Page 1

2011 Annual Report

Our Mission

Our Driving Principles

Helping People Prosper.

The United Nations has named 2012 the International Year of Co-operatives— acknowledging that “co-operatives drive the economy, respond to social change, are resilient to the global economic crisis, and are serious, successful businesses creating jobs in all sectors.”* At Freedom First, both our 2011 operations and our strategic planning for 2012 and beyond are guided by the seven Cooperative Principles that all cooperative enterprises aspire to:

Since 1956, we have served Virginia’s Valley Region with a full range of affordable, accessible financial services.

Our Vision


We are dedicated to developing sustainable solutions to community challenges at the individual, neighborhood, and regional levels.

principle #1 inclusiveness We are open to the entire community. A full range of traditional banking products serves all of our members, and Impact Banking products and programs meet the needs of underserved and credit-challenged members. principle #2 voice We answer to you. Our member-owners elect our all-volunteer Board of Directors. We actively seek member feedback through ongoing Net Promoter Score® surveys. principle #3 participation When our members participate, everyone wins. Better rates, fewer fees, and enhanced services are the direct result of our members’ active participation. principle #4 independence We are owned and controlled by our members, not by outside shareholders. Every decision we make is done in ways that ensure continued cooperative autonomy. principle #5 education The more our members know, the more they can thrive financially. Our free, customized financial education reaches schools, nonprofit agencies, individuals, and families throughout the community. principle #6 cooperation We forge partnerships with businesses, nonprofit agencies, governments, and schools to leverage all of our partners’ resources in ways that have the largest, most sustainable impact. principle #7 community Responsible corporate citizenship is a way of life when a company is not just operating in a community, but is truly part of it. We live and work in the same Valley Region that we serve. *International Co-operative Alliance,, accessed April 9, 2012.

J o i n t R e port f rom th e C ha i rma n a n d P r e s i d e n t / C E O

These are exciting times for Freedom First Credit Union. We have navigated through many of the challenges resulting from the recent recession and are now moving forward from a position of strength. Our performance in 2011 demonstrated our commitment to maintaining our safety and soundness while delivering value to our members and significantly advancing our Community Development mission.

The Big Picture The nation’s economic recovery is clearly on an upward trajectory. Economic expansion is not linear, however, and given the interconnectedness of the global economy, we should expect continued volatility. The overall economic scenario is similarly complex in Virginia and in our Valley Region. At 6.2 percent, unemployment in the Commonwealth is lower than the national rate but still 2.1 percentage points higher than it was when the recession began.1 And while credit scores in Virginia are higher than the national average, more than half of Virginia households report difficulty meeting their monthly expenses.2 The banking industry as a whole continued to stabilize in 2011, although sweeping regulatory reforms—while necessary—continue to hamper economic expansion. The credit union industry received tremendous positive media attention throughout the year as a result of several large banks’ attempts

to implement debit card fees. Nearly 700,000 consumers opened new credit union accounts in the month leading up to Bank Transfer Day.3 Freedom First added 4,680 new members during the year, increasing total membership to nearly 40,000.

Net Income 2010


Safe & Sound We are happy to report that Freedom First’s financial strength continued to build throughout the year. Our net income more than doubled, and our net worth, the primary measure of safety and soundness, was 10.3%, or 13.6% with secondary capital (our regulator, the National Credit Union Administration, considers credit unions to be “well capitalized” if their net worth is 7% or greater). Our accounting practices and financial statements have been independently reviewed by external auditors, who identified no material findings and issued a clean unqualified opinion (see pages

1. Reality Check: A Credit Union Tool for Building a Better Virginia, Virginia Credit Union League, 2012. 2. Building Economic Security for Virginia Families, UVA Weldon Cooper Center for Public Service, February 2011. 3. Credit Union National Association, 2011.








Net Worth 2010 2011 2011

with secondary capital 0%







11-15 for details). The NCUA stated that “the financial stability of the credit union is not a concern as a result of this examination review.”

