Mission Statement

The United Nations Federal Credit Union is dedicated to serving the people who serve the world by enriching the lives of its members.

Report of the
Chairman of the Board

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Throughout 2011, despite ongoing turbulent global marketplace conditions, UNFCU achieved strong financial results through its steadfast commitment to prudent and responsible lending and investment policies, as well as the enduring fulfillment of its service mission. Total assets, share deposits, loans and memberships grew accordingly. Moreover, the National Credit Union Administration (NCUA), our regulator, categorized UNFCU’s capital ratio, or net worth, as well-capitalized, and therefore in excess of industry standards.

The strength of our balance sheet enabled UNFCU to determinedly face several economic challenges, notably historically low interest rates, continued provision for loan loss reserves and payment of our share insurance assessment charged to all federal credit unions to supplement the National Credit Union Share Insurance Fund, which is managed by the NCUA. This requirement for which UNFCU was well-prepared, will replenish the fund to pre-2008 Great Recession levels in five years.

For its part, UNFCU ended the year with USD 3.5 billion in total assets, up by USD 247 million, an increase of 7.5%. This made UNFCU the 28th largest federal credit union in the US out of more than 7,200. Having identified UNFCU as a safe harbor with a keen understanding of the many unique needs of international civil servants and their families, more than 6,600 new members joined the institution with 63% residing outside the US. This brought the total number of members to more than 94,700 by year-end. This is a testament to the many service improvements implemented during the year which kept members connected to their financial lives no matter where they lived or worked. As a result of your trust and loyalty, total shares increased by USD 215 million, or 7.3% in 2011.

While US banks had only begun to see their lending portfolio rebound from the financial crisis during the fourth quarter, according to The Wall Street Journal (29 February 2012), UNFCU crossed the billion dollar mark in outstanding mortgage loans and saw total loan growth of 4.8%, with total outstanding loans reaching USD 1.45 billion. At year-end, UNFCU recorded a 9.48%, capital ratio or net worth, an increase of 1 basis point over the prior year and well exceeding NCUA requirements of 7.0%.

In addition to our fiduciary responsibility, UNFCU, a member of the public-private sector partnership of UN Global Compact, also placed great emphasis and vigorous action on the Board’s policy governance precept to operate as a good citizen of the world.

The Board supported a number of charitable causes spanning one end of the globe to the other to make a difference in the lives of the less fortunate, particularly women and children. Donations to The Floating Hospital, our Long Island City, NY neighbor, helped provide a health care safety-net for New York City’s most fragile families; SNACK & Friends enriched its unique programs for children affected by Autism Spectrum Disorders and other developmental challenges; and NGO SEKOLO Projects grew its programs to work with community leaders to develop programs for orphaned and vulnerable children living with and to prevent HIV/AIDS in Namibia. A grant to PLAY SOCCER Nonprofit International, active in six African countries, supported core year-round grassroots community-based programs that teach health and social life skills. Our contributions to Women In Need International (WIN) enabled the organization to successfully complete its Eri-Silk Project in the Philippines, which has trained women to spin, knit, weave and market their products in the US and Japan. At year-end, children and grandchildren of UNFCU members had completed entries to the Start Smart Scholarship. Students from the United States and Zimbabwe earned the scholarship having submitted highly-creative photo montages documenting their “Vision of the World” and achieving academic excellence.

UNFCU also extended its longtime association with Kilimanjaro Initiative (KI), an NGO which supports disadvantaged youths in Kenya and Tanzania. Further to UNFCU’s sense of social mission, I visited KI offices, met with staff and was greatly impressed by the positive social change and leadership development underway. My colleague Board Vice Chairman A. Julie Griffith drew equal inspiration from the transformational work being accomplished at a UN Women safe house in Ethiopia to which she traveled during a UN duty station trip. Our contributions supported the purchase of a car to provide a much needed source of transportation for the young women and girls at the safe house. UNFCU raised the visibility for the UN Staff Relief Committee for Victims of the Earthquake and Tsunami in Japan through a fundraising campaign to which the Board provided a staff match and additionally supported the United Nations High Commissioner for Refugees (UNHCR) emergency relief efforts in the Horn of Africa, providing assistance to those displaced by conflict.

UNFCU’s healthy financial position and humanitarian concern represents the work of management, staff and many dedicated volunteers. I want to particularly thank the Board and Committees. These are the members of the Supervisory, Loan Review and Nominating Committees, as well as the Regional Advisors who support the Board in its governance responsibilities to ensure that our financial cooperative remains balanced by the pursuit of financial safety and the needs and interests of members and their families. While UNFCU is dedicated to a set of timeless core values, the institution continues to renew itself. To this end, our multicurrency initiative about which you have asked remains at the forefront of UNFCU’s pursuits. Regulatory challenges have however made the process much slower than anticipated. Nevertheless, we continue to persevere.

Looking ahead, our service mission will have added importance in 2012 which the United Nations has declared the International Year of Cooperatives. UNFCU will play an integral part and will join cooperatives large and small to raise awareness about their member-driven impact and results. With this spirit, UNFCU will enter its 65th year profitable, confident, resilient, and in this way, even more fully equipped to serve its members in over 200 countries and territories.

Finally, on behalf of the Board, I would like to extend my deepest appreciation to Mike Connery Jr., President/CEO, who will retire on 1 January 2013, after nearly 24 years at the helm of UNFCU, and whom I have had the pleasure of working with as a volunteer Supervisory Committee and Board member for eighteen and a half years. When he joined the organization our assets were USD 224.3 million and at the end of 2011 they were USD 3.4 billion. It has been a truly memorable journey implementing policy, meeting members and building relationships with our sponsor. I look forward to working closely with Mike in 2012 to advance numerous goals which will benefit the membership and also prepare us for the next chapter in UNFCU’s history. We would not be the financial cooperative we are today without his leadership and he will be leaving us far better off as individuals for having known him.

While the world is continually changing, UNFCU will remain focused on preserving its core ideology and stimulating progress to best serve its members, and in this way, never abandon the fundamental concepts that stand the test of time.


Alan M. Potter


Report of the
President / CEO

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In 2011, UNFCU demonstrated that it is a financial cooperative built to last. Year-end fiscal results proved strong, corporate social responsibility activities driven by our Board mandate soared, and service levels increased across the organization. Rather than a single, defining moment to which to lay claim, UNFCU’s proven business model and adherence to sound, financial principles over 64 years of service excellence enabled it to continue to gain momentum and move forward to record another successful year.

Throughout 2011, our strategies to leverage technology, deepen relationships with the UN community and strengthen our service culture, produced measurable improvements to our members’ experience. We completed a major upgrade to the Internet Banking platform, extended Call Centre operations 24 hours/five days a week, introduced Skype to facilitate member communications via computer and also to reduce the cost of calls borne by members outside local areas. Keeping the lines of communications open with our sponsor, we broadcast informational video conferences to 13 countries direct from New York, interacting with UN staff in East Timor, as well as UN duty stations across Latin America, Africa and the Middle East. First-time onsite visits to South Africa and Ghana, as well as to Ethiopia, were also warmly received by the UN community. Our representative office staff in Europe and Africa continued to conduct member service visits to several European countries, as well as Chile and Panama in English, French and Spanish throughout the year. A new regional online publication Highlights now specifically addresses member needs in our representative office locations. This is in addition to our award-winning Connections magazine, recently named the “Best Member Newsletter” by the National Association of Federal Credit Unions (NAFCU).

Outreach initiatives, such as workshops, financial expos and webinars given by our financial advisors and mortgage experts, were transported to desktops across the UN system and drew more than a total of 600 UN and specialized agency staff; and our participation at pre-retirement events in Vienna, Geneva, Rome and Nairobi, increased members’ understanding of many financial topics. In this same informational vein, UNFCU met regularly with UN and specialized agency officials, as well as with presidents of the Association of Former International Civil Servants and staff unions across the globe. We discussed how UNFCU can be of greater help to staff and this led to numerous productive dialogues and concrete steps. We continue to welcome these opportunities and are already taking positive action as a result of this greater collaboration.

As our staff speaks more than 30 languages, diversity is a tremendous strength of UNFCU as it is also rooted in a common understanding of what we stand for – a never ending journey of discipline, work and the pursuit of an even higher standard. Demonstrating our continuous drive for progress and stimulating efficiencies, we processed over 200,000 outgoing wire transfers for our members amounting to over USD 2.8 billion, up 13% from 2010. At year-end, the Call Centre logged a total of nearly 339,000 calls, WebChats, emails and Web forms.

