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Sample Credit Union

FINANCIAL STATEMENTS

For the Year Ended December 31, 20XX

(Including Independent Auditor's Report)

Financial

Standards

Group, CPA, LLC

PMB 377

31408 Harper Ave

St. Clair Shores, MI 48082

Page

INDEPENDENT AUDITOR'S REPORT 3-4

FINANCIAL STATEMENTS

Statement of Financial Condition 5

Statement of Earnings 6

Statement of Comprehensive Income 7

Statement of Changes in Members' Equity 8

Statement of Cash Flows 9-10

Notes to Financial Statements 11-24

Supplemental Information 23-24

Sample Credit Union

TABLE OF CONTENTS

2

The Board of Directors

Sample Credit Union

Sample City, Michigan

Report on the Financial Statements

We have audited the accompanying financial statements of Sample Credit Union,

which comprise the statement of financial condition as of December 31, 20XX, and the related statement

of earnings and statement of comprehensive income, changes in members' equity, and cash flows for

the year then ended, and the related notes to the financial statements.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in

accordance with accounting principles generally accepted in the United States of America; this includes

the design, implementation, and maintenance of internal control relevant to the preparation and fair

presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted

our audit in accordance with auditing standards generally accepted in the United States of America. Those

standards require that we plan and perform the audit to obtain reasonable assurance about whether the

financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in

the financial statements. The procedures selected depend on the auditor's judgment, including the

assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

In making those risk assessments, the auditor considers internal controls relevant to the entity's preparation

and fair presentation of the financial statements in order to design audit procedures that are appropriate in

the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's

internal controls. Accordingly, we express no such opinion. An audit also includes evaluating the

appropriateness of accounting policies used and the reasonableness of significant accounting estimates

made by management, as well as evaluating the overall financial statement presentation.

INDEPENDENT AUDITOR'S REPORT

PMB 377

31408 Harper Ave


Financial

Standards

Group, CPA, LLC

3

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our

opinion.

Opinion

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

financial position of Sample Credit Union as of December 31, 20XX , and the results of its

operations and its cash flows for the year then ended in accordance with accounting principles

generally accepted in the United States of America.

Financial Standards Group, CPA LLC


St. Clair Shores, Michigan

January 1, 20XX

4

2018

ASSETS

Cash and cash equivalents (Note 2) 6,056,109$

Investment securities

Available-for-sale (Note 3) 7,725,214

Other investments (Note 4) 7,695,850

Loans to members, net of allowance for loan losses (Note 5) 64,491,110

Accrued interest receivable

Property and equipment (Note 6) 3,584,299

NCUSIF deposit (Note 1) 818,074

Other assets 562,497

Total assets 90,933,153$

LIABILITIES AND MEMBERS' EQUITY

Liabilities

Members' share and savings accounts (Note 7) 79,807,338$

Accrued expenses (Note 1) 941,585

Total liabilities 80,748,923

Commitments and contingent liabilities (Note 11) -

Regular reserve 1,469,213

Undivided earnings 8,828,123

Accumulated other comprehensive loss (113,106)

Total members' equity 10,184,230

Total liabilities and members' equity 90,933,153$

The accompanying notes are an integral part of the financial statements

Sample Credit Union

STATEMENT OF FINANCIAL CONDITIONDecember 31, 20XX

5

2018

Interest Income

Interest on loans to members 3,225,158$

Interest on investment securities 475,731

Total interest income 3,700,889

Interest Expense

Interest and dividends on members' shares and savings accounts 237,047

Total interest expense 237,047

Net interest income 3,463,842

Provision for Loan Losses (Note 5) 232,350

Net interest income after provision for loan losses 3,231,492

Fees and other income 1,571,810

4,803,302

Non-Interest Expenses

Compensation and benefits 1,918,325

Operations 902,709

Membership services 125,316

Professional and outside services 852,795

Loan servicing expense 315,000

Miscellaneous expense 32,217

Total non-interest expense 4,146,362

Net Income Before Non-Operating Items 656,940

Non-Operating Gains/(Losses)

