7 6 5 4 3 2 1 8 - Elevations Credit Union

safe. sound. local. 

2008 Annual Report

2008 fi nancial highlights 

77,000 

76,500 

76,000 

75,500 

75,000 

74,500 

$650 

$600 

$550 

$500 

900 

800 

700 

600 

75,444 75,569 

2005 2006 2007 2008 

557 

Member Growth 

75,691 

76,520 

Total Number of Members 

2005 2006 2007 2008 

691 

Total Loans 

(in millions $) 

548 

Total Loans 

523 

600 

$850 

$800 

$750 

$700 

$650 

$600 

$550 

623 

Total Deposits 


652 

2005 2006 2007 2008 

Total Deposits 

asset growth in 2008 to $893M 

deposit growth in 2008 to $804M 

© Copyright Elevations Credit Union 2009 

Assets 


723 

758 

2005 2006 2007 2008 

Total Assets 

893 

70 

60 

50 

40 

30 

0.60 

0.30 

0.00 

-0.30 

-0.60 

-0.90 

62.7 

0.02 

0.33 

ROA 

681 

Capital 


69.1 

65.1 

Capital 

0.47 

804 

63.1 

2005 2006 2007 2008 

Return on Assets (%) 

0.22 * 

2005 2006 2007 2008 

-0.65 ** 

*Before the write down of Elevations capital in the corporate credit 

unions due to the NCUA’s Corporate Credit Union Stabilization Act 

** After the write down of Elevations capital in the corporate credit 

unions due to the NCUA’s Corporate Credit Union Stabilization Act

table of contents 

Joseph Wilson 

Mortgage Loan Originator 

2 Letter from the Chair 

3 Letter from the President 

4 Board of Directors 

6 Supervisory Committee 

8 Volunteer Committees 

10 New Branch Openings 

11 Kids Fair sponsored by Rags to Riches 

12 Wealth Management Services 

13 Mortgages 

14 Member Education 

15 Community Relations 

19 Branch Managers 

20 NCUA Corporate Stabilization Plan 

21 Financials 

45 Senior Leadership Team 

At Elevations Credit Union, we love the outdoors as much 

as you do. In this annual report, you’ll see photos of our 

staff, management and board members at work and at play. 

Our members know that there’s nothing like getting outside 

and hitting the slopes, pedaling on the bike trails, hiking 

the mountains, or just taking the dog for a walk as a great 

way to recharge the batteries, fi ll the senses and live life to 

its fullest. This enthusiasm for nature and the environment 

carries over into our work too. All this exercise, fresh air and 

dramatic scenery inspires us to deliver outstanding member 

service, whether it’s 

over the phone, in 

person at one of 

our many branch 

locations, or online 

at ElevationsCU.com. 

“The Rocky Mountain area has so many 

outdoor activities, it’s hard to choose only one. 

Hiking to Bear Peak or skiing the front range at 

elevations where you feel you can touch the sky 

are only two among many I enjoy. And speaking 

of heights, Elevations Credit Union fi ts my 

style too — so many opportunities as a volunteer 

to learn, grow, and serve my community.” 

- Jo Hetherington 

Jo Hetherington 

Board of Directors

letter from the chair 

Dear Members, 

2008 was a challenging year for Elevations Credit Union. Early in the year, our beloved and respected 

CEO, Bill Sterner, died suddenly while attending a Legislative Forum at the Colorado State Capitol. Even 

in the best run companies, the sudden death of a CEO is disruptive. Immediately, your Board of Directors 

put a plan in place to fi nd a new CEO who would take the reins of an excellent credit union and catapult it 

forward to becoming the best. We conducted a national search for a new CEO that brought us over 200 

qualifi ed candidates from whom to choose. 

In August, we selected Gerry Agnes as President and CEO. It was not only Gerry’s background in credit 

unions, non-profi ts and banks that elevated him to the top of the list; it was also his critical business 

acumen, his deep understanding of our business model, his expertise in strategic planning, his history of 

leadership and his proven track record of team building that made our decision easy. 

Your Directors are extremely appreciative of the extraordinary efforts of all credit union management and 

staff when the economy was in the midst of collapse and during a time when large banks and investment 

houses faltered, failed and were given massive bailouts from your tax dollars. Throughout this transition 

and these diffi cult times, Elevations Credit Union stayed true to its mission and values and focused on 

what’s best for you, our members. As a result of this effort to concentrate on value for all members, 

Elevations had one of the best years we’ve experienced in our history. 

Your Directors are also gratifi ed to see the quick impact Mr. Agnes has had on this organization. 

Immediately, he pulled the management team together into a tightly unifi ed team and began planning the 

future of your credit union by starting at the beginning – our core values. Gerry has mapped out a strategic 

planning process that will help the Board of Directors develop the vision for tomorrow and govern the credit 

union’s progress toward those goals. He has also brought new transparency to our Board meetings with 

clarity in policy, service quality, and fi nancial strategies. With your management team, we are setting a 

course that will make us all delighted to say, “I am a member of Elevations Credit Union.” 

Lastly, I have been blessed to work closely with our Board of Directors this past year and truly thank 

them for their tireless work and dedication to advance our mission. Together, we successfully navigated 

through a very challenging year that resulted in breaking many new records, while also ensuring our future 

success. 

I am confi dent that we will forge ahead, continuing to build a cooperative organization to best serve you, 

our members. 

Respectfully, 

Eric Jones 

Chair, Board of Directors 

ELEVATIONS Credit Union 2008 annual report 2

letter from the president 

Dear Members, 

Thank you for allowing me to serve as your new CEO. I am truly blessed to be a part of Elevations Credit Union 

and our community. Having just arrived in Boulder during the second half of 2008, I swiftly learned about the 

unique quality of Elevations Credit Union, the beauty of Boulder and Colorado, and the loyalty and engagement 

of the nearly 77,000 friends, family, businesses and neighbors that make up our membership. The strength of 

Elevations Credit Union is refl ected in the strength of our membership and together we can accomplish great 

things. I am excited to work with you, our Board of Directors, and our exceptionally talented management team 

to extend our 56 years of successful growth far into the future. 

A Look Back 

This last year was characterized by rapid, often abrupt change. On nearly a daily basis, the newspapers reported 

huge banks, brokerages, investment houses, and insurance companies crashing down. We saw our Legislative 

branch commit almost $1 trillion of our tax dollars to bail out banks, seemingly with no strings attached. 

Clearly, the fi nancial turmoil is unprecedented for this generation and has had enormous affects to our society. 

Importantly, the meltdown in the investment markets did impact Elevations Credit Union. Our Treasurer, Vince 

Wayland, and Chief Financial Offi cer, Peggy Anderson, provide keen insights on the NCUA’s Corporate Credit 

Union Stabilization Plan and how it affected Elevations Credit Union in their report on page 20. In spite of the 

fi nancial market turmoil, your credit union took a different path and reached new heights. Our results for 2008 

were full of good news that we can all celebrate: 

• Asset growth of 18% to $893 million – An all-time high! 

• Deposit growth of 18% to $804 million – An all-time high! 

• Loan growth of 15% to $600 million – An all-time high! 

• Number of Members – 76,520 – An all-time high! 

• Member Service satisfaction score 91.9% - Highest score in four years 

How did we stay out of harm’s way? 

While massive banks faltered and “disappeared” through forced mergers, we did a lot of things right. We stayed 

true to our mission, vision, and values. It is because we adhered to our core values and mission that we did not 

consider offering mortgages that were not in the best interest of our members. Our values and mission served as 

our compass that guided us to responsible underwriting of loans for our members. We stuck to our core purpose 

of providing better solutions for a better life for our members. Consequently, as we helped our members fulfi ll 

their dreams and to strengthen their lives, we also strengthen Elevations Credit Union. 

We’re a unique business 

As a not-for-profi t cooperative credit union, we have one purpose: to provide solutions for a better life for our 

members. We don’t answer to Wall Street or foreign investors. We only answer to you, our members, since you 

are our owners. After the smoke clears from this fi nancial meltdown, our business model will continue to prove 

its sustainability. We lend money to people we know (members) using deposits 

from other members. It is a simple business model that has been successful for 

over 100 years and when delivered exceptionally, it can produce record results 

during even the worst economic downturns. 

What’s in store for Elevations Credit Union in 2009 and beyond? 

Your credit union is uniquely positioned for great success. We are blessed 

with a stellar board of directors that are governing a terrifi c leadership team, 

who are executing well-planned strategies of growth and quality service that 

will springboard us far into the future. During 2009 and beyond, we will open 

new branches in our communities, strengthen our technology to better deliver 

services to you, enhance our products to better meet your growing needs, and 

seek the Malcolm Baldrige National Quality Award. These are very ambitious 

initiatives that I’m very confi dent we will provide you and from which you will 

signifi cantly benefi t. Thank you for your membership and continued support. 

Very truly yours, 

Gerry Agnes 

President, CEO 


oard of directors 

As a not-for-profi t fi nancial cooperative, 

Elevations Credit Union is governed by 

volunteer members. The Board of Directors is 

elected by and from the membership and is 

comprised of professionals who understand 

and represent the goals and objectives of 

Elevations Credit Union members. 

ELEVATIONS Credit Union 2008 annual report 4 

The seven-member Board of Directors 

provides leadership, oversight and direction 

and ensures the safety and soundness of the 

overall operations of Elevations Credit Union. 

Their commitment to the Credit Union philosophy 

of “People Helping People” drives their 

service to the membership.

Pictured page 4 

Eric Jones Chair 

Eric Jones is owner of Tinucci, Jones & Co, P.C., a CPA fi rm well 

1known by not-for-profi t organizations throughout Colorado. He has 

extensive knowledge in all areas of the credit union industry, 

consulting on mortgage banking issues, formation of credit union 

service organizations (CUSOs), and relevant taxation strategies. 

Jim Menghi 1st Vice Chair 

2Jim Menghi has been a member of Elevations Credit Union for 23 years and served on the Supervisory 

Committee for 18 years. He now serves on the Board of Directors. Mr. Menghi has been employed at 

the University Corporation for Atmospheric Research (UCAR) as the Deputy Director of the Joint Offi ce 

for Science Support (JOSS) since 2002 and Internal Auditor/Compliance Offi cer from 1985 to 2002. 