Capacity Building


In 2010 we determined that the most effective way to assess our performance was to ask our members. We employed surveys and the collection of a Net Promoter Score® (NPS) to answer one simple question: “Would you recommend Freedom First to a friend or family member?” We set a high NPS goal of 60 percent for the Credit Union in 2011 (banks’ NPS average is 18 percent). We improved considerably from 2010 to 2011, but did not reach our goal. In June 2011 we added a transaction-based survey that invites our members to comment on specific experiences they have with Freedom First. NPS Promoters overwhelmingly credit our service and our employees’ professionalism. The exceptional service our members enjoy is only possible when we have a knowledgeable, motivated team of dedicated professionals. Our employees repeatedly report, both informally and in formal surveys, that Freedom First is a great place to work. For the second year in a row, Freedom First ranked as one of Virginia’s Best Places to Work by Virginia Business magazine. More critical comments have focused largely on our existing online banking capabilities—and as a direct result of the NPS surveys, we will introduce a greatly enhanced online banking and bill-pay system in mid-2012.

Freedom First Credit Union 2010 Score Freedom First Credit Union 2011 Score 2011 Bank Average 2011 Cell Phone Service Average








*Members selected at random from the general membership regardless of account activity. Source: Satmetrix 2011 Net Promoter® Benchmark Study of U.S. Consumers

Transactional NPS* Freedom First Credit Union 2011 Score


2011 Goal

Our new Member Business Lending department was established in 2011 to offer commercial loan services; our Mortgage Lending department has expanded and implemented a more efficient origination/processing system; and our Community Development team now includes a full-time financial educator, an affordable housing specialist, and an analyst/grant writer. Behind the scenes, our Accounting department now has upgraded systems and software to enable more robust financial analysis, our Compliance/ Internal Auditing department has more staff whose internal controls and business practices comply with the Credit Union’s growing regulatory burden, and our formalized Operations department allows our branch personnel to focus exclusively on member service.

Relational NPS*

2011 Goal

Your Credit Union is constantly changing in response to the economic environment and the needs of our membership. In 2011, we replaced our network infrastructure, implemented a new phone system, and remodeled our Operations Center to house 70 of our 150 employees. In addition, we expanded our staffing in multiple departments to increase our capacity and improve service.

Serving Our Members

10% 20% 30% 40% 50% 60% 70%

*Members selected at random following an interaction with the Credit Union; 9,169 surveys sent/1,032 responses received.

Welcoming Carilion In late 2011, Carilion Federal Credit Union’s Board of Directors unanimously selected Freedom First as their merger partner. When it was put to a vote, a full 94 percent of Carilion FCU members approved the merger. They recognized that Freedom First’s financial strength, commitment to member services, extensive product and service offerings, and superior pricing are a great match for Carilion Clinic’s employees.

Community Development Our Community Development activities have always differentiated us from other financial institutions. The growing interdependency among the business, government, and nonprofit sectors continues to make Freedom First increasingly important to key stakeholders. What began as a concept peripheral to our core function several years ago has turned into an integral part of our strategic plan, informing much of our decision making in 2011 and as we look toward the future. In 2011, funders and grant providers began to recognize the value in our initiatives, and put their own funds into play to help address community needs. We led and participated in collaborations among businesses, governments, and nonprofits to bring about sustainable community change. Our efforts have resulted in new streams of low-cost funding that help us manage liquidity, and more than $1 million in grants that allow us to deepen our commitment to strengthening the entire Valley Region. With our programs and access to grant

opportunities, we can leverage our resources beyond what we thought possible. Earning the NCUA’s lowincome designation4 enabled us to expand our field of membership and capitalize on expanded regulatory powers, while continuing to provide the exceptional value and service our members have enjoyed since 1956.

This is our community too: as the Valley Region goes, so goes Freedom First! All of us live, work, and play in the communities we serve. We are “all in” and we wouldn’t have it any other way!

In short, thanks to the hard work of the talented, mission-driven people throughout your Credit Union, the Freedom First Community Development concept has been validated. As we look toward 2012 and beyond, we are confident that the partnerships we are forging now with other community stakeholders will have a lasting, sustainable effect on the Valley Region.

