7 6 5 4 3 2 1 8 - Elevations Credit Union
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7 6 5 4 3 2 1 8 - Elevations Credit Union
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safe. sound. local.<br />
2008 Annual Report
2008 fi nancial highlights<br />
77,000<br />
76,500<br />
76,000<br />
75,500<br />
75,000<br />
74,500<br />
$650<br />
$600<br />
$550<br />
$500<br />
900<br />
800<br />
700<br />
600<br />
75,444 75,569<br />
2005 2006 2007 2008<br />
557<br />
Member Growth<br />
75,691<br />
76,520<br />
Total Number of Members<br />
2005 2006 2007 2008<br />
691<br />
Total Loans<br />
(in millions $)<br />
548<br />
Total Loans<br />
523<br />
600<br />
$850<br />
$800<br />
$750<br />
$700<br />
$650<br />
$600<br />
$550<br />
623<br />
Total Deposits<br />
(in millions $)<br />
652<br />
2005 2006 2007 2008<br />
Total Deposits<br />
asset growth in 2008 to $893M<br />
deposit growth in 2008 to $804M<br />
© Copyright <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> 2009<br />
Assets<br />
(in millions $)<br />
723<br />
758<br />
2005 2006 2007 2008<br />
Total Assets<br />
893<br />
70<br />
60<br />
50<br />
40<br />
30<br />
0.60<br />
0.30<br />
0.00<br />
-0.30<br />
-0.60<br />
-0.90<br />
62.7<br />
0.02<br />
0.33<br />
ROA<br />
681<br />
Capital<br />
(in millions $)<br />
69.1<br />
65.1<br />
Capital<br />
0.47<br />
804<br />
63.1<br />
2005 2006 2007 2008<br />
Return on Assets (%)<br />
0.22 *<br />
2005 2006 2007 2008<br />
-0.65 **<br />
*Before the write down of <strong>Elevations</strong> capital in the corporate credit<br />
unions due to the NCUA’s Corporate <strong>Credit</strong> <strong>Union</strong> Stabilization Act<br />
** After the write down of <strong>Elevations</strong> capital in the corporate credit<br />
unions due to the NCUA’s Corporate <strong>Credit</strong> <strong>Union</strong> Stabilization Act
table of contents<br />
Joseph Wilson<br />
Mortgage Loan Originator<br />
2 Letter from the Chair<br />
3 Letter from the President<br />
4 Board of Directors<br />
6 Supervisory Committee<br />
8 Volunteer Committees<br />
10 New Branch Openings<br />
11 Kids Fair sponsored by Rags to Riches<br />
12 Wealth Management Services<br />
13 Mortgages<br />
14 Member Education<br />
15 Community Relations<br />
19 Branch Managers<br />
20 NCUA Corporate Stabilization Plan<br />
21 Financials<br />
45 Senior Leadership Team<br />
At <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong>, we love the outdoors as much<br />
as you do. In this annual report, you’ll see photos of our<br />
staff, management and board members at work and at play.<br />
Our members know that there’s nothing like getting outside<br />
and hitting the slopes, pedaling on the bike trails, hiking<br />
the mountains, or just taking the dog for a walk as a great<br />
way to recharge the batteries, fi ll the senses and live life to<br />
its fullest. This enthusiasm for nature and the environment<br />
carries over into our work too. All this exercise, fresh air and<br />
dramatic scenery inspires us to deliver outstanding member<br />
service, whether it’s<br />
over the phone, in<br />
person at one of<br />
our many branch<br />
locations, or online<br />
at <strong>Elevations</strong>CU.com.<br />
“The Rocky Mountain area has so many<br />
outdoor activities, it’s hard to choose only one.<br />
Hiking to Bear Peak or skiing the front range at<br />
elevations where you feel you can touch the sky<br />
are only two among many I enjoy. And speaking<br />
of heights, <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> fi ts my<br />
style too — so many opportunities as a volunteer<br />
to learn, grow, and serve my community.”<br />
- Jo Hetherington<br />
Jo Hetherington<br />
Board of Directors
letter from the chair<br />
Dear Members,<br />
2008 was a challenging year for <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong>. Early in the year, our beloved and respected<br />
CEO, Bill Sterner, died suddenly while attending a Legislative Forum at the Colorado State Capitol. Even<br />
in the best run companies, the sudden death of a CEO is disruptive. Immediately, your Board of Directors<br />
put a plan in place to fi nd a new CEO who would take the reins of an excellent credit union and catapult it<br />
forward to becoming the best. We conducted a national search for a new CEO that brought us over 200<br />
qualifi ed candidates from whom to choose.<br />
In August, we selected Gerry Agnes as President and CEO. It was not only Gerry’s background in credit<br />
unions, non-profi ts and banks that elevated him to the top of the list; it was also his critical business<br />
acumen, his deep understanding of our business model, his expertise in strategic planning, his history of<br />
leadership and his proven track record of team building that made our decision easy.<br />
Your Directors are extremely appreciative of the extraordinary efforts of all credit union management and<br />
staff when the economy was in the midst of collapse and during a time when large banks and investment<br />
houses faltered, failed and were given massive bailouts from your tax dollars. Throughout this transition<br />
and these diffi cult times, <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> stayed true to its mission and values and focused on<br />
what’s best for you, our members. As a result of this effort to concentrate on value for all members,<br />
<strong>Elevations</strong> had one of the best years we’ve experienced in our history.<br />
Your Directors are also gratifi ed to see the quick impact Mr. Agnes has had on this organization.<br />
Immediately, he pulled the management team together into a tightly unifi ed team and began planning the<br />
future of your credit union by starting at the beginning – our core values. Gerry has mapped out a strategic<br />
planning process that will help the Board of Directors develop the vision for tomorrow and govern the credit<br />
union’s progress toward those goals. He has also brought new transparency to our Board meetings with<br />
clarity in policy, service quality, and fi nancial strategies. With your management team, we are setting a<br />
course that will make us all delighted to say, “I am a member of <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong>.”<br />
Lastly, I have been blessed to work closely with our Board of Directors this past year and truly thank<br />
them for their tireless work and dedication to advance our mission. Together, we successfully navigated<br />
through a very challenging year that resulted in breaking many new records, while also ensuring our future<br />
success.<br />
I am confi dent that we will forge ahead, continuing to build a cooperative organization to best serve you,<br />
our members.<br />
Respectfully,<br />
Eric Jones<br />
Chair, Board of Directors<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 2
letter from the president<br />
Dear Members,<br />
Thank you for allowing me to serve as your new CEO. I am truly blessed to be a part of <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
and our community. Having just arrived in Boulder during the second half of 2008, I swiftly learned about the<br />
unique quality of <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong>, the beauty of Boulder and Colorado, and the loyalty and engagement<br />
of the nearly 77,000 friends, family, businesses and neighbors that make up our membership. The strength of<br />
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> is refl ected in the strength of our membership and together we can accomplish great<br />
things. I am excited to work with you, our Board of Directors, and our exceptionally talented management team<br />
to extend our 56 years of successful growth far into the future.<br />
A Look Back<br />
This last year was characterized by rapid, often abrupt change. On nearly a daily basis, the newspapers reported<br />
huge banks, brokerages, investment houses, and insurance companies crashing down. We saw our Legislative<br />
branch commit almost $1 trillion of our tax dollars to bail out banks, seemingly with no strings attached.<br />
Clearly, the fi nancial turmoil is unprecedented for this generation and has had enormous affects to our society.<br />
Importantly, the meltdown in the investment markets did impact <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong>. Our Treasurer, Vince<br />
Wayland, and Chief Financial Offi cer, Peggy Anderson, provide keen insights on the NCUA’s Corporate <strong>Credit</strong><br />
<strong>Union</strong> Stabilization Plan and how it affected <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> in their report on page 20. In spite of the<br />
fi nancial market turmoil, your credit union took a different path and reached new heights. Our results for 2008<br />
were full of good news that we can all celebrate:<br />
• Asset growth of 18% to $893 million – An all-time high!<br />
• Deposit growth of 18% to $804 million – An all-time high!<br />
• Loan growth of 15% to $600 million – An all-time high!<br />
• Number of Members – 76,520 – An all-time high!<br />
• Member Service satisfaction score 91.9% - Highest score in four years<br />
How did we stay out of harm’s way?<br />
While massive banks faltered and “disappeared” through forced mergers, we did a lot of things right. We stayed<br />
true to our mission, vision, and values. It is because we adhered to our core values and mission that we did not<br />
consider offering mortgages that were not in the best interest of our members. Our values and mission served as<br />
our compass that guided us to responsible underwriting of loans for our members. We stuck to our core purpose<br />
of providing better solutions for a better life for our members. Consequently, as we helped our members fulfi ll<br />
their dreams and to strengthen their lives, we also strengthen <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong>.<br />
We’re a unique business<br />
As a not-for-profi t cooperative credit union, we have one purpose: to provide solutions for a better life for our<br />
members. We don’t answer to Wall Street or foreign investors. We only answer to you, our members, since you<br />
are our owners. After the smoke clears from this fi nancial meltdown, our business model will continue to prove<br />
its sustainability. We lend money to people we know (members) using deposits<br />
from other members. It is a simple business model that has been successful for<br />
over 100 years and when delivered exceptionally, it can produce record results<br />
during even the worst economic downturns.<br />
What’s in store for <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> in 2009 and beyond?<br />
Your credit union is uniquely positioned for great success. We are blessed<br />
with a stellar board of directors that are governing a terrifi c leadership team,<br />
who are executing well-planned strategies of growth and quality service that<br />
will springboard us far into the future. During 2009 and beyond, we will open<br />
new branches in our communities, strengthen our technology to better deliver<br />
services to you, enhance our products to better meet your growing needs, and<br />
seek the Malcolm Baldrige National Quality Award. These are very ambitious<br />
initiatives that I’m very confi dent we will provide you and from which you will<br />
signifi cantly benefi t. Thank you for your membership and continued support.<br />
Very truly yours,<br />
Gerry Agnes<br />
President, CEO<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 3
oard of directors<br />
As a not-for-profi t fi nancial cooperative,<br />
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> is governed by<br />
volunteer members. The Board of Directors is<br />
elected by and from the membership and is<br />
comprised of professionals who understand<br />
and represent the goals and objectives of<br />
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> members.<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 4<br />
The seven-member Board of Directors<br />
provides leadership, oversight and direction<br />
and ensures the safety and soundness of the<br />
overall operations of <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong>.<br />
Their commitment to the <strong>Credit</strong> <strong>Union</strong> philosophy<br />
of “People Helping People” drives their<br />
service to the membership.
