Purdue Employees Federal Credit Union. 2009 Annual Report

Purdue Employees Federal Credit Union 2009 Annual Report Together, We Weathered the Storm. Our 40th year was our most challenging one ever. Those challenges came from places we never expected; however, together PEFCU and its members survived, even thrived in a few areas in 2009. Early in the year we learned that our corporate credit union system was facing financial difficulties related to investments in mortgagebacked securities. These were the same investment types that crippled big Wall Street banks and financial investment firms during 2008. PEFCU was required to maintain capital deposits in corporate credit unions in exchange for using them to manage our liquidity when we needed to borrow or invest excess funds. Unfortunately, the investments in corporate credit unions performed so poorly they were valued significantly lower. This negative equity ultimately affected our capital deposits in the two corporate credit unions in which we were involved. The financial impact to PEFCU was a loss of $2,129,000 with $723,000 in additional expenses to fund the National Credit Union Share Insurance Fund (NSUSIF). While PEFCU faced its largest unplanned expense in its 40 years of existence, we quickly developed tactics to lessen this financial impact and we maintained our transparency by continuing to post monthly financials on our Web site. Through our efforts to reassign staff, reduce unnecessary expenses, and spread the NCUSIF expense over seven years, thanks to federal legislation, we managed a very respectable positive bottom line with minimal member and staff impact. Despite the financial stress on PEFCU, we emerged from 2009 with great success. First we met the home mortgage needs of a record number of members and grew several balance sheet categories without experiencing significant loan losses. Second we were extremely honored to be voted by Journal & Courier readers as best credit union, best consumer bank, best commercial bank, best checking account and best mortgage lender in the Journal & Courier s Readers Choice Awards. Bob Falk President & CEO John Trott Board Chair Our mission is to be our members trusted financial partner for life. Our staff and volunteer board of directors work hard every day to fulfill this mission and through these distinguished awards you are telling us that we re succeeding. We thank everyone who nominated and voted for PEFCU. We will continue striving to maintain this high level of member satisfaction. As the dust settles on 2009 and we look forward to 2010, we want to personally thank you for your membership. PEFCU would not be the strong financial institution it is today without members who care about and use the credit union for their financial needs. As your financial cooperative, our success lies in building financial products you need and delivering them with fair prices and excellent service. 2009 Highlights > > > > > > Readers Choice Awards 40th Anniversary Celebration Member Satisfaction Remains High New Debit Card Design Educating Our Youth Most Indiana Branches

PEFCU Voted Best Bank. PEFCU was voted best bank! Yes, you read that right. On Tuesday, November 10, 2009, PEFCU was honored as best consumer and commercial bank at the Journal & Courier s Readers Choice Awards. Nearly 10,000 Journal & Courier readers chose a credit union as the best bank in town. And that s not all PEFCU earned the most votes in nearly all financial services categories, being voted best credit union, best consumer bank, best commercial bank, best checking account and best mortgage lender. They re Playing Our Song. 1969 was a magical year. Woodstock was all the talk. Aquarius was playing on the jukebox. And PEFCU was born. As part of our 40th Anniversary celebration, we asked members to tell us what they like most about their credit union. We could just feel the love, so we thought we d share with you the Top 40 reasons why people prefer PEFCU. Check out all 40 at www.tinyurl.com/40reasons. "Treated me better than any bank." Mike Norris, Lafayette, IN, Member since 1987 "Low loan rates enough said!" Amy Cade, West Lafayette, IN, Member since 1988 "Fraud protection." Darrin Madis, Lafayette, IN, Member since 1998 "Helps students build credit." Aixin Zhang, West Lafayette, IN, Member since 2007 "Employees are always friendly." Pamela Hruska, Lafayette, IN, Member since 1983 "Honesty. No fee deception." Erdmute White, Lafayette, IN, Member since 1973 Membership Satisfaction Level Remains High in 2009. Credit unions have topped the consumer satisfaction ratings in American Banker s annual survey for 12 years in a row. Bankrate.com In our 2009 membership survey, 96.77% of members said they are either satisfied or very satisfied with PEFCU. Banks report their financials quarterly to their owners, the shareholders. Accordingly, it is important for us to share this measurement with you, the owner and member. Your satisfaction is an essential part of our continued success. Member Education Stats. > 96 educational sessions with nearly 3,000 attendees that s double the participation from 2008 > 720 one-on-one credit counseling sessions that s a 9% increase over 2008 Now Serving Boiler Spirit with Every Purchase. We think the all-new Purdue debit card is a pretty cool way to show your Boiler Spirit. What makes it even better are the rewards you ll earn every time you make a purchase. Just sign and score valuable rewards points you can use for brand-name merchandise, travel or even cash. Combine your debit card points with your PEFCU VISA credit card points before redemption and earn even more!

