizational success and sustainability through our commitment to social and financial accountability.

CollaborationWe build relationships that are fair, equitable, and cooperative.

InnovationWe address challenges with creativity and spirited teamwork.

Helping People ProsperOur talents and resources help you achieve financial prosperity.

VisionMission

Core Values

Financial FreedomDream big! There is no limit to your potential. Our long-term vision is to serve as a catalyst, helping people and communities break through barriers to financial freedom.

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2009200820072006200520042003200220012000

$83$95

$108$130

$148$168

$190$215

$248

$277

ASSET GROWTH

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2009200820072006200520042003200220012000

$160

$91

$135

$184

$221

$76$71$71

$110

$221

LOAN GROWTH

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2009200820072006200520042003200220012000

$8$9

$11$12

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NET WORTH GROWTH

Financial Review

2008 2009 ASSETSLoans (net) $ 220,947 $ 220,567Cash and receivables 3,461 3,252 Investments 5,828 34,734 Other assets 18,079 18,013

Total Assets $ 248,315 $ 276,566

LIABILITIES & NET WORTH Payables $ 31,820 $ 29,088Member shares 195,030 225,475Net Worth 21,465 22,003

Total Liabilities & Net Worth $ 248,315 $ 276,566

2008 2009 INCOME Income from member loans $ 14,028 $ 13,741Investment & other income 4,353 6,014

Total Income $ 18,381 $ 19,755

EXPENSESOperating expenses $ 9,312 $ 10,145Dividends & interest expenses 5,669 5,472Loan loss provision 1,641 3,557NCUSIF impairment 1,293 —

Total Expenses $ 17,915 $ 19,174

NET INCOME $ 466 $ 581

STATEMENTS OF FINANCIAL CONDITION($ Amounts in Thousands)

STATEMENTS OF INCOME ($ Amounts in Thousands)

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The Credit Union’s Supervisory Committee, appointed by your Board of Directors, is given the responsibility to determine whether the operations of the Credit Union are carried out in accordance with the Federal Credit Union Act and the regulations of the National Credit Union Administration. We meet regularly to evaluate internal controls, verify cash funds and operations at the branches and to ensure that the Credit Union assets are safeguarded.

The Supervisory Committee engaged the services of Nearman, Maynard, Vallez, CPAs & Consultants, P.A., a certified public accounting firm. Their audit report included an unqualified opinion as to the fair presentation of the Credit Union’s financial statements.

Based on their report and our own observations, we can report to you that Freedom First Federal Credit Union continues to maintain the highest level of financial safety and soundness. All of us on the Supervisory Committee are proud to volunteer our time to serve you, the members of Freedom First Federal Credit Union. If you need assistance, or experience difficulties which cannot be resolved through normal channels, we encourage you to contact us directly or via any Credit Union branch manager. Thank you for your continued cooperation.

Gerald BarnesChairman, Supervisory Committee

The Nominating Committee used the Credit Union newsletter and web site to inform the membership of the Credit Union’s nomination and election process. This year, there were no at-large candidates, and no members sought nomination by petition.

Therefore, in accordance with Article V, Section 2 of the Bylaws and the official Elections Policy of the Freedom First Federal Credit Union, I hereby declare the elections closed and the following three incumbent Directors are

hereby elected without challenge – Susan Hall, Emily Jewett and Tim Sutphin. Each of these three Directors will serve a three-year term beginning this month. The Nominating Committee offers its congratulations to our newly-elected Directors.

Respectfully submitted,Weldon Dinkel Chairman, Nominating Committee

Supervisory Committee Report

Nominating Committee Report

Committee Reports

Committee Reports

Dear Shareholders,

Once again, I am pleased to present the Annual Treasurer’s Report for Freedom First Credit Union for the year ended December 31, 2009. As I write this, the national and local economies are now in the third year of a recession which has impacted everything both you and the Credit Union do. Freedom First has weathered the recessionary storm and has shown it can remain profitable while providing outstanding services to its members.

Total Assets grew from $248.3 million in 2008 to $276.6 million in 2009, an increase of $28.3 million or 11.4%. The largest component of Assets is Loans to Members which was virtually unchanged from last year at $220.6 million. Investments grew from $5.8 million to $34.7 million or 498%. This dramatic increase occurred as members increased their deposits with the Credit Union from $195.0 million in 2008 to $225.5 million in 2009, an increase of $30.5 million or 15.6 %. Our members recognize the safety and security of Freedom First and the distress in other segments of the financial community.

Lastly, Revenues in 2009 totaled $19.8 million against expenses of $19.2 million, resulting in Net Income of $581,000. While this number is smaller than we have been accustomed, it is net of assessments made by state and national regulators navigating through the turmoil of 2009. The Net Worth of the Credit Union increased to $22.0 million or 2.5%.