Pictured page 4<br />
Eric Jones Chair<br />
Eric Jones is owner of Tinucci, Jones & Co, P.C., a CPA fi rm well<br />
1known by not-for-profi t organizations throughout Colorado. He has<br />
extensive knowledge in all areas of the credit union industry,<br />
consulting on mortgage banking issues, formation of credit union<br />
service organizations (CUSOs), and relevant taxation strategies.<br />
Jim Menghi 1st Vice Chair<br />
2Jim Menghi has been a member of <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> for 23 years and served on the Supervisory<br />
Committee for 18 years. He now serves on the Board of Directors. Mr. Menghi has been employed at<br />
the University Corporation for Atmospheric Research (UCAR) as the Deputy Director of the Joint Offi ce<br />
for Science Support (JOSS) since 2002 and Internal Auditor/Compliance Offi cer from 1985 to 2002.<br />
Previous to that time, he held the position of auditor with the US General Accounting Offi ce (GAO) for<br />
nine years.<br />
Carol Krismann 2nd Vice Chair<br />
3Carol Krismann was appointed to the Board of Directors in June, 2006 to fi ll a vacant position and was<br />
elected to the Board in 2007. She is a librarian at the University of Colorado and has been the head of<br />
the William M. White Business Library since 1982.<br />
Vince Wayland Secretary/Treasurer<br />
4Vince Wayland has been a member of <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> for over 30 years, serving as a <strong>Credit</strong><br />
<strong>Union</strong> volunteer since 1999 and on the Board of Directors since 2003. He is retired as a software<br />
engineer from the National Center for Atmospheric Research (NCAR). He is also a Board member for<br />
the National User Group of National Energy Research Super Computer Center (NERSC).<br />
Jo Hetherington Director<br />
5Jo Hetherington has been an <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> member since 1993, a volunteer since 1995, and<br />
was elected to the Board of Directors in 2003. Her other volunteer activity includes work with Boulder<br />
Valley Schools, a counselor at the Boulder Department of Mental Health, and at the Colorado State<br />
Legislature supporting issues on health and welfare of school children.<br />
Lynn Walloch Director<br />
6Lynn Walloch has served on the Board of Directors since 2001. She retired from a 30-year career with<br />
the University of Colorado. She received the Supervisory Employee of the Year award at the University<br />
in 1983. She also has extensive volunteer experience with Boulder County Social Services and the City<br />
of Broomfi eld.<br />
Katie Larson Director<br />
7Katie Larson, 28, represents the youngest person ever appointed or elected to serve on the Board<br />
of Directors at <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong>. She is employed as a Treasury Analyst for Chipotle Mexican<br />
Grill in Denver; earned her B.A. in Economics with an emphasis in Finance from St. Olaf College in<br />
Northfi eld, MN; and she also serves on the Board of Directors for the Colorado Treasury Management<br />
Association. She also worked at <strong>Elevations</strong> as a Financial Services Advisor back when it was known<br />
as U of C FCU.<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 5<br />
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4
supervisory committee<br />
5 4<br />
2<br />
3<br />
1<br />
7 6<br />
8<br />
supervisory committee<br />
Steve Newell Chair<br />
Havish Vinnakota Vice Chair<br />
Tom Hall Secretary<br />
Bob Jobin Committee Member<br />
Brad Jones Committee Member<br />
Meow Tan Committee Member<br />
Ed Gross VP of Internal Audit<br />
Joelle Botello Internal Auditor<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 6<br />
2<br />
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The Supervisory Committee ensures that the <strong>Credit</strong> <strong>Union</strong> adheres to established<br />
policies and conducts business in the members’ best interest. All internal and independent audits<br />
are reported to this Committee. In addition, the Committee maintains a confi dential relationship with<br />
members as their independent representatives at the <strong>Credit</strong> <strong>Union</strong>. The volunteer representatives<br />
of the Committee are: Steve Newell, Havish Vinnakota, Tom Hall, Brad Jones, Bob Jobin and<br />
Meow Tan.<br />
The Supervisory Committee’s responsibility is to verify that records are accurately maintained and<br />
to review <strong>Credit</strong> <strong>Union</strong> internal controls. This allows the Committee to determine that management<br />
activities are carried out in accordance with <strong>Credit</strong> <strong>Union</strong> policy and Federal and State Regulations.<br />
To meet Federal and State guidelines as specifi ed by the National <strong>Credit</strong> <strong>Union</strong> Administration and<br />
the State Department of Regulatory Agencies, we have retained the services of McGladrey and<br />
Pullen, Certifi ed Public Accountants, to perform an audit of the <strong>Credit</strong> <strong>Union</strong>’s fi nancial statements<br />
as of December 31, 2008. McGladrey and Pullen was selected because of their reputation and<br />
experience in auditing similar large credit unions in our asset category.<br />
The Supervisory Committee will continue to work diligently with management and staff to minimize<br />
any fi nancial or fraud risk.<br />
This Committee retains two full-time internal auditors: Ed Gross and Joelle Botello. Their jobs are to<br />
perform operational and fi nancial audits and to evaluate effectiveness of our internal controls, which<br />
includes reviewing the organization’s compliance with <strong>Credit</strong> <strong>Union</strong> policies and procedures. Ed<br />
and Joelle also plan, organize and complete audits of departments and branches, preparing audit<br />
reports for this Committee, the CEO and the executive management team.<br />
Based upon these fi ndings, the Supervisory Committee is satisfi ed that the records accurately<br />
refl ect <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong>’s fi nancial condition and that its operations are handled in<br />
accordance with <strong>Credit</strong> <strong>Union</strong> policies and procedures.<br />
ELEVATIONS CU <strong>Credit</strong> 2008 <strong>Union</strong> annual 2008 report annual report 7<br />
committees
community relations committee<br />
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> strives to be an active and supportive partner in the communities<br />
that we serve. The Community Relations Committee helps us accomplish this mission by directing<br />
matters that concern reinvestment in Boulder County, Broomfi eld County, and surrounding areas.<br />
This includes donating money as well as time. The Committee makes recommendations to help<br />
support worthwhile organizations, charities and other areas of need.<br />
The Committee also reviews grant applications and allocates resources according to the community<br />
relations philosophy and structure as approved by the Board of Directors.<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 8
community<br />
relations committee<br />
Pictured page 8<br />
5 4<br />
2<br />
3<br />
1<br />
7 6<br />
8<br />
9<br />
Jo Hetherington Chair<br />
Carol Krismann Committee Member<br />
Bob Perez Committee Member<br />
DiAnne Franklin Committee Member<br />
Midge Korczak Committee Member<br />
Cris Jones Committee Member<br />
Brad Jones Committee Member<br />
Rachael Maag Committee Member<br />
Tracy Miller Committee Member<br />
governance<br />
committee<br />
Lynn Walloch Chair<br />
Jim Menghi Committee Member<br />
Vince Wayland Committee Member<br />
nominating<br />
committee<br />
Jim Menghi Chair<br />
Eric Jones Committee Member<br />
Carol Krismann Committee Member<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 9<br />
3<br />
8<br />
2<br />
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1<br />
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7<br />
5
new branch openings 2008<br />
Longmont Main Broomfi eld/Erie<br />
Broomfi eld/Westminster<br />
three new branches<br />
four new ATM’s<br />
8,140 new members<br />
<strong>Elevations</strong> opened three new branches in<br />
2008, providing current <strong>Credit</strong> <strong>Union</strong> members with<br />
added convenience, while at the same time making<br />
our full range of fi nancial products and services<br />
accessible to more new members.<br />
The fi rst new branch, located on the border of<br />
Broomfi eld and Westminster, opened on February<br />
25 to the delight of the 2,500+ <strong>Elevations</strong> members<br />
who live within that area. The branch, located near<br />
the corner of 120th and Sheridan in the Sheridan<br />
Crossing Shopping Center, includes a full service<br />
lobby and 24-hour ATM. Cynthia Lamb, Branch<br />
Manager, has previous experience managing other<br />
<strong>Elevations</strong> branches.<br />
On July 9, the second new branch of the year opened<br />
in north Longmont. Located at 2101 Main Street, this<br />
branch provides added convenience for those who<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 10<br />
live, work or travel in the northern and eastern<br />
sections of Longmont. This branch is the perfect<br />
complement to <strong>Elevations</strong> Longmont branch located<br />
on Hover Street, which provides service to those<br />
who are in the western and southern areas of<br />
Longmont. The Main Street branch’s 2,193 square<br />
feet includes three teller stations, a drive-up lane, and<br />
24-hour ATM. The Branch Manager, Chris Smith, is a<br />
Longmont native.<br />
On September 16, <strong>Elevations</strong> opened its third new<br />
branch of the year to serve the Broomfi eld and Erie<br />
areas. This branch became the only credit union<br />
or bank branch within a three mile radius when it<br />
opened. Located at 3140 Village Vista Drive in the<br />
Village at Vista Ridge, this branch is managed by<br />
Robert Barr and serves a community of primarily<br />
newer homes off of Highway 7 just west of Interstate<br />
25, near the Vista Ridge Golf Course.
kids fair<br />
Hundreds of fun-loving kids and<br />
their parents showed up for our fi rst-ever “Rags<br />
to Riches Club Kids’ fair” in 2008. The draw? A<br />
bounce house, spin-art, temporary tattoo booth,<br />
carnival games, music, refreshments, and the<br />
opportunity to have a souvenir photo taken<br />
with our very own Kids’ Club mascot, Rags the<br />
mountain lion. That’s an unbeatable combination<br />
that any kid would enjoy.<br />
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong>’s “Rags to Riches Club”<br />
is a special savings account for children up to age<br />
13 that teaches them about money. Kids learn<br />
the “save, share and spend” method of managing<br />
money. They learn lessons early on that will serve<br />
them well for a lifetime.<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 11<br />
To encourage the savings habit, kids can pick a<br />
reward every time they make a deposit of $5.00<br />
or more at any <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> branch<br />
once they become a member.<br />
Club membership includes three money pouches,<br />
a savings account with no minimum balance,<br />
newsletters, and much more.<br />
The Rags Kids’ Fairs were held in 2008 at the<br />
fl agship Diagonal Branch in June and then helped<br />
kick off the grand opening of the Broomfi eld/<br />
Erie Branch in September. Each event attracted<br />
hundreds of people and resulted in new account<br />
openings.
wealth management services<br />
Products and services offered through CUSO Financial Services, L.P. (CFS), an independent broker/dealer and SEC Registered Investment Advisor,<br />
are not NCUA/NCUSIF insured, are not credit union guaranteed and may lose value. Independent Investment representatives are registered through<br />
CFS (member FINRA/SIPC).<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 12<br />
No one would argue that the investment climate has changed<br />
dramatically over the past year. The unfortunate result of the recent<br />
economic downturn has been that many people have experienced<br />
signifi cant decreases in the overall value of their retirement and<br />
investment accounts.<br />
At <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong>, through its Wealth Management Services,<br />
including CUSO Financial Services (CFS), L.P., we are keeping up with<br />
the changes and helping members to reevaluate or establish their goals<br />
in these challenging economic times.<br />
Registered Financial Advisors Patrick Seal and Robert Cribbs provide fi nancial planning, retirement, and<br />
investment solutions designed to help members address the volatility in today’s market. They create<br />
fi nancial plans customized to members’ goals, time horizon, risk tolerance and cash-fl ow requirements.<br />
Robert Cribbs<br />
Financial Advisor<br />
<strong>Elevations</strong> Wealth Management<br />
Patrick Seal<br />
Senior Financial Advisor<br />
<strong>Elevations</strong> Wealth Management
mortgages<br />
<strong>Elevations</strong> side-stepped that whole sub-prime mortgage mess and other deceptive and risky<br />
lending practices that took a toll on the nation’s fi nancial health over the past year.<br />
While the questionable mortgage lending practices at other banks and fi nancial institutions proved costly<br />
to homeowners and taxpayers alike in 2008, you didn’t see any of that type of activity at <strong>Elevations</strong>.<br />
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> has a long-standing history of playing it safe and playing it smart, protecting the<br />
assets of the members and maintaining a safe, sound and solvent lending option for members.<br />
As a result, <strong>Elevations</strong> set an all-time high record for mortgage loan activity in 2008.<br />
Members chose <strong>Elevations</strong> to take advantage of the lower fees and closing costs, the attractive low rates<br />
that saved them money whether they were buying or refi nancing, and for the personalized and local<br />
servicing of their home loans.<br />
While others were pulling in the purse strings, <strong>Elevations</strong> had an open wallet. Ready to lend and doing<br />
so with low risk. That’s the <strong>Elevations</strong> way.<br />
5 4<br />
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Linda Cooper AVP Real Estate Lending<br />
Michael Roth Mortgage Loan Originator<br />
Joseph Wilson Mortgage Loan Originator<br />
Greg Roller Mortgage Loan Originator<br />
Steve Gorbet Mortgage Underwriter<br />
Pam Pruessner Lending Systems Project Specialist<br />
7 6<br />
8<br />
9<br />
10<br />
11<br />
Bruce Allen Secondary Market Research<br />
JoLyn Webb Senior Mortgage Processor<br />
Cindy Smario Mortgage Closer/Funder<br />
Andrew Johnson Mortgage Closer/Funder<br />
Stephanie Coe Mortgage Processor<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 13<br />
5 3 7<br />
6 4 1<br />
11<br />
9 10<br />
8<br />
2
member education<br />
Given our roots with the University of Colorado, it’s no wonder we have a well-established<br />
history of positioning <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> as the premier provider of fi nancial education<br />
within the communities we serve. Education is a hallmark of the credit union and 2009 marks the<br />
beginning of our sixth year offering the award-winning RealityCheck consumer education program.<br />
Nationally known consumer advocate Remar Sutton and his team provide value-added content that<br />
has become sought after by our community partners as well as our business partners. In addition<br />
to his work with the credit union industry, Mr. Sutton and his team advocate on behalf of consumers<br />
groups seeking to level the playing fi eld<br />
“Consumer <strong>Credit</strong> Laws in the United<br />
States are written by the banking lobby<br />
and designed to trap consumers in<br />
expensive products that are almost<br />
impossible to get out of. Fairness and<br />
equality never enter into the equation.”<br />
- Remar Sutton<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 14<br />
when it comes to terms and conditions<br />
associated with fi nancial products, the<br />
automotive industry and on privacy rights<br />
issues. It’s a pleasure to have Remar on<br />
our side.<br />
Your credit union has made a<br />
commitment to be a safe haven for<br />
unbiased information on real issues that<br />
consumers face every day. This has been our pledge since we opened our doors over 50 years<br />
ago and continues to be our pledge today. Our award-winning RealityCheck Member Education<br />
Program offers resources through easy to access channels that include:<br />
• A comprehensive consumer information website<br />
• Seminars that are open to our membership, as well as the communities we serve<br />
• Consumer Guides that provide help and guidance for car-buying, home-buying, and more<br />
• Reality Check-up to help members understand their credit report and save money<br />
• FoolProof Youth Financial Literacy Program<br />
Your credit union offered over 90 education events in 2008 with over 3,500 participants. As a<br />
member-owned fi nancial cooperative, it is in our best interest to serve an educated constituency.<br />
If our member-owners thrive, in turn <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> will thrive. This has proven to be a<br />
valuable business model and it sets your credit union apart from the pack.