Planning Educating Our Youth. We believe the best way to tackle the recent economic crisis and to defend against future challenges is by arming our youth with knowledge and skills to successfully manage their finances. We are committed to helping them reach their potential through our many financial literacy programs held throughout the year. In 2009, our staff facilitated 39 educational sessions in four high schools. Additional highlights follow. 201 Hoosier Credit Union Branches; 4,000 Nationwide. Over 4,000 locations and 30,000 ATMs nationwide. It s free wherever you go! Indiana s credit unions know that it s nice to share many of them have been sharing branch locations with each other for years. Now that collaborative spirit has grown into something big. Financial Football with Drew Brees. On the morning of June 24, summer school was about more than reading, writing and arithmetic for Lafayette Jefferson, William Henry Harrison and McCutcheon High School students. PEFCU President and CEO Bob Falk, and New Orleans Saints Quarterback and PEFCU Spokesperson Drew Brees, presented VISA s Financial Football program an interactive money-management game designed to teach students important moneymanagement skills. Through Financial Football students learn about assets and liabilities, savings and interest, advantages and disadvantages of credit and debit cards, and how to create a budget or spending plan. Purdue Athletes Life Success Program. In partnership with the Brees Dream Foundation, we donated $50,000 to the Purdue Athletes Life Success (PALS) program at Purdue University. PALS is a five-week camp that provides sports, fitness, health instruction and financial literacy (provided by PEFCU staff) to local, underprivileged youth aged 10-16. Prior to beginning the 2009 program, PEFCU staff worked for weeks developing curriculum for specific age groups. During the program, 11 PEFCU staff members taught 450 PALS participants how to manage money through a variety of age-appropriate, fun exercises and games. Through the credit union shared branch network, PEFCU members can access their accounts at 201 shared Indiana locations and thousands of locations nationwide. That is more branches than any other financial institution that does business in the state, including large regional institutions JP Morgan Chase, PNC/National City and Fifth Third! The shared branch network allows us to expand the physical locations available to our members without incurring the costs associated with building our own brick-and-mortar branches, said Bob Falk, PEFCU president and chief executive officer. It really creates an on-demand network for our members; when they need a branch in a town where we re not located, the shared branch network steps in to provide a convenient alternative. We find shared branching is terrific for our business travelers, college students and vacationers. What is shared branching? Let s look at a real example. PEFCU members can access their accounts at any shared branch location, such as a Forum Credit Union branch in Indianapolis, a Teachers Credit Union branch in South Bend, or even thousands of locations throughout the nation. The member simply brings his or her credit union account number and a photo ID, and he or she is able to make deposits, withdraw cash, and make some loan payments just as if he or she was at a PEFCU branch. Access 4,000 shared branch locations nationwide: Online: www.purdueefcu.com Mobile: www.pefcu2go.com Phone: 800.919.2872 Access CO-OP ATMs nationwide: Text your address with city, state and zip code, or intersection (with city and state) to MYCOOP (692667).* *This service is free; however, standard text-messaging rates apply.

2009 PEFCU Volunteer Committees Board of Directors Asset and Liability Committee Robert W. Bain, Chair Thomas E. Moore P. Greggory Williams James Schackmuth John A. Schneider A. Charlene Sullivan John O. Trott Chair Stephen E. Brewer Vice Chair Robert W. Bain Treasurer Susan M. Smith Secretary Susan K. Aufderheide Director Jayne L. Feathers Director Mark M. Moriarty Director Thomas E. Moore Director P. Greggory Williams Director Supervisory Committee Christiane Keck, Chair Stephen E. Brewer Lucia Anderson Rick Davis Marcus Rogers Membership Services Committee Susan M. Smith, Chair Susan K. Aufderheide Jayne L. Feathers Mark M. Moriarty Judith Austin Rick Bradley Bharat Binani Darren Cooper Dan Heman Ted Hingst Sean Jeffries Sharon Kraebber Carrie Lanoue Jesse Moore Executive Leadership Bob Falk President/CEO Gail Koehler Executive Vice President Brian Musser Vice President Finance/CFO Evelyn Royer Vice President Risk Management & Support Services Jackie Hofman Vice President Human Resources & Marketing Nikki Gaylord Vice President Lending 2010 Purdue Employees Federal Credit Union PO Box 1950 West Lafayette, IN 47996 765.497.3328 / 800.627.3328 www.purdueefcu.com

Purdue Employees Federal Credit Union TREASURER S REPORT SUPERVISORY COMMITTEE S REPORT ACCOUNTANTS REPORT and CONSOLIDATED FINANCIAL STATEMENTS

2009 Treasurer s Report On behalf of your volunteer Board of Directors I am pleased to report that while 2009 was another challenging year for the financial services industry, Purdue Employees Federal Credit Union (PEFCU) rose to the economic challenges and continued to provide the exceptional service that our members deserve and expect from their trusted financial partner for life. Your cooperative organization continues to be financially strong and is prepared to remain a pillar of strength on the economic road to recovery. 2009 continued the worst economic decline since the Great Depression of the 1930s. The repercussion of the housing valuation bubble, the devaluation of the stock market, high unemployment, and the resulting liquidity crunch and credit crisis for the financial system and many businesses has negatively impacted every community in varying degrees. The year did show some mending as housing valuation declines slowed, liquidity in the financial system stabilized, and the stock market partially rebounded. In contrast to many financial institutions, your credit union remains financially stable and had another strong year of responsible lending to members. No credit crunch exists at PEFCU as the membership s demand for loans, including a record year for home loans, was met. The board, management and staff take pride in helping members with prudent lending decisions. This provides a strong foundation for financial success for both the membership and PEFCU. The board and management stand ready to serve members financial needs into 2010 and beyond. A secure foundation of capital remains to navigate through any additional uncertainties that may exist from this down economic cycle. Net loans outstanding grew by 7.0% or $30.7 million (M) in 2009. Growth came from three loan categories with first mortgage loans experiencing a record year of demand at $217.3M of mortgage originations. This represents a total of 1,379 members (2.4% of the membership) completing a first mortgage loan in 2009, and a 93% increase from the 712 completed in 2008. Mortgage loans outstanding increased $22.1M (9.3%), 3,604 members (6.3% of membership) now have a mortgage loan serviced by PEFCU. The credit card program had another year of successful growth as PEFCU completed a third calendar year offering the Purdue Alumni Association Visa affinity credit card program. The popularity of the program continues as credit card balances grew another $5.8M (15.1%) in 2009. Commercial loan relationships also grew this past year with loans outstanding increasing $4.2M (7.3%). Balance sheet strength is grounded in a well diversified loan portfolio with strong credit quality. Many institutions within the financial industry were negatively impacted by poor lending practices. PEFCU s credit granting policies and practices remain strong with loan delinquency (0.57%) holding well below industry average of 1.71%. Lower loan losses contributed to the bottom line and benefited your credit union. Charge offs of 0.36% of average loans compared favorably to the 2009 industry average of 1.17%. Loan funding is primarily drawn from member deposits and can be supplemented by institutional borrowings if needed. Member deposit growth was very robust at $55.3M (11.5%) in 2009. Insured credit union deposits are a safe place for member assets during tough economic times. Your credit union stands ready with $500,000 of insurance per each account relationship, sufficient capital, and