Furthermore, reducing paper usage and operating with great energy efficiency remained at the core of our corporate social responsibility platform. Because of its dynamic 30-member Green Team, UNFCU continued to be committed to making improvements on operational practices. We introduced eSign, a paperless service that allows members to complete loan documents online while reducing paper consumption at UNFCU by more than 24,000 sheets of paper last year alone. Earth Day on 5 June was officially marked at UNFCU headquarters with the welcome addition of UN staff who received timely updates from the special advisor of UN Secretariat Forum on Forests and local cooperative farmers and compost experts. We oversaw the production of eco-friendly Green Bags in Nairobi for distribution at the Gigiri campus commissary with proceeds earmarked for United Nations Office Nairobi greening efforts in 2012. Further to our greening initiatives, UNFCU headquarters proudly received the prestigious US Green Building Council’s (USGBC) Leadership in Energy and Environmental Design program (LEED®) Silver certification for its energy-saving, eco-friendly programs. As of 1 June 2011, headquarters was one of only 30 existing buildings in all of New York City to be deemed LEED EB certified.

Built to last in a global, cultural world was evidenced by being more agile in 2011 than perhaps ever before. We implemented a host of new services working with carefully selected providers. Through both our Credit Union Service Organization and global insurance provider Clements Worldwide, we became the first financial services company to offer a credit card-based term life insurance program. Providing protection in the event of war, terrorism and political violence, enabled the Insurance Centre to meet the needs of more than 900 members in just the first 10 weeks it was offered. Our industry pioneering VISA® Elite smart chip and PIN (personal identification number) credit card underscored UNFCU’s responsiveness and leadership in the global payments arena. This was evidenced by overall usage increasing 30% in 2011, while reported fraud decreased 30% over the same period.

Wanting to quickly, yet comprehensively learn more about what members want and how we can continually enhance service, we deployed online surveys on topics ranging from insurance and investments to mobile banking. Based on member feedback and our in-depth analysis, we expanded the General Service Staff Lending Program in 2011 to include Azerbaijan and Chile to meet our members’ needs and our requirements for operating with great safety and soundness.

Thinking beyond our US borders, we brought other new resources to fruition to benefit members globally. Members can now specify their country location and currency paid when logging onto our website and in this way obtain products and services specific to their needs. A new search engine tool, as well as the ability to announce Call Centre wait time provided additional member convenience. Do you need to know about investment offerings in Vienna or Geneva? Websites for UNFCU Advisors GmbH and the Geneva Branch of UNFCU Financial Advisors launched in 2011 provided timely information. UNFCU’s entry into social media last year with a Facebook page focused on corporate social responsibility generated a multitude of member “likes” and conversations.

Indeed, the Board’s “doing good” mandate expanded into many additional areas in 2011. These ranged from reducing our carbon footprint in UNFCU’s offices to mentoring staff at neighboring East River Development Alliance Credit Union, which serves the largest public housing development in the US, to making financial contributions to a number of humanitarian and social causes that support the UN Millennium Development Goals, including the United Nations Trust Fund to End Violence against Women, United Nations Office on Drugs and Crime World AIDS Day educational campaigns, and The Greenbelt Movement and eight Non-Governmental Organization winners of our popular online member vote. Meanwhile, our total contributions to IAEA Programme of Action for Cancer Therapy and UNAIDS reached USD 20,000 and USD 500,000, respectively – the latter thanks to our members generous support.

I close this report of the President/CEO with fond memories and lasting friendships made at UNFCU and around the world. Before I begin my last year, I still have much to accomplish, building first and foremost for the long-term while simultaneously seeking to achieve ever-higher operating standards and short-term goals that continue to distinguish UNFCU from the competition in the eyes of its members. In collaboration with the Board, I am confident that our energetic and committed staff, talented management team, faithful volunteers and I will have a fruitful and productive 2012.

Looking at the accumulation of past events and the shaping forces of our service DNA, I am most fulfilled knowing that I was part of UNFCU – an enduring institution with a relentless drive for progress. Thank you for your loyalty, trust and confidence over the years.


Michael J. Connery, Jr.


Report of the

Image of Treasurer

Revolutions in the Middle East, natural disasters in Japan, sovereign debt concerns in Europe, a slowing global economy, and continued economic uncertainty and market volatility did not weaken UNFCU’s financial condition in 2011. UNFCU remained a stronghold, meeting members’ needs worldwide.

UNFCU closed 2011 with USD 3.5 billion in total assets, an increase of USD 247 million or 7.5% over 2010. Our shares grew by USD 215 million to USD 3.17 billion, up 7.3% compared to last year. We welcomed more than 6,600 new members, an annual increase of 7%, bringing our total membership to more than 94,700 by year-end.

While loan growth in our peer group of credit unions (all credit unions over USD 1 billion in assets) was only 1.1% in 2011, in contrast, UNFCU’s total loans grew 4.8% to USD 1.45 billion. Our loan delinquency rate of 1.43% and charge-off rate of 0.52% were higher than 2010 levels, which were 1.26% and 0.41%, respectively. However, our prudent lending practices kept us safer in this regard than our peers, whose rates averaged 1.73% for delinquencies and 1.01% for charge-offs in 2011.

As described in the Report of the Chairman, UNFCU’s required payments to supplement the National Credit Union Share Insurance Fund (NCUSIF) were comparable to those of 2010. It is worth noting that the National Credit Union Administration (NCUA), our regulator and manager of the NCUSIF, announced significant reductions in projected assessments for 2012 as a result of its improved financial condition and thanks to previous contributions by all federal credit unions, with whom we share responsibility for the NCUSIF.

The Board’s declaration of a 1% bonus dividend and a 1% rebate of interest paid on loans to the membership, amounting to USD 1.1 million returned to members, is evidence of UNFCU’s solid performance in 2011. In addition, USD 24.2 million in dividends were paid to our members. UNFCU focused on keeping operating costs under control, lowering the net operating expense ratio from 2.30% in 2010 to 2.26% in 2011. UNFCU continued to invest in staff via training and professional development programs, predominantly in-house, in 2011. High-level service training as well as the use of outside services to advance product and service offerings, enabled UNFCU to meet members’ evolving needs.

Our year-end capital ratio (percentage of net worth to total assets) grew to 9.48%, an increase of 1 basis point over the prior year. According to the relevant NCUA criterion, we remained well capitalized. Moreover, the Investment portfolio returned 3.51% (income plus price appreciation) in 2011, better than 2010’s 2.65%, despite the decline of interest rates to exceptionally low levels and increased market volatility.

UNFCU continues to maintain sound financial performance while providing competitively priced products that satisfy needs and safeguard members’ assets, now and in the future. Thank you for your membership and participation in the continued success of our unique cooperative financial institution.

The audited financial statements which accompany this report provide further details and a comparison of data for the periods ended on 31 December 2011 and 2010.


Joyce A. Barbarich


Financial Report

Report of Independent Certified Public Accountants

To the Supervisory Committee and Members of United Nations Federal Credit Union and Subsidiary

We have audited the accompanying consolidated statements of financial condition of United Nations Federal Credit Union and Subsidiary (“UNFCU”) as of 31 December 2011 and 2010, and the related consolidated statements of income, comprehensive income, members’ equity, and cash flows for the years then ended. These financial statements are the responsibility of UNFCU’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America as established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of UNFCU’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of United Nations Federal Credit Union and Subsidiary as of 31 December 2011 and 2010, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Thornton signature

New York, New York

30 April 2012

Consolidated Statements of Financial Condition

For the years ended 31 December 2011 and 2010
Cash and cash equivalents$95,849,358$117,454,488
Investments Note 2  
Loans to members, net Note 31,439,270,8881,373,858,504
Accrued interest receivable11,751,50112,655,400
Property and equipment, net Note 5131,075,254136,462,384
National Credit Union Share Insurance Fund deposit28,310,49326,312,311
Other assets20,838,00024,258,727
Total Assets$3,529,805,616$3,282,515,731
Members’ shares Note 7$3,171,137,933$2,955,788,740
Dividends payable1,089,4381,070,677
Accrued expenses and other liabilities25,276,60724,026,848
Total liabilities3,197,503,9782,980,886,265
Members’ equity  
Retained earnings334,577,261310,705,646
Accumulated other comprehensive loss(2,275,623)(9,076,180)
Total members’ equity332,301,638301,629,466
Total liabilities and members’ equity$3,529,805,616$3,282,515,731
The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Income