Previous to that time, he held the position of auditor with the US General Accounting Offi ce (GAO) for 

nine years. 

Carol Krismann 2nd Vice Chair 

3Carol Krismann was appointed to the Board of Directors in June, 2006 to fi ll a vacant position and was 

elected to the Board in 2007. She is a librarian at the University of Colorado and has been the head of 

the William M. White Business Library since 1982. 

Vince Wayland Secretary/Treasurer 

4Vince Wayland has been a member of Elevations Credit Union for over 30 years, serving as a Credit 

Union volunteer since 1999 and on the Board of Directors since 2003. He is retired as a software 

engineer from the National Center for Atmospheric Research (NCAR). He is also a Board member for 

the National User Group of National Energy Research Super Computer Center (NERSC). 

Jo Hetherington Director 

5Jo Hetherington has been an Elevations Credit Union member since 1993, a volunteer since 1995, and 

was elected to the Board of Directors in 2003. Her other volunteer activity includes work with Boulder 

Valley Schools, a counselor at the Boulder Department of Mental Health, and at the Colorado State 

Legislature supporting issues on health and welfare of school children. 

Lynn Walloch Director 

6Lynn Walloch has served on the Board of Directors since 2001. She retired from a 30-year career with 

the University of Colorado. She received the Supervisory Employee of the Year award at the University 

in 1983. She also has extensive volunteer experience with Boulder County Social Services and the City 

of Broomfi eld. 

Katie Larson Director 

7Katie Larson, 28, represents the youngest person ever appointed or elected to serve on the Board 

of Directors at Elevations Credit Union. She is employed as a Treasury Analyst for Chipotle Mexican 

Grill in Denver; earned her B.A. in Economics with an emphasis in Finance from St. Olaf College in 

Northfi eld, MN; and she also serves on the Board of Directors for the Colorado Treasury Management 

Association. She also worked at Elevations as a Financial Services Advisor back when it was known 

as U of C FCU. 


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supervisory committee 

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supervisory committee 

Steve Newell Chair 

Havish Vinnakota Vice Chair 

Tom Hall Secretary 

Bob Jobin Committee Member 

Brad Jones Committee Member 

Meow Tan Committee Member 

Ed Gross VP of Internal Audit 

Joelle Botello Internal Auditor 


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The Supervisory Committee ensures that the Credit Union adheres to established 

policies and conducts business in the members’ best interest. All internal and independent audits 

are reported to this Committee. In addition, the Committee maintains a confi dential relationship with 

members as their independent representatives at the Credit Union. The volunteer representatives 

of the Committee are: Steve Newell, Havish Vinnakota, Tom Hall, Brad Jones, Bob Jobin and 

Meow Tan. 

The Supervisory Committee’s responsibility is to verify that records are accurately maintained and 

to review Credit Union internal controls. This allows the Committee to determine that management 

activities are carried out in accordance with Credit Union policy and Federal and State Regulations. 

To meet Federal and State guidelines as specifi ed by the National Credit Union Administration and 

the State Department of Regulatory Agencies, we have retained the services of McGladrey and 

Pullen, Certifi ed Public Accountants, to perform an audit of the Credit Union’s fi nancial statements 

as of December 31, 2008. McGladrey and Pullen was selected because of their reputation and 

experience in auditing similar large credit unions in our asset category. 

The Supervisory Committee will continue to work diligently with management and staff to minimize 

any fi nancial or fraud risk. 

This Committee retains two full-time internal auditors: Ed Gross and Joelle Botello. Their jobs are to 

perform operational and fi nancial audits and to evaluate effectiveness of our internal controls, which 

includes reviewing the organization’s compliance with Credit Union policies and procedures. Ed 

and Joelle also plan, organize and complete audits of departments and branches, preparing audit 

reports for this Committee, the CEO and the executive management team. 

Based upon these fi ndings, the Supervisory Committee is satisfi ed that the records accurately 

refl ect Elevations Credit Union’s fi nancial condition and that its operations are handled in 

accordance with Credit Union policies and procedures. 

ELEVATIONS CU Credit 2008 Union annual 2008 report annual report 7 

committees

community relations committee 

Elevations Credit Union strives to be an active and supportive partner in the communities 

that we serve. The Community Relations Committee helps us accomplish this mission by directing 

matters that concern reinvestment in Boulder County, Broomfi eld County, and surrounding areas. 

This includes donating money as well as time. The Committee makes recommendations to help 

support worthwhile organizations, charities and other areas of need. 

The Committee also reviews grant applications and allocates resources according to the community 

relations philosophy and structure as approved by the Board of Directors. 


community 

relations committee 

Pictured page 8 

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Jo Hetherington Chair 

Carol Krismann Committee Member 

Bob Perez Committee Member 

DiAnne Franklin Committee Member 

Midge Korczak Committee Member 

Cris Jones Committee Member 

Brad Jones Committee Member 

Rachael Maag Committee Member 

Tracy Miller Committee Member 

governance 

committee 

Lynn Walloch Chair 

Jim Menghi Committee Member 

Vince Wayland Committee Member 

nominating 

committee 

Jim Menghi Chair 

Eric Jones Committee Member 

Carol Krismann Committee Member 


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new branch openings 2008 

Longmont Main Broomfi eld/Erie 

Broomfi eld/Westminster 

three new branches 

four new ATM’s 

8,140 new members 

Elevations opened three new branches in 

2008, providing current Credit Union members with 

added convenience, while at the same time making 

our full range of fi nancial products and services 

accessible to more new members. 

The fi rst new branch, located on the border of 

Broomfi eld and Westminster, opened on February 

25 to the delight of the 2,500+ Elevations members 

who live within that area. The branch, located near 

the corner of 120th and Sheridan in the Sheridan 

Crossing Shopping Center, includes a full service 

lobby and 24-hour ATM. Cynthia Lamb, Branch 

Manager, has previous experience managing other 

Elevations branches. 

On July 9, the second new branch of the year opened 

in north Longmont. Located at 2101 Main Street, this 

branch provides added convenience for those who 


live, work or travel in the northern and eastern 

sections of Longmont. This branch is the perfect 

complement to Elevations Longmont branch located 

on Hover Street, which provides service to those 

who are in the western and southern areas of 

Longmont. The Main Street branch’s 2,193 square 

feet includes three teller stations, a drive-up lane, and 

24-hour ATM. The Branch Manager, Chris Smith, is a 

Longmont native. 

On September 16, Elevations opened its third new 

branch of the year to serve the Broomfi eld and Erie 

areas. This branch became the only credit union 

or bank branch within a three mile radius when it 

opened. Located at 3140 Village Vista Drive in the 

Village at Vista Ridge, this branch is managed by 

Robert Barr and serves a community of primarily 

newer homes off of Highway 7 just west of Interstate 

25, near the Vista Ridge Golf Course.

kids fair 

Hundreds of fun-loving kids and 

their parents showed up for our fi rst-ever “Rags 

to Riches Club Kids’ fair” in 2008. The draw? A 

bounce house, spin-art, temporary tattoo booth, 

carnival games, music, refreshments, and the 

opportunity to have a souvenir photo taken 

with our very own Kids’ Club mascot, Rags the 

mountain lion. That’s an unbeatable combination 

that any kid would enjoy. 

Elevations Credit Union’s “Rags to Riches Club” 

is a special savings account for children up to age 

13 that teaches them about money. Kids learn 

the “save, share and spend” method of managing 

money. They learn lessons early on that will serve 

them well for a lifetime. 


To encourage the savings habit, kids can pick a 

reward every time they make a deposit of $5.00 

or more at any Elevations Credit Union branch 

once they become a member. 

Club membership includes three money pouches, 

a savings account with no minimum balance, 

newsletters, and much more. 

The Rags Kids’ Fairs were held in 2008 at the 

fl agship Diagonal Branch in June and then helped 

kick off the grand opening of the Broomfi eld/ 

Erie Branch in September. Each event attracted 

hundreds of people and resulted in new account 

openings.

wealth management services 

Products and services offered through CUSO Financial Services, L.P. (CFS), an independent broker/dealer and SEC Registered Investment Advisor, 

are not NCUA/NCUSIF insured, are not credit union guaranteed and may lose value. Independent Investment representatives are registered through 

CFS (member FINRA/SIPC). 


No one would argue that the investment climate has changed 

dramatically over the past year. The unfortunate result of the recent 

economic downturn has been that many people have experienced 

signifi cant decreases in the overall value of their retirement and 

investment accounts. 

At Elevations Credit Union, through its Wealth Management Services, 

including CUSO Financial Services (CFS), L.P., we are keeping up with 

the changes and helping members to reevaluate or establish their goals 

in these challenging economic times. 

Registered Financial Advisors Patrick Seal and Robert Cribbs provide fi nancial planning, retirement, and 

investment solutions designed to help members address the volatility in today’s market. They create 

fi nancial plans customized to members’ goals, time horizon, risk tolerance and cash-fl ow requirements. 

Robert Cribbs 

Financial Advisor 

Elevations Wealth Management 

Patrick Seal 

Senior Financial Advisor 

Elevations Wealth Management

mortgages 

Elevations side-stepped that whole sub-prime mortgage mess and other deceptive and risky 

lending practices that took a toll on the nation’s fi nancial health over the past year. 

While the questionable mortgage lending practices at other banks and fi nancial institutions proved costly 

to homeowners and taxpayers alike in 2008, you didn’t see any of that type of activity at Elevations. 

Elevations Credit Union has a long-standing history of playing it safe and playing it smart, protecting the 

assets of the members and maintaining a safe, sound and solvent lending option for members. 

As a result, Elevations set an all-time high record for mortgage loan activity in 2008. 

Members chose Elevations to take advantage of the lower fees and closing costs, the attractive low rates 

that saved them money whether they were buying or refi nancing, and for the personalized and local 

servicing of their home loans. 

While others were pulling in the purse strings, Elevations had an open wallet. Ready to lend and doing 

so with low risk. That’s the Elevations way. 