competitive returns for deposited funds. Overall member product usage showed continued strength. Money market accounts provided the strongest growth at $39M (35.6%). Even with all the economic and banking industry turmoil extending into 2009, earnings held up reasonably well. Return on average assets (ROA) was similar to 2008 at 0.41%. Net income of $2.3M demonstrated strong core earnings, especially when factoring in the unplanned corporate credit union system loss of $2.1M and the National Credit Union Share Insurance Fund Premium of $0.7M that was explained in the President/Board Chair s report. Strong revenue was generated from growth in interest margin and mortgage origination production. As mentioned above, credit card program expansion continues with loan balance and transaction growth increasing revenue. The board and management believe PEFCU s core business model remains strong and is counteracting the negative impacts of this economy. Capital, or PEFCU s regulatory net worth, ended the year at $46.6M or 8.2% of average assets. Stable earnings and capital enable PEFCU to make enhancements to products and services while also providing a cushion for future economic and marketplace uncertainties. The Board of Directors and management appreciate the opportunity to build a strong credit union with the goal of exceeding your service expectations for years to come. Your member owned credit union is ready to serve your family with a collective financial service value beyond that of any other local financial service provider. We look forward to being your trusted financial partner for life! Robert W. Bain Treasurer

Supervisory Committee Report The Supervisory Committee is a volunteer group of PEFCU members, which is appointed by the Board of Directors to ensure the financial condition of the credit union is accurately and fairly presented in the organization s financial statements, and that the credit union s management practices and procedures are in accordance with federal regulation and are sufficient to safeguard member assets and sensitive member information. Under the direction of the Supervisory Committee, an annual audit is performed by an independent, outside accounting firm with proven knowledge of credit union regulations and operations. This year that firm is BKD. The committee then works with the board and the credit union s management team to address any areas of concern raised in the audit. After completion of this year s external audit, BKD met with the Supervisory Committee on March 11, 2010. The discussion items included a complete review of the financial statement and audit reports. BKD has issued an unqualified opinion on PEFCU s financial statements and did not note any material weaknesses or significant deficiencies relating to internal controls at PEFCU. All financials and required letters were reviewed with no major exceptions found. So once again this year the result of the audit is very positive news. The Internal Audit staff also reports to the Supervisory Committee. They carefully examine and monitor all procedures and financial statements. The internal audit and information technology security audit programs assure the protection of your information and your assets that you have entrusted to the credit union. The Internal Audit staff is also responsible for compliance and meeting the industry s ever greater demands of procedures and exams. Our unqualified audit opinion from BKD reflects the good leadership and careful work of the Internal Audit staff of PEFCU. The Supervisory Committee would like to acknowledge the outstanding support and professionalism exhibited by the credit union staff. We thank the management team for the exceptional care and high ethical standards during these challenging financial times. I would also like to acknowledge and thank all the members of the Supervisory Committee for volunteering their time and expertise. It is a pleasure to serve you, the members. Christiane E. Keck Supervisory Committee Chair April 6, 2010

Accountants Report and Consolidated Financial Statements

Contents Independent Accountants Report... 1 Consolidated Financial Statements Balance Sheets... 2 Statements of Income... 3 Statements of Changes in Members Equity... 4 Statements of Cash Flows... 5 Notes to Financial Statements... 6 Independent Accountants Report on Supplementary Data... 23 Supplementary Data Consolidating Schedule - Balance Sheet Information... 24 Consolidating Schedule - Statement of Income Information... 25

Consolidated Balance Sheets Assets 2009 2008 Cash and due from banks $ 6,009,593 $ 6,197,754 Interest-bearing demand deposits 35,108,218 28,161,688 Cash and cash equivalents 41,117,811 34,359,442 Interest-bearing deposits 10,309,000 4,700,000 Trading securities - 1,891,631 Corporate credit union member shares and paid-in capital - 2,128,678 Available-for-sale securities 36,858,069 12,186,951 Loans held for sale 2,358,402 7,661,969 Loans, net of allowance for loan losses of $2,384,241 and $1,872,549 at 469,942,360 439,223,709 Premises and equipment 12,484,440 13,760,290 National Credit Union Share Insurance Fund (NCUSIF) deposit 4,819,097 3,901,002 Federal Home Loan Bank stock, at cost 2,419,000 2,023,100 Interest receivable 1,603,135 1,563,746 Other 4,444,452 4,395,700 Liabilities Total assets $ 586,355,766 $ 527,796,218 Members' deposits $ 535,314,667 $ 480,033,815 Other liabilities 4,298,223 3,343,557 Total liabilities 539,612,890 483,377,372 Members Equity Regular reserve 7,502,640 7,502,640 Undivided earnings 39,078,586 36,781,609 Accumulated other comprehensive income 161,650 134,597 Total members equity 46,742,876 44,418,846 Total liabilities and members equity $ 586,355,766 $ 527,796,218 See Notes to Consolidated Financial Statements 2

Consolidated Statements of Income Years Ended 2009 2008 Interest income Loans $ 27,311,859 $ 27,066,779 Securities 737,021 663,474 Interest-earning deposits with other financial institutions 232,215 522,556 28,281,095 28,252,809 Interest Expense Members' deposits 8,389,789 10,315,318 Short-term borrowings 1,310 581,679 Total interest expense 8,391,099 10,896,997 Net Interest Income 19,889,996 17,355,812 Provision for Loan Losses 2,150,000 1,779,800 Net Interest Income After Provision for Loan Losses 17,739,996 15,576,012 Other Income Customer service fees 7,251,381 6,623,778 Income (loss) from trading securities 284,754 (407,059) Net gains on loan sales 2,151,727 962,112 Loss on corporate credit union member shares and paid-in capital (2,128,678) - Gain on sales of securities 30,213 17,690 Other 190,379 491,577 7,779,776 7,688,098 Other Expenses Salaries and employee benefits 9,645,088 8,560,621 Net occupancy expense 1,732,268 1,598,827 Office operations and equipment expense 4,355,637 4,427,663 Loan servicing 2,896,303 2,625,323 ATM and debit card expense 1,625,572 1,289,501 NCUSIF premium expense 722,864 - Advertising and marketing expense 1,299,559 1,651,282 Other 945,504 906,603 Total noninterest expense 23,222,795 21,059,820 Net Income $ 2,296,977 $ 2,204,290 See Notes to Consolidated Financial Statements 3