For the years ended 31 December 2011 and 2010
Interest on loans to members$82,257,004$80,777,197
Interest on investments and cash equivalents42,088,99344,198,547
Total interest income124,345,997124,975,744
Dividends on members’ shares24,174,48225,914,505
Interest on borrowed funds3119,228
Total interest expense24,174,51325,933,733
Net interest income100,171,48499,042,011
Service charges and other fees17,722,79116,233,729
Loan servicing fees851,482836,815
Other non-interest income3,718,2403,591,154
Total non-interest income22,292,51320,661,698
Salaries and benefits40,028,79936,617,453
Total non-interest expense89,742,38283,970,715
Net income$23,871,615$29,132,994
The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Comprehensive Income

For the years ended 31 December 2011 and 2010
NET INCOME$23,871,615$29,132,994
Change in pension(3,491,772)(96,144)
Change in unrealized holding gains/(losses) on investments classified as available-for-sale10,292,329(4,673,411)
Comprehensive income$30,672,172$24,363,439
The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Members’ Equity

For the years ended 31 December 2011 and 2010
 Unappropriated Retained EarningsAccumulated Other Comprehensive Loss
Balance, 31 December 2009$281,572,652$(4,306,625)
Net income29,132,994-
Change in pension-(96,144)
Change in unrealized losses on available-for-sale investments-(4,673,411)
Balance, 31 December 2010310,705,646(9,076,180)
Net income23,871,615-
Change in pension-(3,491,772)
Change in unrealized gains on available-for-sale investments-10,292,329
Balance, 31 December 2011$334,577,261$(2,275,623)
The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Cash Flows

For the years ended 31 December 2011 and 2010
Net income$23,871,615$29,132,994
Adjustments to reconcile net income to net cash provided by operating activities
Net amortization of premiums and accretion of discounts1,240,421730,544
Provision for loan losses8,850,0006,600,000
Depreciation and amortization10,449,3369,972,043
Gain on sales of investments-(11,700)
Net change in:
Accrued interest receivable903,899504,306
Other assets3,420,7272,857,820
Dividend payable18,761(95,492)
Accrued expenses and other liabilities(2,242,013)(1,872,046)
Net cash provided by operating activities46,512,74647,818,469
Purchases of available-for-sale investments(849,493,784)(1,006,712,209)
Proceeds from maturities of available-for-sale investments827,691,200842,581,063
Purchases of held-to-maturity investments(381,777,490)(246,425,587)
Proceeds from maturities of held-to-maturity investments200,537,777231,186,839
Proceeds from sales of investments-2,011,700
Net change in other investments898,00029,755,334
Net change in loans to members(74,262,384)(53,991,078)
Increase in the National Credit Union Share Insurance Fund deposit(1,998,182)(1,699,566)
Purchases of property and equipment(5,062,206)(2,616,607)
Net cash used in investing activities(283,467,069)(205,910,111)
Net increase in members’ shares215,349,193198,092,961
Repayments of borrowed funds-(30,143,209)
Net cash provided by financing activity215,349,193167,949,752
Cash and cash equivalents at end of year$95,849,358$117,454,488
Interest paid$24,155,751$26,029,225
The accompanying notes are an integral part of these consolidated financial statements.

Notes to Consolidated Financial Statements

For the years ended 31 December 2011 and 2010

Note 1

Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the United Nations Federal Credit Union (“UNFCU”) and its wholly owned subsidiary, UNFCU Financial Services, LLC (the “Company”). The subsidiary is primarily engaged in investments, insurance products, and financial planning service activities. All significant intercompany accounts and transactions have been eliminated in consolidation.

Nature of Operations

UNFCU is a cooperative association holding a corporate charter under the provisions of the Federal Credit Union Act. Participation in UNFCU is limited to those individuals who qualify for membership, including employees and their families employed by the United Nations and their agencies. The field of membership is defined in UNFCU’s Charter and Bylaws.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The principal estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and temporary impairment of investment securities.

Concentrations of Credit Risk

The loan portfolio is well diversified and UNFCU does not have any significant concentrations of credit risk except unsecured loans, which by their nature increase the risk of loss compared to those loans that are collateralized.

Cash and Cash Equivalents

For the purpose of the statements of financial position and the statements of cash flows, cash and cash equivalents includes cash on hand, amounts due from financial institutions, federal funds sold and highly liquid debt instruments classified as cash which were purchased with maturities of three months or less. Amounts due from financial institutions may exceed federally insured limits.


Debt securities that management has the positive intent and ability to hold to maturity are classified as “held-to-maturity” and recorded at amortized cost. Securities not classified as held–to-maturity or trading, including equity securities with readily determinable fair values, are classified as “available-for-sale” and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income.

Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Declines in the fair value of individual available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In determining whether other-than-temporary impairment exists, management considers many factors, including (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of UNFCU to retain its investment in the issue for a period of time sufficient to allow for any anticipated recovery in fair value. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Federal Home Loan Bank Stock

UNFCU is required to hold Federal Home Loan Bank of New York (“FHLB”) stock equal to the sum of 0.2% of mortgage-related assets and 4.5% of outstanding FHLB borrowings. UNFCU has met these requirements for both 2011 and 2010.

No ready market exists for the FHLB stock, and it has no quoted market value. Therefore, UNFCU’s investment in FHLB stock is carried at cost and tested for impairment. At December 31, 2011 and 2010, management did not believe the stock was impaired.

Loans to Members

UNFCU grants mortgage and consumer loans to members. The ability of the members to honor their contracts is dependent upon the real estate and general economic conditions of the area.

Loans that UNFCU has the intent and ability to hold for the foreseeable future or until maturity or pay-off are stated at their outstanding unpaid principal balances, less an allowance for loan losses. Interest income on loans is recognized over the term of the loan and is calculated using the simple interest method on principal amounts outstanding.

The accrual of interest income on loans is discontinued at the time the loan is 90 days past due, unless the credit is well secured and in the process of collection. Other personal loans are typically charged off no later than 180 days past due. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on non-accrual or charged off at an earlier date if the collection of principal and interest is considered doubtful.

All interest accrued but not collected for loans that are placed on non-accrual or charged off is reversed against interest income. Interest income on these loans is recognized on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all of the principal and interest amounts contractually past due are brought current and future payments are reasonably assured.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred though a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is likely. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. In addition, regulatory agencies, as an integral part of their examination process, periodically review UNFCU’s allowance for loan losses, and may require UNFCU to make additions to the allowance based on their judgment about information available to them at the time of their examinations.

UNFCU’s allowance for loan losses is that amount considered adequate to absorb probable losses in the portfolio based on management’s evaluations of the size and current risk characteristics of the loan portfolio. Such evaluations consider prior loss experience, the risk rating and the levels of non-performing loans. Specific allowances for loan losses are established for impaired losses on an individual basis as required per Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) ASC 310 “Receivables – Loans and Debt Securities”. The specific allowances established for these loans are based on a thorough analysis of the most probable source of repayment, including the present value of the loan’s expected future cash flow, the loan’s estimated market value, or the estimated fair value of the underlying collateral. As of 31 December, 2011 and 2010, the total of loans that met the ASC 310 impaired loan definition amounted to $25,439,750 and $18,635,000 for 2011 and 2010, respectively. General allowances are established for loans that can be grouped into pools based on similar characteristics as described in ASC 450 “Contingencies”. In this process, general allowance factors are based on an analysis of historical charge-off experience and expected losses given default derived from UNFCU’s internal risk rating process. These factors are developed and applied to the portfolio by loan type. The qualitative factors associated with the allowances are subjective and require a high degree of management judgment. These factors include the credit quality statistics, recent economic uncertainty, losses incurred from recent events, and lagging data.

UNFCU will repossess collateral when all other collection efforts have been exhausted and UNFCU has full and complete access to repossess the collateral.

Loan Servicing

Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal.

Property and Equipment

Land is carried at cost. Leasehold improvements and furniture and equipment are carried at cost, less accumulated depreciation and amortization. Building, furniture and equipment are depreciated using the straight-line method over the estimated useful lives of the assets. The cost of leasehold improvements is amortized using the straight-line method over the terms of the related leases.

Long-Lived Assets

UNFCU has adopted ASC 360 “Property, Plant, and Equipment”. The statement requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. UNFCU periodically reevaluates the original assumptions and rationale utilized in the establishment of the carrying value and estimated lives of its long-lived assets. The criteria used for these evaluations include management’s estimate of the asset’s continuing ability to generate income from operations and positive cash flow in future periods as well as the strategic significance of the asset in UNFCU’s business objectives.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from UNFCU, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) UNFCU does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.

National Credit Union Share Insurance Fund Deposit

The deposit in the National Credit Union Share Insurance Fund (NCUSIF) is in accordance with National Credit Union Administration (NCUA) regulations, which require the maintenance of a deposit by each federally insured credit union in an amount equal to 1% of its insured members shares. The deposit would be refunded to UNFCU if its insurance coverage is terminated, if it converts its insurance coverage to another source, or if management of the fund is transferred from the NCUA Board.

