2010 Audit Report

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• Langue: English

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United Federal Credit Union
Consolidated Financial Report
with Additional Information
December 31, 2010United Federal Credit Union
Contents
Report Letter 1
Consolidated Financial Statements
Statement of Financial Condition 2
Statement of Income 3
Statement of Members' Equity 4
Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6-23
Additional Information 24
Report Letter 25
Consolidating Statement of Financial Condition 26
Consolidating Statement of Income 27Independent Auditor's Report
To the Board of Directors
United Federal Credit Union
We have audited the accompanying consolidated statement of financial condition of United
Federal Credit Union (the "Credit Union") as of December 31, 2010 and 2009 and the related
consolidated statements of income, members’ equity, and cash flows for the years then ended.
These consolidated financial statements are the responsibility of the Credit Union's
management. O ur responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of United Federal Credit Union a t
December 31, 2010 and 2009 and the consolidated results of its operations, members' equity,
and its cash flows for the years then ended, in conformity with accounting principles generally
accepted in the United States of America.
January 24, 2011
1United Federal Credit Union
Consolidated Statement of Financial Condition
December 31, December 31,
2010 2009
Assets
Cash and cash equivalents $ 30,078,443 $ 67,070,797
Investment securities - Available for sale (Note 2) 105,066,449 75,038,318
Time deposits with other financial institutions 12,628,000 14,750,000
Loans to members - Net (Note 3) 1,011,775,781 887,533,579
Accrued interest receivable 3,840,520 3,689,080
Premises and equipment - Net (Note 4) 44,140,729 42,460,889
NCUSIF deposit (Note 15) 8,701,857 8,128,336
FHLB stock 5,960,400 4,868,500
CenCorp member capital share deposit 455,329 534,244
Other assets 5,806,479 4,147,931
$ 1,228,453,987 $1,108,221,674Total assets
Liabilities and Members' Equity
Liabilities
Members' share and savings accounts (Note 5) $ 985,825,324 $ 885,864,156
Borrowed funds (Note 7) 93,257,719 86,602,205
Accrued interest payable 992,816 1,027,201
Accrued expenses and other liabilities 13,080,368 10,415,966
Total liabilities 1,093,156,227 983,909,528
135,297,760 124,312,146Members' Equity
$ 1,228,453,987 $1,108,221,674Total liabilities and members' equity
See Notes to Consolidated Financial Statements. 2United Federal Credit Union
Consolidated Statement of Income
Year Ended
December 31, December 31,
2010 2009
Interest Income
Loans $ 64,492,061 $ 52,679,546
Investment securities and other 2,466,011 1,352,649
Total interest income 66,958,072 54,032,195
Interest Expense
Members' share and savings accounts 15,677,583 18,586,119
Borrowed funds and line of credit 3,620,851 4,017,114
19,298,434 22,603,233Total interest expense
Net Interest Income - Before provision for loan losses 47,659,638 31,428,962
11,616,890 9,896,732Provision for Loan Losses - After provision for loan losses 36,042,748 21,532,230
Noninterest Income
Fees and charges 18,925,425 16,833,335
Recapitalization of NCUSIF deposit - 3,765,575
Insurance commissions 1,171,455 837,170
Other 1,475,942 466,891
Total noninterest income 21,572,822 21,902,971
Noninterest Expenses
Compensation and benefits 23,880,460 18,880,221
Operating expenses 16,879,665 14,262,068
Occupancy 2,950,471 2,399,229
Impairment - NCUSIF deposit - 1,157,013
Other 3,005,284 1,745,974
46,715,880 38,444,505Total noninterest expenses
$ 10,899,690 $ 4,990,696Net Income
See Notes to Consolidated Financial Statements. 3United Federal Credit Union
Consolidated Statement of Members' Equity
Accumulated
Other
Comprehensive
Appropriated Unappropriated Income Total
Balance - January 1, 2009 $ 22,892,415 $ 95,776,031 $ - $ 118,668,446
Comprehensive income:
Net income - 4,990,696 - 4,990,696
Change in unrealized gain
on securities available
653,004for sale - - 653,004
Total comprehensive
5,643,700income