Consolidated Statements of Changes in Members Equity Years Ended Accumulated Other Comprehensive Regular Undivided Income Reserve Earnings (Loss) Total Balance, January 1, 2008 $ 7,502,640 $ 34,577,319 $ (93,611) $ 41,986,348 Net income 2,204,290 2,204,290 Change in unrealized gains on available-for-sale securities, net of reclassification adjustment of $17,690 228,208 228,208 Comprehensive income 2,432,498 Balance, December 31, 2008 7,502,640 36,781,609 134,597 44,418,846 Comprehensive income Net income 2,296,977 2,296,977 Change in unrealized gains on available-for-sale securities, net of reclassification adjustment of $30,213 27,053 27,053 Comprehensive income 2,324,030 Balance, December 31, 2009 $ 7,502,640 $ 39,078,586 $ 161,650 $ 46,742,876 See Notes to Consolidated Financial Statements 4

Consolidated Statements of Cash Flows Years Ended 2009 2008 Operating Activities Net income $ 2,296,977 $ 2,204,290 Items not requiring (providing) cash Depreciation and amortization 1,776,744 1,753,518 Provision for loan losses 2,150,000 1,779,800 Accretion and amortization 268,294 (11,621) Gain on sale of available-for-sale securities (30,213) (17,690) Gain on sale of loans (2,151,727) (962,112) Loss on the sale of fixed assets 3,258 4,680 Proceeds from sales of loans held for sale 159,453,394 154,147,606 Originations of loans held for sale (151,879,678) (66,381,461) Loss on membership shares and paid-in capital 2,128,678 - Changes in Trading securities (284,754) 407,059 Interest receivable (39,389) 1,168,133 Other assets (167,178) (376,810) Interest payable and other liabilities 954,669 (4,075,997) Net cash provided by operating activities 14,479,075 89,639,395 Investing Activities Proceeds from maturities of available-for-sale securities 9,535,779 7,464,716 Proceeds from sales of available-for-sale securities 3,000,000 2,015,079 Net change in interest-bearing time deposits (5,609,000) (3,700,000) Net change in loans (32,868,651) (51,469,321) Purchase of available-for-sale securities (35,241,539) (5,102,861) Purchase of premises and equipment (504,152) (1,708,306) Purchase of FHLB stock (395,900) - Net change in NCUSIF deposit (918,095) (301,303) Net change in corporate credit union paid-in capital - (628,678) Net cash used in investing activities (63,001,558) (53,430,674) Financing Activities Net change in members' deposits 55,280,852 57,964,867 Net decrease in short-term borrowings - (66,430,000) Net cash provided by (used in) financing activities 55,280,852 (8,465,133) Increase in Cash and Cash Equivalents 6,758,369 27,743,588 Cash and Cash Equivalents, Beginning of Year 34,359,442 6,615,854 Cash and Cash Equivalents, End of Year $ 41,117,811 $ 34,359,442 Supplemental Cash Flows Information Interest paid $ 8,391,099 $ 10,976,402 Transfer of securities from trading to available-for-sale 2,176,385 - See Notes to Consolidated Financial Statements 5

Notes to Consolidated Financial Statements Note 1: Nature of Operations and Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Purdue Employees Federal Credit Union (Credit Union), and its wholly owned credit union service organization, CU Channels, LLC (CUSO). All significant intercompany accounts and transactions have been eliminated in consolidation. Nature of Operations Purdue Employees Federal Credit Union (Credit Union) is a federally chartered credit union with locations in Lafayette and West Lafayette, Indiana. The Credit Union offers a broad range of financial services to its members. The Credit Union s primary services include accepting members deposits and making loans. The Credit Union grants loans to members who are primarily individuals (including family members) employed at or attending Purdue University campuses. The majority of its loans are collateralized by specific items, including consumer assets, residential real estate and member share balances. Additional services include financial planning, investment, trust and insurance services to Credit Union members through PEFCU Trust and Financial Services, a third-party provider. The CUSO provides services to nonmember Credit Unions, primarily first mortgage loan origination and servicing for other credit unions. The CUSO is a 14% owner of Passageways LLC, a software development company providing portal solutions to credit unions. Use of Estimates To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported and disclosed in the financial statements, and future results could differ from those estimates. The collectibility of loans, valuation and amortization of loan-servicing rights and fair values of financial instruments are particularly subject to change. Cash Equivalents The Credit Union considers all liquid investments with original maturities of three months or less to be cash equivalents. The credit unions holding the Credit Union s cash accounts are participating in the NCUA s Temporary Corporate Credit Union Share Guarantee Program (TCCUSGP). Under this program, through December 31, 2011, all accounts are fully guaranteed for the entire amount in the account. The Credit Union s cash accounts exceeded the insured limits by approximately $15,695,000. This entire amount of uninsured funds is held with the Federal Reserve Bank and Federal Home Loan Bank, which is not federally insured. 6