NCUSIF Insurance Premium

UNFCU is required to pay an annual insurance premium, unless the payment is waived or reduced by the NCUA Board. The NCUA Board waived the insurance premium, and assessed .25% for the Temporary Corporate Credit Union Stabilization Fund (TCCUSF)of approximately $7,078,000 in 2011.

In 2010, the NCUA Board assessed a .1242% insurance premium of approximately $3,268,000 plus an additional .134% premium for the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) of approximately $3,485,500. Insurance premiums are included in non-interest expense operations.

Members’ Shares

Members’ shares are the savings deposit accounts of the owners of UNFCU. Share ownership entitles the members to vote in the annual elections of the Board of Directors and on other corporate matters. Irrespective of the amount of shares owned, no member has more than one vote. Members’ shares are subordinated to all other liabilities of UNFCU upon liquidation. Dividends on members’ shares are based on available earnings at the end of a dividend period and are not guaranteed by UNFCU. Dividend rates are set by UNFCU’s Board of Directors.

Marketing Costs

Marketing costs are expensed as incurred.

Income Taxes

UNFCU is exempt, by statute, from federal and state income taxes. UNFCU’s wholly owned subsidiary is a single member limited liability company and as such is not subject to income tax. Income or loss from the Company is passed through to UNFCU.

Pension Plan

UNFCU has a qualified, noncontributory defined-benefit pension plan covering substantially all of its employees. UNFCU’s policy is to fund an amount in excess of the minimum amount required under ERISA.

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains, and losses be included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities and pension related adjustments, are reported as a separate component of the members’ equity section of the statements of financial condition.

Gains and losses on available-for-sale securities reclassified to net income as gains or losses are realized upon the sale of securities. Unrealized gains arising during 2011 approximated $10,292,300 and are recorded in other comprehensive income net of any reclassification adjustments for gains included in net income which were zero for 2011. Unrealized losses arising during 2010 approximated $4,673,400 and are recorded in other comprehensive income net of a reclassification adjustment of approximately $11,700 for losses included in net income.


Certain account reclassifications have been made to the 2010 consolidated financial statements in order to conform to classifications used in the current year.

Recent Accounting Pronouncements

In January 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-06, which amends the authoritative accounting guidance under ASC 820. The update requires the following additional disclosures: (1) separately disclose the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers and (2) separately disclose information about purchases, sales, issuances and settlements in the reconciliation for fair value measurements using Level 3. The update provides for amendments to existing disclosures as follows: (1) fair value measurement disclosures are to be made for each class of assets and liabilities and (2) disclosures are to be made about valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. The update also includes conforming amendments to guidance on employers’ disclosures about postretirement benefit plan assets. The update is effective for reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010. Adoption of this update did not have a material effect on UNFCU’s results of operations or financial condition.

In July 2010, the FASB issued ASU 2010-20, which amends the authoritative accounting guidance under ASC 310 “Receivables.” The update is to provide financial statement users with greater transparency about an entity’s allowance for credit losses and the credit quality of its financing receivables. The update requires disclosures that facilitate financial statement users’ evaluation of the following: (1) the nature of credit risk inherent in the entity’s portfolio of financing receivables; (2) how that risk is analyzed and assessed in arriving at the allowance for credit losses and (3) the changes and reasons for those changes in the allowance for credit losses. An entity is required to provide disclosures on a disaggregated basis by portfolio segment and class of financing receivables. This update requires the expansion of currently required disclosures about financing receivables as well as requiring additional disclosures about financing receivables. The disclosures as of the end of a reporting period are effective for the annual reporting periods ending on or after December 15, 2011. The disclosures about activity that occurs during a reporting period are effective for annual reporting periods beginning on or after December 15, 2011. Adoption of this update did not have a material effect on UNFCU’s results of operations or financial condition.

In April 2011, the FASB issued ASU 2011-02, which amends the authoritative accounting guidance under ASC 310 “Receivables.” The update provides clarifying guidance as to what constitutes a troubled debt restructuring. The update provides clarifying guidance on a creditor’s evaluation of the following: (1) how a restructuring constitutes a concession and (2) if the debtor is experiencing financial difficulties. The amendments in this update are effective for the annual period beginning on or after December 15, 2012 and should be applied retrospectively to the beginning of the annual period of adoption. Adoption of this update is not expected to have a material effect on UNFCU’s results of operations or financial condition.

In May 2011, the FASB issued ASU 2011-04, which amends the authoritative accounting guidance under ASC 820 “Fair Value Measurement.” The amendments in this update clarify how to measure and disclose fair value under ASC 820. The amendments in this update are effective for the annual period beginning on or after December 15, 2011 and should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted. Adoption of this update is not expected to have a material effect on UNFCU’s results of operations or financial condition.

In June 2011, the FASB issued ASU 2011-05, which amends the authoritative accounting guidance under ASC 220 “Comprehensive Income.” The amendments eliminate the option to present components of other comprehensive income in the statement of stockholders’ equity. Instead, the new guidance requires entities to present all non-owner changes in stockholders’ equity either as a single continuous statement of comprehensive income or as two separate but consecutive statements. The amendments in this update are effective for the annual period beginning on or after December 15, 2012 and must be applied retrospectively. Early adoption is permitted. Adoption of this update is not expected to have a material effect on UNFCU’s results of operations or financial condition.

In December 2011, FASB ASU 2011-12, amended ASC 220 “Comprehensive Income.” The amendments defer certain disclosure requirements regarding reclassifications within ASU 2011-05, until the FASB can deliberate further on these requirements. The amendments in this update are effective for the annual period beginning on or after December 15, 2012 and must be applied retrospectively. The implementation of ASU 2011-12 is not expected to have a material effect on UNFCU’s consolidated financial statements.

Note 2


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

31 December 2011Amortized CostUnrealized GainsUnrealized LossesFair Value
US government obligations$4,996,695$24,005$ -$5,020,700
FDIC-TLPG Gov’t Ins. Bonds40,069,164384,736-40,453,900
Federal agencies716,534,1035,877,547(42,941)722,368,709
Corporate bonds1,379,5706,793(4,131)1,382,232
Mortgage-backed securities193,000897-193,897
31 December 2010Amortized CostUnrealized GainsUnrealized LossesFair Value
FDIC-TLPG Gov’t Ins. Bonds$80,321,744$1,033,306$ -$81,355,050
Federal agencies658,046,0523,774,685(8,867,219)652,953,518
Corporate bonds2,022,45714,840(4)2,037,293
Mortgage-backed securities194,200-(1,031)193,169

Investments classified as held-to-maturity consist of the following:

31 December 2011Amortized CostUnrealized GainsUnrealized LossesFair Value
Bank obligations$4,999,547$ -$(197)$4,999,350
Municipal bonds176,296,9267,129,218(78,560)183,347,584
Mortgage-backed securities697,298,87016,922,946(1,287,662)712,934,154
Small Business Administration147,687,7052,376,554(382,572)149,681,687
Structured Bank Notes3,302,63638,557-3,341,193
31 December 2010Amortized CostUnrealized GainsUnrealized LossesFair Value
Bank obligations$4,997,219$ -$(199)$4,997,020
Municipal bonds185,370,4784,908,193(1,885,175)188,393,496
Mortgage-backed securities557,541,05815,723,288(2,415,458)570,848,888
Small Business Administration98,303,8492,160,106(51,312)100,412,643
Structured Bank Notes4,159,283168,551-4,327,834

Investments by maturity as of 31 December 2011 are summarized as follows:

Amortized costFair valueAmortized costFair value
Less than 1 year maturity$80,425,543$81,227,739$32,602,143$32,986,965
1-5 years maturity519,165,540523,089,505110,195,390114,226,397
5-10 years maturity101,750,653102,880,41533,498,94035,902,022
Over 10 years maturity61,637,79662,027,8825,000,0005,231,550
Mortgage-backed securities193,000193,897697,298,870712,934,154
Small Business Administration--147,687,705149,681,687
Structured Bank Notes--3,302,6363,341,193

Investments by maturity as of 31 December 2010 are summarized as follows:

Amortized costFair valueAmortized costFair value
Less than 1 year maturity$80,983,492$81,347,401$35,468,980$36,008,542
1-5 years maturity247,603,881250,009,76399,811,880103,548,815
5-10 years maturity314,881,456310,001,74839,555,93638,351,678
Over 10 years maturity96,921,42494,986,94915,530,90115,481,481
Mortgage-backed securities194,200193,169557,541,058570,848,888
Small Business Administration--98,303,849100,412,643
Structured Bank Notes--4,159,2834,327,834

Expected maturities of mortgage-backed securities, Small Business Administration, and structured bank notes may differ from contractual maturities because borrowers may have the right to call or prepay the obligations and are, therefore, classified separately with no specific maturity date.