Nelson Shibley Chairman

Paul Phillips President / CEO

We Live Here Too At Freedom First, we pride ourselves on being a different kind of financial institution. As a locally owned financial cooperative, we are uniquely structured to look beyond bottom-line results to needs often ignored by mainstream financial institutions. Because we are a designated Community Development Financial Institution (CDFI), we can serve as a conduit, accessing capital from outside our community to fund local programs. Our capabilities, coupled with the strength that comes with being a $250 million credit union, enable us to remain fully committed to providing a broad range of full-service banking solutions to our members throughout the Valley Region while working collaboratively with others to help build sustainable communities.

4. Credit unions earn the LICU designation when a majority of their members qualify as low income; 12 CFR 701.34.


growth a n d r e cog n i t i o n

From a student’s first checking account and basic financial education to home and auto opportunities,**


commercial lending, and investment

Freedom First offers a full suite of products, programs,

and services designed to meet the needs of individuals, families, businesses, and nonprofit agencies throughout the entire community.

Serving Our Members In 2011, more people than ever before recognized the value Freedom First brings to the Valley Region, and 4,680 signed up to become new memberowners. We welcome each and every one of them.

Awards and Accolades Our mission of “helping people prosper” brings meaning to our work and serves to inspire our employees, and in 2011 our efforts were recognized in multiple ways. • Freedom First was chosen by the Board and membership of Carilion Federal Credit Union as a merger partner. • Drew national attention for our Responsible Rides program, a model of successful partnerships for other credit unions to emulate.1 • Named Corporate Citizen of the Year by NAACP-Roanoke.

To better serve our growing membership, • Won the Dora Maxwell Award we set plans into motion in 2011 to for Social Responsibility for the establish two new branches that Commonwealth of Virginia. exemplify our dual mission of providing premium products, • Named one of 2011’s Top 10 exceptional value, Community-Focused Credit Total Loans Granted and convenience to Unions in the country for our our members while $67,430,944 community grant program.2 also reaching out to those historically • Highlighted at Roanoke’s underserved by Thriving Communities Institute for traditional banks. Our new, full-service Responsible Rides, where President/ Daleville branch will serve our growing CEO Paul Phillips spoke about membership in Botetourt County, collaboration among community and our branch in Roanoke’s West stakeholders. End neighborhood will serve as a • Awarded CDFI grant funding to neighborhood anchor as well as a establish a micro-branch in a much-needed financial institution. Both distressed urban neighborhood. branches are in development with plans to open in early 2013. • Named one of Virginia’s Best Places to


1. National Credit Union Foundation, REAL Solutions League 2., January 2012

Work by Virginia Business magazine.

At Freedom First, we recognize that as important as it is to keep our financial house in order, we are a not-for-profit credit union and are therefore compelled to deliver products and programs to help the disadvantaged and strengthen communities. We believe this dual focus is why credit unions were created, and our commitment to it is what makes us unique in the financial services industry.

Impact Banking

Traditional Banking

Our Impact Banking products and programs ensure that everyone has access to affordable financial services.

Since 1956, Freedom First Credit Union has served the Roanoke and New River Valleys with a mission of helping people prosper. With nearly 40,000 members and assets over $250 million, we help people reach their financial goals through a broad range of low-cost, high-value banking products and services.

• Home loans—for purchases and refinancing (FHA, VA, VHDA, USDA, Portfolio)

• Free share draft (checking) accounts

• Investment and wealth management through Freedom First Investment Services.**

• Payday Alternative Loan: saved borrowers an average of $620 each in interest/fees in 2011 • Credit Builder Loans: 103 loans in 2011, totaling $66,235 • Micro Loans: the majority of loans issued in 2011 were for transportation, home repairs, debt consolidation, and medical expenses. Average Micro Loan amount $1,397

• Basic and high-yield share (savings) and certificate accounts

• Responsible Rides: award-winning collaboration between Freedom First and area businesses and nonprofit agencies

• Free online banking and bill payment

• Convenient auto loans, right at the dealership • Home and auto insurance through Freedom First Insurance, LLC.*

• Debit and credit cards, including cashback platinum Visa® cards

• 10 retail branches • 50,000+ surcharge-free ATMs

*Insurance products are not sold by or products of Freedom First Federal Credit Union. **Securities products and investment advisory services are offered through MetLife Securities, Inc. (MSI) (member FINRA/SIPC), a registered investment advisor; NY, NY. MetLife agents do not provide tax advice. MSI and Freedom First are not affiliates and MSI products are not NCUA Insured. No Credit Union Guarantee. May Lose Value. Not Obligations of the Credit Union.