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Linda Cooper AVP Real Estate Lending 

Michael Roth Mortgage Loan Originator 

Joseph Wilson Mortgage Loan Originator 

Greg Roller Mortgage Loan Originator 

Steve Gorbet Mortgage Underwriter 

Pam Pruessner Lending Systems Project Specialist 

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Bruce Allen Secondary Market Research 

JoLyn Webb Senior Mortgage Processor 

Cindy Smario Mortgage Closer/Funder 

Andrew Johnson Mortgage Closer/Funder 

Stephanie Coe Mortgage Processor 


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member education 

Given our roots with the University of Colorado, it’s no wonder we have a well-established 

history of positioning Elevations Credit Union as the premier provider of fi nancial education 

within the communities we serve. Education is a hallmark of the credit union and 2009 marks the 

beginning of our sixth year offering the award-winning RealityCheck consumer education program. 

Nationally known consumer advocate Remar Sutton and his team provide value-added content that 

has become sought after by our community partners as well as our business partners. In addition 

to his work with the credit union industry, Mr. Sutton and his team advocate on behalf of consumers 

groups seeking to level the playing fi eld 

“Consumer Credit Laws in the United 

States are written by the banking lobby 

and designed to trap consumers in 

expensive products that are almost 

impossible to get out of. Fairness and 

equality never enter into the equation.” 

- Remar Sutton 


when it comes to terms and conditions 

associated with fi nancial products, the 

automotive industry and on privacy rights 

issues. It’s a pleasure to have Remar on 

our side. 

Your credit union has made a 

commitment to be a safe haven for 

unbiased information on real issues that 

consumers face every day. This has been our pledge since we opened our doors over 50 years 

ago and continues to be our pledge today. Our award-winning RealityCheck Member Education 

Program offers resources through easy to access channels that include: 

• A comprehensive consumer information website 

• Seminars that are open to our membership, as well as the communities we serve 

• Consumer Guides that provide help and guidance for car-buying, home-buying, and more 

• Reality Check-up to help members understand their credit report and save money 

• FoolProof Youth Financial Literacy Program 

Your credit union offered over 90 education events in 2008 with over 3,500 participants. As a 

member-owned fi nancial cooperative, it is in our best interest to serve an educated constituency. 

If our member-owners thrive, in turn Elevations Credit Union will thrive. This has proven to be a 

valuable business model and it sets your credit union apart from the pack.

community relations 

Broomfi eld Community 

Foundation Youth Advisory Council 

At Elevations Credit Union, we believe in the power of cooperative values and community. 

With our success we recognize the importance of giving back. We support people, organizations and 

causes that create opportunities and empower lives. 

By sharing our energy and resources, we enrich our surroundings. By supporting organizations that 

promote affordable housing, education and our environment, we strive to build a stronger, richer 

and more vibrant community. We’re proud to report that in 2008, we gave our local communities 

$142,812 in monetary and in-kind contributions. Our involvement takes many forms, including student 

scholarships and grants to local nonprofi t groups. 

“Our Volunteer Time Off program is great; it 

allows Elevations Credit Union employees to 

regularly maintain our adopted Mud Lake trail.” 

- Jamie Kirkland, 

Elevations Credit Union Training Specialist 

Organizations sponsored by Elevations Credit Union in 2008: Thistle Community Housing, Imagine!, Center for Resource 

Conservation, Naropa University, Community Foundation Serving Boulder County, Share a Gift, Holiday Food 

Basket, Buffalo Bicycle Classic, Colorado Shakespeare Festival, WOW! Childrens Museum, Retired Senior Volunteer 

Program, “I Have A Dream” Foundation of Boulder County, Bright Eyes – Longmont Mayor’s Book Club, Alternatives For 

Youth, Intercambio de Comunidades, Eco-cycle – Zero Waste, Growing Gardens, Longmont Downtown Development 

Association, Boulder County Business Hall of Fame, Volunteer Connection, Community Food Share, YMCA, Boulder 

East Transportation Management Organization, Broomfi eld Community Foundation, and Impact on Education. 


“Seed funding for grants to low-income and at-risk youth 

and behaviors, provides services for young people while at 

the same time fosters the skills of philanthropy in 

members of our Youth Advisory Council.” 

Karen Smith, Executive Director, Broomfi eld Community Foundation 

264 hours of Volunteer 

Time Off to benefi t 

our community in 2008 

Elevations Credit Union also takes an active role in the 

community. We encourage our employees to get involved 

and to support programs that make a positive difference. 

You’ll see our staff serving on charitable boards, helping out 

at events we sponsor, and volunteering for organizations 

which spark their individual community passions. As we 

moved into new markets, we developed exciting new 

relationships and partnerships. In Longmont we support 

the Longmont Mayor’s Book Club that encourages early 

childhood learning and a love of reading. Our 2008 grant 

to the Broomfi eld Community Foundation will be used as 

seed funds by the Youth Involvement Board to launch an 

annual program teaching philanthropy and addressing 

at-risk behaviors in youth. 

Quite simply, service is the basis of our founding, and we are proud to have this as a strong core value 

that guides our business and socially responsible activities. Through our many charitable programs, 

we will continue to extend our cooperative values and enhance lives through service.

You can’t reach the top without preparation, 

planning, and commitment. This applies whether you’re climbing 

a mountain or working on a new product or service that makes 

life easier and better for our members. Lessons learned on the 

mountains translate quite readily to the offi ce. 

Christina DeFrancesco 

Corporate Project Manager 

Chris Smith 

Branch Mgr -Longmont Main St. 

Kevin Gunnerson 

Branch Manager - UMC 

Colleen Milligan 

Branch Mgr-Table Mesa 


“The outdoors is a beautiful 

and magnifi cent place. 

But while rugged, it can 

also prove fragile. It’s our 

responsibility to defend and 

preserve it. We view our 

role at Elevations similarly. 

Our members’ trust and 

faith in us is paramount, 

and we work to earn that 

trust everyday.” 

- Ed Beckmann, AVP Marketing 

Andrew Johnson 

Mortgage Closer/ 

Ivan Jackson 

Systems Administrator

“I am equally passionate about work and play. I’m 

fortunate to work for an employer that values both. 

Working at Elevations gives me the opportunity to 

work hard, enjoy the challenges it offers and also 

have work life balance to enjoy time with my family 

and all that life has to offer outside of the offi ce.” 

- Annette Matthies, VP of People 

“I can have a whale of a good time thanks to my 

Elevations Visa card.” 

- Vince Wayland, Board of Directors - Secretary/Treasurer 

“Working at Elevations has been a 

wonderful experience for me in my 

professional and personal life. The 

Credit Union supports and nurtures an 

atmosphere of quality, integrity and a 

strong focus on doing what is best for 

the entire membership.” 

- Catherine Dillie, Loan Support Supervisor 


Patrick Seal 

Senior Financial Advisor 

Elevations Wealth Management 

Joelle Botello 

Internal Auditor

Jim Menghi 

Board of Directors 

1st Vice Chair 

“As a bicyclist, I know the music of whirring 

tires while descending a mountain pass. I 

also remember the effort, stress and pain 

of attaining the summit. Bicyclists know 

that the ride is easier when the challenge 

of the ascent, the joy at the summit and 

the exhilaration of the descent are shared 

with others. Cycling is really a metaphor for 

what working at Elevations is like. We work 

as a team to overcome challenges so we 

can serve our members better. We attain 

worthy goals that make us stronger. We 

share in the joy of a job well done.” 

- Rich Jones, VP of Marketing 

“The hiking and biking in the 

fall colors are both wonderful 

ways to enjoy the southwest 

mountains in Colorado and to 

get some good exercise. And 

you never know who you may 

meet along the way. Sometimes 

it is wildlife like foxes 

and ground squirrels. Other 

times it is a local author of a 

mountain bike trail book.” 

- Jim Menghi, Board of Directors 

1st Vice Chair 


Dave Kennedy 

Accountant 

“At Elevations, we are passionate 

about the work that 

we do. And we also recognize 

that our passions extend to 

our families, friends and the 

experiences we share with 

them. It is this lifestyle that 

brings so much energy to 

our organization, and drives 

so many of us to explore the 

world in which we live.” 

- Matt Henry, VP of IT

anch managers 

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Mary Ann Kammerer VP of Service Delivery 

Kerry Westlund AVP of Retail Sales and Branches 

Colleen Milligan Boulder Table Mesa 

Sarah Brown Boulder Baseline 

Kevin Gunnerson Boulder UMC 

Clint Jones Lafayette 

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Cynthia Lamb Broomfi eld/Westminster 

Robert Barr Broomfi eld/Erie 

Chris Smith Longmont Main Street 

Bill Smellage Longmont Hover 


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letter from the CFO 

NCUA’s Corporate Credit Union Stabilization Plan 

We know that the collapse of major fi nancial institutions has you worried. No one has been immune from this. 

Not even credit unions. 

Before I explain how this affects Elevations Credit Union, I want to assure you that we are safe and sound, and our 

capital remains strong. You can borrow money from us to fi nance a car, a home, an education, or a variety of other 

purposes. You can also invest your money with us in a safe, federally insured account. Your credit union did not get 

involved in the sub-prime mortgage market. Your credit union did not get involved in leveraged derivatives. In fact, 

your credit union is proud to report that in all categories we had the best year we have had in our history. 

However, even though we did many things right we are still being affected. 

Let me give you some background. Elevations is a “natural person” credit union. This means we provide banking 

products and services direct to consumers and businesses. We also have a relationship with what is known as a 

“corporate credit union.” The corporate is where we (and other credit unions) process payments (such as members’ 

checks) for deposit into the Federal Reserve. The corporate credit union is also where we invest in Certifi cates, just 

like you would invest in a Certifi cate. Through the corporate, we have access to a line of credit if we ever needed more 

liquidity. Our corporate credit unions are SunCorp, located in Westminster, CO and WesCorp located in San Dimas, 

CA. The corporate credit unions (including SunCorp and WesCorp) also have a corporate credit union: U. S. Central 

Credit Union. U. S. Central provides the corporate credit unions with investment options and is a source of liquidity for 

corporates, much the same as the corporates provide this service to natural person credit unions. 

U. S. Central and WesCorp had some investments that plummeted along with the economy. As a result, the potential 

credit losses on the collateral underlying the investments outweighed their capital. Because of this decrease in their 

capital, the National Credit Union Administration (NCUA), which regulates all credit unions, used $1 billion from the 

National Credit Union Share Insurance Fund (NCUSIF – similar to the FDIC except it protects credit union members). 

As a result, all federally-insured credit unions (this includes Elevations) are being required to recapitalize the NCUSIF. 