Gross unrealized losses and fair value by length of time that the individual securities have been in a continuous unrealized loss position at 31 December, 2010 and 2009 are as follows:

31 December 2011Continuous unrealized losses existing for
Available-for-saleFair valueLess than 12 months12 months or longerTotal unrealized losses
Federal agencies$77,453,775$(42,941)$-$(42,941)
Corporate bonds348,625(4,131)-(4,131)
Held-to-maturityFair valueLess than 12 months12 months or longerTotal unrealized losses
Bank obligations$4,999,350$ -$(197)$(197)
Municipal bonds5,921,440(78,560)-(78,560)
Mortgage-backed securities60,038,045(198,708)(1,088,954)(1,287,662)
Small Business Administration50,031,337(382,572)-(382,572)
31 December 2010Continuous unrealized losses existing for
Available-for-saleFair valueLess than 12 months12 months or longerTotal unrealized losses
Federal agencies$366,555,055$(8,867,219)$ -$(8,867,219)
Corporate bonds50,065(4)-(4)
Mortgage-backed securities193,169(1,031)-(1,031)
 $366,798,289$(8,868,254)$ -$(8,868,254)
Held-to-maturityFair valueLess than 12 months12 months or longerTotal unrealized losses
Bank obligations$4,997,020$(199)$ -$(199)
Municipal bonds48,446,420(1,885,175)-(1,885,175)
Mortgage-backed securities91,891,020(1,574,158)(841,300)(2,415,458)
Small Business Administration12,769,489(45,000)(6,312)(51,312)

At 31 December 2011 there were 40 securities in an unrealized loss position of which 9 have current unrealized losses which have existed for a period longer than 12 months and 31 for 12 months or less. At 31 December 2010 the investment portfolio included 108 securities in an unrealized loss position, 8 of which had current unrealized losses which had existed for a period longer than 12 months and 100 for 12 months or less. All of these securities are considered to be acceptable credit risks. Based upon an evaluation of the available evidence, including recent changes in market rates, credit rating information and information obtained from regulatory filings, management believes the decline in fair value for these securities is temporary. In addition, UNFCU has the ability and does not believe it will be required to sell these investment securities for a period of time sufficient to allow for an anticipated recovery or maturity.

Other investments consist of the following:

31 December20112010
Federal Home Loan Bank Stock$3,065,000$3,213,000
Community MM Investment Fund-NCB250,000-
Certificates of deposit in credit unions390,0001,390,000

Certificates are generally non-negotiable and non-transferable, and may incur substantial penalties for withdrawal prior to maturity.

As discussed in Note 14, management evaluated the investment portfolio and determined that there were no other-than-temporary impairments for either 31 December 2011 or 2010.

Note 3

Loans To Members

Loans to members consist of the following:

 31 December
Mortgage loans
Fixed rate$404,295,455$409,447,027
Variable rate538,568,084499,322,961
Home equity line of credit, variable rate61,973,42364,134,338
Loan participations1,358,215-
Consumer Loans
Auto loans10,649,98914,729,518
Home improvement29,963,72523,833,389
Share secured12,653,21511,057,765
Government guaranteed student loans265,747304,828
Credit card loans, unsecured126,570,229116,361,797
Consumer loans, primarily unsecured261,765,327241,771,779
Allowance for loan losses(10,613,650)(9,187,766)

UNFCU offers variable rate mortgages and balloon mortgages to its members. Variable rate mortgages have an initial introductory rate of either 1, 3, 5, 7, or 10 years. After this period the annual percentage rate adjusts to the fully indexed rate (index plus margin). UNFCU variable rate mortgages have annual and lifetime rate caps to minimize payment shock to borrowers. UNFCU also offers balloon loans to members whereby payments are based on a 30 year amortization but the loan balance becomes due and payable at the end of a specified 7, 10 or 15 year period. Variable rate and balloon mortgages may have significantly different credit risk characteristics than traditional fixed rate mortgages. However, UNFCU believes it has established prudent underwriting standards as well as adequate risk management functions to monitor these additional risks.

The following table shows the activity in the allowance for loan losses:

Mortgage LoansConsumer LoansTotalTotal
Balance at beginning of year$3,259,374$5,928,392$9,187,766$8,139,475
Provision for loan losses3,365,8525,484,1488,850,0006,600,000
Loans charged-off(1,889,212)(6,291,449)(8,180,661)(6,118,911)
Balance at end of year$4,910,727$5,702,923$10,613,650$9,187,766

The following table shows the ending balance of our allowance for loan losses by loan type and the allowance for loan losses based on the impairment method used at 31 December 2011:

 Allowance for Loan Losses
Individually Evaluated For Impairment Ending BalanceCollectively Evaluated For Impairment Ending Balance
Mortgage Loans$3,101,843$1,808,884
Consumer Loans-5,702,923

The following table shows an age analysis of loans at 31 December 2011:

 30-59 Days Past Due60-89 Days Past DueGreater than 90 DaysCurrentTotal Loans
Mortgage Loans$2,498,689$1,601,225$13,064,838$990,851,554$1,008,016,306
Consumer Loans1,721,874891,6701,426,863437,827,825441,868,232

The following table shows the recorded investment, unpaid principal balance, allocated allowance for loan losses, average recorded investment and interest income recognized for loans that were considered impaired at 31 December 2011:

 Recorded InvestmentUnpaid Principal BalanceRelated AllowanceAverage Recorded InvestmentInterest Income Recognized
With no related allowance recorded:
Mortgage Loans$4,841,485$4,703,809$-$3,534,528$51,505
With an allowance recorded:
Mortgage Loans21,217,06320,735,9413,101,84319,961,371290,873
Total Impaired Loans$26,058,548$25,439,750$3,101,843$23,495,899$342,378

The following table shows our loans that are on non-accrual status and 90 days or more past due and still accruing interest as of 31 December:

Loans 90 days or more past due and still accruing:
Mortgage loans$ -$ -
Consumer loans367,137362,365
Non-accrual loans:
Mortgage Loans$13,064,838$10,966,295
Consumer Loans$1,059,726$1,002,535
Total past due loans$14,491,701$12,331,195

The following table summarizes the activity related to information on troubled debt restructing:

Modifications as of 31 December

 No. ContractsPre- Modification Outstanding Recorded InvestmentPost- Modification Outstanding Recorded Investment
Troubled Debt Restructuring
Mortgage Loans13$4,000,711$4,166,779
Consumer Loans10550,561570,085
  Number of Contracts Recorded Investment
Troubled Debt Restructuring That Subsequently Defaulted
Troubled debt restructuring:
Mortgage Loans3  $1,047,817
Consumer Loans3 189,358

Note 4

Loan Servicing

Mortgage loans serviced for other institutions are not included in the accompanying consolidated statements of financial condition. The unpaid principal balances of these loans at 31 December 2011 and 2010 were approximately $61,652,900 and $54,517,151, respectively.

Note 5

Property and Equipment

Property and equipment are summarized as follows:

 31 December
Furniture and equipment60,895,23256,736,514
Leasehold improvements7,313,5057,159,004
Accumulated depreciation and amortization(47,237,563)(36,788,227)

Rental expense for the years ended 31 December 2011 and 2010 for all facilities leased under operating leases totaled $833,000 and $756,000, respectively. In addition, UNFCU has rental arrangements with the sponsor organizations for our NY and overseas locations. The rental expenses for these locations for the years ended 31 December 2011 and 2010 totaled $478,000 and $478,000, respectively.

Note 6

Rental Income

UNFCU leases office space to third parties. Rental income from these operating leases totaled approximately $ 3,285,000 and $3,622,000 for the years ended 31 December 2011 and 2010, respectively, and is included in other noninterest income.

Future minimum rental income under operating leases with initial or remaining terms of one year or more at 31 December 2011 are as follows:

Year ending 31 December 
Subsequent years12,099,796

Note 7

Members’ Shares

Members’ shares are summarized as follows:

 31 December
Regular shares$1,472,657,935$1,313,299,756
Checking accounts305,380,097276,815,872
Money market506,838,765458,098,977
Individual retirement shares4,980,3634,238,227
Individual retirement certificates5,477,7194,999,812

Shares by maturity as of 31 December 2011 are summarized as follows:

No contractual maturity$2,293,650,422
0 - 1 year maturity561,590,317
1 - 2 years maturity113,053,576
2 - 3 years maturity84,789,588
3 - 4 years maturity45,035,589
4 - 5 years maturity73,018,441

Regular shares, checking accounts, money market, individual retirement shares, and other account shares have no contractual maturity. Certificate accounts have maturities of five years or less.