community relations<br />
Broomfi eld Community<br />
Foundation Youth Advisory Council<br />
At <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong>, we believe in the power of cooperative values and community.<br />
With our success we recognize the importance of giving back. We support people, organizations and<br />
causes that create opportunities and empower lives.<br />
By sharing our energy and resources, we enrich our surroundings. By supporting organizations that<br />
promote affordable housing, education and our environment, we strive to build a stronger, richer<br />
and more vibrant community. We’re proud to report that in 2008, we gave our local communities<br />
$142,812 in monetary and in-kind contributions. Our involvement takes many forms, including student<br />
scholarships and grants to local nonprofi t groups.<br />
“Our Volunteer Time Off program is great; it<br />
allows <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> employees to<br />
regularly maintain our adopted Mud Lake trail.”<br />
- Jamie Kirkland,<br />
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> Training Specialist<br />
Organizations sponsored by <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> in 2008: Thistle Community Housing, Imagine!, Center for Resource<br />
Conservation, Naropa University, Community Foundation Serving Boulder County, Share a Gift, Holiday Food<br />
Basket, Buffalo Bicycle Classic, Colorado Shakespeare Festival, WOW! Childrens Museum, Retired Senior Volunteer<br />
Program, “I Have A Dream” Foundation of Boulder County, Bright Eyes – Longmont Mayor’s Book Club, Alternatives For<br />
Youth, Intercambio de Comunidades, Eco-cycle – Zero Waste, Growing Gardens, Longmont Downtown Development<br />
Association, Boulder County Business Hall of Fame, Volunteer Connection, Community Food Share, YMCA, Boulder<br />
East Transportation Management Organization, Broomfi eld Community Foundation, and Impact on Education.<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 15<br />
“Seed funding for grants to low-income and at-risk youth<br />
and behaviors, provides services for young people while at<br />
the same time fosters the skills of philanthropy in<br />
members of our Youth Advisory Council.”<br />
Karen Smith, Executive Director, Broomfi eld Community Foundation<br />
264 hours of Volunteer<br />
Time Off to benefi t<br />
our community in 2008<br />
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> also takes an active role in the<br />
community. We encourage our employees to get involved<br />
and to support programs that make a positive difference.<br />
You’ll see our staff serving on charitable boards, helping out<br />
at events we sponsor, and volunteering for organizations<br />
which spark their individual community passions. As we<br />
moved into new markets, we developed exciting new<br />
relationships and partnerships. In Longmont we support<br />
the Longmont Mayor’s Book Club that encourages early<br />
childhood learning and a love of reading. Our 2008 grant<br />
to the Broomfi eld Community Foundation will be used as<br />
seed funds by the Youth Involvement Board to launch an<br />
annual program teaching philanthropy and addressing<br />
at-risk behaviors in youth.<br />
Quite simply, service is the basis of our founding, and we are proud to have this as a strong core value<br />
that guides our business and socially responsible activities. Through our many charitable programs,<br />
we will continue to extend our cooperative values and enhance lives through service.
You can’t reach the top without preparation,<br />
planning, and commitment. This applies whether you’re climbing<br />
a mountain or working on a new product or service that makes<br />
life easier and better for our members. Lessons learned on the<br />
mountains translate quite readily to the offi ce.<br />
Christina DeFrancesco<br />
Corporate Project Manager<br />
Chris Smith<br />
Branch Mgr -Longmont Main St.<br />
Kevin Gunnerson<br />
Branch Manager - UMC<br />
Colleen Milligan<br />
Branch Mgr-Table Mesa<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 16<br />
“The outdoors is a beautiful<br />
and magnifi cent place.<br />
But while rugged, it can<br />
also prove fragile. It’s our<br />
responsibility to defend and<br />
preserve it. We view our<br />
role at <strong>Elevations</strong> similarly.<br />
Our members’ trust and<br />
faith in us is paramount,<br />
and we work to earn that<br />
trust everyday.”<br />
- Ed Beckmann, AVP Marketing<br />
Andrew Johnson<br />
Mortgage Closer/<br />
Ivan Jackson<br />
Systems Administrator
“I am equally passionate about work and play. I’m<br />
fortunate to work for an employer that values both.<br />
Working at <strong>Elevations</strong> gives me the opportunity to<br />
work hard, enjoy the challenges it offers and also<br />
have work life balance to enjoy time with my family<br />
and all that life has to offer outside of the offi ce.”<br />
- Annette Matthies, VP of People<br />
“I can have a whale of a good time thanks to my<br />
<strong>Elevations</strong> Visa card.”<br />
- Vince Wayland, Board of Directors - Secretary/Treasurer<br />
“Working at <strong>Elevations</strong> has been a<br />
wonderful experience for me in my<br />
professional and personal life. The<br />
<strong>Credit</strong> <strong>Union</strong> supports and nurtures an<br />
atmosphere of quality, integrity and a<br />
strong focus on doing what is best for<br />
the entire membership.”<br />
- Catherine Dillie, Loan Support Supervisor<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 17<br />
Patrick Seal<br />
Senior Financial Advisor<br />
<strong>Elevations</strong> Wealth Management<br />
Joelle Botello<br />
Internal Auditor
Jim Menghi<br />
Board of Directors<br />
1st Vice Chair<br />
“As a bicyclist, I know the music of whirring<br />
tires while descending a mountain pass. I<br />
also remember the effort, stress and pain<br />
of attaining the summit. Bicyclists know<br />
that the ride is easier when the challenge<br />
of the ascent, the joy at the summit and<br />
the exhilaration of the descent are shared<br />
with others. Cycling is really a metaphor for<br />
what working at <strong>Elevations</strong> is like. We work<br />
as a team to overcome challenges so we<br />
can serve our members better. We attain<br />
worthy goals that make us stronger. We<br />
share in the joy of a job well done.”<br />
- Rich Jones, VP of Marketing<br />
“The hiking and biking in the<br />
fall colors are both wonderful<br />
ways to enjoy the southwest<br />
mountains in Colorado and to<br />
get some good exercise. And<br />
you never know who you may<br />
meet along the way. Sometimes<br />
it is wildlife like foxes<br />
and ground squirrels. Other<br />
times it is a local author of a<br />
mountain bike trail book.”<br />
- Jim Menghi, Board of Directors<br />
1st Vice Chair<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 18<br />
Dave Kennedy<br />
Accountant<br />
“At <strong>Elevations</strong>, we are passionate<br />
about the work that<br />
we do. And we also recognize<br />
that our passions extend to<br />
our families, friends and the<br />
experiences we share with<br />
them. It is this lifestyle that<br />
brings so much energy to<br />
our organization, and drives<br />
so many of us to explore the<br />
world in which we live.”<br />
- Matt Henry, VP of IT
anch managers<br />
5 4<br />
2<br />
3<br />
1<br />
Mary Ann Kammerer VP of Service Delivery<br />
Kerry Westlund AVP of Retail Sales and Branches<br />
Colleen Milligan Boulder Table Mesa<br />
Sarah Brown Boulder Baseline<br />
Kevin Gunnerson Boulder UMC<br />
Clint Jones Lafayette<br />
7 6<br />
8<br />
9<br />
10<br />
Cynthia Lamb Broomfi eld/Westminster<br />
Robert Barr Broomfi eld/Erie<br />
Chris Smith Longmont Main Street<br />
Bill Smellage Longmont Hover<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 19<br />
8<br />
3<br />
6<br />
5<br />
7<br />
1<br />
9<br />
4<br />
10<br />
2
letter from the CFO<br />
NCUA’s Corporate <strong>Credit</strong> <strong>Union</strong> Stabilization Plan<br />
We know that the collapse of major fi nancial institutions has you worried. No one has been immune from this.<br />
Not even credit unions.<br />
Before I explain how this affects <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong>, I want to assure you that we are safe and sound, and our<br />
capital remains strong. You can borrow money from us to fi nance a car, a home, an education, or a variety of other<br />
purposes. You can also invest your money with us in a safe, federally insured account. Your credit union did not get<br />
involved in the sub-prime mortgage market. Your credit union did not get involved in leveraged derivatives. In fact,<br />
your credit union is proud to report that in all categories we had the best year we have had in our history.<br />
However, even though we did many things right we are still being affected.<br />
Let me give you some background. <strong>Elevations</strong> is a “natural person” credit union. This means we provide banking<br />
products and services direct to consumers and businesses. We also have a relationship with what is known as a<br />
“corporate credit union.” The corporate is where we (and other credit unions) process payments (such as members’<br />
checks) for deposit into the Federal Reserve. The corporate credit union is also where we invest in Certifi cates, just<br />
like you would invest in a Certifi cate. Through the corporate, we have access to a line of credit if we ever needed more<br />
liquidity. Our corporate credit unions are SunCorp, located in Westminster, CO and WesCorp located in San Dimas,<br />
CA. The corporate credit unions (including SunCorp and WesCorp) also have a corporate credit union: U. S. Central<br />
<strong>Credit</strong> <strong>Union</strong>. U. S. Central provides the corporate credit unions with investment options and is a source of liquidity for<br />
corporates, much the same as the corporates provide this service to natural person credit unions.<br />
U. S. Central and WesCorp had some investments that plummeted along with the economy. As a result, the potential<br />
credit losses on the collateral underlying the investments outweighed their capital. Because of this decrease in their<br />
capital, the National <strong>Credit</strong> <strong>Union</strong> Administration (NCUA), which regulates all credit unions, used $1 billion from the<br />
National <strong>Credit</strong> <strong>Union</strong> Share Insurance Fund (NCUSIF – similar to the FDIC except it protects credit union members).<br />
As a result, all federally-insured credit unions (this includes <strong>Elevations</strong>) are being required to recapitalize the NCUSIF.<br />
Also, since the NCUA decided to fully insure all deposits in corporate credit unions until December 2010, federally<br />
insured credit unions are required to pay an additional premium to the NCUSIF to cover the loss reserve for the<br />
corporate credit union deposit insurance. Additionally, NCUA has since taken into conservatorship both U.S. Central<br />
and WesCorp which means that our capital investment totaling $7,241,193 in our two corporates, SunCorp and<br />
WesCorp, has become impaired.<br />
The costs related to the NCUA’s Corporate <strong>Credit</strong> <strong>Union</strong> Stabilization Plan are designed to bring the NCUSIF up to<br />
its required regulatory capital level and will be recognized by <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> over the next several years,<br />
beginning in 2009. What is recorded in the accompanying fi nancial statements is our loss of capital in both SunCorp<br />
and WesCorp due to the conservatorship of U.S. Central and Wescorp.<br />
What is important for you, our members, to understand is we are fi nancially strong, safe and sound because we stayed<br />
true to our mission of serving our members. We had a strong 2008 and are beginning 2009 with great results. We can<br />
absorb this shock without risking our strength or soundness. Our capital ratio will remain above NCUA guidelines for<br />
a well capitalized credit union. Remember, your deposits with us are insured up to $250,000 and backed by the full<br />
strength of the United States Government.<br />
If you have questions, please call us at 303.443.4672 or email us at CU.Strength@<strong>Elevations</strong>CU.com.<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 20<br />
Vince Wayland<br />
Board Secretary/Treasurer<br />
Peggy Anderson<br />
Chief Financial Offi cer
fi nancials<br />
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Financial Statements<br />
December 31, 2008 and 2007<br />
McGladrey & Pullen, LLP is a member of RSM International—an affi liation of separate and independent legal entities.<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 21
TABLE OF CONTENTS<br />
INDEPENDENT AUDITOR’S REPORT ............................................................................................. 23 1<br />
STATEMENTS OF FINANCIAL CONDITION...................................................................................... 24 2<br />
STATEMENTS OF OPERATIONS ................................................................................................... 25 3<br />
STATEMENTS OF COMPREHENSIVE (LOSS)INCOME ..................................................................... 26 4<br />