Also, since the NCUA decided to fully insure all deposits in corporate credit unions until December 2010, federally 

insured credit unions are required to pay an additional premium to the NCUSIF to cover the loss reserve for the 

corporate credit union deposit insurance. Additionally, NCUA has since taken into conservatorship both U.S. Central 

and WesCorp which means that our capital investment totaling $7,241,193 in our two corporates, SunCorp and 

WesCorp, has become impaired. 

The costs related to the NCUA’s Corporate Credit Union Stabilization Plan are designed to bring the NCUSIF up to 

its required regulatory capital level and will be recognized by Elevations Credit Union over the next several years, 

beginning in 2009. What is recorded in the accompanying fi nancial statements is our loss of capital in both SunCorp 

and WesCorp due to the conservatorship of U.S. Central and Wescorp. 

What is important for you, our members, to understand is we are fi nancially strong, safe and sound because we stayed 

true to our mission of serving our members. We had a strong 2008 and are beginning 2009 with great results. We can 

absorb this shock without risking our strength or soundness. Our capital ratio will remain above NCUA guidelines for 

a well capitalized credit union. Remember, your deposits with us are insured up to $250,000 and backed by the full 

strength of the United States Government. 

If you have questions, please call us at 303.443.4672 or email us at CU.Strength@ElevationsCU.com. 


Vince Wayland 

Board Secretary/Treasurer 

Peggy Anderson 

Chief Financial Offi cer

fi nancials 

Elevations Credit Union 

Financial Statements 

December 31, 2008 and 2007 

McGladrey & Pullen, LLP is a member of RSM International—an affi liation of separate and independent legal entities. 


TABLE OF CONTENTS 

INDEPENDENT AUDITOR’S REPORT ............................................................................................. 23 1 

STATEMENTS OF FINANCIAL CONDITION...................................................................................... 24 2 

STATEMENTS OF OPERATIONS ................................................................................................... 25 3 

STATEMENTS OF COMPREHENSIVE (LOSS)INCOME ..................................................................... 26 4 

STATEMENTS OF MEMBERS’EQUITY........................................................................................... 27 5 

STATEMENTS OF CASH FLOWS................................................................................................... 28 6 

NOTES TO FINANCIAL STATEMENTS............................................................................................ 29 

7 


Independent Auditor’s Report 

Supervisory Committee 


Boulder, Colorado 

We have audited the accompanying statements of financial condition of Elevations Credit Union (hereafter “the Credit 

Union”) (a Colorado state chartered credit union) as of December 31, 2008 and 2007 and the related statements of 

operations, comprehensive (loss) income, members’ equity, and cash flows for the years then ended. These 

financial statements are the responsibility of the Credit Union’s management. Our responsibility is to express an 

opinion on these 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 audit 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 our audits provide a reasonable basis for our opinion. 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial condition 

of Elevations Credit Union as of December 31, 2008 and 2007 and the results of its operations and its cash flows for 

the years then ended, in conformity with accounting principles generally accepted in the United States of America. 

As disclosed in Note 15 to the consolidated financial statements, the Credit Union wrote-off all of its $7,241,194 

corporate credit union capital based on announcements that the corporate credit union’s losses exceed the capital in 

the organization. The Credit Union has not recorded any impairment or expenses related to the industry matters 

described in Note 15. 

Phoenix, Arizona 

June 1, 2009 

McGladrey & Pullen, LLP is an independent member firm 

of RSM International an affiliation of separate and independent 

accounting and consulting firms. 



Statements of Financial Condition 


Assets 

2008 2007 

Cash and cash equivalents 

Investments 

$ 38,310,922 $ 78,080,971 

Available-for-sale 143,108,865 39,902,500 

Other 68,163,600 75,565,745 

Loans held for sale 1,998,200 4,860,718 

Loans to members, net 600,117,246 522,831,263 

Accrued interest receivable 3,349,978 3,007,928 

Other real estate owned 2,101,606 2,332,498 

Property and equipment, net 18,789,122 18,536,642 

National Credit Union Share Insurance Fund deposit 6,733,717 5,882,831 

Other assets 7,951,380 6,970,667 

Liabilities and Members’ Equity 

Liabilities 


$ 890,624,636 $ 757,971,763 

Members’ shares $ 803,900,600 $ 680,803,277 

Borrowed funds 15,000,000 0 

Accrued expenses and other liabilities 8,658,235 8,066,203 

Total liabilities 827,558,835 688,869,480 

Commitments and contingent liabilities 

Members’ equity 

Retained earnings, substantially restricted 63,175,744 68,562,110 

Accumulated other comprehensive (loss) income (109,943) 540,173 

Total members’ equity 63,065,801 69,102,283 

$ 890,624,636 $ 757,971,763 

The accompanying notes are an integral part of these statements. 2


Statements of Operations 

For the Years Ended December 31, 2008 and 2007 


2008 2007 

Interest Income 

Interest on loans to members $ 33,212,013 $ 34,414,382 

Interest on investments and cash equivalents 9,163,716 6,809,392 

42,375,729 41,223,774 

Interest Expense 

Dividends on members’ shares 18,239,347 17,926,875 

Interest on borrowed funds 393,599 0 

18,632,946 17,926,875 

Net Interest Income 23,742,783 23,296,899 

Provision for Loan Losses 3,535,800 4,616,998 

Net Interest Income After Provision for Loan Losses 20,206,983 18,679,901 

Non-Interest Income 

Service charges and other fees 4,638,867 5,110,440 

Impairment of corporate credit union capital (7,241,194) - 

Other than temporary impairment (OTTI) (2,225,890) - 

Interchange income 6,467,737 6,111,388 

Gain on Visa stock 930,599 0 

Loan servicing income 516,165 455,380 

Gain on sale of loans 402,560 90,824 

Other non-interest income 975,862 1,118,213 

4,464,706 12,886,245 

24,671,689 31,566,146 

General and Administrative Expenses 

Salaries and benefits 14,610,943 14,022,761 

Operations 13,274,102 12,201,595 

Occupancy 2,173,010 1,873,931 

30,058,055 28,098,287 

Net (Loss) Income $ (5,386,366) $ 3,467,859 



Statements of Comprehensive (Loss) Income 



2008 2007 

Net (Loss) Income $ (5,386,366) $ 3,467,859 

Other Comprehensive (Loss) Income 

Unrealized holding (losses) gains on investments classified 

as available-for-sale (650,116) 540,173 

Comprehensive (Loss) Income $ (6,036,482) $ 4,008,032 



Statements of Members’ Equity 



Accumulated 

Retained Earnings Other 

Regular Comprehensive 

Reserve Unappropriated Total Income (Loss) 

Balance, 

December 31, 2006 $ 11,879,721 $ 53,214,530 $ 65,094,251 $ 0 

Net income 3,467,859 3,467,859 

Change in unrealized gains 

(losses) on available-for-sale 

investments 540,173 

Balance, 

December 31, 2007 11,879,721 56,682,389 68,562,110 540,173 

Net loss (5,386,366) (5,386,366) 

Change in unrealized gains 

(losses) on available-for-sale 

investments (650,116) 

Balance, 

December 31, 2008 $ 11,879,721 $ 51,296,023 $ 63,175,744 $ (109,943) 



Statements of Cash Flows 



2008 2007 

Operating Activities 

Net (loss) income $ (5,386,366) $ 3,467,859 

Adjustments to reconcile net (loss) income to net cash provided by 

operating activities: 

Accretion of securities, net (83,367) (29,699) 

Provision for loan losses 3,535,800 4,616,998 

Depreciation and amortization 1,782,607 1,840,867 

Loss on corporate credit union capital 7,241,194 0 

Other than temporary impairment 2,225,890 0 

Gain on sale of loans (402,560) (90,824) 

Decrease(increase) in other real estate owned 230,892 (359,873) 

Net change in: 

Loans held for sale 2,862,518 (1,469,552) 

Accrued interest receivable (342,051) 626,075 

Other assets (980,713) (340,979) 

Accrued expenses and other liabilities 592,032 1,959,839 

Net cash provided by operating activities 11,275,876 10,220,711 

Investing Activities 

Purchases of available-for-sale investments (120,880,357) (43,534,728) 

Proceeds from maturities of available-for-sale investments 14,881,353 4,202,100 

Net change in other investments 160,951 (1,097,331) 

Net change in loans to members (80,419,221) (15,413,001) 

Increase in the National Credit Union Share Insurance Fund deposit (850,887) (342,820) 

Purchases of property and equipment (2,035,088) (1,212,849) 

Net cash used in investing activities (189,143,249) (57,398,629) 

Financing Activities 

Increase on borrowed funds 15,000,000 0 

Net increase in members’ shares 123,097,324 29,140,799 

Net cash provided by financing activities 138,097,324 29,140,799 

(Decrease) Increase in Cash and Cash Equivalents (39,770,049) 18,037,119 

Cash and Cash Equivalents at Beginning of Year 78,080,971 60,043,852 

Cash and Cash Equivalents at End of Year $ 38,310,922 $ 78,080,971 

Supplemental Cash Flow Information 

Dividends paid on members’ shares and interest paid on borrowed funds $ 18,632,946 $ 17,926,875 

Other real estate acquired in settlement of loans $ 135,879 $ 1,358,184 



Notes to Financial Statements 


Note 1. Significant Accounting Policies and Nature of Operations 

Nature of Operations: Elevations Credit Union (Credit Union) is a state chartered credit union organized under the 

provisions of the Colorado Credit Union Act. Participation in the Credit Union is limited to those individuals that 

qualify for membership. The field of membership is defined in the Credit Union’s Charter and Bylaws. 

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 assumptions that affect the 

reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial 

statements and the reported amounts of income and expenses during the reporting period. Actual results could differ 

from those estimates. Material estimates that are particularly susceptible to significant change in the near term 

relates to the determination of the allowance for loan losses, mortgage servicing rights, and the fair value of financial 

instruments. 

Concentrations of Credit Risk: Most of the Credit Union’s business activity is with its members who are student of 

or are employed by the University of Colorado. The Credit Union may be exposed to credit risk from a regional 

economic standpoint, since a significant concentration of its borrowers resides in Boulder, Colorado. However, the 

loan portfolio is well diversified and the Credit Union does not have any significant concentrations of credit risk except 

unsecured loans, which by their nature increase the risk of loss compared to those loans that are collateralized. 