The aggregate amount of uninsured shares at 31 December 2011 and 2010 is approximately $261,288,000 and $221,355,000, respectively.

Note 8

Borrowed Funds

UNFCU has a demand loan agreement with FHLB. This FHLB demand loan called for the pledging of mortgage-backed securities as collateral for any advances. The approved limit of the FHLB demand loan is up to 30% of UNFCU’s total assets. In the event that more would be needed, UNFCU must seek and obtain an exception approval from FHLB to a maximum of 50% of the total assets, with interest charged at a rate determined by the lender on a periodic basis.

Note 9

Off-Balance Sheet Activities

UNFCU is party to conditional commitments to lend funds in the normal course of business to meet the financing needs of its members. These commitments represent financial instruments to extend credit which include lines of credit, credit cards and home equity lines that involve, to varying degrees, elements of credit and interest rate risk in excess of amounts recognized in the consolidated financial statements.

UNFCU’s exposure to credit loss is represented by the contractual amount of these commitments. UNFCU follows the same credit policies in making commitments as it does for those loans recorded in the consolidated financial statements.

Outstanding loan commitments at 31 December 2011 and 2010 total approximately $65,875,000 and $77,553,000, respectively.

Unfunded loan commitments under lines of credit are summarized as of 31 December 2011 and 2010 follows:

Home equity$34,982,000$35,732,000
Credit card290,235,000251,141,000
Other consumer52,450,00049,576,000

Commitments to extend credit are agreements to lend to a member as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. UNFCU evaluates each member’s credit worthiness on a case-by-case basis. The amount of collateral obtained to secure borrowing on the lines of credit is based on management’s credit evaluation of the member.

Unfunded commitments under home equity lines-of-credit, revolving credit lines and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines-of-credit are uncollateralized and usually do not contain a specified maturity date and ultimately may not be drawn upon to the total extent to which UNFCU is committed.

Note 10

Commitments and Contingent Liabilities

UNFCU is a party to various legal actions normally associated with collections of loans and other business activities of financial institutions, the aggregate effect of which, in management’s opinion, would not have a material adverse effect on the financial condition or results of operations of UNFCU.

Note 11

Employee Benefits

UNFCU sponsors a defined benefit pension plan for the benefit of its employees. The plan calls for benefits to be paid to eligible employees at retirement based primarily upon years of service with UNFCU and compensation levels at retirement. Contributions to the plan reflect benefits attributed to employees’ services to date, as well as services expected to be earned in the future. Plan assets consist primarily of investments in common/collective trust funds.

31 December20112010
Benefit obligation at 31 December$20,527,281$15,675,872
Fair value of plan assets24,692,99324,364,110
Funded status$4,165,712$8,688,238
Accumulated benefit obligation$16,672,215$12,730,488
Years ended 31 December20112010
Net pension cost$1,030,754$901,983
Employer contribution$ -$ -
Benefit payments$236,112$505,387

Amounts recognized in the statement of financial condition consist of:

31 December20112010

Amounts recognized in accumulated other comprehensive income consist of:

31 December20112010
Prior service cost$1,888,843$2,150,453

The following are the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic pension cost over the next fiscal year ending 2011.

Other losses$341,623
Prior service cost261,610
31 December20112010
Assumptions used to determine benefit obligation
Discount rate4.75%5.50%
Rate of compensation increase3.00%3.50%
31 December20112010
Assumptions used to determine net pension cost
Discount rate4.75%5.50%
Expected long-term return on plan assets7.50%7.50%
Rate of compensation increase3.00%3.50%

The expected long-term rate of return on plan assets was determined by applying historical average investment returns from published indexes relating to the current allocation of assets in the portfolio.

UNFCU’s pension plan weighted-average asset allocations by asset category are as follows:

31 December20112010
Equity securities (Level 1)60%65%
Debt securities (Level 1)40%35%

UNFCU’s pension investment strategies are targeted to produce a total return that, when combined with UNFCU’s contributions to the plan, will maintain the fund’s ability to meet all required benefit obligations. Risk is controlled through diversification of asset types and investments in domestic and international equities, fixed income securities and cash.

There were no contributions to the plan during 2011 or 2010.

The following pension benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows:

Years ending 31 December
2017 and forward4,625,478

UNFCU has a 401(k) retirement plan that allows employees to defer a portion of their salary into the 401(k) plan. UNFCU matches a portion of employees’ wage reductions. Costs are accrued and funded on a current basis. UNFCU contributed $1,243,596 and $1,319,417, respectively, to the plan for the years ended 31 December 2011 and 2010.

UNFCU has deferred compensation agreements with members of the management team that provides benefits payable to these employees if they remain employed by UNFCU until age 65 or age 55 with five years of service as defined by the agreements. The benefits are subject to forfeiture if employment is terminated on or before the third anniversary of the initial plan election as defined in the agreement.

Note 12

Members’ Equity

UNFCU is subject to various regulatory capital requirements administered by the NCUA. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on UNFCU’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, UNFCU must meet specific capital guidelines that involve quantitative measures of UNFCU’s assets, liabilities, and certain off-balance-sheet items as calculated under generally accepted accounting principles. UNFCU’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require UNFCU to maintain minimum amounts and ratios (set forth in the table below) of net worth to total assets. Further, credit unions over $10,000,000 in assets are also required to calculate a Risk-Based Net Worth (RBNW) requirement which establishes whether or not UNFCU will be considered “complex” under the regulatory framework. UNFCU’s RBNW requirements as of 31 December 2011 and 2010 were 6.88% and 6.79%, respectively. The minimum requirement to be considered “complex” under the regulatory framework is 6%. Management believes, as of 31 December 2011 and 2010, that UNFCU meets all capital adequacy requirements to which it is subject.

As of 31 December 2011, the most recent call reporting period, the NCUA categorized UNFCU as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized,” UNFCU must maintain a minimum net worth ratio of 7% of assets. There are no conditions or events since that notification that management believes have changed the institution’s category.

UNFCU’s actual capital amounts and ratios are presented in the following table:

 31 December 201131 December 2010
Amount needed to be classified as “adequately capitalized”$211,788,3376.00%$196,950,9446.00%
Amount needed to be classified as “well capitalized”$247,086,3937.00%$229,776,1017.00%
Actual net worth$334,577,2619.48%$310,705,6469.47%

Because the RBNW requirement is less than the net worth ratio, UNFCU retains its original category. Further, in performing its calculation of total assets, UNFCU used the quarter-end balance option, as permitted by regulation.

Note 13

Related Party Transactions

In the normal course of business, UNFCU extends credit to directors, supervisory committee members and executive officers. The aggregate loans to related parties at 31 December 2011 and 2010 amounted to approximately $4,336,592 and $4,570,443, respectively. Deposits from related parties at 31 December 2011 and 2010 amounted to approximately $2,381,684 and $2,214,726, respectively.

Note 14

Fair Value

UNFCU generally holds its earning assets, other than securities available-for -sale, to maturity and settles it liabilities at maturity. However, fair value estimates are made at a specific point in time and are based on relevant market information. These estimates do not reflect any premium or discount that could result from offering for sale at one time the UNFCU’s entire holdings of a particular instrument. Accordingly, as assumptions change, such as interest rates and prepayments, fair value estimates change and these amounts may not necessarily be realized in an immediate sale.

Disclosure of fair value does not require fair value information for items that do not meet the definition of a financial instrument or certain other financial instruments specifically excluded from its requirements. These items include property and equipment, leases, foreclosed properties, and equity.

Further, fair value disclosure does not attempt to value future income or business. These items may be material and accordingly, the fair value information presented does not purport to represent, nor should it be construed to represent, the underlying “market” or franchise value of UNFCU.

In accordance with ASC 820, “Fair Value Measurements and Disclosures”, assets and liabilities are classified at fair value in one of the three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value. These levels are:

  • Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities that UNFCU has the ability to access at the measurement date.
  • Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices in markets that are not active for identical or similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
  • Level 3 Unobservable inputs that are supported by little or no market activity and significant to the fair value of the assets or liabilities that are developed using the reporting entities’ estimates and assumptions, which reflect those that market participants would use.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

A description of the valuation methodologies used for financial instruments measured at fair value on a recurring basis, as well as the classification of the instruments pursuant to the valuation hierarchy, is as follows:

Securities classified as available-for-sale are reported using Level 1 and Level 2 inputs. Level 1 securities generally include equity securities valued based on quoted market prices in active markets, UNFCU includes US Treasuries in the Level 1 category. Level 2 instruments include U.S. government agency obligations, state and municipal bonds, mortgage-backed securities, collateralized mortgage obligations and corporate bonds. For these securities, UNFCU obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.