Notes to Consolidated Financial Statements Trading Activities The Credit Union has transferred trading securities to available-for-sale as of November 30, 2009. The investments were recorded at fair value with changes in fair value included in earnings up until the transfer at November 30, 2009. Total security gains (losses) recognized in the income statement before the transfer were approximately $285,000 and $(407,000) for 2009 and 2008, respectively. Securities Available-for-sale securities, which include any federal agencies, mortgage-backed, mutual funds and an annuity contract for which the Credit Union has no immediate plan to sell but which may be sold in the future, are carried at fair value. Unrealized gains and losses are recorded in other comprehensive income. Amortization of premiums and accretion of discounts are recorded as interest income from securities. Realized gains and losses are recorded as net security gains (losses). Gains and losses on sales of securities are determined on the specific-identification method. Corporate Credit Union Member Shares and Paid-in Capital Corporate credit union member shares and paid-in capital consists of the following at : 2009 2008 Members United paid-in capital $ - $ 1,500,000 WesCorp member shares - 628,678 $ - $ 2,128,678 The Corporate Credit Union shares and paid-in capital were impaired during 2009 due to losses incurred by Members United and WesCorp and the subsequent actions taken by the NCUA. The Credit Union recorded a loss of $2,128,678 related to the write down of the shares and paid-in capital. Federal Home Loan Bank (FHLB) Stock FHLB stock is a required investment based upon predetermined formulas and is carried at cost. The FHLB stock may only be sold to the FHLB at par value. Loans Held for Sale Mortgage and student loans originated and intended for sale in the secondary market are carried at the lower of cost or fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income. Loans sold in the secondary market are primarily sold with the servicing of the loans being retained. 7

Notes to Consolidated Financial Statements Loans Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at the unpaid principal balances, plus net deferred loan origination costs, less an allowance for loan losses. Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan term. Interest income on loans is discontinued if management believes collection of interest is doubtful. All interest accrued but not received for loans placed on nonaccrual are reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, and future payments are reasonably assured. Allowance for Loan Losses The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required based on past loan loss experience, known and inherent risks in the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and other factors. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management s judgment, should be charged-off. Loans are considered impaired if full principal or interest payments are not anticipated. Loans considered impaired are reduced to the present value of expected future cash flows or to the fair value of the collateral, by allocating a portion of the allowance for loan losses to such loans. If these allocations cause the allowance for loan losses to require an increase, such increase is reported as a provision for loan losses. Larger-balance mortgage loans are evaluated individually for impairment. All other loans are considered smaller-balance homogeneous loans and are evaluated for impairment in total. Loans are individually evaluated for impairment when payments are delayed, typically for 90 days or more. Premises and Equipment Premises and equipment are recorded at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the related assets. These assets are reviewed for impairment when events indicate the carrying amount may not be recoverable. Leasehold improvements are amortized over the shorter of the estimated useful lives of the related assets or the lease term. 8

Notes to Consolidated Financial Statements NCUSIF Deposit The deposit in the National Credit Union Share Insurance Fund (NCUSIF) is required by NCUA regulations in an amount equal to 1 percent of the Credit Union s insured shares. The deposit would be refunded to the Credit Union if its insurance coverage is terminated, it converts to insurance coverage from another source, or the operations of the fund are transferred from the NCUA Board. NCUSIF Insurance Premiums A credit union is required to pay an annual insurance premium equal to one-twelfth of one percent of its total insured shares, unless the payment is waived or reduced by the NCUA Board. The Credit Union paid $723,000 in share insurance premiums in 2009. The NCUA Board waived the 2008 insurance premium. Foreclosed Assets Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net income or expense from foreclosed assets. Loan-Servicing Rights Loan-servicing rights represent the fair value of retained servicing rights on loans sold. The capitalized value of loan-servicing rights is included in other assets on the consolidated balance sheets and is amortized in proportion to, and over the period of, estimated net servicing revenues. Fair value is based on market prices for comparable mortgage-servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. The Credit Union compares the valuation model inputs and results to published industry data in order to validate the model results and assumptions. All classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans. Impairment of mortgage-servicing rights is assessed based on the fair value of those rights as compared to the carrying amount. For purposes of measuring impairment, servicing rights are stratified based on predominant risk characteristics, including loan type, term, age and note rate. Impairment represents the amount by which the amortized cost of an individual stratum exceeds its fair value, and is recognized through a valuation allowance. Amortization and impairment adjustments are recorded with net loan servicing fee income. 9

Notes to Consolidated Financial Statements Members' Deposits Members' deposits are subordinated to all other liabilities of the Credit Union upon liquidation. Interest on members' deposits is based on available earnings and is not guaranteed by the Credit Union. Interest rates on members' deposits are set by the board of directors, based on an evaluation of a number of factors, including market conditions. Members' Equity The Credit Union is required by regulation to maintain a statutory reserve. This reserve, which represents a regulatory restriction of retained earnings, is not available for the payment of interest to members. Comprehensive Income Comprehensive income consists of net income and other comprehensive income or loss. Other comprehensive income or loss includes unrealized gains and losses on securities available for sale, which is recognized as a separate component of members equity. Income Taxes The Credit Union is exempt by statute from federal and state income taxes. Current Economic Conditions The current protracted economic decline continues to present financial institutions with difficult circumstances and challenges, which in some cases have resulted in large and unanticipated declines in the fair values of investments and other assets, constraints on liquidity and capital and significant credit quality problems, including severe volatility in the valuation of real estate and other collateral supporting loans. At December 31, 2009, the Credit Union held $57,786,000 in commercial real estate and related loans. Due to national, state and local economic conditions, values for commercial and development real estate may have declined significantly, and the market for these properties is depressed. The accompanying consolidated financial statements have been prepared using values and information currently available to the Credit Union. Given the volatility of current economic conditions, the values of assets and liabilities recorded in the consolidated financial statements could change rapidly, resulting in material future adjustments in asset values, the allowance for loan losses and capital that could negatively impact the Credit Union s ability to meet regulatory capital requirements and maintain sufficient liquidity. 10