In addition, during the year ended December 31, 2008 and continuing into 2009, the financial deterioration resulting 

from the general economic conditions of the Credit Union’s market area have yielded significant loan losses and 

investment fluctuations for the Credit Union and those with whom it does business, including other financial 

institutions and corporate credit unions. Management continues to monitor the Credit Union’s operations, including 

the loan and investment portfolios, for potential impairment and other accounting consequences. 

Fair Value: In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial 

Accounting Standards No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 defines fair value, 

establishes a framework for measuring fair value and expands disclosures about fair value measurement. SFAS No. 

157 also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets 

out a fair value hierarchy with the highest priority being quoted prices in active markets. Under SFAS No. 157, fair 

value measurements are disclosed by level within that hierarchy. In February 2008, the FASB issued FASB Staff 

Position No. 157-2, Effective Date of FASB Statement No. 157, which permits a one-year deferral for the 

implementation of SFAS No. 157 with regard to nonfinancial assets and liabilities that are not recognized or disclosed 

at fair value in the financial statements on a recurring basis. The Credit Union adopted SFAS No. 157 for the fiscal 

year beginning January 1, 2008, except for nonfinancial assets and nonfinancial liabilities that are recognized or 

disclosed at fair value in the financial statements on a nonrecurring basis for which delayed application is permitted 

until our fiscal year beginning January 1, 2009. The adoption did not have a material impact on the financial 

statement or the results of operations of the Credit Union but did require the Credit Union to include additional 

disclosures in the footnotes to the financial statements. 

Cash and Cash Equivalents: For the purpose of the statements of financial condition and the statements of cash 

flow, cash and cash equivalents includes cash on hand, amounts due from financial institutions, and highly liquid debt 

instruments classified as cash which were purchased with maturities of three months or less. Amounts due from 

financial institutions may, at times, exceed federally insured limits. 


7




Investments: Securities are classified as “available for sale” and recorded at fair value, with unrealized gains and 

losses excluded from earnings and reported in other comprehensive (loss) income. 

Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the 

securities. Declines in the fair value of individual available-for-sale securities below their cost that are deemed to be 

other than temporary are reflected in earnings as realized losses. In determining whether other-than-temporary 

impairment exists, management considers many factors, including (1) the length of time and the extent to which the 

fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent 

and ability of the Credit Union to retain its investment in the issue for a period of time sufficient to allow for any 

anticipated recovery in fair value. Gains and losses on the sale of securities are recorded on the trade date and are 

determined using the specific identification method. 

Other investments are classified separately and are stated at cost. 

Federal Home Loan Bank Stock: The Credit Union, as a member of the Federal Home Loan Bank of Topeka 

(FHLB) system, is required to maintain an investment in capital stock of the FHLB in an amount equal to the greater 

of 1 percent of its outstanding mortgage loans or 5 percent of advances from the FHLB. No ready market exists for 

the FHLB stock, and it has no quoted market value. 

Loans Held for Sale: Mortgage loans originated and intended for sale in the secondary market are carried at the 

lower of aggregate cost or estimated market value. All sales are made with recourse. 

Loans to Members: The Credit Union grants mortgage, commercial and consumer loans to members. The ability of 

the members to honor their contracts is dependent upon the real estate and general economic conditions of the area. 

Loans that the Credit Union has the intent and ability to hold for the foreseeable future or until maturity or pay-off are 

stated at their outstanding unpaid principal balances and net deferred origination costs, less an allowance for loan 

losses. Interest income on loans is recognized over the term of the loan and is calculated using the simple interest 

method on principal amounts outstanding. 

The accrual of interest income on loans is discontinued at the time the loan is 90 days past due, unless the credit is 

well secured and in the process of collection. Other personal loans are typically charged-off no later than 180 days 

past due. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual 

or charged-off at an earlier date if the collection of principal and interest is considered doubtful. 

All interest accrued but not collected for loans that are placed on nonaccrual or charged-off is reversed against 

interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until 

qualifying for return to accrual. Loans are returned to accrual status when all of the principal and interest amounts 

contractually due are brought current and future payments are reasonably assured. 

Loan fees and certain direct loan origination costs are deferred, and the net fee or cost is recognized as an 

adjustment to interest income using the interest method over the contractual life of the loans, adjusted for estimated 

prepayments based on the Credit Union’s historical prepayment experience. 

Allowance for Loan Losses: The allowance for loan losses is established as losses are estimated to have occurred 

though a provision for loan losses charged to earnings. Loan losses are charged against the allowance when 

management believes the uncollectibility of a loan balance is likely. Subsequent recoveries, if any, are credited to 

the allowance. 


8




The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s 

periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan 

portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying 

collateral, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that 

are susceptible to significant revision as more information becomes available. In addition, regulatory agencies, as an 

integral part of their examination process, periodically review the Credit Union’s allowance for loan losses, and may 

require the Credit Union to make additions to the allowance based on their judgment about information available to 

them at the time of their examinations. 

The Credit Union’s allowance for loan losses is that amount considered adequate to absorb probable losses in the 

portfolio based on management’s evaluations of the size and current risk characteristics of the loan portfolio. Such 

evaluations consider prior loss experience, the risk rating and the levels of non-performing loans. Specific 

allowances for loan losses are established for large impaired loss on an individual basis as required per SFAS No. 

114, Accounting by Creditors for Impairment of a Loan. The specific allowances established for these loans are 

based on a thorough analysis of the most probable source of repayment, including the present value of the loan’s 

expected future cash flow, the loan’s estimated market value, or the estimated fair value of the underlying collateral. 

General allowances are established for loans that can be grouped into pools based on similar characteristics as 

described in SFAS No. 5, Accounting for Contingencies. In this process, general allowance factors are based on an 

analysis of historical charge-off experience and expected losses given default derived from the Credit Union’s internal 

risk rating process. These factors are developed and applied to the portfolio by loan type. The qualitative factors 

associated with the allowances are subjective and require a high degree of management judgment. These factors 

include the credit quality statistics, recent economic uncertainty, losses incurred from recent events, and lagging 

data. 

Loan Servicing: Servicing assets are recognized as separate assets when rights are acquired through purchase or 

through sale of financial assets. For sales of mortgage loans, a portion of the cost of originating the loan is allocated 

to the servicing right based on relative fair value. Fair value is based on market prices for comparable mortgage 

servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value 

of estimated future net servicing income. The valuation model incorporates assumptions that market participants 

would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial 

earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. Capitalized 

servicing rights are reported in other assets and are amortized into non-interest income in proportion to, and over the 

period of, the estimated future net servicing income of the underlying financial assets. 

Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. 

Impairment is determined by stratifying rights into tranches based on predominant risk characteristics, such as 

interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual 

tranche, to the extent that fair value is less than the capitalized amount for the tranche. If the Credit Union later 

determines that all or a portion of the impairment no longer exists for a particular tranche, a reduction of the 

allowance may be recorded as an increase to income. 

Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual 

percentage of the outstanding principal; or a fixed amount per loan and are recorded as income when earned. The 

amortization of mortgage servicing rights is netted against loan servicing fee income. 

Other Real Estate Owned: Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially 

recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to 

foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying 

amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation 

allowance are included in operating expenses. 


9




Property and Equipment: Land is carried at cost. Building, leasehold improvements, and furniture and equipment 

are carried at cost, less accumulated depreciation and amortization. Buildings and furniture and equipment are 

depreciated using the straight-line method over the estimated useful lives of the assets. The cost of leasehold 

improvements is amortized using the straight-line method over the terms of the related leases. 

Transfers of Financial Assets: Transfers of financial assets are accounted for as sales, when control over the 

assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets 

have been isolated from the Credit Union, (2) the transferee obtains the right (free of conditions that constrain it from 

taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Credit Union does not 

maintain effective control over the transferred assets through an agreement to repurchase them before their maturity 

or the ability to unilaterally cause the holder to return specific assets. 

National Credit Union Share Insurance Fund Deposit: The deposit in the National Credit Union Share Insurance 

Fund (NCUSIF) is in accordance with National Credit Union Administration (NCUA) regulations, which require the 

maintenance of a deposit by each federally insured Credit Union in an amount equal to 1 percent of its insured 

members shares. The deposit would be refunded to the Credit Union if its insurance coverage is terminated, if it 

converts its insurance coverage to another source, or if management of the fund is transferred from the NCUA Board. 

See Note 15 regarding the impairment of NCUSIF. 

NCUSIF Insurance Premium: The Credit Union is required to pay an annual insurance premium equal to onetwelfth 

of one percent of total insured shares, unless the payment is waived or reduced by the NCUA Board. The 

NCUA Board waived the 2008 and 2007 insurance premiums. See Note 15 regarding the stabilization of NCUSIF. 

Members’ Shares: Members’ shares are the savings deposit accounts of the owners of the Credit Union. Share 

ownership entitles the members to vote in the annual elections of the Board of Directors and on other corporate 

matters. Irrespective of the amount of shares owned, no member has more than one vote. Members’ shares are 

subordinated to all other liabilities of the Credit Union upon liquidation. Dividends on members’ shares are based on 

available earnings at the end of a dividend period and are not guaranteed by the Credit Union. Dividend rates are set 

by the Credit Union’s Board of Directors. 

Income Taxes: The Credit Union is exempt, by statute, from federal and state income taxes. However, the Credit 

Union is subject to unrelated business income tax as further discussed in Note 10. 

Comprehensive Income: Accounting principles generally require that recognized revenue, expenses, gains and 

losses be included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on 

available-for-sale securities, are reported as a separate component of the members’ equity section of the statements 

of financial condition. For 2008 and 2007, other comprehensive income includes no reclassification adjustments. 

Reclassifications: Certain account reclassifications have been made to the 2007 financial statements in order to 

conform to classifications used in the current year. 

Recent Accounting Pronouncements: In July 2006, the Financial Accounting Standards Board (“FASB”) issued 

Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement 109 (“FIN 

48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial 

statements in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income 

Taxes. FIN 48 prescribes a comprehensive model for recognizing, measuring, presenting and disclosing in the 

financial statements tax positions taken or expected to be taken on a tax return. The cumulative effect of applying 

the provisions of FIN 48, if any, will be reported as an adjustment to the opening balance of retained earnings for the 

fiscal year of adoption. FIN 48 is to be effective for fiscal years beginning after December 15, 2007. However, at its 

October 15, 2008 meeting, the FASB reconsidered the scope of its proposed one-year deferral of the effective date 





of FIN 48 for all private enterprises, including credit unions. Under the expanded proposal, FIN 48 will be effective for 

private entities for annual periods beginning after December 15, 2008 if they have not yet issued a full set of U.S. 