As we look ahead to 2010 and beyond, the uncertainty of the past is likely to continue well into 2011. Rest assured Freedom First continues to be proactive and prepared to meet the challenges ahead. On behalf of myself and all Credit Union members, I want to express my thanks and appreciation to the management and staff of Freedom First for continuing to put members first.

Frank P. Turk Treasurer

Treasurer’s Report

Treasurer’s Report

GivinG BackCommunity

The Jefferson Center Foundation ................. $5,000For: Underwriting for a Production by the National Council for the Traditional Arts for presentation of “Music from the Crooked Road”.

The Boy Scouts of America – Blue Ridge Mountain Council ..................... $4,800For: Implementation of the Soccer & Scouting Program, which enables the BSA to reach out and engage Hispanic families and children in our membership area.

Children’s Health Improvement Partnership of the New River Valley – NRCA .................... $5,000For: Purchase of a dependable vehicle that will be integral to the case work/counseling services they provide to families in the New River Valley.

The Girl Scouts of Virginia –Skyline Council ............................................. $1,500For: Assistance in funding for the “STEP AFRIKA” program that helps reach out and develop teamwork, discipline and commitment in young women in our membership area.

Historic Smithfield Plantation – Blacksburg, Virginia .................................... $1,500For: Assistance in funding the “Juneteenth Commemoration Program” that honors the African American slave population that was part of Smithfield Plantation’s history.

The Homeless Student Program, Roanoke City Public Schools ........................ $1,000For: Assistance in funding Project SEARCH, a program that assists in finding and integrating a growing number of homeless school-aged students into the city school system.

Refugee and Immigration Services............... $1,200For: Assistance in funding their outreach in the Roanoke City and County School systems as they help counsel and work with non-English proficient children and parents as they settle into life here in the Roanoke Valley as new residents of the United States.

$20,000 Awarded in Community Involvement GrantsIn 2009, Freedom First awarded $20,000 in grants to the following organizations:

$7,000 Awarded in Scholarships• Charles Perkins Scholarship ..... $1,000 each recipient Mr. Kyle O’Connor (William Byrd High School) Ms. Davina Tramuel (Salem High School)

• Fritz Kehn Scholarship ................................... $1,000 Ms. Bunge Okeyo (Roanoke Catholic School)

• Frank Turk Scholarship .................................. $1,000 Mr. Nathan Michael Cox (Salem High School)

• Torie Phillips Memorial Scholarship.............. $1,000 Ms. MacKenzie G. Tyree (Lord Botetourt High School)

• Big Creek High School (Big Creek, WV) Scholarship ..........$500 each recipient Ms. Brianna Asbury

Mr. Zachary Tyler Atwell Ms. Britney Hope Muncy Mr. Tyler Nathan Timpson

GivinG BackBoard of Directors

Supervisory CommitteeNelson Shibley, ChairmanTim Sutphin, Vice ChairmanFrank Turk, TreasurerSusan Hall, SecretaryThomas ChapmanWeldon DinkelEmily Faye JewettRoger JournellHerb Scholz

Gerald BarnesChairperson

Lois EversIra HartmanJanette Markham

Paul PhillipsPresident/CEO

As a way of recognizing the value nonprofit agencies directly provide in improving the lives of area residents, Freedom First Credit Union organizes an annual “Community Work Day.” In 2009, nine nonprofit agencies in the Roanoke and New River Valley areas directly benefited from this annual event.

• Boys & Girls Club

• Habitat for Humanity

• Headstart - New River Valley

• NRV Cares

• Presbyterian Community Center

• Salvation Army

• SWVA 2nd Harvest Food Bank

• The Greenvale School

• YMCA at Virginia Tech

2009 Community Work Day: Freedom to Make a Difference

MissionService

2009 Board Of Directors & Supervisory Committee

MailiNg aDDRESS

P.O. Box 1999Salem, VA 24153

BRaNChES

Blacksburg 1204 South Main Street Virginia Tech, Squires Student Center, College Avenue

Christiansburg 417 North Franklin Street

Roanoke 2125 Colonial Avenue, Towers Shopping Center 5102 Williamson Road Steel Dynamics Roanoke Bar Division (closed to the public)

Salem 1235 Electric Road 1900 Electric Road, Lewis Gale Hospital

Vinton 203 Virginia Avenue

OPERaTiONS CENTER

5240 Valleypark DriveRoanoke, VA 24019

(540) 389-0244 local(866) 389-0244 toll-free

www.freedomfirst.com

FREEDOM FiRST iNSuRaNCE

6375-A Peters Creek RoadRoanoke, VA 24019

(540) 362-9781

FiRST COMMuNiTy TiTlE

2847 Penn Forest Boulevard Bldg. D, Suite 203Roanoke, VA 24018

(540) 777-2550