A f f ordabl e H ous i n g a n d E n e rg y E f f i c i e n c y

Freedom First has responded to the growing need for affordable home loan products by greatly expanding the availability of down payment assistance programs, financial education, and partnerships with government, business, and nonprofit partners to help qualified individuals and families become home owners. We make FHA, VA, USDA, and VHDA programs available to borrowers, and have partnered with Community Housing Partners and cafe2 to expand our footprint in the housing market. In addition to down payment assistance and weatherization, energy efficiency, and accessibility programs, we have enhanced our customized

Francisco and Imelda Zuniga The Zunigas, first-generation immigrants, had a successful small business and were leaders in their church. College tuition and medical bills wiped out their savings, so they were unable to qualify for a mortgage. Freedom First offered them financial education and credit counseling to help them create a budget, pay down their debt, and begin to save for a home. The Zunigas’ journey to their new home took six steps:

underwriting practices. Our new Freedom Advantage program allows us

1. Financial Education

to serve home buyers who may be overlooked using common industry

2. Credit Counseling

practices. When we understand each member’s unique situation, we can

3. Credit Builder Loan

address their goals with their long-term financial health in mind.

4. Secured Visa Card 5. Down Payment Assistance 6. Affordable Home Loan

“We could not get student loans for our daughter’s college tuition, and we fell behind in other payments, mostly medical bills. Freedom First helped us re-establish and build good credit, and qualified us for a mortgage. We trust Freedom First Credit Union.”


C ommu n i t y S upport

Academic Scholarships $1,000 Charles Perkins Scholarships

$500 Big Creek Scholarships

• Joshua Kingery, Lord Botetourt High School: studying business administration at Roanoke College

Awarded each year to four students at Big Creek High School in War, West Virginia, Charles Perkins’ hometown. The 2011 scholarships went to Alicia Arnett, Kaila Cooper, Brittany Hubbard, and Samantha Thomas.

• Kelsey Rae Tripp, William Byrd High School: studying human nutrition at Virginia Tech Charles Perkins was president and general manager of Freedom First, and his vision and determination were the driving force behind our affiliation with Virginia Tech. $1,000 Fritz Kehn Scholarship • Lucas Tyree: studying agriculture at the University of Hawaii with plans to teach sustainable agriculture practices to the Monacan tribe in Virginia Fritz Kehn was one of the charter members of the Credit Union, a General Electric sheet metal foreman who became the first Credit Union president. $1,000 City of Salem/Frank Turk Scholarship • Jessica Sheppard, Salem High School: studying special education at Concord University Frank Turk is a current Credit Union board member who served with the City of Salem Employees Credit Union before it merged with Freedom First.

$1,000 Torie Phillips Scholarship Named in memory and in honor of Freedom First President/CEO Paul Phillips’ daughter, this scholarship is awarded each year to a Lord Botetourt High School graduate. Brooke Whitehead was awarded the scholarship in 2011. Cabell Brand Scholarship In 2011, we entered into a partnership with the Cabell Brand Center for Global Poverty and Resource Sustainability to offer a new scholarship to students interested in poverty, environment, and peace issues. Our first $1,000 scholarship will be awarded in 2012.

Financial Education In 2011 we hired a full-time community educator who develops customized financial education programs for schools, individuals, families, nonprofits, and businesses.



• M


• S



Community Grants Promoting a healthy, sustainable quality of life is central to our mission. To that end, Freedom First Credit Union awarded more than $18,000 to six local nonprofits in 2011 to support their efforts to break down barriers, enable people to fully participate as local citizens, and provide opportunities to help families achieve economic success. Community High School: $5,000 to support the production of Miss Lucy, a folk opera based on the life of Roanoke education pioneer Lucy Addison Roanoke Community Garden Association: $5,000 to fund a community garden in Southeast Roanoke Rescue Mission: $3,425 to fund supplies for the Bless My Sole program Katie’s Place Farm: $2,325 to help fund a permanent home for persons with intellectual and developmental disabilities Girl Scouts of the Virginia Skyline Council: $1,300 to fund the In Her Shoes career expo and mentor event Virginia Cooperative Extension: $1,000 to fund the Master Financial Education Volunteer program