Notes to Consolidated Financial Statements Reclassifications Certain reclassifications have been made to the 2008 financial statements to conform to the 2009 financial statement presentation. These reclassifications had no effect on net income. Note 2: Securities The amortized cost and approximate fair values of securities are as follows: 2009 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Federal agencies $ 19,756,061 $ 45,260 $ (29,861) $ 19,771,460 Mortgage-backed securities 14,763,973 189,897 (52,952) 14,900,918 Mutual funds 1,194,277 4,782 (269) 1,198,790 Annuity contract 982,108 4,793-986,901 Total investment securities $ 36,696,419 $ 244,732 $ (83,082) $ 36,858,069 2008 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Mortgage-backed securities $ 12,052,354 $ 140,410 $ (5,813) $ 12,186,951 11

Notes to Consolidated Financial Statements The amortized cost and fair value of available-for-sale securities at December 31, 2009, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Available-for-Sale Amortized Fair Cost Value Within one year $ 1,033,421 $ 1,040,554 One to five years 18,722,640 18,730,906 19,756,061 19,771,460 Mortgage-backed securities 14,763,973 14,900,918 Mutual funds 1,194,277 1,198,790 Annuity contract 982,108 986,901 Totals $ 36,696,419 $ 36,858,069 Gross gains of $30,213 resulting from sales of available-for-sale securities were realized for 2009. There were no gains or losses realized from maturities or calls of available-for-sale securities in 2009 and 2008. Securities in the amount of $3,000,000 were sold in 2009. No securities were sold during 2008. The mutual fund and annuity contract were transferred from trading securities on November 30, 2009. A gain of $285,000 was recognized on the income statement before the securities were transferred. A total net unrealized gain of $9,000 was recognized through other comprehensive income subsequent to the transfer. Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at was $13,518,000 and $2,846,000, which is approximately 55% and 23%, respectively, of the Credit Union s available-for-sale investment portfolio. These declines primarily resulted from changes in market interest rates. Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these securities are temporary. Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the otherthan-temporary impairment is identified. 12

Notes to Consolidated Financial Statements The following tables show the Credit Union s investments gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at : Description of Fair Unrealized Fair Unrealized Fair Unrealized Securities Value Losses Value Losses Value Losses 2009 Less Than 12 Months 12 Months or More Total Federal agencies $ 6,974,465 $ (29,861) $ - $ - $ 6,974,465 $ (29,861) Mortgage-backed securities 6,004,812 (52,946) 74,874 (6) 6,079,686 (52,952) Mutual funds 464,348 (269) - - 464,348 (269) Total investment securities $ 13,443,625 $ (83,076) $ 74,874 $ (6) $ 13,518,499 $ (83,082) 2008 Less Than 12 Months 12 Months or More Total Description of Fair Unrealized Fair Unrealized Fair Unrealized Securities Value Losses Value Losses Value Losses Mortgage-backed securities $ 1,887,231 $ (135) $ 959,018 $ (5,678) $ 2,846,249 $ (5,813) Note 3: Loans 2009 2008 Consumer $ 62,039,817 $ 65,675,802 Real estate 258,729,230 236,644,426 Home equity 42,894,227 40,000,068 Visa 44,030,007 38,215,926 Lines of credit 1,366,917 1,422,739 Commercial loans 61,788,279 57,649,062 470,848,477 439,608,023 Net deferred loan origination costs 1,478,124 1,488,235 Allowance for loan losses (2,384,241) (1,872,549) $ 469,942,360 $ 439,223,709 In the normal course of business, the Credit Union makes loans to directors, supervisory committee members and executive officers. The aggregate dollar amount of these loans amounted to $3,213,000 and $3,174,000 at. 13

Notes to Consolidated Financial Statements Activity in the allowance for loan losses was as follows: 2009 2008 Balance, beginning of year $ 1,872,549 $ 1,429,711 Provision for loan losses 2,150,000 1,779,800 Loans charged-off (2,022,352) (1,662,549) Recoveries of loans previously charged-off 384,044 325,587 Balance, end of year $ 2,384,241 $ 1,872,549 There were no loans individually classified as impaired during 2009 and 2008, respectively. There were no accruing loans delinquent 90 days or more at. Nonaccruing loans at were $2,127,000 and $1,145,000, respectively. Note 4: Premises and Equipment 2009 2008 Land $ 2,358,090 $ 2,358,090 Buildings 12,795,742 12,691,434 Furniture, fixtures and equipment 14,420,207 14,244,357 Leasehold improvements 352,195 597,079 29,926,234 29,890,960 Less accumulated depreciation (17,441,794) (16,130,670) $ 12,484,440 $ 13,760,290 Note 5: Loan-Servicing Rights Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balance of mortgage loans serviced for others was $222,123,000 and $118,257,000 at, respectively. Custodial escrow balances maintained in connection with the loan servicing, and included in demand deposits, were approximately $1,059,000 and $816,000 at, respectively. 14

Notes to Consolidated Financial Statements Activity in the balance of mortgage-servicing rights was as follows: 2009 2008 Amortized cost Balance at January 1 $ 746,938 $ 679,911 Additions 1,194,783 334,114 Amortization (504,687) (267,087) Balance at December 31 $ 1,437,034 $ 746,938 The fair value of loan-servicing rights was approximately $1,500,000 and $1,100,000 at. There was no valuation allowance established at December 31, 2009 and 2008. Note 6: Members Deposits 2009 2008 Checking $ 94,789,795 $ 84,872,217 Regular and IRA savings accounts 115,039,086 99,031,725 Money market accounts 148,480,569 109,486,162 Share and IRA certificate accounts 177,005,217 186,643,711 $ 535,314,667 $ 480,033,815 Individual share certificates of $100,000 or more were approximately $69,867,000 and $65,827,000 at. At December 31, 2009, scheduled maturities of certificates for the next five years were as follows: 2010 $ 108,261,104 2011 40,764,784 2012 17,142,997 2013 7,345,245 2014 3,491,087 $ 177,005,217 Deposits from related parties held by the Credit Union at totaled $1,552,000 and $1,937,000, respectively. 15