STATEMENTS OF MEMBERS’EQUITY........................................................................................... 27 5<br />
STATEMENTS OF CASH FLOWS................................................................................................... 28 6<br />
NOTES TO FINANCIAL STATEMENTS............................................................................................ 29<br />
7<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 22
Independent Auditor’s Report<br />
Supervisory Committee<br />
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Boulder, Colorado<br />
We have audited the accompanying statements of financial condition of <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> (hereafter “the <strong>Credit</strong><br />
<strong>Union</strong>”) (a Colorado state chartered credit union) as of December 31, 2008 and 2007 and the related statements of<br />
operations, comprehensive (loss) income, members’ equity, and cash flows for the years then ended. These<br />
financial statements are the responsibility of the <strong>Credit</strong> <strong>Union</strong>’s management. Our responsibility is to express an<br />
opinion on these financial statements based on our audits.<br />
We conducted our audits in accordance with auditing standards generally accepted in the United States of America.<br />
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the<br />
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence<br />
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting<br />
principles used and significant estimates made by management, as well as evaluating the overall financial statement<br />
presentation. We believe our audits provide a reasonable basis for our opinion.<br />
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial condition<br />
of <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> as of December 31, 2008 and 2007 and the results of its operations and its cash flows for<br />
the years then ended, in conformity with accounting principles generally accepted in the United States of America.<br />
As disclosed in Note 15 to the consolidated financial statements, the <strong>Credit</strong> <strong>Union</strong> wrote-off all of its $7,241,194<br />
corporate credit union capital based on announcements that the corporate credit union’s losses exceed the capital in<br />
the organization. The <strong>Credit</strong> <strong>Union</strong> has not recorded any impairment or expenses related to the industry matters<br />
described in Note 15.<br />
Phoenix, Arizona<br />
June 1, 2009<br />
McGladrey & Pullen, LLP is an independent member firm<br />
of RSM International an affiliation of separate and independent<br />
accounting and consulting firms.<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 23
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Statements of Financial Condition<br />
December 31, 2008 and 2007<br />
Assets<br />
2008 2007<br />
Cash and cash equivalents<br />
Investments<br />
$ 38,310,922 $ 78,080,971<br />
Available-for-sale 143,108,865 39,902,500<br />
Other 68,163,600 75,565,745<br />
Loans held for sale 1,998,200 4,860,718<br />
Loans to members, net 600,117,246 522,831,263<br />
Accrued interest receivable 3,349,978 3,007,928<br />
Other real estate owned 2,101,606 2,332,498<br />
Property and equipment, net 18,789,122 18,536,642<br />
National <strong>Credit</strong> <strong>Union</strong> Share Insurance Fund deposit 6,733,717 5,882,831<br />
Other assets 7,951,380 6,970,667<br />
Liabilities and Members’ Equity<br />
Liabilities<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 24<br />
$ 890,624,636 $ 757,971,763<br />
Members’ shares $ 803,900,600 $ 680,803,277<br />
Borrowed funds 15,000,000 0<br />
Accrued expenses and other liabilities 8,658,235 8,066,203<br />
Total liabilities 827,558,835 688,869,480<br />
Commitments and contingent liabilities<br />
Members’ equity<br />
Retained earnings, substantially restricted 63,175,744 68,562,110<br />
Accumulated other comprehensive (loss) income (109,943) 540,173<br />
Total members’ equity 63,065,801 69,102,283<br />
$ 890,624,636 $ 757,971,763<br />
The accompanying notes are an integral part of these statements. 2
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Statements of Operations<br />
For the Years Ended December 31, 2008 and 2007<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 25<br />
2008 2007<br />
Interest Income<br />
Interest on loans to members $ 33,212,013 $ 34,414,382<br />
Interest on investments and cash equivalents 9,163,716 6,809,392<br />
42,375,729 41,223,774<br />
Interest Expense<br />
Dividends on members’ shares 18,239,347 17,926,875<br />
Interest on borrowed funds 393,599 0<br />
18,632,946 17,926,875<br />
Net Interest Income 23,742,783 23,296,899<br />
Provision for Loan Losses 3,535,800 4,616,998<br />
Net Interest Income After Provision for Loan Losses 20,206,983 18,679,901<br />
Non-Interest Income<br />
Service charges and other fees 4,638,867 5,110,440<br />
Impairment of corporate credit union capital (7,241,194) -<br />
Other than temporary impairment (OTTI) (2,225,890) -<br />
Interchange income 6,467,737 6,111,388<br />
Gain on Visa stock 930,599 0<br />
Loan servicing income 516,165 455,380<br />
Gain on sale of loans 402,560 90,824<br />
Other non-interest income 975,862 1,118,213<br />
4,464,706 12,886,245<br />
24,671,689 31,566,146<br />
General and Administrative Expenses<br />
Salaries and benefits 14,610,943 14,022,761<br />
Operations 13,274,102 12,201,595<br />
Occupancy 2,173,010 1,873,931<br />
30,058,055 28,098,287<br />
Net (Loss) Income $ (5,386,366) $ 3,467,859<br />
The accompanying notes are an integral part of these statements. 3
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Statements of Comprehensive (Loss) Income<br />
For the Years Ended December 31, 2008 and 2007<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 26<br />
2008 2007<br />
Net (Loss) Income $ (5,386,366) $ 3,467,859<br />
Other Comprehensive (Loss) Income<br />
Unrealized holding (losses) gains on investments classified<br />
as available-for-sale (650,116) 540,173<br />
Comprehensive (Loss) Income $ (6,036,482) $ 4,008,032<br />
The accompanying notes are an integral part of these statements. 4
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Statements of Members’ Equity<br />
For the Years Ended December 31, 2008 and 2007<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 27<br />
Accumulated<br />
Retained Earnings Other<br />
Regular Comprehensive<br />
Reserve Unappropriated Total Income (Loss)<br />
Balance,<br />
December 31, 2006 $ 11,879,721 $ 53,214,530 $ 65,094,251 $ 0<br />
Net income 3,467,859 3,467,859<br />
Change in unrealized gains<br />
(losses) on available-for-sale<br />
investments 540,173<br />
Balance,<br />
December 31, 2007 11,879,721 56,682,389 68,562,110 540,173<br />
Net loss (5,386,366) (5,386,366)<br />
Change in unrealized gains<br />
(losses) on available-for-sale<br />
investments (650,116)<br />
Balance,<br />
December 31, 2008 $ 11,879,721 $ 51,296,023 $ 63,175,744 $ (109,943)<br />
The accompanying notes are an integral part of these statements. 5
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Statements of Cash Flows<br />
For the Years Ended December 31, 2008 and 2007<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 28<br />
2008 2007<br />
Operating Activities<br />
Net (loss) income $ (5,386,366) $ 3,467,859<br />
Adjustments to reconcile net (loss) income to net cash provided by<br />
operating activities:<br />
Accretion of securities, net (83,367) (29,699)<br />
Provision for loan losses 3,535,800 4,616,998<br />
Depreciation and amortization 1,782,607 1,840,867<br />
Loss on corporate credit union capital 7,241,194 0<br />
Other than temporary impairment 2,225,890 0<br />
Gain on sale of loans (402,560) (90,824)<br />
Decrease(increase) in other real estate owned 230,892 (359,873)<br />
Net change in:<br />
Loans held for sale 2,862,518 (1,469,552)<br />
Accrued interest receivable (342,051) 626,075<br />
Other assets (980,713) (340,979)<br />
Accrued expenses and other liabilities 592,032 1,959,839<br />
Net cash provided by operating activities 11,275,876 10,220,711<br />
Investing Activities<br />
Purchases of available-for-sale investments (120,880,357) (43,534,728)<br />
Proceeds from maturities of available-for-sale investments 14,881,353 4,202,100<br />
Net change in other investments 160,951 (1,097,331)<br />
Net change in loans to members (80,419,221) (15,413,001)<br />
Increase in the National <strong>Credit</strong> <strong>Union</strong> Share Insurance Fund deposit (850,887) (342,820)<br />
Purchases of property and equipment (2,035,088) (1,212,849)<br />
Net cash used in investing activities (189,143,249) (57,398,629)<br />
Financing Activities<br />
Increase on borrowed funds 15,000,000 0<br />
Net increase in members’ shares 123,097,324 29,140,799<br />
Net cash provided by financing activities 138,097,324 29,140,799<br />
(Decrease) Increase in Cash and Cash Equivalents (39,770,049) 18,037,119<br />
Cash and Cash Equivalents at Beginning of Year 78,080,971 60,043,852<br />
Cash and Cash Equivalents at End of Year $ 38,310,922 $ 78,080,971<br />
Supplemental Cash Flow Information<br />
Dividends paid on members’ shares and interest paid on borrowed funds $ 18,632,946 $ 17,926,875<br />
Other real estate acquired in settlement of loans $ 135,879 $ 1,358,184<br />
The accompanying notes are an integral part of these statements. 6
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Notes to Financial Statements<br />
December 31, 2008 and 2007<br />
Note 1. Significant Accounting Policies and Nature of Operations<br />
Nature of Operations: <strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong> (<strong>Credit</strong> <strong>Union</strong>) is a state chartered credit union organized under the<br />
provisions of the Colorado <strong>Credit</strong> <strong>Union</strong> Act. Participation in the <strong>Credit</strong> <strong>Union</strong> is limited to those individuals that<br />
qualify for membership. The field of membership is defined in the <strong>Credit</strong> <strong>Union</strong>’s Charter and Bylaws.<br />
Use of Estimates: The preparation of financial statements in conformity with accounting principles generally<br />
accepted in the United States of America requires management to make estimates and assumptions that affect the<br />
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial<br />
statements and the reported amounts of income and expenses during the reporting period. Actual results could differ<br />
from those estimates. Material estimates that are particularly susceptible to significant change in the near term<br />
relates to the determination of the allowance for loan losses, mortgage servicing rights, and the fair value of financial<br />
instruments.<br />
Concentrations of <strong>Credit</strong> Risk: Most of the <strong>Credit</strong> <strong>Union</strong>’s business activity is with its members who are student of<br />
or are employed by the University of Colorado. The <strong>Credit</strong> <strong>Union</strong> may be exposed to credit risk from a regional<br />
economic standpoint, since a significant concentration of its borrowers resides in Boulder, Colorado. However, the<br />
loan portfolio is well diversified and the <strong>Credit</strong> <strong>Union</strong> does not have any significant concentrations of credit risk except<br />
unsecured loans, which by their nature increase the risk of loss compared to those loans that are collateralized.<br />
In addition, during the year ended December 31, 2008 and continuing into 2009, the financial deterioration resulting<br />
from the general economic conditions of the <strong>Credit</strong> <strong>Union</strong>’s market area have yielded significant loan losses and<br />
investment fluctuations for the <strong>Credit</strong> <strong>Union</strong> and those with whom it does business, including other financial<br />
institutions and corporate credit unions. Management continues to monitor the <strong>Credit</strong> <strong>Union</strong>’s operations, including<br />
the loan and investment portfolios, for potential impairment and other accounting consequences.<br />
Fair Value: In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial<br />
Accounting Standards No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 defines fair value,<br />
establishes a framework for measuring fair value and expands disclosures about fair value measurement. SFAS No.<br />
157 also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets<br />
out a fair value hierarchy with the highest priority being quoted prices in active markets. Under SFAS No. 157, fair<br />
value measurements are disclosed by level within that hierarchy. In February 2008, the FASB issued FASB Staff<br />
Position No. 157-2, Effective Date of FASB Statement No. 157, which permits a one-year deferral for the<br />
implementation of SFAS No. 157 with regard to nonfinancial assets and liabilities that are not recognized or disclosed<br />
at fair value in the financial statements on a recurring basis. The <strong>Credit</strong> <strong>Union</strong> adopted SFAS No. 157 for the fiscal<br />
year beginning January 1, 2008, except for nonfinancial assets and nonfinancial liabilities that are recognized or<br />