GAAP annual financial statements incorporating the recognition, measurement and disclosure requirements of FIN 

48. Early adoption is still permitted. The adoption of FIN 48 is not expected to have a material impact on the Credit 

Union’s financial position, results of operations or cash flows. 

In December 2007, the FASB issued SFAS No. 141R, Business Combinations. This new standard significantly 

changes the accounting for business combination transactions as the pooling-of-interests accounting method will no 

longer be an acceptable accounting method. This change is effective for fiscal years beginning on or after 

December 15, 2008, with early adoption prohibited. The Credit Union is currently evaluating the future impact of 

SFAS No. 141R on the Credit Union’s financial condition. 

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. The new 

standard is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting 

accounting principles to be used in preparing financial statements that are presented in conformity with GAAP for 

nongovernmental entities. The statement is effective 60 days following the Securities and Exchange Commission's 

approval of the Public Credit Union Accounting Oversight Board Auditing amendments to AU Section 411, The 

Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. SFAS No. 162 is not 

expected to have a material impact on the Credit Union’s financial position, results of operations or cash flows. 

On April 9, 2009, FASB issued three final FASB Staff Positions (FSPs) intended to provide additional application 

guidance and enhance disclosures regarding fair value measurements and impairments of securities. FSP FAS 157- 

4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly 

Decreased and Identifying Transactions That Are Not Orderly, provides guidelines for making fair value 

measurements more consistent with the principles presented in SFAS No. 157, Fair Value Measurements. FSP FAS 

107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, enhances consistency in 

financial reporting by increasing the frequency of fair value disclosures. FSP FAS 115-2 and FAS 124-2, Recognition 

and Presentation of Other-Than-Temporary Impairments, provides additional guidance designed to create greater 

clarity and consistency in accounting for and presenting impairment losses on securities. The FSPs are effective for 

interim and annual periods ending after June 15, 2009, but entities may early adopt the FSPs for the interim and 

annual periods ending after March 15, 2009. 





Note 2. Investments 

Investments classified as available-for-sale consist of the following: 

Amortized Unrealized Unrealized Fair 

December 31, 2008 Cost Gains Losses Value 

U.S. government obligations and 

federal agencies securities $ 11,155,659 $ 560,009 $ - $11,715,668 

Auction rate securities 45,000,000 - (1,575,000) 43,425,000 

Private label mortgage-backed 

securities 2,874,117 0 0 2,874,117 

Mortgage-backed securities 84,189,032 944,425 (39,377) 85,094,080 


$143,218,808 $1,504,434 $(1,614,377) $143,108,865 

Amortized Unrealized Unrealized Fair 

December 31, 2007 Cost Gains Losses Value 

U.S. government obligations and 

federal agencies securities $ 15,942,139 $ 281,861 $ - $ 16,224,000 

Mortgage-backed securities 23,420,188 258,312 - 23,678,500 

$ 39,362,327 $ 540,173 $ - $ 39,902,500 

Gross unrealized losses and fair value by length of time that the individual securities have been in a continuous 

unrealized loss position at December 31, 2008 are as follows: 

December 31, 2008 

Available-for-sale Fair Value 

Continuous Unrealized 

Losses Existing For: 

Less Than 

12 Months 

More Than 

12 Months 

Total 

Unrealized 

Losses 

Auction rate securities $ 43,425,000 $(1,575,000) $ - $ (1,575,000) 

Mortgage-backed securities 18,644,145 (39,377) - (39,377) 

$ 62,069,145 $(1,614,377) $ - $ (1,614,377) 

At December 31, 2008, the investment portfolio included 11 securities, none of which have current unrealized losses 

which have existed for longer than one year. At 2007, the investment portfolio included 17 securities, 4 of which had 

current unrealized losses which have existed for longer than one year. All of these securities are considered to be 

acceptable credit risks. Based upon an evaluation of the available evidence, including recent changes in market 

rates, credit rating information and information obtained from regulatory filings, management believes the decline in 

fair value for these securities is temporary. In addition, the Credit Union has the intent and ability to hold these 

investment securities for a period of time sufficient to allow for an anticipated recovery. 

At December 31, 2008, the Credit Union recognized $2,225,890 in other -than -temporary -impairment related to two 

private label mortgage-backed securities. These investments were recently downgraded and showed breaks in future 

cash flows which resulted in an other-than-temporary-impairment charge.




Should the impairment of any of these securities become other than temporary, the cost basis of the investment will 

be reduced and the resulting loss recognized in net income in the period in which the other-than-temporary 

impairment is identified. 

Investments by maturity as of December 31, 2008 are summarized as follows: 

Available-for-sale 

Amortized Fair 

Cost Value Other 

No contractual maturity $ - $ - $ 1,163,600 

Less than 1 year maturity - - 62,000,000 

1—5 years maturity 11,155,659 11,715,668 5,000,000 

Over 10 years maturity 

Private label mortgage-backed 

45,000,000 43,425,000 - 

securities 2,874,117 

2,874,117 - 

Mortgage-backed securities 84,189,032 85,094,080 - 


$ 143,218,808 $ 143,108,865 $68,163,600 

Expected maturities of private label mortgage-backed securities and mortgage-backed securities may differ from 

contractual maturities because borrowers may have the right to call or prepay the obligations and are, therefore, 

classified separately with no specific maturity date. FHLB stock has been classified with no contractual maturity. 

Other investments consist of the following: 

December 31 

2008 2007 

Share certificates in a corporate credit union $ 67,000,000 $ 69,000,000 

Member capital account in a corporate credit union - 889,944 

Permanent capital account in a corporate credit union - 4,533,101 

FHLB stock 1,163,600 1,142,700 

$ 68,163,600 $ 75,565,745 

The Credit Union views its investment in the FHLB stock as a long-term investment. Accordingly, when evaluating 

for impairment, the value is determined based on the ultimate recovery of the par value rather than recognizing 

temporary declines in value. The determination of whether a decline affects the ultimate recovery is influenced by 

criteria such as: 1) the significance of the decline in net assets of the FHLB as compared to the capital stock amount 

and length of time a decline has persisted; 2) impact of legislative and regulatory changes on the FHLB and 3) the 

liquidity position of the FHLB. The FHLB recently announced that it will likely report a risk-based capital deficiency as 

of December 31, 2008, and therefore will not be able pay a dividend for the fourth quarter of 2008 and will not be able 

to repurchase capital stock. The FHLB noted their primary concern with meeting the risk-based capital requirements 

relates to the potential impact of other-than-temporary impairment charges that they may be required to record on 

their private label mortgage back securities. While it appears that the FHLB of Topeka will be less than adequately 

capitalized as of December 31, 2008, the Credit Union does not believe that its investment in the FHLB is impaired 

as of this date. However, this estimate could change in the near term if: 1) significant other-than-temporary losses 

are incurred on the mortgage backed securities causing a significant decline in their regulatory capital status; 2) the 

economic losses resulting from credit deterioration on the mortgage backed securities increases significantly and 3) 

capital preservation strategies being utilized by the FHLB become ineffective.




As noted in Note 15, the Credit Union wrote-off its entire $2,708,093 member and permanent capital in Western 

Corporate Federal Credit Union (WesCorp) and its $4,533,101 capital in Sun Corporate Credit Union (SunCorp) in 

2008 based on the March 20, 2009 announcement that the losses at these institutions exceeded the capital in these 

organizations. On January 28, 2009, the NCUA Board announced the Temporary Corporate Credit Union Share 

Guarantee Program through September 30, 2011. The NCUSIF guarantee applies to all share amounts above 

$250,000, and the NCUSIF insurance coverage applies to all share amounts below $250,000. The net effect is that 

during the period of the guarantee the entire share account will be treated by the NCUSIF as if it was insured. 

Approximately $62,000,000 of the corporate credit union certificates mature before December 31, 2009 and therefore 

are guaranteed. Approximately $5,000,000 of the corporate credit union certificates mature after September 30, 

2009 and are therefore not guaranteed. 

Certificates are generally non-negotiable and non-transferable, and may incur substantial penalties for withdrawal 

prior to maturity. 

Note 3. Loans to Members 

Loans to members consist of the following: 

December 31 

2008 2007 

Mortgage loans: 

Fixed rate $ 186,100,212 $ 157,217,441 

Variable rate 8,763,092 34,729,744 

Hybrid/Balloon 42,633,093 46,291,361 

Home equity line of credit, variable rate 179,252,493 75,227,165 

416,748,890 313,465,711 

Vehicle loans 120,783,369 149,012,084 

Credit card loans, unsecured 53,868,563 51,511,270 

Commercial loans 5,293,992 2,572,149 

Other consumer loans, primarily unsecured 8,845,055 10,920,513 

605,539,869 527,481,727 

Deferred net loan origination costs 649,491 795,588 

Allowance for loan losses (6,072,114) (5,446,052) 


$ 600,117,246 $ 522,831,263 

The Credit Union offers non-traditional hybrid/balloon mortgage loans to its members. Hybrid/Balloon loans consist 

of loans that are fixed for an initial period of three, five or seven years. After this period, the mortgages are converted 

to variable rate using the fully indexed rate, which can result in significant payment shock to the borrower. 

Non-traditional mortgage loans may have significantly different credit risk characteristics than traditional fixed and 

variable rate mortgages. However, the Credit Union believes it has established prudent underwriting standards as 

well as adequate risk management functions to monitor these additional risks. 

The following is an analysis of the allowance for loan losses: 

Years Ended December 31 

2008 2007 

Balance, beginning of year $ 5,446,052 $ 6,134,728




Provision for loan losses 3,535,800 4,616,998 

Recoveries 1,629,977 626,488 

Loans charged off (4,539,715) (5,932,162) 

Balance, end of year $ 6,072,114 $ 5,446,052 

Loans on which accrual of interest has been discontinued or reduced amounted to $2,147,000 and $2,570,000, 

respectively, at December 31, 2008 and 2007. If interest on those loans had been accrued, such income would have 

approximated $110,000 and $156,000 for December 31, 2008 and 2007, respectively. 