Gains on sales of assets 33,134

Total non-operating gains/(losses) 33,134

Net Income 690,074$

Sample Credit Union

STATEMENT OF EARNINGS

December 31, 20XX


6

2018

Net income 690,074$

Accumulated other comprehensive income:

Unrealized loss on available-for-sale securities:

Unrealized holding loss on available-for-sale securities during period (112,073)

Total accumulated other comprehensive income: (112,073)

Comprehensive Income 578,001$

Sample Credit Union

STATEMENT OF COMPREHENSIVE INCOME

December 31, 20XX


7

Regular Reserve

Undivided

Earnings

Accumulated

Other

Comprehensive

Loss Total

Members' Equity

December 31, 2017 1,469,213$ 8,138,049$ (1,033)$ 9,606,229$

Net Income - 690,074 - 690,074

Other Comprehensive Loss - - (112,073) (112,073)

Members' Equity,

December 31, 20XX 1,469,213$ 8,828,123$ (113,106)$ 10,184,230$


STATEMENT OF CHANGES IN MEMBERS' EQUITY

December 31, 20XX

Sample Credit Union

8

2018

Cash flows from operating activities:

Net income 690,074$

Adjustments:

Depreciation 316,429

Provision for loan losses 232,350

Changes in operating assets and liabilities:

Decrease in other assets 41,452

(Decrease) in accrued expenses (38,909)

Increase in accrued dividends 2,212

Net cash provided by operating activities 1,243,608

Cash flows from investing activities:

Acquisition of available-for-sale securities (739,000)

Proceeds from maturities of available-for-sale securities 2,988,000

Change in other investments 945,000

Change in premiums/discounts 212

(Increase) in loans to members (3,983,791)

Recoveries on loans charged off 85,432

Acquisition of property and equipment (161,171)

Net cash used in investing activities (865,318)

Cash flows from financing activities:

(Decrease) in members' share and savings accounts (2,074,618)

Net cash used in financing activities (2,074,618)

Net decrease in cash and cash equivalents (1,696,328)

Cash and cash equivalents - beginning of year 7,752,437

Cash and cash equivalents - end of year $ 6,056,109

December 31, 20XX


STATEMENT OF CASH FLOWS

Sample Credit Union

9

2018

Supplemental Disclosures:

Cash paid during the year for interest 234,835$

Sample Credit Union

STATEMENT OF CASH FLOWS

December 31, 20XX


10

Note 1 - Significant Accounting Policies

Nature of Business

Sample Credit Union provides a variety of financial services to its members, most

of whom reside, are employed, attend school, or who worship in the counties of Arenac, Bay, Midland,

or Saginaw counties. The Credit Union's primary source of revenue is from loans to its members. Its

primary source of finds is savings deposits from its members.

Use of Estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles in the

United States of America (GAAP), requires management to make estimates and assumptions that affect

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

statements and the reported amounts of revenue and expenses during the reporting period. Actual results

could differ from those estimates.

Cash and Cash Equivalents

For purposes of financial condition classification and the statements of cash flows, the Credit Union

classifies changes in cash or cash equivalents (short-term, highly liquid investments readily convertible into

cash with an original maturity of three months or less) according to operating, investing or financing

activities. Financial instruments which potentially subject the Credit Union to concentrations of credit risk

consist principally of cash and temporary cash investments. At times, cash balances held at financial

institutions were in excess of Federal Deposit Insurance Corporation (FDIC) and National Credit Union

Association (NCUA) insurance limits. The Credit Union places its temporary cash investments with high-

credit, quality financial institutions and, by policy, limits the amount of credit exposure to any one financial

institution. The Credit Union believes no significant concentration of credit risk exists with respect to these

cash investments.

Investments

The Credit Union's investments in securities are classified and accounted for as follows:

Available-for-Sale Securities

Securities which could be sold in response in rate changes, prepayment risk, liquidity concerns,

availability of and yield on alternative investments, and other market conditions or economic

factors are classified as available-for-sale. These securities are reported at fair value. Unrealized

gains or losses on available-for-sale securities are recognized as direct increases or decreases

in other comprehensive income. The cost of securities sold is recognized using the specific identification

method.