disclosed at fair value in the financial statements on a nonrecurring basis for which delayed application is permitted<br />
until our fiscal year beginning January 1, 2009. The adoption did not have a material impact on the financial<br />
statement or the results of operations of the <strong>Credit</strong> <strong>Union</strong> but did require the <strong>Credit</strong> <strong>Union</strong> to include additional<br />
disclosures in the footnotes to the financial statements.<br />
Cash and Cash Equivalents: For the purpose of the statements of financial condition and the statements of cash<br />
flow, cash and cash equivalents includes cash on hand, amounts due from financial institutions, and highly liquid debt<br />
instruments classified as cash which were purchased with maturities of three months or less. Amounts due from<br />
financial institutions may, at times, exceed federally insured limits.<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 29<br />
7
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Notes to Financial Statements<br />
December 31, 2008 and 2007<br />
Investments: Securities are classified as “available for sale” and recorded at fair value, with unrealized gains and<br />
losses excluded from earnings and reported in other comprehensive (loss) income.<br />
Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the<br />
securities. Declines in the fair value of individual available-for-sale securities below their cost that are deemed to be<br />
other than temporary are reflected in earnings as realized losses. In determining whether other-than-temporary<br />
impairment exists, management considers many factors, including (1) the length of time and the extent to which the<br />
fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent<br />
and ability of the <strong>Credit</strong> <strong>Union</strong> to retain its investment in the issue for a period of time sufficient to allow for any<br />
anticipated recovery in fair value. Gains and losses on the sale of securities are recorded on the trade date and are<br />
determined using the specific identification method.<br />
Other investments are classified separately and are stated at cost.<br />
Federal Home Loan Bank Stock: The <strong>Credit</strong> <strong>Union</strong>, as a member of the Federal Home Loan Bank of Topeka<br />
(FHLB) system, is required to maintain an investment in capital stock of the FHLB in an amount equal to the greater<br />
of 1 percent of its outstanding mortgage loans or 5 percent of advances from the FHLB. No ready market exists for<br />
the FHLB stock, and it has no quoted market value.<br />
Loans Held for Sale: Mortgage loans originated and intended for sale in the secondary market are carried at the<br />
lower of aggregate cost or estimated market value. All sales are made with recourse.<br />
Loans to Members: The <strong>Credit</strong> <strong>Union</strong> grants mortgage, commercial and consumer loans to members. The ability of<br />
the members to honor their contracts is dependent upon the real estate and general economic conditions of the area.<br />
Loans that the <strong>Credit</strong> <strong>Union</strong> has the intent and ability to hold for the foreseeable future or until maturity or pay-off are<br />
stated at their outstanding unpaid principal balances and net deferred origination costs, less an allowance for loan<br />
losses. Interest income on loans is recognized over the term of the loan and is calculated using the simple interest<br />
method on principal amounts outstanding.<br />
The accrual of interest income on loans is discontinued at the time the loan is 90 days past due, unless the credit is<br />
well secured and in the process of collection. Other personal loans are typically charged-off no later than 180 days<br />
past due. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual<br />
or charged-off at an earlier date if the collection of principal and interest is considered doubtful.<br />
All interest accrued but not collected for loans that are placed on nonaccrual or charged-off is reversed against<br />
interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until<br />
qualifying for return to accrual. Loans are returned to accrual status when all of the principal and interest amounts<br />
contractually due are brought current and future payments are reasonably assured.<br />
Loan fees and certain direct loan origination costs are deferred, and the net fee or cost is recognized as an<br />
adjustment to interest income using the interest method over the contractual life of the loans, adjusted for estimated<br />
prepayments based on the <strong>Credit</strong> <strong>Union</strong>’s historical prepayment experience.<br />
Allowance for Loan Losses: The allowance for loan losses is established as losses are estimated to have occurred<br />
though a provision for loan losses charged to earnings. Loan losses are charged against the allowance when<br />
management believes the uncollectibility of a loan balance is likely. Subsequent recoveries, if any, are credited to<br />
the allowance.<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 30<br />
8
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Notes to Financial Statements<br />
December 31, 2008 and 2007<br />
The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s<br />
periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan<br />
portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying<br />
collateral, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that<br />
are susceptible to significant revision as more information becomes available. In addition, regulatory agencies, as an<br />
integral part of their examination process, periodically review the <strong>Credit</strong> <strong>Union</strong>’s allowance for loan losses, and may<br />
require the <strong>Credit</strong> <strong>Union</strong> to make additions to the allowance based on their judgment about information available to<br />
them at the time of their examinations.<br />
The <strong>Credit</strong> <strong>Union</strong>’s allowance for loan losses is that amount considered adequate to absorb probable losses in the<br />
portfolio based on management’s evaluations of the size and current risk characteristics of the loan portfolio. Such<br />
evaluations consider prior loss experience, the risk rating and the levels of non-performing loans. Specific<br />
allowances for loan losses are established for large impaired loss on an individual basis as required per SFAS No.<br />
114, Accounting by <strong>Credit</strong>ors for Impairment of a Loan. The specific allowances established for these loans are<br />
based on a thorough analysis of the most probable source of repayment, including the present value of the loan’s<br />
expected future cash flow, the loan’s estimated market value, or the estimated fair value of the underlying collateral.<br />
General allowances are established for loans that can be grouped into pools based on similar characteristics as<br />
described in SFAS No. 5, Accounting for Contingencies. In this process, general allowance factors are based on an<br />
analysis of historical charge-off experience and expected losses given default derived from the <strong>Credit</strong> <strong>Union</strong>’s internal<br />
risk rating process. These factors are developed and applied to the portfolio by loan type. The qualitative factors<br />
associated with the allowances are subjective and require a high degree of management judgment. These factors<br />
include the credit quality statistics, recent economic uncertainty, losses incurred from recent events, and lagging<br />
data.<br />
Loan Servicing: Servicing assets are recognized as separate assets when rights are acquired through purchase or<br />
through sale of financial assets. For sales of mortgage loans, a portion of the cost of originating the loan is allocated<br />
to the servicing right based on relative fair value. Fair value is based on market prices for comparable mortgage<br />
servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value<br />
of estimated future net servicing income. The valuation model incorporates assumptions that market participants<br />
would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial<br />
earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. Capitalized<br />
servicing rights are reported in other assets and are amortized into non-interest income in proportion to, and over the<br />
period of, the estimated future net servicing income of the underlying financial assets.<br />
Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost.<br />
Impairment is determined by stratifying rights into tranches based on predominant risk characteristics, such as<br />
interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual<br />
tranche, to the extent that fair value is less than the capitalized amount for the tranche. If the <strong>Credit</strong> <strong>Union</strong> later<br />
determines that all or a portion of the impairment no longer exists for a particular tranche, a reduction of the<br />
allowance may be recorded as an increase to income.<br />
Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual<br />
percentage of the outstanding principal; or a fixed amount per loan and are recorded as income when earned. The<br />
amortization of mortgage servicing rights is netted against loan servicing fee income.<br />
Other Real Estate Owned: Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially<br />
recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to<br />
foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying<br />
amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation<br />
allowance are included in operating expenses.<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 31<br />
9
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Notes to Financial Statements<br />
December 31, 2008 and 2007<br />
Property and Equipment: Land is carried at cost. Building, leasehold improvements, and furniture and equipment<br />
are carried at cost, less accumulated depreciation and amortization. Buildings and furniture and equipment are<br />
depreciated using the straight-line method over the estimated useful lives of the assets. The cost of leasehold<br />
improvements is amortized using the straight-line method over the terms of the related leases.<br />
Transfers of Financial Assets: Transfers of financial assets are accounted for as sales, when control over the<br />
assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets<br />
have been isolated from the <strong>Credit</strong> <strong>Union</strong>, (2) the transferee obtains the right (free of conditions that constrain it from<br />
taking advantage of that right) to pledge or exchange the transferred assets, and (3) the <strong>Credit</strong> <strong>Union</strong> does not<br />
maintain effective control over the transferred assets through an agreement to repurchase them before their maturity<br />
or the ability to unilaterally cause the holder to return specific assets.<br />
National <strong>Credit</strong> <strong>Union</strong> Share Insurance Fund Deposit: The deposit in the National <strong>Credit</strong> <strong>Union</strong> Share Insurance<br />
Fund (NCUSIF) is in accordance with National <strong>Credit</strong> <strong>Union</strong> Administration (NCUA) regulations, which require the<br />
maintenance of a deposit by each federally insured <strong>Credit</strong> <strong>Union</strong> in an amount equal to 1 percent of its insured<br />
members shares. The deposit would be refunded to the <strong>Credit</strong> <strong>Union</strong> if its insurance coverage is terminated, if it<br />
converts its insurance coverage to another source, or if management of the fund is transferred from the NCUA Board.<br />
See Note 15 regarding the impairment of NCUSIF.<br />
NCUSIF Insurance Premium: The <strong>Credit</strong> <strong>Union</strong> is required to pay an annual insurance premium equal to onetwelfth<br />
of one percent of total insured shares, unless the payment is waived or reduced by the NCUA Board. The<br />
NCUA Board waived the 2008 and 2007 insurance premiums. See Note 15 regarding the stabilization of NCUSIF.<br />
Members’ Shares: Members’ shares are the savings deposit accounts of the owners of the <strong>Credit</strong> <strong>Union</strong>. Share<br />
ownership entitles the members to vote in the annual elections of the Board of Directors and on other corporate<br />
matters. Irrespective of the amount of shares owned, no member has more than one vote. Members’ shares are<br />
subordinated to all other liabilities of the <strong>Credit</strong> <strong>Union</strong> upon liquidation. Dividends on members’ shares are based on<br />
available earnings at the end of a dividend period and are not guaranteed by the <strong>Credit</strong> <strong>Union</strong>. Dividend rates are set<br />
by the <strong>Credit</strong> <strong>Union</strong>’s Board of Directors.<br />
Income Taxes: The <strong>Credit</strong> <strong>Union</strong> is exempt, by statute, from federal and state income taxes. However, the <strong>Credit</strong><br />
<strong>Union</strong> is subject to unrelated business income tax as further discussed in Note 10.<br />
Comprehensive Income: Accounting principles generally require that recognized revenue, expenses, gains and<br />
losses be included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on<br />