Assets measured at fair value on a recurring basis at 31 December 2011 are summarized below:

 Fair Value Measurement Using
Quoted prices in Active markets for identical assets/liabilities
(Level 1)
Significant others observable Inputs
(Level 2)
Significant unobservable inputs (Level 3)31 December 2011
Investment securities available-for-sale
US government obligations$5,020,700$-$-$5,020,700
FDIC-TLPG Gov’t Ins. Bond-40,453,900-40,453,900
Federal agencies-722,368,709-722,368,709
Corporate bonds-1,382,232-1,382,232
Mortgage backed securities-193,897-193,897

Assets measured at fair value on a recurring basis at 31 December 2010 are summarized below:

  Fair Value Measurement Using
Quoted prices in Active markets for identical assets/liabilities
(Level 1)
Significant others observable inputs
(Level 2)
Significant unobservable inputs (Level 3)31 December 2010
Investment securities available-for-sale
FDIC-TLPG Gov’t Ins. Bond$-$81,355,050$-$81,355,050
Federal agencies-652,953,518-652,953,518
Corporate bonds-2,037,293-2,037,293
US Treasuries-193,169-193,169

The above tables include $47,072 and $8,868,254 in unrealized losses on UNFCU’s available-for-sale securities for the year ended 31 December, 2011 and 2010, respectively. UNFCU has reviewed its investment portfolio at 31 December, 2011, and has determined that the above unrealized losses are temporary. Such determination was based upon an evaluation of the creditworthiness of the issuers and/or guarantors, the underlying collateral, if applicable, as well as the continuing performance of the securities. Management also evaluates other facts and circumstances that may be indicative of an other-than-temporary impairment condition. This includes, but is not limited to, an evaluation of the type of security and length of time and extent to which the fair value has been less than cost, as well as certain collateral related characteristics. In addition, management considers UNFCU’s ability to hold such securities to maturity, if necessary, thereby recovering its investment.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

Impaired loans are evaluated and valued at the time the loan is identified as impaired, at the lower of the recorded investment in the loan or market value. The loans identified as impaired are real estate secured.

Other real estate owned (OREO) are evaluated and valued at the time the ownership of the property is transferred from the member to the credit union.

Market value is determined by using the value of the collateral securing the loans and is therefore classified as a level 3 hierarchy. The value of the real estate is determined by qualified independent licensed appraisers contracted by UNFCU to perform the assessment. The appraised value is then discounted based upon management’s experience, which includes estimated disposal costs, understanding of the customer and the customer’s business as well as economic conditions. Impaired loans and OREO are reviewed and evaluated on a quarterly basis for additional impairment and adjusted accordingly, based upon the pertinent conditions.

Assets measured at fair value on a non-recurring basis at 31 December 2011 are summarized below:

 Fair Value Measurement Using
Quoted prices in Active markets for identical assets/liabilities
(Level 1)
Significant others observable inputs
(Level 2)
Significant unobservable inputs (Level 3)31 December 2011
Impaired Loans$-$-$25,439,750$25,439,750

Assets measured at fair value on a non-recurring basis at 31 December 2010 are summarized below:

 Fair Value Measurement Using
Quoted prices in Active markets for identical assets/liabilities
(Level 1)
Significant others observable inputs
(Level 2)
Significant unobservable inputs (Level 3)31 December 2010
Impaired Loans$-$-$18,635,000$18,635,000

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for UNFCU’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. The aggregate fair value amounts presented may not necessarily represent the underlying fair value of UNFCU.

The following methods and assumptions were used by UNFCU in estimating fair values of financial instruments as disclosed herein:

Cash and Cash Equivalents:

For these short-term instruments, the carrying amounts is a reasonable estimate of market value.

Available-for-Sale and Held-to-Maturity Investments:

For investments, fair values are based on quoted market prices, quoted market prices for similar assets or brokered market quotes.

Other Investments:

The carrying value of the FLHBNY stock is deemed to approximate the fair value. The carrying value of remaining other investments approximates fair value based on the redemption provisions of the underlying investments.

Loans to Members:

Fair values for performing loans are based on discounted future cash flows based on estimates incorporating information relating to weighted-average term to maturity, weighted-average coupon, the weighted-average balance, the value of servicing rights, rate-resetting characteristics, maturity and amortization attributes. For nonperforming loans, the carrying value, which is net of the appraised value of the underlying collateral and the applicable portion of the allowance for loan losses, is considered a reasonable estimate of fair value.

Members’ Shares:

The fair value of deposits with no stated maturity, such as regular shares, share drafts, money market accounts and individual retirement accounts, is considered to be the amount payable on demand as of 31 December 2011 and 2010. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is equivalent to the rate currently offered by UNFCU for deposits of similar size, type and maturity.

Borrowed Funds:

The carrying value of borrowed funds with a maturity date within one year is a reasonable estimate of fair value.

The estimated fair value of UNFCU’s financial instruments is summarized as follows:

 31 December 201131 December 2010
Carrying amountFair valueCarrying amountFair value
Financial assets
Cash and cash equivalents$95,849,358$95,849,358$117,454,488$117,454,488
Investments available-for-sale769,419,438769,419,438736,539,030736,539,030
Investments held-to-maturity1,029,585,6841,054,303,968850,371,887868,979,881
Other investments3,705,0003,705,0004,603,0004,603,000
Loans to members, net1,439,270,8881,463,068,3201,373,855,5041,387,253,825
Financial Liabilities:
Members’ shares3,171,137,9333,175,876,8052,955,788,7402,961,295,619

Note 15

Subsequent Events

UNFCU evaluated subsequent events through 30 April 2012, the date the financial statements were available to be issued. UNFCU is not aware of any subsequent events which require recognition or disclosure in the audited consolidated financial statements.



Minutes of the Annual Meeting of the United Nations Federal Credit Union held on 16 June 2011

Alan M. Potter, Chairman of the Board of Directors, called the meeting to order at 13:15. He announced the passing of former Director and respected colleague, Mr. Michael Chan, who had died on 30 December 2010. Mr. Chan became a Director of the Board in 1993 and was a strong advocate for the membership until his retirement in 2005.

Mr. Potter then opened his remarks by reminding the audience that once again the Annual General Meeting was being broadcast live, via video streaming from our world headquarters in Long Island City, Queens, New York. He then formally introduced his fellow Board Members, the Supervisory, Loan Review and Nominating Committees and the senior management team.

Following the introductions, Mr. Potter praised the individuals who had assisted with the Annual Election process on behalf of the Board, and expressed his gratitude to the 349 UNFCU staff members. He then sought the approval of the agenda and the 2010 Annual General Meeting (AGM) minutes. Mr. Potter announced that UNFCU had enjoyed another successful year, culminating in a Board approved 1% rebate of interest and a 1% bonus on dividends, with total dividends paid to members for the year of USD 25.9 million.

Mr. Potter informed the AGM that UNFCU had ended the year with USD 3.3 billion in total assets, up 6.2% over 2009. More than 4,500 new members had joined UNFCU, bringing the total membership to more than 91,000 by year-end 2010. UNFCU’s net income had increased to USD 29.1 million, up from USD 16.8 million in 2009. According to the NCUA, and as disclosed in the audited financial statements, UNFCU was a well-capitalized financial institution. While US banks had not expanded their loans to consumers until the fourth quarter of 2010, and credit union industry lending had declined by 1.4% for the first time since the US recession of 1980, UNFCU continued to lend to its members, as reflected in our loan growth of 3.6%.

Mr. Potter shared information about his visits to the representative offices in Geneva, Vienna, Rome and Nairobi, and about feedback he had received from members. He noted the work of the non governmental organization Kilimanjaro Initiative, which was positively impacting the lives of young people. Mr. Potter concluded his remarks by recognizing Michael Connery Jr., President and Chief Executive Officer of UNFCU, who had received the 2010 Credit Union Executive Society’s Lifetime Achievement Award for his 20 years of service and numerous contributions to the financial cooperative movement. He then gave the floor to Mr. Connery.

Mr. Connery provided information on the 2010 financial and operational results. He stated that, despite the economic challenges and sweeping regulatory reforms, UNFCU had maintained highly competitive rates in comparison with other financial institutions. The investment portfolio had returned 2.65% and, at the end of 2010, UNFCU had had a net capital position (i.e. total members’ equity) in the amount of USD 301 million, versus USD 277 million in 2009.