Community Work Day 2011 In recognition of the value nonprofit agencies directly provide in improving the lives of area residents, we organize an annual Community Work Day on the Columbus Day holiday to help area agencies complete projects they’re unable to complete on their own. From installing gutters to hauling community garden stones to helping families apply for a holiday gift program, our staff spent their holiday cheerfully helping area nonprofits and their clients. 2011 Community Work Day Agencies Montgomery County Emergency Assistance Program NRV Cares Rescue Mission Roanoke Community Garden Association Salvation Army Trust House Turning Point Shelter Virginia Amateur Sports West End Center for Youth




May 13, 2011


Supervisory May 13, 2011Committee May 13, 2011 Freedom First Credit Union Roanoke, Virginia Supervisory Committee INDEPENDENT AUDITOR’S REPORT Supervisory Committee We have First audited theUnion accompanying consolidated statements of financial condition of Freedom First Freedom Credit Freedom First Credit Union31, 2011 and 2010, and the related statements of income, members' equity, Credit Union as of March Roanoke, Virginia Roanoke, Virginia comprehensive income, and cash flows for the years then ended. These financial statements are the May 13, 2011 of the Credit Union's Management. Our responsibility is to express an opinion on these responsibility We have audited the accompanying consolidated statements of financial condition of Freedom First We have audited accompanying consolidated financial ofcondition Freedom First consolidated financial statements based on2010, our audits. Credit Union as ofthe March 31, 2011 and and statements the related of statements income, of members' equity, Credit Union asincome, of March 2011 and for 2010, thethen related statements income,statements members' are equity, comprehensive and31,cash flows theand years ended. These of financial the Supervisory Committee comprehensive income, and cash flows for the years then ended. These financialan the We conducted in Union's accordance with auditing generally instatements the United States responsibility ofour theaudits Credit Management. Ourstandards responsibility is toaccepted express opinion onare these Freedom FirstThose Credit Union Union's responsibility of thestandards Credit Management. Ourperform responsibility is to an opinionassurance on these of America. require that and the audits to express obtain reasonable consolidated financial statements based onwe ourplan audits. Roanoke, Virginia consolidated financial statements based are on our about whether the financial statements freeaudits. of material misstatement. An audit includes examining, on aconducted test basis,our evidence the with amounts and disclosures in the financial AnStates audit We audits supporting in accordance auditing standards generally acceptedstatements. in the United We have audited accompanying consolidated statements ofgenerally financial condition First We conducted our the audits accordance with auditing in of the United States also includes assessing theinaccounting principles used and significant estimates made byFreedom Management, of America. Those standards require that we plan and standards perform the audits toaccepted obtain reasonable assurance Credit Union as of March 31, 2011 and 2010, and the related statements of income, members' equity, of America. Those standards require that plan andpresentation. perform the audits toAn obtain assurance as wellwhether as evaluating the overall financial statement We believe thatreasonable our auditsexamining, provide a about the financial statements arewe free of material misstatement. audit includes comprehensive income, andstatements cash flowsareforfree theofyears thenmisstatement. ended. TheseAn financial statements are the about whether the financial material audit includes examining, reasonable basis for our opinion. on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit responsibility of the Credit Union's Management. Our responsibility is to express an opinion on on a includes test basis,assessing evidencethe supporting theprinciples amounts used and disclosures in theestimates financialmade statements. An these audit also accounting and significant by Management, consolidated financial statements based on our audits. alsowell includes assessing accounting principles used and significant estimates made In our opinion, the consolidated financial statements referred to We above present fairly, inManagement, allprovide materiala as as evaluating thethe overall financial statement presentation. believe that ourby audits as well asthe evaluating the overalloffinancial presentation. believe ourand audits provide respects, financial position Freedomstatement First Credit Union as ofWe March 31,that 2011 2010, and thea reasonable basis for our opinion. We conducted our in accordance with auditing standards in the United States reasonable basis foraudits our opinion. results of its operations and its cash flows for the years then generally ended in accepted conformity with accounting of America. Those standards require that we plan and perform the audits to obtain reasonable assurance principles generally in thefinancial United States of America. In our opinion, the accepted consolidated statements referred to above present fairly, in all material about the statements are free ofCredit material misstatement. An31,audit includes examining, In ourwhether opinion, thefinancial consolidated financial statements referred fairly, all material respects, the financial position of Freedom First Union astoofabove Marchpresent 2011 andin2010, and the on a test basis, evidence supporting the amounts and disclosures in the financial statements. An respects,ofthe position Freedom Union of March 31, 2011 and 2010, andaudit the results its financial operations and itsof cash flowsFirst for Credit the years thenas ended in conformity with accounting also includes assessing the accounting principles used and significant estimates made by Management, results of generally its operations and initsthe cash flows for of theAmerica. years then ended in conformity with accounting principles accepted United States as well as generally evaluatingaccepted the overall financial presentation. We believe that our audits provide a principles in the United statement States of America. reasonable basis for our opinion. Nearman, Maynard, Vallez, CPAs A-1 In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, financial position of Freedom First Credit Union as of March 31, 2011 and 2010, and the Nearman,the Maynard, Vallez, CPAs results of its operations and its years then ended in conformity with accounting Nearman, Maynard, Vallez, CPAscash flows for the A-1 principles generally accepted in the United States of America. A-1