available-for-sale securities, are reported as a separate component of the members’ equity section of the statements<br />
of financial condition. For 2008 and 2007, other comprehensive income includes no reclassification adjustments.<br />
Reclassifications: Certain account reclassifications have been made to the 2007 financial statements in order to<br />
conform to classifications used in the current year.<br />
Recent Accounting Pronouncements: In July 2006, the Financial Accounting Standards Board (“FASB”) issued<br />
Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement 109 (“FIN<br />
48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial<br />
statements in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income<br />
Taxes. FIN 48 prescribes a comprehensive model for recognizing, measuring, presenting and disclosing in the<br />
financial statements tax positions taken or expected to be taken on a tax return. The cumulative effect of applying<br />
the provisions of FIN 48, if any, will be reported as an adjustment to the opening balance of retained earnings for the<br />
fiscal year of adoption. FIN 48 is to be effective for fiscal years beginning after December 15, 2007. However, at its<br />
October 15, 2008 meeting, the FASB reconsidered the scope of its proposed one-year deferral of the effective date<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 32
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Notes to Financial Statements<br />
December 31, 2008 and 2007<br />
of FIN 48 for all private enterprises, including credit unions. Under the expanded proposal, FIN 48 will be effective for<br />
private entities for annual periods beginning after December 15, 2008 if they have not yet issued a full set of U.S.<br />
GAAP annual financial statements incorporating the recognition, measurement and disclosure requirements of FIN<br />
48. Early adoption is still permitted. The adoption of FIN 48 is not expected to have a material impact on the <strong>Credit</strong><br />
<strong>Union</strong>’s financial position, results of operations or cash flows.<br />
In December 2007, the FASB issued SFAS No. 141R, Business Combinations. This new standard significantly<br />
changes the accounting for business combination transactions as the pooling-of-interests accounting method will no<br />
longer be an acceptable accounting method. This change is effective for fiscal years beginning on or after<br />
December 15, 2008, with early adoption prohibited. The <strong>Credit</strong> <strong>Union</strong> is currently evaluating the future impact of<br />
SFAS No. 141R on the <strong>Credit</strong> <strong>Union</strong>’s financial condition.<br />
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. The new<br />
standard is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting<br />
accounting principles to be used in preparing financial statements that are presented in conformity with GAAP for<br />
nongovernmental entities. The statement is effective 60 days following the Securities and Exchange Commission's<br />
approval of the Public <strong>Credit</strong> <strong>Union</strong> Accounting Oversight Board Auditing amendments to AU Section 411, The<br />
Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. SFAS No. 162 is not<br />
expected to have a material impact on the <strong>Credit</strong> <strong>Union</strong>’s financial position, results of operations or cash flows.<br />
On April 9, 2009, FASB issued three final FASB Staff Positions (FSPs) intended to provide additional application<br />
guidance and enhance disclosures regarding fair value measurements and impairments of securities. FSP FAS 157-<br />
4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly<br />
Decreased and Identifying Transactions That Are Not Orderly, provides guidelines for making fair value<br />
measurements more consistent with the principles presented in SFAS No. 157, Fair Value Measurements. FSP FAS<br />
107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, enhances consistency in<br />
financial reporting by increasing the frequency of fair value disclosures. FSP FAS 115-2 and FAS 124-2, Recognition<br />
and Presentation of Other-Than-Temporary Impairments, provides additional guidance designed to create greater<br />
clarity and consistency in accounting for and presenting impairment losses on securities. The FSPs are effective for<br />
interim and annual periods ending after June 15, 2009, but entities may early adopt the FSPs for the interim and<br />
annual periods ending after March 15, 2009.<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 33
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Notes to Financial Statements<br />
December 31, 2008 and 2007<br />
Note 2. Investments<br />
Investments classified as available-for-sale consist of the following:<br />
Amortized Unrealized Unrealized Fair<br />
December 31, 2008 Cost Gains Losses Value<br />
U.S. government obligations and<br />
federal agencies securities $ 11,155,659 $ 560,009 $ - $11,715,668<br />
Auction rate securities 45,000,000 - (1,575,000) 43,425,000<br />
Private label mortgage-backed<br />
securities 2,874,117 0 0 2,874,117<br />
Mortgage-backed securities 84,189,032 944,425 (39,377) 85,094,080<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 34<br />
$143,218,808 $1,504,434 $(1,614,377) $143,108,865<br />
Amortized Unrealized Unrealized Fair<br />
December 31, 2007 Cost Gains Losses Value<br />
U.S. government obligations and<br />
federal agencies securities $ 15,942,139 $ 281,861 $ - $ 16,224,000<br />
Mortgage-backed securities 23,420,188 258,312 - 23,678,500<br />
$ 39,362,327 $ 540,173 $ - $ 39,902,500<br />
Gross unrealized losses and fair value by length of time that the individual securities have been in a continuous<br />
unrealized loss position at December 31, 2008 are as follows:<br />
December 31, 2008<br />
Available-for-sale Fair Value<br />
Continuous Unrealized<br />
Losses Existing For:<br />
Less Than<br />
12 Months<br />
More Than<br />
12 Months<br />
Total<br />
Unrealized<br />
Losses<br />
Auction rate securities $ 43,425,000 $(1,575,000) $ - $ (1,575,000)<br />
Mortgage-backed securities 18,644,145 (39,377) - (39,377)<br />
$ 62,069,145 $(1,614,377) $ - $ (1,614,377)<br />
At December 31, 2008, the investment portfolio included 11 securities, none of which have current unrealized losses<br />
which have existed for longer than one year. At 2007, the investment portfolio included 17 securities, 4 of which had<br />
current unrealized losses which have existed for longer than one year. All of these securities are considered to be<br />
acceptable credit risks. Based upon an evaluation of the available evidence, including recent changes in market<br />
rates, credit rating information and information obtained from regulatory filings, management believes the decline in<br />
fair value for these securities is temporary. In addition, the <strong>Credit</strong> <strong>Union</strong> has the intent and ability to hold these<br />
investment securities for a period of time sufficient to allow for an anticipated recovery.<br />
At December 31, 2008, the <strong>Credit</strong> <strong>Union</strong> recognized $2,225,890 in other -than -temporary -impairment related to two<br />
private label mortgage-backed securities. These investments were recently downgraded and showed breaks in future<br />
cash flows which resulted in an other-than-temporary-impairment charge.
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Notes to Financial Statements<br />
December 31, 2008 and 2007<br />
Should the impairment of any of these securities become other than temporary, the cost basis of the investment will<br />
be reduced and the resulting loss recognized in net income in the period in which the other-than-temporary<br />
impairment is identified.<br />
Investments by maturity as of December 31, 2008 are summarized as follows:<br />
Available-for-sale<br />
Amortized Fair<br />
Cost Value Other<br />
No contractual maturity $ - $ - $ 1,163,600<br />
Less than 1 year maturity - - 62,000,000<br />
1—5 years maturity 11,155,659 11,715,668 5,000,000<br />
Over 10 years maturity<br />
Private label mortgage-backed<br />
45,000,000 43,425,000 -<br />
securities 2,874,117<br />
2,874,117 -<br />
Mortgage-backed securities 84,189,032 85,094,080 -<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 35<br />
$ 143,218,808 $ 143,108,865 $68,163,600<br />
Expected maturities of private label mortgage-backed securities and mortgage-backed securities may differ from<br />
contractual maturities because borrowers may have the right to call or prepay the obligations and are, therefore,<br />
classified separately with no specific maturity date. FHLB stock has been classified with no contractual maturity.<br />
Other investments consist of the following:<br />
December 31<br />
2008 2007<br />
Share certificates in a corporate credit union $ 67,000,000 $ 69,000,000<br />
Member capital account in a corporate credit union - 889,944<br />
Permanent capital account in a corporate credit union - 4,533,101<br />
FHLB stock 1,163,600 1,142,700<br />
$ 68,163,600 $ 75,565,745<br />
The <strong>Credit</strong> <strong>Union</strong> views its investment in the FHLB stock as a long-term investment. Accordingly, when evaluating<br />
for impairment, the value is determined based on the ultimate recovery of the par value rather than recognizing<br />
temporary declines in value. The determination of whether a decline affects the ultimate recovery is influenced by<br />
criteria such as: 1) the significance of the decline in net assets of the FHLB as compared to the capital stock amount<br />
and length of time a decline has persisted; 2) impact of legislative and regulatory changes on the FHLB and 3) the<br />
liquidity position of the FHLB. The FHLB recently announced that it will likely report a risk-based capital deficiency as<br />
of December 31, 2008, and therefore will not be able pay a dividend for the fourth quarter of 2008 and will not be able<br />
to repurchase capital stock. The FHLB noted their primary concern with meeting the risk-based capital requirements<br />
relates to the potential impact of other-than-temporary impairment charges that they may be required to record on<br />
their private label mortgage back securities. While it appears that the FHLB of Topeka will be less than adequately<br />
capitalized as of December 31, 2008, the <strong>Credit</strong> <strong>Union</strong> does not believe that its investment in the FHLB is impaired<br />
as of this date. However, this estimate could change in the near term if: 1) significant other-than-temporary losses<br />
are incurred on the mortgage backed securities causing a significant decline in their regulatory capital status; 2) the<br />
economic losses resulting from credit deterioration on the mortgage backed securities increases significantly and 3)<br />
capital preservation strategies being utilized by the FHLB become ineffective.
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Notes to Financial Statements<br />
December 31, 2008 and 2007<br />
As noted in Note 15, the <strong>Credit</strong> <strong>Union</strong> wrote-off its entire $2,708,093 member and permanent capital in Western<br />
Corporate Federal <strong>Credit</strong> <strong>Union</strong> (WesCorp) and its $4,533,101 capital in Sun Corporate <strong>Credit</strong> <strong>Union</strong> (SunCorp) in<br />
2008 based on the March 20, 2009 announcement that the losses at these institutions exceeded the capital in these<br />
organizations. On January 28, 2009, the NCUA Board announced the Temporary Corporate <strong>Credit</strong> <strong>Union</strong> Share<br />
Guarantee Program through September 30, 2011. The NCUSIF guarantee applies to all share amounts above<br />
$250,000, and the NCUSIF insurance coverage applies to all share amounts below $250,000. The net effect is that<br />
during the period of the guarantee the entire share account will be treated by the NCUSIF as if it was insured.<br />
Approximately $62,000,000 of the corporate credit union certificates mature before December 31, 2009 and therefore<br />
are guaranteed. Approximately $5,000,000 of the corporate credit union certificates mature after September 30,<br />
2009 and are therefore not guaranteed.<br />
Certificates are generally non-negotiable and non-transferable, and may incur substantial penalties for withdrawal<br />
prior to maturity.<br />
Note 3. Loans to Members<br />
Loans to members consist of the following:<br />
December 31<br />
2008 2007<br />
Mortgage loans:<br />
Fixed rate $ 186,100,212 $ 157,217,441<br />
Variable rate 8,763,092 34,729,744<br />
Hybrid/Balloon 42,633,093 46,291,361<br />
Home equity line of credit, variable rate 179,252,493 75,227,165<br />
416,748,890 313,465,711<br />
Vehicle loans 120,783,369 149,012,084<br />
<strong>Credit</strong> card loans, unsecured 53,868,563 51,511,270<br />
Commercial loans 5,293,992 2,572,149<br />
Other consumer loans, primarily unsecured 8,845,055 10,920,513<br />
605,539,869 527,481,727<br />
Deferred net loan origination costs 649,491 795,588<br />
Allowance for loan losses (6,072,114) (5,446,052)<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 36<br />
$ 600,117,246 $ 522,831,263<br />
The <strong>Credit</strong> <strong>Union</strong> offers non-traditional hybrid/balloon mortgage loans to its members. Hybrid/Balloon loans consist<br />