Mr. Connery then referred to the numerous accomplishments achieved during 2010, highlighting key areas such as improvements in member service, in technology and in business development outreach efforts. He also referred to UNFCU’s corporate social responsibility program, which was aligned with the UN Millennium Development Goals.

Mr. Connery concluded by recognizing the commitment of the Board of Directors, the liaison volunteers, committees, regional advisors and staff members.

Mr. Potter followed by thanking the current regional advisors: Mr. Nabil Michel Sahab and Ms. Martha Scherer in Vienna, Austria; Mr. Nabil Gangi and Ms Carla Esposito in Rome, Italy; Ms Vibeke Glavind in Nairobi, Kenya; Mr. Alexandre Petrachkov and Mr. Istvan Bozsoki in Geneva, Switzerland; and Mr. Constant-Serge Bounda in Addis Ababa, Ethiopia. He also announced that all regional advisors had been re-appointed for a one-year term.

Ms. A. Julie Griffith, Secretary of the Board of Directors, read the questions that had been submitted in advance of the AGM via email by members from around the globe. Mr. Potter and Mr. Connery answered the questions. Mr. Connery concluded with the announcement of the results of the Annual Election to the Board of Directors. The three candidates elected to the Board of Directors were: Joyce A. Barbarich, A. Julie Griffith and Michael Zilberg. He then congratulated the winners of the sweepstake prizes. The meeting was adjourned at 14:30.

Laura's signature

Laura Rockwood


Report of the Nominating Committee

Report of the Nominating Committee

In compliance with Article V, Section 1 of the Bylaws, the Chairman of the Board of Directors called for the appointment of a Nominating Committee. In December of 2011, Deborah Landey, Marc Harris, Wai-Sing (Eddie) Lee, and Joseph Toochin were accordingly appointed by the Chairman of the Board of Directors, and instructed as to the necessary qualifications for nomination.

The purpose of the Nominating Committee is to nominate at least one candidate for each vacancy on the Board, and file its nomination with the Secretary of the Board of Directors at least 90 days prior to the Annual Meeting.

In accordance with the Bylaws, a notification of nomination by petition was mailed to the entire membership, posted in the branches/representative offices, and on the UNFCU website. The notification communicated that nominations made by petition must be signed by a minimum of 500 members, and must be filed with the Secretary no later than 2 April 2012.

Deborah's signature

Deborah Landey


Report of the Supervisory Committee

Report of the Supervisory Committee

The Supervisory Committee (the “Committee”) is primarily responsible for assisting the UNFCU Board of Directors in fulfilling its oversight responsibility of providing an independent appraisal of the safety and soundness of the operations and activities of the Credit Union.

In carrying out this responsibility, the Committee: i) oversees the Internal Audit Department, which reports functionally to the Committee and administratively to the President/CEO of UNFCU, ii) monitors the policies established by the Board of Directors and ensures compliance with them, iii) evaluates the adequacy and effectiveness of the system of internal controls established by UNFCU management and iv) investigates and responds to written member inquiries referred to the Committee.

The Committee also has the responsibility for appointing the independent certified public accounting firm and reviewing the services performed by this firm. The Committee does not itself prepare financial statements or perform audits, and its members are not the certifiers or auditors of UNFCU financial statements.

The Committee engaged the independent certified public accounting firm of Grant Thornton LLP to render an opinion as to whether the UNFCU financial statements are fairly presented in all material aspects. The Committee reviews the policies and procedures for the audit engagement, including its scope, fees, auditor independence matters and non-audit-related services.

As noted in this annual report, Grant Thornton LLP issued an unqualified opinion on the UNFCU financial statements for the year ended 31 December 2011.

Darcy's signature

Darcy Mitchell, CGA


Report of the Loan Review Committee

Report of the Loan Review Committee

The members of the Loan Review Committee are volunteers dedicated to the goals and objectives of UNFCU. Our responsibility is to review a sample of the declined loan applications presented to us in order to ensure a final due diligence on behalf of the UNFCU members, while assuring that our lending standards are not compromised.

During 2011, there were 14,977 loans approved with a total value of 482,925,598 USD bringing the total amount of loans outstanding to 1,449,884,538 USD. The Committee reviewed a random sample of the 3,316 loans, which had been declined, with an approximate value of 153,949,379 USD.

Despite challenging economic times, UNFCU loans have grown at a rate of 4.8% compared to 1.1% for the Credit Union Industry. This is a significant accomplishment that is consistent with the overall growth and strength of UNFCU.

The Loan Review Committee supports the work of the UNFCU Lending Department, and the common goal of the Board of Directors, other volunteers, management and staff, of providing members with access to a wide variety of borrowing solutions.

Theresa's signature

Theresa Panuccio


Names and Titles

Names and Titles of Volunteers

Board of Directors

  • Alan Potter

    Alan M. Potter


  • A. Julie Griffith

    A. Julie Griffith

    Vice Chairman

  • Joyce A. Barbarich

    Joyce A. Barbarich


  • Michael Zilberg

    Michael Zilberg

    Assistant Treasurer

  • Laura Rockwood

    Laura Rockwood


  • Thomas A. Bieler

    Thomas A. Bieler


  • Michael N. Clark

    Michael N. Clark


  • Michael Helke

    Michael Helke


  • Kumiko Matsuura-Mueller

    Kumiko Matsuura-Mueller


CUSO Board

  • Leon Hosang


  • Thomas A. Bieler

    Vice Chairman

  • Michael J. Connery, Jr.


Loan Review Committee

  • Theresa Panuccio


  • Dominik Jaksekovic


  • Ajay Lakhanpal


  • Ahsan Nabi


  • Gabriel Wanga


Nominating Committee

  • Deborah Landey


  • Marc Harris


  • Joseph Toochin


  • Wai-Sing (Eddie) Lee


Regional Advisors

  • Constant-Serge Bounda

    Addis Ababa

  • Carla Esposito


  • Nabil Gangi


  • Vibeke Glavind


  • Alexandre Petrachkov


  • Nabil Michel Sahab


  • Martha Scherer


Supervisory Committee

  • Darcy Mitchell


  • Advit Nath


  • Dino Cataldo Dell’Accio


  • Hazelien Featherstone


  • Helen Hall


Names and Titles of UNFCU Senior Management

  • Michael J. Connery, Jr.


  • William Predmore

    Executive Vice President

  • Pamela K. Agnone

    Senior Vice President

    Retail Services
  • James W. Fenimore

    Senior Vice President

  • John Lewis, Esq.

    Senior Vice President

    Corporate Affairs & General Counsel
  • Christopher J. Sullivan, CFA

    Chief Investment Officer

    Corporate Investments
  • Richard Colavecchio, CFA

    Vice President

    Investments Management
  • Debra I. Da Costa

    Vice President

  • Anita Donnelly

    Vice President

    Human Resources
  • Daniel Ptacek

    Vice President

    International Branch
  • Donald Roe

    Vice President

  • Stephen Ryerson

    Vice President

    Financial Services
  • Prasad Surapaneni

    Chief Information Officer

    Information Technology
  • William Thomas

    Vice President

    Program Management
  • Theresa Williams-Barrett

    Vice President

  • Charles Bellotti

    Assistant Vice President

    Facilities and Real Estate Management
  • Lorna Colgan

    Assistant Vice President

    CUSO Operations
  • Tatyana Costa

    Assistant Vice President

    Branch Administration
  • Geraldine Coyle

    Assistant Vice President

    Loss Prevention
  • Juan Ducali

    Assistant Vice President

  • Srinivasa Govindan

    Assistant Vice President

    IT Application Management
  • Jose Guzman

    Assistant Vice President

  • Merrill Halpern

    Assistant Vice President

    Card Services
  • Lynne Healey

    Assistant Vice President

    Human Resources Operations
  • David Kay

    Assistant Vice President

    Internal Audit Operations
  • Sarah Klinger

    Assistant Vice President

    Lending Operations
  • Yee Lew

    Assistant Vice President

    Member Directed Services
  • Jules Mbogi

    Assistant Vice President

    Investment Centre
  • Kara Mertzel

    Assistant Vice President

    Learning & Development
  • Jamie O'Donnell

    Assistant Vice President

    Member Communication & Research
  • Patrick J. Raziano

    CPA Assistant Vice President

    Risk Management
  • Christopher Salata

    Assistant Vice President

    Mortgage Centre
  • Aaron Sears, CPA, CISA

    Assistant Vice President

    Internal Audit
  • Manisha Shah

    Deputy General Counsel

    General Counsel
  • Bobi Shields-Farrelly

    Assistant Vice President

    Payment Systems
  • Brian Toia

    Assistant Vice President

    Program Management
  • Philip Vetrano

    Assistant Vice President

    Business Intelligence