Note 4. Other Real Estate Owned 

Transfers of loans to other real estate owned for the years ended December 31, 2008 and 2007 totaled $135,879 

and $1,358,184, respectively. 

Expenses related to other real estate owned are summarized as follows: 

Years Ended December 31 

2008 2007 

Write-downs of carrying value $ 69,439 $ 832,774 

Net gains on sales of foreclosed properties (7,079) (19,535) 

Operating expenses 68,206 37,057 

Note 5. Loan Servicing 


$ 130,566 $ 850,296 

Mortgage loans serviced for others are not included in the accompanying statements of financial condition. The 

unpaid principal balances of these loans at December 31, 2008 and 2007 are summarized as follows: 

December 31 

2008 2007 

Mortgage loan portfolios serviced for: 

FNMA $ 104,303,612 $ 97,938,112 

FHLMC 66,961,784 34,517,592 

$ 171,265,396 $ 132,455,704 

Custodial escrow balances maintained in connection with the foregoing loan servicing, and included in deposits, were 

approximately $1,040,484 and $768,647 at December 31, 2008 and 2007, respectively. 

Note 6. Property and Equipment 

Property and equipment are summarized as follows: 

December 31 

2008 2007 

Land $ 3,307,797 $ 3,307,797 

Building 13,919,617 13,727,883 

Furniture and equipment 11,050,019 9,951,430




Leasehold improvements 3,117,253 2,379,389 

31,394,686 29,366,499 

Accumulated depreciation and amortization (12,605,564) (10,829,857) 

$ 18,789,122 $ 18,536,642 

The Credit Union leases several offices. The operating leases contain renewal options and provisions requiring the 

Credit Union to pay property taxes and operating expenses over base period amounts. All rental payments are 

dependent only upon the lapse of time. Minimum rental payments under operating leases with initial or remaining 

terms of one year or more at December 31, 2008 are as follows: 

Years Ending December 31 

2009 $ 580,000 

2010 541,000 

2011 516,000 

2012 364,000 

2013 368,000 

Subsequent years 2,326,000 

$ 4,695,000 

Rental expense for the years ended December 31, 2008 and 2007 for all facilities leased under operating leases 

totaled approximately $527,000 and $376,000, respectively. 

Note 7. Members’ Shares 

Members’ shares are summarized as follows: 

December 31 

2008 2007 

Regular shares $ 94,116,895 $ 82,150,062 

Share draft accounts 143,840,069 134,896,318 

Money market accounts 286,490,940 222,357,996 

Certificates 223,767,971 204,619,012 

Individual retirement certificate accounts 53,162,963 34,950,781 

Individual retirement accounts 2,521,762 1,829,108 

$ 803,900,600 $ 680,803,277 

Shares by maturity as of December 31, 2008 are summarized as follows: 

No contractual maturity $ 526,969,666 

0—1 year maturity 177,239,593 

1—2 years maturity 49,884,178 




5—6 years maturity 2,739 


$ 803,900,600




Regular shares, share draft accounts, money market accounts and individual retirement accounts have no 

contractual maturity. Certificate and individual retirement certificate accounts have maturities of six years or less. 

The NCUSIF insures members’ shares and certain individual retirement and Keogh accounts. Effective October 3, 

2008 and continuing through December 31, 2009, new legislation provides for an increase in the minimum NCUSIF 

coverage from $100,000 to $250,000 on member share accounts. This includes all account types, such as regular 

share, share draft, money market and certificates of deposit. Individual Retirement Account and Keogh account 

coverage remains at up to $250,000 separate from other types of accounts owned. 

The aggregate amount of certificates in denominations of $100,000 or more at December 31, 2008 and 2007 is 

approximately $80,344,000 and $67,522,000, respectively. 

At December 31, 2008 and 2007, overdraft demand shares reclassified to loans totaled $85,136 and $104,897, 

respectively. 

Note 8. Borrowed Funds 

The Credit Union utilizes a demand loan agreement with FHLB. The terms of the agreement call for pledging certain 

investments held in safekeeping by the FHLB and a portion of the Credit Union’s mortgage portfolio. The agreement 

provides for a maximum borrowing amount of $180,453,645. As of December 31, 2008 the total advances total 

$15,000,000 with an interest rate of 3.05 percent and matures on March 24, 2011. 

The Credit Union utilizes a demand loan agreement with a corporate credit union. The terms of this agreement call 

for the pledging of all assets as security for any and all obligations taken by the Credit Union under this agreement. 

The agreement provides for a credit limit of $25 million with interest charged at a rate determined by the lender on a 

periodic basis. At December 31, 2008 and 2007, there were no borrowings under this agreement. The agreement is 

reviewed for continuation by the lender and the Credit Union annually. 

Note 9. Off-Balance Sheet Activities 

The Credit Union is party to conditional commitments to lend funds in the normal course of business to meet the 

financing needs of its members. These commitments represent financial instruments to extend credit which include 

lines of credit, credit cards and home equity lines that involve, to varying degrees, elements of credit and interest rate 

risk in excess of amounts recognized in the financial statements. 

The Credit Union’s exposure to credit loss is represented by the contractual amount of these commitments. The 

Credit Union follows the same credit policies in making commitments as it does for those loans recorded in the 

financial statements. 

Outstanding loan commitments at December 31, 2008 and 2007 total approximately $2,909,000 and $137,000, 

respectively. 

Unfunded loan commitments under lines of credit are summarized as follows: 

December 31 

2008 2007 

Credit card $ 125,799,000 $ 68,615,000 

Home equity 81,084,000 101,848,000 

Other consumer 75,906,000 73,809,000 






$ 282,789,000 $ 244,272,000 

Commitments to extend credit are agreements to lend to a member as long as there is no violation of any condition 

established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may 

require payment of a fee. Because many of the commitments are expected to expire without being drawn upon, the 

total commitment amounts do not necessarily represent future cash requirements. The Credit Union evaluates each 

member's credit worthiness on a case-by-case basis. The amount of collateral obtained to secure borrowing on the 

lines of credit is based on management’s credit evaluation of the member. 

Unfunded commitments under revolving credit lines and overdraft protection agreements are commitments for 

possible future extensions of credit to existing customers. These lines-of-credit are uncollateralized and usually do 

not contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Credit 

Union is committed. 

Note 10. Commitments and Contingent Liabilities 

The Credit Union is a party to various legal actions normally associated with collections of loans and other business 

activities of financial institutions, the aggregate effect of which, in management’s opinion, would not have a material 

adverse effect on the financial condition or results of operations of the Credit Union. 

The Credit Union is a state-chartered credit union described in Internal Revenue Code (“IRC”) Section 501(c) (14). 

As such, the Credit Union is exempt from federal taxation of income derived from the performance of activities that 

are in furtherance of its exempt purposes. However, IRC Section 511 imposes a tax on the unrelated business 

income (as defined in Section 512) derived by state-chartered credit unions. Many states have similar laws. The 

specific application of Section 512 to the various activities conducted by state-chartered credit unions has been at 

issue for many years. During 2007, the Internal Revenue Service (“IRS”) issued a series of Technical Advice 

Memoranda (“TAM”) to a number of state-chartered credit unions located throughout the country. In these TAMs the 

IRS ruled certain products and services to be subject to taxation as unrelated business income. In light of the TAMs, 

the Credit Union has assessed its activities and any potential federal or state income tax liability. In the opinion of 

management, any liability arising from federal or state taxation of activities deemed to be unrelated to its exempt 

purposes is not expected to have a material effect on the Credit Union’s financial position or results of operation. 

Note 11. Employee Benefits 

The Credit Union has a 401(k) plan that allows employees to contribute by deferring a portion of their compensation 

into the plan. The Credit Union matches a portion of the employees’ deferred contributions. Additionally, the Credit 

Union makes a discretionary contribution to all employees, regardless of their own participation. 401(k) plan costs 

are accrued and funded on a current basis. The Credit Union contributed $644,579 and $636,716, respectively, to 

the plan for the years ended December 31, 2008 and 2007. 

Note 12. Members’ Equity 

The Credit Union is subject to various regulatory capital requirements administered by the NCUA. Failure to meet 

minimum capital requirements can initiate certain mandatory – and possibly additional discretionary – actions by 

regulators that, if undertaken, could have a direct material effect on the Credit Union’s financial statements. Under 

capital adequacy guidelines and the regulatory framework for prompt corrective action, the Credit Union must meet 

specific capital guidelines that involve quantitative measures of the Credit Union’s assets, liabilities, and certain offbalance-sheet 

items as calculated under generally accepted accounting principles. The Credit Union’s capital 

amounts and classification are also subject to qualitative judgments by the regulators about components, risk 

weightings, and other factors.




Quantitative measures established by regulation to ensure capital adequacy require the Credit Union to maintain 

minimum amounts and ratios (set forth in the table below) of net worth to total assets. Further, credit unions over 

$10,000,000 in assets are also required to calculate a Risk-Based Net Worth (RBNW) requirement which establishes 

whether or not the Credit Union will be considered “complex” under the regulatory framework. The Credit Union’s 

RBNW requirements as of December 31, 2008 and 2007 were 5.40 percent and 6.04 percent, respectively. The 

minimum requirement to be considered “complex” under the regulatory framework is 6 percent. Management 

believes, as of December 31, 2008 and 2007, that the Credit Union meets all capital adequacy requirements to which 

it is subject. 

As of December 31, 2008, the NCUA categorized the Credit Union as “well capitalized” under the regulatory 

framework for prompt corrective action. To be categorized as “well capitalized,” the Credit Union must maintain a 

minimum net worth ratio of 7 percent of assets. There are no conditions or events since that notification that 

management believes have changed the institution’s category. 

The Credit Union’s actual capital amounts and ratios are presented in the following table: 

December 31, 2008 December 31, 2007 

Amount Ratio/Requirement Amount Ratio/Requirement 

Amount needed to be 

classified as “adequately 

capitalized” 

Amount needed to be 

classified as “well 

$53,437,478 6.00% $45,781,494 6.04% 

capitalized” $62,343,725 7.00% $53,058,023 7.00% 

Actual net worth $63,175,744 7.09% $68,562,110 9.05% 

Because the RBNW requirement is less than the net worth ratio, the Credit Union retains its original category. 