Other Investments

Certain securities are non-negotiable. They consist of certificates of deposits at other financial

institutions (non-brokered), and well as other miscellaneous investments. These are not considered

investment securities under GAAP.

Sample Credit Union

NOTES TO FINANCIAL STATEMENTS

December 31, 20XX

11

Note 1 - Significant Accounting Policies (Continued)

Loans to Members

Loans that the Credit Union has the intent and ability to hold for the foreseeable future are stated at

unpaid principal balances, less an allowance for loan losses and net deferred loan originations fees

and discounts. Interest 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 on loans is discounted

at the time the loan is 90 days delinquent unless the credit is well-secured and in the process of collection.

Credit card loans and 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 collection of principal or 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. The interest on these loans is accounted for on the cash-basis or cost-recovery method,

until qualifying for return to accrual. Loans are returned to accrual status when all 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 established as losses are estimated to have occurred through a provision

for loan losses charged to earnings. Loan losses are charged against the allowance when management

believes the collectability of a loan balance is confirmed. 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 collectability 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 any 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.

The Credit Union's allowance for loan losses is the amount considered adequate to absorb probably 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 distribution of the portfolios, the

impact of current internal and external influences on credit loss and the levels of non-performing loans.

Specific allowances for loan losses are established for large impaired loans on an individual basis as

required by Generally Accepted Accounting Principles. The specific allowances established for these

loans is based on a through analysis of the most probable source of repayment, including the present value

of the loan's expected future cash flows, the loan's estimated market value, or the estimated fair value of

the underlying collateral. General allowances are established for loans that can be grouped into pools based

on similar characteristics as described in Generally Accepted Accounting Principles. In this process,

general allowance factors are based on an analysis of historical charge-off experience and expected

losses given default derived from the Credit Union's internal risk rating process. These factors are

developed and applied to the portfolio in terms of loan type. The qualitative factors associated with the

allowance 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.

A loan is impaired when full payment under the loan terms is not expected. If a loan is impaired, a portion

of the allowance is allocated so that the loan is reported, net, at present value of estimated future cash

flows using the loan's existing rate or at the fair value of collateral if repayment is expected solely from

the collateral. Large groups of smaller balance homogeneous loans are collectively evaluated for

impairment, and accordingly, they are not separately


December 31, 20XX

Sample Credit Union

12

Note 1 - Significant Accounting Policies (Continued)

Allowance for Loan Losses (Continued)

identified for impairment disclosures. Loans for which the terms have been modified and for which the

borrower is experiencing financial difficulties, are considered troubled debt restructurings and are classified as

impaired. Troubled debt restructurings are measured at the present value of estimated future cash flows using

the loan's effective rate at inception. If a troubled debt restructuring is considered to be a collateral

dependent loan, the loan is reported, net, at the net realizable value of the collateral.

Property and Equipment

Land is carried at cost. Building, furniture, fixtures, and equipment are carried at cost, less accumulated

depreciation. The building, furniture, fixtures, and equipment are depreciated using the straight line

method over the estimated useful lives of the asset.

NCUSIF 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

insured credit union in an amount equal to one percent of its insured shares. The deposit would be refunded

to the Credit Union if its insurance coverage is terminated, it converts to insurance coverage form

another source, or the operations of the fund are transferred from the NCUA Board.

Members' Shares and Savings Accounts

Members' shares are subordinated to all other liabilities of the Credit Union upon liquidation. Interest on

members' shares and savings accounts is based on available earnings at the end of an interest period and is

not guaranteed by the Credit Union. Interest rates on members' share accounts are set by the Board of

Directors, based on an evaluation of current and future market conditions.

Member's Equity

The Credit Union is required by regulation to maintain a statutory reserve. This reserve, which

represents a regulatory restriction of undivided earnings, is not available for the payment of interest and dividends.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss) that includes

unrealized gains and losses on available-for-sale investments.