Nearman, Maynard, Vallez, CPAs Nearman, Maynard, Vallez, CPAs Nearman, Maynard, Vallez, CPAs

Nearman, Maynard, Vallez, CPAs Nearman, Maynard, Vallez, CPAs A-1


C o n sol i dat e d S tat e m e n ts o f F i n a n c i al C o n d i t i o n Assets Cash and cash equivalents $ Investments: Available-for-sale Other Federal Home Loan Bank (FHLB) stock Loans held-for-sale Loans receivable, net of allowance for loan losses Accrued interest receivable Premises and equipment, net National Credit Union Share Insurance Fund deposit Other assets

March 31, 2011 3,513,679 $

2010 3,492,332

503,344 14,087,796 1,911,900 — 210,053,829 777,321 6,684,481 2,072,553 14,481,856

965,884 39,935,107 1,686,900 802,215 212,927,244 776,548 7,121,380 2,172,872 10,101,379

Total Assets





Liabilities and Members’ Equity Liabilities Members’ share and savings accounts $ Borrowed funds Interest payable Accrued expenses and other liabilities Uninsured secondary capital

March 31, 2011


198,805,596 $ 20,500,000 106,497 1,616,430 9,278,000

228,601,223 27,500,000 182,555 1,522,459 —



Members’ Equity Regular reserve Undivided earnings Accumulated other comprehensive income (loss)

5,751,716 18,426,715 (398,195)

5,751,716 16,685,985 (262,077)



Total liabilities

Commitments and contingent liabilities

Total members’ equity

Total Liabilities and Members’ Equity






C o n sol i dat e d S tat e m e n ts o f I n com e Interest Income Interest on loans receivable $ Interest on investments Interest income Interest Expense Dividends on members’ share and savings accounts Interest on borrowed funds Interest expense Net Interest Income Provision for Loan Losses Net Interest Income After Provision for Loan Losses Non-interest Income Insufficient funds fees Interchange income Other miscellaneous income ATM fees Other service fees Loan fees NCUSIF recapitalization Other non-operating income Non-interest income Non-interest Expense Compensation and employee benefits Operation expense Loan servicing Education and promotion expense NCUA assessment Occupancy expense Professional and outside services Loss on disposition of assets acquired in liquidation, net Impairment of corporate credit union membership capital Loss on disposition of premises and equipment, net Non-interest expense Net Income


March 31, 2011


12,812,041 $ 58,368 12,870,409

13,995,632 125,268 14,120,900

2,028,750 1,163,057 3,191,807 9,678,602 3,220,593 6,458,009

4,080,539 1,183,369 5,263,908 8,856,992 4,213,313 4,643,679

2,483,494 1,395,356 990,355 371,504 358,793 283,194 — — 5,882,696 12,340,705

1,843,740 1,288,356 728,111 310,497 430,026 211,167 1,292,646 115,788 6,220,331 10,864,010