Further, in performing its calculation of total assets, the Credit Union used the quarter-end balance option, as 

permitted by regulation. 

Note 13. Related Party Transactions 

In the normal course of business, the Credit Union extends credit to directors, supervisory committee members and 

executive officers. The aggregate loans to related parties at December 31, 2008 and 2007 are $3,572,615 and 

$2,337,608, respectively. Shares from related parties at December 31, 2008 and 2007 amounted to $560,858 and 

$326,814, respectively. 

Note 14. Fair Value of Financial Instruments 

Effective January 1, 2008, the Credit Union adopted the provisions of SFAS No. 157, (SFAS 157) "Fair Value 

Measurements" for assets and liabilities measured and reported at fair value. SFAS 157 defines fair value, 

establishes a framework for measuring fair value and expands disclosures about fair value measurements. 

SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an 

orderly transaction between market participants. SFAS 157 requires the use of valuation techniques that are 

consistent with the market approach, the income approach and/or the cost approach. Inputs to valuation techniques 

refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, 

meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed 

based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting 

entity's own assumptions about the assumptions market participants would use in pricing the asset or liability 





developed based on the best information available in the circumstances. In that regard, SFAS 157 establishes a fair 

value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical 

assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows: 

Level 1: Quoted prices for identical assets or liabilities in active markets that the entity has the ability to access as of 

the measurement date. 

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or 

liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by 

observable market data. 

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that 

market participants would use in pricing an asset or liability. 

A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the 

general classification of such instruments pursuant to the valuation hierarchy, is set forth below. 

Investments Available –for- Sale: Where quoted prices are available in an active market, investments are classified 

within level 1 of the valuation hierarchy. Level 1 investments would include highly liquid government bonds and 

exchange traded equities. If quoted market prices are not available, then fair values are estimated by using pricing 

models, quoted prices of securities with similar characteristics, or discounted cash flow. Level 2 investments would 

include U.S. agency securities, mortgage backed agency securities, obligations of states and political subdivisions 

and certain corporate, asset backed and other securities. In certain cases where there is limited activity or less 

transparency around inputs to the valuation, investments are classified within level 3 of the valuation hierarchy. 

The following table summarizes the investments available for sale that measured at fair value on a recurring basis as 

of December 31, 2008, segregated by the level of the valuation inputs within the fair value hierarchy utilized to 

measure fair value. 



Fair Value Measurements at December 31, 2008 Using 

Quoted Prices in 

Active Markets for 

Identical Assets 

(Level 1) 

Significant Other 

Observable Inputs 

(Level 2) 

Significant 

Unobservable 

Inputs (Level 3) 

Investments available- for- sale $ 143,108,865 $ 143,108,865 

Other real estate owned 2,101,206 $ 2,101,206 

The Credit Union may be required, from time to time, to measure certain assets and liabilities at fair value on a 

nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets that are 

measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. 

Impaired Loans: The Credit Union does not record loans at fair value on a recurring basis. However, from time to 

time, a loan is considered impaired and an allowance for loan losses is established. The specific reserves for 

collateral dependent impaired loans are based on the fair value of the collateral less estimated costs to sell. The fair 

value of collateral was determined based on appraisals. In some cases, adjustments were made to the appraised 

values due to various factors including age of the appraisal, age of comparables included in the appraisal, and known 

changes in the market and in the collateral. When significant adjustments were based on unobservable inputs, the 

resulting fair value measurement has been categorized as a Level 3 measurement.




Fair Value Measurements at December 31, 2008 Using 


Quoted Prices in 

Active Markets for 

Identical Assets 

(Level 1) 


Significant Other 

Observable Inputs 

(Level 2) 

Significant 

Unobservable 

Inputs (Level 3) 

Assets 

Impaired loans $ 2,061,645 2,061,645 

SFAS 107, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of fair value information about 

financial instruments, whether or not recognized in the balance sheet. Fair value is determined under the framework 

established by SFAS 157. SFAS 107 excludes certain financial instruments and all non-financial instruments from its 

disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the 

underlying fair value of the Company. The following information presents estimated fair values of the Company’s 

financial instruments as of December 31, 2008 and 2007 and the methods and assumptions used to estimate those 

fair values. 

Cash and Cash Equivalents: The carrying amounts of cash and cash equivalents approximate their fair value. 

Other Investments: The fair value of other investments is the market value based on quoted market prices, when 

available, or market prices provided by recognized broker dealers. If listed prices or quotes are not available, fair 

value is based, as appropriate, upon redemption provisions of the underlying securities. 

Loans: When quoted market prices are not available, the fair value of loans receivable is generally based upon 

observable market prices of similar instruments, including bonds, credit derivatives and loans with similar 

characteristics. If observable market prices are not available, fair value is based upon estimated cash flows adjusted 

for credit risk which are discounted using an interest rate appropriate for the maturity of the applicable loans or the 

unfunded commitments. 

The inputs for the determination of the fair value of loans are generally classified within Level 2 of the valuation 

hierarchy. However, certain of the Credit Union’s loans, including purchased nonperforming loans and subprime 

loans are classified within Level 3 due to the lack of observable pricing data. The fair value of these Level 3 loans is 

calculated with a discounted cash flows model using market-based credit spreads of comparable debt instruments or 

credit derivatives of the specific borrower or comparable borrowers. 

Accrued Interest Receivable: Accrued interest receivable represents interest on loans and securities. The carrying 

amount of accrued interest receivable approximates fair value. 

Members’ Shares: The fair value of shares payable upon demand (regular shares, share draft and money market 

accounts is the amount payable at the date of the statement of condition. The fair value of fixed maturity accounts 

(share certificates and IRA share accounts) is estimated by discounting the estimated cash flows using interest rates 

for comparable instruments and terms and are classified within Level 2 or Level 3. 

Borrowed Funds: The fair values of the Credit Union's borrowed funds are estimated using discounted cash flow 

analyses based on the Credit Union's incremental borrowing rates for similar types of borrowing arrangements. 

Off-Balance Sheet Credit-Related Instruments: Fair values for off-balance-sheet, credit-related financial instruments 

are based on fees currently charge to enter into similar agreements, taking into account the remaining terms of the 

agreements and the counterparties’ credit standing. The fair value for such financial instruments is nominal. 

December 31, 2008 December 31, 2007 

Carrying Fair Carrying Fair





Amount Value Amount Value 

Financial Assets: 

Cash and cash equivalents $38,311,000 $38,311,000 $ 78,081,000 $ 78,081,000 

Investments available-for-sale 143,109,000 143,109,000 39,903,000 39,903,000 

Other investments 68,164,000 68,164,000 75,566,000 75,566,000 

Loans and loans held for sale, net 600,117,000 621,147,000 522,831,000 521,826,000 

Accrued interest receivable 3,350,000 3,350,000 3,008,000 3,008,000 

Financial Liabilities: 

Members’ shares 803,901,000 792,857,000 680,803,000 680,803,000 

Borrowed funds 15,000,000 15,111,000 0 0 

Note 15. Subsequent Event 

In January 2009, U.S. Central Federal Credit Union (U.S. Central) announced that it was taking a $1.2 billion charge 

during the fourth quarter of 2008 as a result of determining that certain of its investment securities were other-thantemporarily 

impaired. On January 28, 2009, the NCUA announced that it was injecting $1 billion of capital into U.S. 

Central from the NCUSIF and offering a temporary guarantee through December 31, 2010 of all member shares in 

corporate credit unions to provide stability and help maintain liquidity in the corporate credit union system. All 

federally-insured credit unions will share the cost of these actions proportionately through a partial write-off of the 

credit unions’ existing 1 percent NCUSIF deposit and future assessments of additional premiums to return the 

NCUSIF to the normal operating level of 1.3 percent of insured deposits. The impairment of the deposit was 

estimated at 51 percent of the December 31, 2008 asset value with an additional assessment of .3 percent of insured 

deposits as of December 31, 2008. In March 2009, the NCUA announced that both U.S. Central and WesCorp were 

taken into conservatorship and the original loss reserve estimate had increased by $1.2 billion since the January 

2009 estimate was made. Based on this adjustment of the loss reserve estimate, the impairment of the NCUSIF 

deposit was revised to 69 percent of the December 31, 2008 deposit fund balance. The additional assessment of .3 

percent of insured deposits as of December 31, 2008 remained unchanged 

On March 27, 2009, the NCUA introduced an amendment to the Federal Credit Union Act to Congress that, if 

enacted, could substantially impact the amount of impairment currently estimated. The proposed legislation would 

create the Corporate Credit Union Stabilization Fund to absorb losses associated with the corporate credit union 

stabilization actions and assess federally insured credit unions for associated costs over as much as a 7-year period. 

If the Corporate Credit Union Stabilization Fund is not created, the Credit Union will incur approximately $7,210,000 

in impairment and assessment charges for the year ending December 31, 2009. 

The underlying causes of the impairment and assessment are events considered to have occurred before 2009, and 

were probable but not estimable as of December 31, 2008. Because the amounts became estimable with the NCUA 

Board actions in 2009 prior to the issuance of the audited financial statements, the Credit Union wrote-off all of its 

$2,708,093 capital in WesCorp. based on the March 20, 2009 announcement that the losses at this institution exceed 

the capital in the organization. In addition, the Credit Union performed an evaluation of its corporate capital account 

in SunCorp and wrote off $4,533,101 as of December 31, 2008. 

As of May 19, 2009 legislation has passed that will allow the Credit Union to defer the expenses related to the 

NCUSIF assessment.

senior leadership team 

Gerry Agnes President and Cheif Executive Offi cer 

Craig Burkhard Executive VP/Chief Operating Offi icer 

Peggy Anderson Chief Financial Offi cer 

Annette Matthies VP of People 

Matt Henry VP of IT 

Rich Jones VP of Marketing 

Mary Ann Kammerer VP of Service Delivery 

Steve Schmidle VP of Finance 

Ed Gross VP of Internal Audit 

5 4 

2 

3 

1 

7 6 

8 

9 


7 

6 9 

8 5 

2 1 3 

4

ElevationsCU.com 

303.443.4672

7 6 5 4 3 2 1 8 - Elevations Credit Union

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