of loans that are fixed for an initial period of three, five or seven years. After this period, the mortgages are converted<br />
to variable rate using the fully indexed rate, which can result in significant payment shock to the borrower.<br />
Non-traditional mortgage loans may have significantly different credit risk characteristics than traditional fixed and<br />
variable rate mortgages. However, the <strong>Credit</strong> <strong>Union</strong> believes it has established prudent underwriting standards as<br />
well as adequate risk management functions to monitor these additional risks.<br />
The following is an analysis of the allowance for loan losses:<br />
Years Ended December 31<br />
2008 2007<br />
Balance, beginning of year $ 5,446,052 $ 6,134,728
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Notes to Financial Statements<br />
December 31, 2008 and 2007<br />
Provision for loan losses 3,535,800 4,616,998<br />
Recoveries 1,629,977 626,488<br />
Loans charged off (4,539,715) (5,932,162)<br />
Balance, end of year $ 6,072,114 $ 5,446,052<br />
Loans on which accrual of interest has been discontinued or reduced amounted to $2,147,000 and $2,570,000,<br />
respectively, at December 31, 2008 and 2007. If interest on those loans had been accrued, such income would have<br />
approximated $110,000 and $156,000 for December 31, 2008 and 2007, respectively.<br />
Note 4. Other Real Estate Owned<br />
Transfers of loans to other real estate owned for the years ended December 31, 2008 and 2007 totaled $135,879<br />
and $1,358,184, respectively.<br />
Expenses related to other real estate owned are summarized as follows:<br />
Years Ended December 31<br />
2008 2007<br />
Write-downs of carrying value $ 69,439 $ 832,774<br />
Net gains on sales of foreclosed properties (7,079) (19,535)<br />
Operating expenses 68,206 37,057<br />
Note 5. Loan Servicing<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 37<br />
$ 130,566 $ 850,296<br />
Mortgage loans serviced for others are not included in the accompanying statements of financial condition. The<br />
unpaid principal balances of these loans at December 31, 2008 and 2007 are summarized as follows:<br />
December 31<br />
2008 2007<br />
Mortgage loan portfolios serviced for:<br />
FNMA $ 104,303,612 $ 97,938,112<br />
FHLMC 66,961,784 34,517,592<br />
$ 171,265,396 $ 132,455,704<br />
Custodial escrow balances maintained in connection with the foregoing loan servicing, and included in deposits, were<br />
approximately $1,040,484 and $768,647 at December 31, 2008 and 2007, respectively.<br />
Note 6. Property and Equipment<br />
Property and equipment are summarized as follows:<br />
December 31<br />
2008 2007<br />
Land $ 3,307,797 $ 3,307,797<br />
Building 13,919,617 13,727,883<br />
Furniture and equipment 11,050,019 9,951,430
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Notes to Financial Statements<br />
December 31, 2008 and 2007<br />
Leasehold improvements 3,117,253 2,379,389<br />
31,394,686 29,366,499<br />
Accumulated depreciation and amortization (12,605,564) (10,829,857)<br />
$ 18,789,122 $ 18,536,642<br />
The <strong>Credit</strong> <strong>Union</strong> leases several offices. The operating leases contain renewal options and provisions requiring the<br />
<strong>Credit</strong> <strong>Union</strong> to pay property taxes and operating expenses over base period amounts. All rental payments are<br />
dependent only upon the lapse of time. Minimum rental payments under operating leases with initial or remaining<br />
terms of one year or more at December 31, 2008 are as follows:<br />
Years Ending December 31<br />
2009 $ 580,000<br />
2010 541,000<br />
2011 516,000<br />
2012 364,000<br />
2013 368,000<br />
Subsequent years 2,326,000<br />
$ 4,695,000<br />
Rental expense for the years ended December 31, 2008 and 2007 for all facilities leased under operating leases<br />
totaled approximately $527,000 and $376,000, respectively.<br />
Note 7. Members’ Shares<br />
Members’ shares are summarized as follows:<br />
December 31<br />
2008 2007<br />
Regular shares $ 94,116,895 $ 82,150,062<br />
Share draft accounts 143,840,069 134,896,318<br />
Money market accounts 286,490,940 222,357,996<br />
Certificates 223,767,971 204,619,012<br />
Individual retirement certificate accounts 53,162,963 34,950,781<br />
Individual retirement accounts 2,521,762 1,829,108<br />
$ 803,900,600 $ 680,803,277<br />
Shares by maturity as of December 31, 2008 are summarized as follows:<br />
No contractual maturity $ 526,969,666<br />
0—1 year maturity 177,239,593<br />
1—2 years maturity 49,884,178<br />
2—3 years maturity 27,026,080<br />
3—4 years maturity 12,915,338<br />
4—5 years maturity 9,863,006<br />
5—6 years maturity 2,739<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 38<br />
$ 803,900,600
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Notes to Financial Statements<br />
December 31, 2008 and 2007<br />
Regular shares, share draft accounts, money market accounts and individual retirement accounts have no<br />
contractual maturity. Certificate and individual retirement certificate accounts have maturities of six years or less.<br />
The NCUSIF insures members’ shares and certain individual retirement and Keogh accounts. Effective October 3,<br />
2008 and continuing through December 31, 2009, new legislation provides for an increase in the minimum NCUSIF<br />
coverage from $100,000 to $250,000 on member share accounts. This includes all account types, such as regular<br />
share, share draft, money market and certificates of deposit. Individual Retirement Account and Keogh account<br />
coverage remains at up to $250,000 separate from other types of accounts owned.<br />
The aggregate amount of certificates in denominations of $100,000 or more at December 31, 2008 and 2007 is<br />
approximately $80,344,000 and $67,522,000, respectively.<br />
At December 31, 2008 and 2007, overdraft demand shares reclassified to loans totaled $85,136 and $104,897,<br />
respectively.<br />
Note 8. Borrowed Funds<br />
The <strong>Credit</strong> <strong>Union</strong> utilizes a demand loan agreement with FHLB. The terms of the agreement call for pledging certain<br />
investments held in safekeeping by the FHLB and a portion of the <strong>Credit</strong> <strong>Union</strong>’s mortgage portfolio. The agreement<br />
provides for a maximum borrowing amount of $180,453,645. As of December 31, 2008 the total advances total<br />
$15,000,000 with an interest rate of 3.05 percent and matures on March 24, 2011.<br />
The <strong>Credit</strong> <strong>Union</strong> utilizes a demand loan agreement with a corporate credit union. The terms of this agreement call<br />
for the pledging of all assets as security for any and all obligations taken by the <strong>Credit</strong> <strong>Union</strong> under this agreement.<br />
The agreement provides for a credit limit of $25 million with interest charged at a rate determined by the lender on a<br />
periodic basis. At December 31, 2008 and 2007, there were no borrowings under this agreement. The agreement is<br />
reviewed for continuation by the lender and the <strong>Credit</strong> <strong>Union</strong> annually.<br />
Note 9. Off-Balance Sheet Activities<br />
The <strong>Credit</strong> <strong>Union</strong> is party to conditional commitments to lend funds in the normal course of business to meet the<br />
financing needs of its members. These commitments represent financial instruments to extend credit which include<br />
lines of credit, credit cards and home equity lines that involve, to varying degrees, elements of credit and interest rate<br />
risk in excess of amounts recognized in the financial statements.<br />
The <strong>Credit</strong> <strong>Union</strong>’s exposure to credit loss is represented by the contractual amount of these commitments. The<br />
<strong>Credit</strong> <strong>Union</strong> follows the same credit policies in making commitments as it does for those loans recorded in the<br />
financial statements.<br />
Outstanding loan commitments at December 31, 2008 and 2007 total approximately $2,909,000 and $137,000,<br />
respectively.<br />
Unfunded loan commitments under lines of credit are summarized as follows:<br />
December 31<br />
2008 2007<br />
<strong>Credit</strong> card $ 125,799,000 $ 68,615,000<br />
Home equity 81,084,000 101,848,000<br />
Other consumer 75,906,000 73,809,000<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 39
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Notes to Financial Statements<br />
December 31, 2008 and 2007<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 40<br />
$ 282,789,000 $ 244,272,000<br />
Commitments to extend credit are agreements to lend to a member as long as there is no violation of any condition<br />
established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may<br />
require payment of a fee. Because many of the commitments are expected to expire without being drawn upon, the<br />
total commitment amounts do not necessarily represent future cash requirements. The <strong>Credit</strong> <strong>Union</strong> evaluates each<br />
member's credit worthiness on a case-by-case basis. The amount of collateral obtained to secure borrowing on the<br />
lines of credit is based on management’s credit evaluation of the member.<br />
Unfunded commitments under revolving credit lines and overdraft protection agreements are commitments for<br />
possible future extensions of credit to existing customers. These lines-of-credit are uncollateralized and usually do<br />
not contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the <strong>Credit</strong><br />
<strong>Union</strong> is committed.<br />
Note 10. Commitments and Contingent Liabilities<br />
The <strong>Credit</strong> <strong>Union</strong> is a party to various legal actions normally associated with collections of loans and other business<br />
activities of financial institutions, the aggregate effect of which, in management’s opinion, would not have a material<br />
adverse effect on the financial condition or results of operations of the <strong>Credit</strong> <strong>Union</strong>.<br />
The <strong>Credit</strong> <strong>Union</strong> is a state-chartered credit union described in Internal Revenue Code (“IRC”) Section 501(c) (14).<br />
As such, the <strong>Credit</strong> <strong>Union</strong> is exempt from federal taxation of income derived from the performance of activities that<br />
are in furtherance of its exempt purposes. However, IRC Section 511 imposes a tax on the unrelated business<br />
income (as defined in Section 512) derived by state-chartered credit unions. Many states have similar laws. The<br />
specific application of Section 512 to the various activities conducted by state-chartered credit unions has been at<br />
issue for many years. During 2007, the Internal Revenue Service (“IRS”) issued a series of Technical Advice<br />
Memoranda (“TAM”) to a number of state-chartered credit unions located throughout the country. In these TAMs the<br />
IRS ruled certain products and services to be subject to taxation as unrelated business income. In light of the TAMs,<br />
the <strong>Credit</strong> <strong>Union</strong> has assessed its activities and any potential federal or state income tax liability. In the opinion of<br />
management, any liability arising from federal or state taxation of activities deemed to be unrelated to its exempt<br />
purposes is not expected to have a material effect on the <strong>Credit</strong> <strong>Union</strong>’s financial position or results of operation.<br />
Note 11. Employee Benefits<br />
The <strong>Credit</strong> <strong>Union</strong> has a 401(k) plan that allows employees to contribute by deferring a portion of their compensation<br />
into the plan. The <strong>Credit</strong> <strong>Union</strong> matches a portion of the employees’ deferred contributions. Additionally, the <strong>Credit</strong><br />
<strong>Union</strong> makes a discretionary contribution to all employees, regardless of their own participation. 401(k) plan costs<br />
are accrued and funded on a current basis. The <strong>Credit</strong> <strong>Union</strong> contributed $644,579 and $636,716, respectively, to<br />
the plan for the years ended December 31, 2008 and 2007.<br />
Note 12. Members’ Equity<br />
The <strong>Credit</strong> <strong>Union</strong> is subject to various regulatory capital requirements administered by the NCUA. Failure to meet<br />
minimum capital requirements can initiate certain mandatory – and possibly additional discretionary – actions by<br />
regulators that, if undertaken, could have a direct material effect on the <strong>Credit</strong> <strong>Union</strong>’s financial statements. Under<br />
capital adequacy guidelines and the regulatory framework for prompt corrective action, the <strong>Credit</strong> <strong>Union</strong> must meet<br />
specific capital guidelines that involve quantitative measures of the <strong>Credit</strong> <strong>Union</strong>’s assets, liabilities, and certain offbalance-sheet<br />
items as calculated under generally accepted accounting principles. The <strong>Credit</strong> <strong>Union</strong>’s capital<br />
amounts and classification are also subject to qualitative judgments by the regulators about components, risk<br />
weightings, and other factors.