Notes to Consolidated Financial Statements Note 7: Borrowings The Credit Union has $100,000,000 of line of credit and advance borrowing capacity agreement with the Federal Home Loan Bank. Additionally, the Credit Union has a borrowing capacity of $150,000,000 under a line of credit from Members United providing adequate collateral is available. The terms of the related security agreement allow Members United the right to perfect an interest in Credit Union assets at anytime with an exception of assets currently pledged elsewhere. At, the Credit Union has $168,265,000 and $159,605,000 of mortgage loans pledged to FHLB. As of, there were no amounts outstanding on either line of credit. Note 8: Retirement Plans The Credit Union maintains a defined-contribution pension plan (401(k) Plan and Trust) covering substantially all employees who meet certain age and service requirements. The Credit Union s contribution and expense for the pension plan is a discretionary amount approved by the Board of Directors. The 2009 and 2008 contribution was 11% (reduced by forfeitures) of annual wages for eligible employees and was approximately $679,000 and $558,000 in 2009 and 2008. Note 9: Disclosures About Fair Value of Assets and Liabilities ASC Topic 820, Fair Value Measurements, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic 820 also specifies a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1 Level 2 Level 3 Quoted prices in active markets for identical assets or liabilities Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities 16

Notes to Consolidated Financial Statements Following is a description of the valuation methodologies used for assets and liabilities measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy. Trading and Available-for-Sale Securities Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include mutual funds. If quoted market prices are not available, then fair values are estimated by using pricing models and quoted prices of securities with similar characteristics. 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. Pricing models typically include a technique known as matrix pricing, which is a mathematical technique used in the banking industry to value investment securities without relying exclusively on quoted prices for specific investments securities, but rather, relying on the investment securities relationship to other benchmark quoted investment securities. Level 2 securities include all federal agencies, mortgage-backed securities and an annuity contract. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. No securities are classified within Level 3. The Credit Union obtains all fair value measurements from an independent pricing service. The following tables present the fair value measurements of assets and liabilities recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2009 and 2008: 2009 Fair Value Measurements Using Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Fair Assets Inputs Inputs Value (Level 1) (Level 2) (Level 3) Federal agencies $ 19,771,460 $ - $ 19,771,460 $ - Mortgage-backed securities 14,900,918-14,900,918 - Mutual funds 1,198,790 1,198,790 - - Annuity contract 986,901-986,901 - $ 36,858,069 $ 1,198,790 $ 35,659,279 $ - 17

Notes to Consolidated Financial Statements 2008 Fair Value Measurements Using Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Fair Assets Inputs Inputs Value (Level 1) (Level 2) (Level 3) Trading - mutual funds $ 931,631 $ 931,631 $ - $ - Available-for-sale - mortgage-backed securities 12,186,951-12,186,951 - $ 13,118,582 $ 931,631 $ 12,186,951 $ - The following table presents the fair value measurement of assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2009: Other Real Estate Owned The fair value of real estate is generally determined based on appraisals by qualified licensed appraisers. The appraisers typically determine the value of the real estate by utilizing an income or market valuation approach. If an appraisal is not available, the fair value may be determined by using a cash flow analysis. 2009 Fair Value Measurements Using Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Fair Assets Inputs Inputs Value (Level 1) (Level 2) (Level 3) Other real estate owned $ 568,038 $ - $ - $ 568,038 18

Notes to Consolidated Financial Statements The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying consolidated balance sheets at amounts other than fair value. Cash and Cash Equivalents, Interest-bearing Deposits, Corporate Credit Union Member Shares and Paid-in Capital and Federal Home Loan Bank Stock The carrying amount approximates fair value. Loans The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Loans with similar characteristics were aggregated for purposes of the calculations. The carrying amount of accrued interest approximates its fair value. Loans Held for Sale Fair value of loans held for sale are based on quoted market prices, where available, or are determined by discounting estimated cash flows using interest rates approximating the Credit Union s current origination rates for similar loans and adjusted to reflect the inherent credit risk. NCUSIF Deposit and Other Investments The fair value of the NCUSIF deposit approximates the carrying value. Interest Receivable The fair value of interest receivable approximates the carrying value. Members Deposits Deposits include demand deposits, savings accounts, certain money market deposits and time deposits. The carrying amount approximates fair value. The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities. 19

Notes to Consolidated Financial Statements The following table shows the approximate carrying amount and fair value of financial instruments held by the Credit Union at December 31: 2009 2008 Carrying Fair Carrying Fair Amount Value Amount Value Financial Assets Cash and cash equivalents $ 41,117,811 $ 41,117,811 $ 34,359,442 $ 34,359,442 Interest-bearing balances with financial institutions 10,309,000 10,309,000 4,700,000 4,700,000 Corporate credit union member shares and paid-in capital - - 2,128,678 2,128,678 Trading securities - - 1,891,631 1,891,631 Securities available for sale 36,858,609 36,858,609 12,186,951 12,186,951 FHLB stock 2,419,000 2,419,000 2,023,100 2,023,100 Loans held for sale 2,358,402 2,358,402 7,661,969 7,661,969 Loans, net 469,942,360 488,693,302 439,221,866 453,522,190 NCUSIF deposit 4,819,097 4,819,097 3,901,002 3,901,002 Interest receivable 1,603,135 1,603,135 1,536,746 1,563,746 Financial Liabilities Members share accounts 535,314,667 536,902,471 480,033,815 483,498,233 Note 10: Commitments and Contingent Liabilities In the normal course of business, there are outstanding commitments and contingent liabilities, such as commitments to extend credit, which are not included in the accompanying consolidated financial statements. The Credit Union s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit is represented by the contractual or notional amount of those instruments. The Credit Union uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheets. Financial instruments whose contract amount represents credit risk as of December 31 were as follows: 2009 2008 Commitments to extend credit $ 215,780,000 $ 218,514,000 20