5,400,272 2,531,403 689,277 602,169 554,469 553,708 218,654 50,023 — — 10,599,975

5,405,983 1,930,189 669,482 410,140 325,931 555,220 179,472 41,275 500,855 872 10,019,419





C o n sol i dat e d S tat e m e n ts o f M e mb e rs ’ E q u i t y a n d C ompr e h e n s i v e I n com e Members’ Equity Accumulated Other Comprehensive Income (Loss)

Regular Reserve

Undivided Earnings

Balance, March 31, 2009 Net income Change in unrealized gain/(loss) on securities Change relating to pension plan accounting

$ 5,751,716 —

$ 15,841,394 844,591

$ (825,989) —

$ 20,767,121 844,591





Balance, March 31, 2010 Net income Change in unrealized gain/(loss) on securities Change relating to pension plan accounting

5,751,716 —

16,685,985 1,740,730

(262,077) —

22,175,624 1,740,730





$ 5,751,716

$ 18,426,715

$ (398,195)

$ 23,780,236

Balance, March 31, 2011


Comprehensive Income March 31, Net Income Other Comprehensive Income or (Loss) Net unrealized holding (losses)/gains on securities arising during the year Adjustment due to pension plan accounting Comprehensive Income


2011 $ 1,740,730

2010 $ 844,591

(12,756) (123,362) (136,118)

11,240 552,672 563,912

$ 1,604,612

$ 1,408,503

C o n sol i dat e d S tat e m e n ts o f C ash Flows Operating Activities Net income $ Adjustments Provision for loan losses Depreciation and amortization of premises and equipment Loss on assets acquired in liquidation, net Loss on disposition of premises and equipment, net Amortization of investment premiums/discounts Amortization of deferred loan origination costs Changes in operating assets and liabilities Loans held-for-sale Accrued interest receivable Other assets Interest payable Accrued expenses and other liabilities Uninsured secondary capital Net cash provided by operating activities

March 31, 2011 1,740,730




3,220,593 529,326 50,023 — 2,553 701,303

4,213,313 568,600 41,275 872 5,823 392,450

802,215 (773) (4,553,862) (76,058) 93,971 9,278,000 11,788,021

(802,215) 86,429 (2,087,404) (2,560) 108,391 — 3,369,565

Investment Activities Purchases of FHLB stock (225,000) — Premises and equipment (92,427) (31,738) Proceeds from Maturities, paydowns and sales of available-for-sale securities 447,231 1,011,283 Sale of mortgage loans — 3,047,750 Net change in Other investments 25,847,311 (19,134,115) Loans receivable, net of charge-offs (1,526,291) 1,286,801 NCUSIF deposit 100,319 (1,610,248) Recoveries on loans charged off 477,810 294,037 Net cash provided by (used in) investing activities 25,028,953 (15,136,230) Financing Activities Net change in members’ share and savings accounts (29,795,627) 12,060,079 Repayments of borrowings (7,000,000) — Net cash (used in) provided by financing activities (36,795,627) 12,060,079 Net Change in Cash and Cash Equivalents 21,347 293,414 Cash and Cash Equivalents at Beginning of Year 3,492,332 3,198,918 Cash and Cash Equivalents at End of Year $ 3,513,679 $ 3,492,332 Supplemental Cash Flow Disclosures Dividends and interest paid Loans receivable transferred to other assets


3 ,267,865








Treasurer’s Report Dear Shareholders: The economy, both nationally and locally, is similar to the family car‌it is no longer new and efficient, and it takes a certain amount of tinkering to keep it in good condition. Likewise, the economy seems to be moving forward in fits and jumps. For every good indicator, something spooks the markets, resulting in setbacks. Locally, the economy is improving with lower unemployment and somewhat higher retail sales, but the housing market, one of the key drivers of Freedom First, is still moving along very slowly. An economy like we knew in 2007 is still 15 months away. Here at Freedom First, due to some very strategic planning and continued commitment by staff, we have not only

survived 2011, but positioned ourselves very well for 2012 and 2013. Looking at the numbers, Assets grew by only $3.9 million compared to 2010, while Net Income increased by $1.33 million to a total of $2.3 million. Much of this was accomplished by smaller loan/loss provisions and smaller dividend and interest expenses. One of the most important indicators of financial success is the Net Worth of the Credit Union, which increased from $23.055 million to $25.186 million, or $2.1 million. Our Credit Union has been examined by NCUA, our regulator, and audited by Nearman, Maynard, Vallez, CPAs. Both attest to the soundness and high quality of our Credit Union.