Balance - December 31, 2009 22,892,415 100,766,727 653,004 124,312,146
Comprehensive income:
Net income - 10,899,690 - 10,899,690
Change in unrealized gain
on securities available
85,924for sale - - 85,924
Total comprehensive
10,985,614income
$ 22,892,415 $ 111,666,417 $ 738,928 $ 135,297,760Balance - December 31, 2010
See Notes to Consolidated Financial Statements. 4United Federal Credit Union
Consolidated Statement of Cash Flows
Year Ended
December 31, 2010 December 31, 2009
Cash Flows from Operating Activities
Net income $ 10,899,690 $ 4,990,696
Adjustments to reconcile net income to net cash from operating activities:
Depreciation 2,403,726 2,045,926
Amortization of securities 678,509 118,479
Provision for loan losses 11,616,890 9,896,732
Impairment - NCUSIF deposit - 1,157,013
Recapitalization - NCUSIF deposit - (3,765,575)
Impairment - CenCorp member capital share deposit 78,915 165,756
Net change in:
Accrued interest receivable (151,440) (1,043,401)
Other assets (1,658,548) 1,288,161
Accrued interest payable (34,385) (230,934)
Accrued expenses and other liabilities 2,664,402 637,452
Net cash provided by operating activities 26,497,759 15,260,305
Cash Flows from Investing Activities
Proceeds from maturities and principal paydowns of investment securities -
Available for sale 62,722,023 21,440,815
Purchases of investment securities - Available for sale (93,342,739) (87,830,597)
Net increase in loans to members (135,859,092) (51,374,002)
Increase in NCUSIF deposit (573,521) (3,013,509)
Purchases of FHLB stock (1,091,900) -
Purchases of premises and equipment (4,083,566) (3,950,072)
Proceeds from maturities of time deposits with other financial institutions 11,461,000 13,968,000
Purchase of time deposits with other financial institutions (9,339,000) (28,718,000)
Cash and investments received from the acquisition of Clearstar Federal
- 42,706,496Credit Union
Net cash used in investing activities (170,106,795) (96,770,869)
Cash Flows from Financing Activities
Net increase in members' shares and savings accounts 99,961,168 132,096,547
Proceeds from FHLB advances 18,000,000 10,000,000
Repayment of FHLB advances (11,344,486) (17,265,988)
Net repayment of revolving credit facilities - (7,254,243)
106,616,682 117,576,316Net cash provided by financing activities
Net (Decrease) Increase in Cash and Cash Equivalents (36,992,354) 36,065,752
67,070,797 31,005,045Cash and Cash Equivalents - Beginning of year
$ 30,078,443 $ 67,070,797 - End of year
$ 19,332,819 $ 22,834,167Supplemental Cash Flow Information - Cash paid for interest
During 2009, the Credit Union acquired Clearstar Federal Credit Union. See Note 14 for the additional details on the assets and
liabilities acquired.
See Notes to Consolidated Financial Statements. 5United Federal Credit Union
Notes to Consolidated Financial Statements
December 31, 2010 and 2009
Note 1 - Nature of Business and Significant Accounting Policies
Nature of Business - United Federal Credit Union is a nonprofit financial cooperative
operating in Michigan, Ohio, Arkansas, North Carolina, North Dakota, and Nevada.
The Credit Union's primary source of revenue is interest income resulting from loans
made to its members, many of whom live and work in southwestern Michigan, as well as
fees and charges.
On September 25, 2009, the Credit Union acquired Clearstar Federal Credit Union.
See Note 14 regarding the acquisition.
Principles of Consolidation - During 2010, the Credit Union formed United Holdings,
LLC, a 100 percent-owned subsidiary, and United Diamond Insurance Agency, LLC
(UDIA), a credit union service organization that provides insurance brokerage services
to credit union members. UDIA is 100 percent owned by United Holdings, LLC. The
consolidated financial statements include the accounts of Federal Credit Union,
United Holdings, LLC, and UDIA, which are collectively referred to as the "Credit
Union" throughout the report. All significant intercompany balances and transactions
have been eliminated in consolidation.
Use of Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America requires
management to make estimates and assump