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Notes to Financial Statements<br />
December 31, 2008 and 2007<br />
Quantitative measures established by regulation to ensure capital adequacy require the <strong>Credit</strong> <strong>Union</strong> to maintain<br />
minimum amounts and ratios (set forth in the table below) of net worth to total assets. Further, credit unions over<br />
$10,000,000 in assets are also required to calculate a Risk-Based Net Worth (RBNW) requirement which establishes<br />
whether or not the <strong>Credit</strong> <strong>Union</strong> will be considered “complex” under the regulatory framework. The <strong>Credit</strong> <strong>Union</strong>’s<br />
RBNW requirements as of December 31, 2008 and 2007 were 5.40 percent and 6.04 percent, respectively. The<br />
minimum requirement to be considered “complex” under the regulatory framework is 6 percent. Management<br />
believes, as of December 31, 2008 and 2007, that the <strong>Credit</strong> <strong>Union</strong> meets all capital adequacy requirements to which<br />
it is subject.<br />
As of December 31, 2008, the NCUA categorized the <strong>Credit</strong> <strong>Union</strong> as “well capitalized” under the regulatory<br />
framework for prompt corrective action. To be categorized as “well capitalized,” the <strong>Credit</strong> <strong>Union</strong> must maintain a<br />
minimum net worth ratio of 7 percent of assets. There are no conditions or events since that notification that<br />
management believes have changed the institution’s category.<br />
The <strong>Credit</strong> <strong>Union</strong>’s actual capital amounts and ratios are presented in the following table:<br />
December 31, 2008 December 31, 2007<br />
Amount Ratio/Requirement Amount Ratio/Requirement<br />
Amount needed to be<br />
classified as “adequately<br />
capitalized”<br />
Amount needed to be<br />
classified as “well<br />
$53,437,478 6.00% $45,781,494 6.04%<br />
capitalized” $62,343,725 7.00% $53,058,023 7.00%<br />
Actual net worth $63,175,744 7.09% $68,562,110 9.05%<br />
Because the RBNW requirement is less than the net worth ratio, the <strong>Credit</strong> <strong>Union</strong> retains its original category.<br />
Further, in performing its calculation of total assets, the <strong>Credit</strong> <strong>Union</strong> used the quarter-end balance option, as<br />
permitted by regulation.<br />
Note 13. Related Party Transactions<br />
In the normal course of business, the <strong>Credit</strong> <strong>Union</strong> extends credit to directors, supervisory committee members and<br />
executive officers. The aggregate loans to related parties at December 31, 2008 and 2007 are $3,572,615 and<br />
$2,337,608, respectively. Shares from related parties at December 31, 2008 and 2007 amounted to $560,858 and<br />
$326,814, respectively.<br />
Note 14. Fair Value of Financial Instruments<br />
Effective January 1, 2008, the <strong>Credit</strong> <strong>Union</strong> adopted the provisions of SFAS No. 157, (SFAS 157) "Fair Value<br />
Measurements" for assets and liabilities measured and reported at fair value. SFAS 157 defines fair value,<br />
establishes a framework for measuring fair value and expands disclosures about fair value measurements.<br />
SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an<br />
orderly transaction between market participants. SFAS 157 requires the use of valuation techniques that are<br />
consistent with the market approach, the income approach and/or the cost approach. Inputs to valuation techniques<br />
refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable,<br />
meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed<br />
based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting<br />
entity's own assumptions about the assumptions market participants would use in pricing the asset or liability<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 41
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Notes to Financial Statements<br />
December 31, 2008 and 2007<br />
developed based on the best information available in the circumstances. In that regard, SFAS 157 establishes a fair<br />
value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical<br />
assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:<br />
Level 1: Quoted prices for identical assets or liabilities in active markets that the entity has the ability to access as of<br />
the measurement date.<br />
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or<br />
liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by<br />
observable market data.<br />
Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that<br />
market participants would use in pricing an asset or liability.<br />
A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the<br />
general classification of such instruments pursuant to the valuation hierarchy, is set forth below.<br />
Investments Available –for- Sale: Where quoted prices are available in an active market, investments are classified<br />
within level 1 of the valuation hierarchy. Level 1 investments would include highly liquid government bonds and<br />
exchange traded equities. If quoted market prices are not available, then fair values are estimated by using pricing<br />
models, quoted prices of securities with similar characteristics, or discounted cash flow. Level 2 investments would<br />
include U.S. agency securities, mortgage backed agency securities, obligations of states and political subdivisions<br />
and certain corporate, asset backed and other securities. In certain cases where there is limited activity or less<br />
transparency around inputs to the valuation, investments are classified within level 3 of the valuation hierarchy.<br />
The following table summarizes the investments available for sale that measured at fair value on a recurring basis as<br />
of December 31, 2008, segregated by the level of the valuation inputs within the fair value hierarchy utilized to<br />
measure fair value.<br />
December 31, 2008<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 42<br />
Fair Value Measurements at December 31, 2008 Using<br />
Quoted Prices in<br />
Active Markets for<br />
Identical Assets<br />
(Level 1)<br />
Significant Other<br />
Observable Inputs<br />
(Level 2)<br />
Significant<br />
Unobservable<br />
Inputs (Level 3)<br />
Investments available- for- sale $ 143,108,865 $ 143,108,865<br />
Other real estate owned 2,101,206 $ 2,101,206<br />
The <strong>Credit</strong> <strong>Union</strong> may be required, from time to time, to measure certain assets and liabilities at fair value on a<br />
nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets that are<br />
measured at the lower of cost or market that were recognized at fair value below cost at the end of the period.<br />
Impaired Loans: The <strong>Credit</strong> <strong>Union</strong> does not record loans at fair value on a recurring basis. However, from time to<br />
time, a loan is considered impaired and an allowance for loan losses is established. The specific reserves for<br />
collateral dependent impaired loans are based on the fair value of the collateral less estimated costs to sell. The fair<br />
value of collateral was determined based on appraisals. In some cases, adjustments were made to the appraised<br />
values due to various factors including age of the appraisal, age of comparables included in the appraisal, and known<br />
changes in the market and in the collateral. When significant adjustments were based on unobservable inputs, the<br />
resulting fair value measurement has been categorized as a Level 3 measurement.
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Notes to Financial Statements<br />
December 31, 2008 and 2007<br />
Fair Value Measurements at December 31, 2008 Using<br />
December 31, 2008<br />
Quoted Prices in<br />
Active Markets for<br />
Identical Assets<br />
(Level 1)<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 43<br />
Significant Other<br />
Observable Inputs<br />
(Level 2)<br />
Significant<br />
Unobservable<br />
Inputs (Level 3)<br />
Assets<br />
Impaired loans $ 2,061,645 2,061,645<br />
SFAS 107, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of fair value information about<br />
financial instruments, whether or not recognized in the balance sheet. Fair value is determined under the framework<br />
established by SFAS 157. SFAS 107 excludes certain financial instruments and all non-financial instruments from its<br />
disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the<br />
underlying fair value of the Company. The following information presents estimated fair values of the Company’s<br />
financial instruments as of December 31, 2008 and 2007 and the methods and assumptions used to estimate those<br />
fair values.<br />
Cash and Cash Equivalents: The carrying amounts of cash and cash equivalents approximate their fair value.<br />
Other Investments: The fair value of other investments is the market value based on quoted market prices, when<br />
available, or market prices provided by recognized broker dealers. If listed prices or quotes are not available, fair<br />
value is based, as appropriate, upon redemption provisions of the underlying securities.<br />
Loans: When quoted market prices are not available, the fair value of loans receivable is generally based upon<br />
observable market prices of similar instruments, including bonds, credit derivatives and loans with similar<br />
characteristics. If observable market prices are not available, fair value is based upon estimated cash flows adjusted<br />
for credit risk which are discounted using an interest rate appropriate for the maturity of the applicable loans or the<br />
unfunded commitments.<br />
The inputs for the determination of the fair value of loans are generally classified within Level 2 of the valuation<br />
hierarchy. However, certain of the <strong>Credit</strong> <strong>Union</strong>’s loans, including purchased nonperforming loans and subprime<br />
loans are classified within Level 3 due to the lack of observable pricing data. The fair value of these Level 3 loans is<br />
calculated with a discounted cash flows model using market-based credit spreads of comparable debt instruments or<br />
credit derivatives of the specific borrower or comparable borrowers.<br />
Accrued Interest Receivable: Accrued interest receivable represents interest on loans and securities. The carrying<br />
amount of accrued interest receivable approximates fair value.<br />
Members’ Shares: The fair value of shares payable upon demand (regular shares, share draft and money market<br />
accounts is the amount payable at the date of the statement of condition. The fair value of fixed maturity accounts<br />
(share certificates and IRA share accounts) is estimated by discounting the estimated cash flows using interest rates<br />
for comparable instruments and terms and are classified within Level 2 or Level 3.<br />
Borrowed Funds: The fair values of the <strong>Credit</strong> <strong>Union</strong>'s borrowed funds are estimated using discounted cash flow<br />
analyses based on the <strong>Credit</strong> <strong>Union</strong>'s incremental borrowing rates for similar types of borrowing arrangements.<br />
Off-Balance Sheet <strong>Credit</strong>-Related Instruments: Fair values for off-balance-sheet, credit-related financial instruments<br />
are based on fees currently charge to enter into similar agreements, taking into account the remaining terms of the<br />
agreements and the counterparties’ credit standing. The fair value for such financial instruments is nominal.<br />
December 31, 2008 December 31, 2007<br />
Carrying Fair Carrying Fair
<strong>Elevations</strong> <strong>Credit</strong> <strong>Union</strong><br />
Notes to Financial Statements<br />
December 31, 2008 and 2007<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 44<br />
Amount Value Amount Value<br />
Financial Assets:<br />
Cash and cash equivalents $38,311,000 $38,311,000 $ 78,081,000 $ 78,081,000<br />
Investments available-for-sale 143,109,000 143,109,000 39,903,000 39,903,000<br />
Other investments 68,164,000 68,164,000 75,566,000 75,566,000<br />
Loans and loans held for sale, net 600,117,000 621,147,000 522,831,000 521,826,000<br />
Accrued interest receivable 3,350,000 3,350,000 3,008,000 3,008,000<br />
Financial Liabilities:<br />
Members’ shares 803,901,000 792,857,000 680,803,000 680,803,000<br />
Borrowed funds 15,000,000 15,111,000 0 0<br />
Note 15. Subsequent Event<br />
In January 2009, U.S. Central Federal <strong>Credit</strong> <strong>Union</strong> (U.S. Central) announced that it was taking a $1.2 billion charge<br />
during the fourth quarter of 2008 as a result of determining that certain of its investment securities were other-thantemporarily<br />
impaired. On January 28, 2009, the NCUA announced that it was injecting $1 billion of capital into U.S.<br />
Central from the NCUSIF and offering a temporary guarantee through December 31, 2010 of all member shares in<br />
corporate credit unions to provide stability and help maintain liquidity in the corporate credit union system. All<br />
federally-insured credit unions will share the cost of these actions proportionately through a partial write-off of the<br />
credit unions’ existing 1 percent NCUSIF deposit and future assessments of additional premiums to return the<br />
NCUSIF to the normal operating level of 1.3 percent of insured deposits. The impairment of the deposit was<br />
estimated at 51 percent of the December 31, 2008 asset value with an additional assessment of .3 percent of insured<br />
deposits as of December 31, 2008. In March 2009, the NCUA announced that both U.S. Central and WesCorp were<br />
taken into conservatorship and the original loss reserve estimate had increased by $1.2 billion since the January<br />
2009 estimate was made. Based on this adjustment of the loss reserve estimate, the impairment of the NCUSIF<br />
deposit was revised to 69 percent of the December 31, 2008 deposit fund balance. The additional assessment of .3<br />
percent of insured deposits as of December 31, 2008 remained unchanged<br />
On March 27, 2009, the NCUA introduced an amendment to the Federal <strong>Credit</strong> <strong>Union</strong> Act to Congress that, if<br />
enacted, could substantially impact the amount of impairment currently estimated. The proposed legislation would<br />
create the Corporate <strong>Credit</strong> <strong>Union</strong> Stabilization Fund to absorb losses associated with the corporate credit union<br />
stabilization actions and assess federally insured credit unions for associated costs over as much as a 7-year period.<br />
If the Corporate <strong>Credit</strong> <strong>Union</strong> Stabilization Fund is not created, the <strong>Credit</strong> <strong>Union</strong> will incur approximately $7,210,000<br />
in impairment and assessment charges for the year ending December 31, 2009.<br />
The underlying causes of the impairment and assessment are events considered to have occurred before 2009, and<br />
were probable but not estimable as of December 31, 2008. Because the amounts became estimable with the NCUA<br />
Board actions in 2009 prior to the issuance of the audited financial statements, the <strong>Credit</strong> <strong>Union</strong> wrote-off all of its<br />
$2,708,093 capital in WesCorp. based on the March 20, 2009 announcement that the losses at this institution exceed<br />
the capital in the organization. In addition, the <strong>Credit</strong> <strong>Union</strong> performed an evaluation of its corporate capital account<br />
in SunCorp and wrote off $4,533,101 as of December 31, 2008.<br />
As of May 19, 2009 legislation has passed that will allow the <strong>Credit</strong> <strong>Union</strong> to defer the expenses related to the<br />
NCUSIF assessment.
senior leadership team<br />
Gerry Agnes President and Cheif Executive Offi cer<br />
Craig Burkhard Executive VP/Chief Operating Offi icer<br />
Peggy Anderson Chief Financial Offi cer<br />
Annette Matthies VP of People<br />
Matt Henry VP of IT<br />
Rich Jones VP of Marketing<br />
Mary Ann Kammerer VP of Service Delivery<br />
Steve Schmidle VP of Finance<br />
Ed Gross VP of Internal Audit<br />
5 4<br />
2<br />
3<br />
1<br />
7 6<br />
8<br />
9<br />
ELEVATIONS <strong>Credit</strong> <strong>Union</strong> 2008 annual report 45<br />
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6 9<br />
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<strong>Elevations</strong>CU.com<br />
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