Frank P. Turk Treasurer

Consolidated Statement of Condition (Unaudited) $ Amounts in Thousands

Consolidated Income Statement (Unaudited) $ Amounts in Thousands


12/31/2010 12/31/2011 INCOME

12/31/2010 12/31/2011

Loans (net) $ 215,318 $ 206,542 Cash 4,069 4,073 Investments 15,120 22,217 Other assets 17,952 23,537

Income from member loans $ 13,088 12,348 Investment & other income 5,979 6,132

Total Assets

Total Income

$ 252,459

$ 256,369


$ 27,190



Secondary capital 9,278 9,278 Member shares 192,936 198,533 Net worth 23,055 25,186 Total Liabilities & Net Worth


As we look forward, a level of uncertainty is still just outside our window; however, I believe the steady progress being made on a number of fronts will serve us well in the coming year. On behalf of myself and the Credit Union family, I want to express our sincere appreciation to the management and staff of Freedom First Credit Union, because without their diligence and hard work, these successes would not be possible.

$ 252,459

$ 256,369

$ 19,067

$ 18,480

EXPENSES Operating expenses $ 10,626 $ 12,100 Dividends & interest expenses 3,808 2,377 Loan loss provision 3,680 1,714 Total Expenses

$ 18,114

$ 16,191



$ 2,289


Nominating Committee Report

Supervisory Committee Report

The Nominating Committee used the Credit Union newsletter, website, and lobby notices to inform the membership of the Credit Union’s nomination and election process for Board of Directors. This year, four applications were received and found to be in order, and no members sought nomination by petition.

The Credit Union’s Supervisory Committee has the responsibility to determine that the operations of the Credit Union are carried out in accordance with the Federal Credit Union Act and the rules and regulations of the National Credit Union Administration. This year, we have directed an emphasis on compliance, fraud prevention, the Bank Secrecy Act, and many other new rules that affect the Credit Union.

In accordance with Article V, Section 2 of the Bylaws and the official Elections Policy of Freedom First Federal Credit Union, an election will be held at the Annual Meeting on May 10, 2012. The four nominees are: Thomas Chapman, Roger Journell, Gregg Lewis, and Nelson Shibley. Each of the three elected Directors will serve a 3-year term beginning this month, May 2012. Susan Hall Chair, Nominating Committee

The Supervisory Committee engaged the services of Nearman, Maynard, Vallez, CPAs, 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 a safe and sound financial institution.

This is a special Annual Meeting for Freedom First Credit Union. We welcome the officers and members of Carilion Federal Credit Union and look forward to adding them to the rhythm of our superb group of volunteers and staff at Freedom First Credit Union. The Supervisory Committee would like to thank you for your cooperation and support of the Credit Union. Gerald Barnes Chairman, Supervisory Committee

Board of Directors

Nelson Shibley, Chairman Tim Sutphin, Vice Chairman Frank Turk, Treasurer Susan Hall, Secretary Thomas Chapman Emily Faye Jewett Roger Journell Dan Merenda Jared Poff

Supervisory Committee

Gerald Barnes Chairman Ira Hartman Emily Faye Jewett


Paul Phillips



Mailing Address


P.O. Box 1999, Salem, VA 24153

1204 South Main Street

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, LewisGale Hospital

Vinton 203 Virginia Avenue

Virginia Tech Squires Student Center, College Avenue

Federally insured by NCUA.

Operations Center 5240 Valleypark Drive, Roanoke, VA 24019 (540) 389-0244 local / (866) 389-0244 toll-free

Freedom First Insurance 6375-A Peters Creek Road, Roanoke, VA 24019 (540) 362-9781

2011 Annual Report  

2011 Annual Report

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