Notes to Consolidated Financial Statements The Credit Union has entered into noncancelable operating lease and other agreements. The leases are for office space. Future minimum commitments at year-end 2009 for all noncancelable lease and other agreements are summarized as follows: 2010 $ 1,297,515 2011 1,161,992 2012 1,045,281 2013 522,320 2014 2,420 $ 4,029,528 The amount expensed for 2009 and 2008 related to the lease and other agreements was $1,381,000 and $1,342,000, respectively. In the normal course of business, the Credit Union is subject to various legal actions. Management believes that the results of these legal actions will not have a material adverse effect on the Credit Union's financial position. Note 11: Regulatory Capital Credit unions are subject to regulatory capital requirements prescribed by a federal regulatory agency. There are five classifications based on the combined result of quarterly net worth and riskbased net worth requirements: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. The net worth requirement is based on net worth to total assets. The risk-based net worth requirement requires net worth to exceed the sum of various asset categories times risk factors for each category, and must be met (if this requirement exceeds 6%) to be classified as well or adequately capitalized. If classified as adequately capitalized, net worth and the regular reserve account must increase quarterly by.1% of assets. If undercapitalized, a net worth restoration plan must also be filed and asset growth and business lending are restricted. Additional regulatory actions may be taken at lower capital classifications such as restriction on interest, required merger or liquidation. The Credit Union s current capital classification is well capitalized. There are no conditions or events since that notification that management believes have changed the Credit Union s category. 21

Notes to Consolidated Financial Statements Actual and required capital amounts (in millions) and ratios as of December 31 are presented below. Minimum Required to be Risk-Based Actual Well Capitalized Requirement Amount Ratio Amount Ratio Amount Ratio As of December 31, 2009 Net worth to total assets $ 46.6 8.2% $ 39.7 7.0% $ - - Risk-based net worth 46.6 8.2% - - 37.1 6.5% As of December 31, 2008 Net worth to total assets $ 44.2 8.6% $ 36.0 7.0% $ - - Risk-based net worth 44.2 8.6% - - 33.5 6.5% Note 12: Subsequent Events Subsequent events have been evaluated through March 3, 2010, which is the date the consolidated financial statements were available to be issued. 22

Consolidating Schedule - Balance Sheet Information December 31, 2009 Assets Purdue Employees Federal CU Channels, Consolidating Credit Union LLC Eliminations Totals Cash and due from banks $ 6,009,593 $ 383,808 $ (383,808) $ 6,009,593 Interest-bearing demand deposits 35,108,218 - - 35,108,218 Cash and cash equivalents 41,117,811 383,808 (383,808) 41,117,811 Interest-bearing deposits 10,309,000 - - 10,309,000 Available-for-sale securities 36,858,069 - - 36,858,069 Loans held for sale 2,239,980 118,422-2,358,402 Loans, net of allowance for loan losses of $2,384,241 at December 31, 2009 469,942,360 - - 469,942,360 Premises and equipment 12,484,440 - - 12,484,440 National Credit Union Share Insurance Fund (NCUSIF) deposit 4,819,097 - - 4,819,097 Federal Home Loan Bank stock, at cost 2,419,000 - - 2,419,000 Interest receivable 1,603,135 - - 1,603,135 Other 4,793,513 239,368 (588,429) 4,444,452 Total assets $ 586,586,405 $ 741,598 $ (972,237) $ 586,355,766 Liabilities Members' deposits $ 535,698,475 $ - $ (383,808) $ 535,314,667 Interest payable and other liabilities 4,145,054 216,435 (63,266) 4,298,223 Total liabilities 539,843,529 216,435 (447,074) 539,612,890 Members Equity Regular reserve 7,502,640 - - 7,502,640 Undivided earnings 39,078,586 525,163 (525,163) 39,078,586 Accumulated other comprehensive income 161,650 - - 161,650 Total members equity 46,742,876 525,163 (525,163) 46,742,876 Total liabilities and members equity $ 586,586,405 $ 741,598 $ (972,237) $ 586,355,766 24

Consolidating Schedule - Statement of Income Information Year Ended December 31, 2009 Purdue Employees Federal CU Channels, Consolidating Credit Union LLC Eliminations Totals Interest Income Loans $ 27,311,859 $ - $ - $ 27,311,859 Securities 737,021 - - 737,021 Interest-earning deposits with other financial institutions 232,215 51 (51) 232,215 28,281,095 51 (51) 28,281,095 Interest Expense Members' deposits 8,389,840 - (51) 8,389,789 Short-term borrowings 1,310 - - 1,310 Total interest expense 8,391,150 - (51) 8,391,099 Net Interest Income 19,889,945 51-19,889,996 Provision for Loan Losses 2,150,000 - - 2,150,000 Net Interest Income After Provision for Loan Losses 17,739,945 51-17,739,996 Other Income Customer service fees 7,620,269 195,585 (564,473) 7,251,381 Income from trading securities 284,754 - - 284,754 Net gains on loan sales 2,071,443 80,284-2,151,727 Loss on corporate credit union member shares and paid-in capital (2,128,678) - - (2,128,678) Gain on sales of securities 30,213 - - 30,213 Other 175,594 79,771 (64,986) 190,379 8,053,595 355,640 (629,459) 7,779,776 Other Expenses Salaries and employee benefits 9,998,407 211,154 (564,473) 9,645,088 Net occupancy expense 1,723,821 11,476 (3,029) 1,732,268 Office operations and equipment expense 4,322,668 32,969-4,355,637 Loan servicing 2,880,246 16,057-2,896,303 ATM and debit card expense 1,625,572 - - 1,625,572 NCUSIF premium expense 722,864 - - 722,864 Advertising and marketing expense 1,278,486 21,073-1,299,559 Other 944,499 1,005-945,504 Total noninterest expense 23,496,563 293,734 (567,502) 23,222,795 Net Income $ 2,296,977 $ 61,957 $ (61,957) $ 2,296,977 25