Income Taxes

The Credit Union is exempt, by statue, from federal income taxes on income related to the exempt

purpose of the Credit Union. The Credit Union is a state-chartered Credit Union described in the Internal

Revenue Code (IRC) Section 501c(14). As such, the Credit Union is exempt from federal taxation of income

derived from the performance of activities that are in furtherance of its exempt purposes. However, IRC

Section 511 imposes a tax on the unrelated business income (as defined in Section 512) derived by state-

chartered Credit Unions. In the opinion of management, any liability arising from unrelated business tax is not

expected to have a material effect on the Credit Union's financial condition or results of operations.


December 31, 20XX

Sample Credit Union

13

Note 2 - Cash and Cash Equivalents

The carrying amounts of cash and cash equivalents as shown in the statements of financial condition of the

Credit Union are as follows:

December 31,

20XX

Cash 1,121,670$

Deposits with corporate credit unions 4,825,842

Other deposits 108,597

Total 6,056,109$

Note 3 - Investment Securities (Available-for-Sale)

The amortized cost and fair value of securities available-for-sale are as follows:

Amortized Cost

Gross

Unrealized

Gains

Gross Unrealized

Losses Fair Value

Certificate of deposit 7,538,000$ -$ 109,810$ 7,428,190$

Corporate bonds 300,320 - 3,296 297,024

Total 7,838,320$ -$ 113,106$ 7,725,214$

The amortized cost and fair value of investment securities at December 31, 20XX, by contractual maturity,

are shown below.

Amortized Costs Fair Value

Due is one year or less 3,399,000$ 3,390,585$

Due after one year through five years 4,439,320 4,334,629

7,838,320$ 7,725,214$

Securities containing unrealized losses determined to be temporary at December 31, 20XX are as follows:

Less than 12 Months 12 Months or Longer

Fair Value Unrealized Losses Fair Value Unrealized Losses

Certificate of deposit 3,390,585$ 8,415$ 4,037,606$ 101,395$

Corporate bonds - - 297,023 3,296

Total 3,390,585$ 8,415$ 4,334,629$ 104,691$

Total

Fair Value Unrealized Losses

Certificate of deposit 7,428,191$ 109,810$

Corporate bonds 297,023 3,296

Total 7,725,214$ 113,106$

Sample Credit Union


December 31, 20XX

December 31, 20XX

14

Note 4 - Investment Securities (Other Investments)

The composition of other investments is as follows:

December 31,

20XX

Certificates of deposit $ 6,944,000

FHLB stock 261,300

CUSO 111,250

Alloya capital 379,300

Total 7,695,850$

As a requirement of membership, the Credit Union is required to maintain a perpetual capital account at

Corporate Alloya Federal Credit Union. A perpetual capital share account is a restricted share base that is

subject to depletion based on the financial health of the corporate credit union, it is uninsured and not

available for withdrawal. Therefore, the perpetual capital share account balance is subject to impairment.

Note 5 - Loans to Members

The composition of loans to members is as follows:

December 31,

20XX

Personal loans 24,451,219$

Real estate loans 33,290,463

Business loans 3,910,597

Credit card loans 3,116,299

Total loans 64,768,578

Less: Allowance for loan losses 277,468

Total net loans to members 64,491,110$

Allowance for Loan Losses: The Credit Union has an established methodology to determine the adequacy

of the allowance for loan losses that assesses the risks and losses inherent in the Credit Union's portfolio.

For purposes of determining the allowance for loan losses, the Credit Union segments certain loans in its

portfolio by product type. The Credit Union's loans are segmented into the following pools:

Auto

Other secured

Credit card

Unsecured

Collection/workout

Real esate - first

Real estate - second

Each class of loan requires significant judgment to determine the estimation method that fits the

credit risk characteristics of its portfolio segment. The Credit Union uses an internally developed

process.

Sample Credit Union


December 31, 20XX

15

Note 5 - Loans to Members (Continued)

The Credit Union uses a two-year rolling historical loss ratio to apply to each portfolio in addition

to a specific evaluation of selected loans. This amount is the result of the management's judgment

of risks inherent in the portfolios, economic uncertainties, historical loss experience and other

subjective factors, calculated to better reflect the Credit Union's view of risk in each loan portfolio.

No single statistic or measurement determines the adequacy of the allowance for loan loss.

Changes in the allowance for loan loss and related provision expense can materially affect

net income.

The Credit Union's Estimation Process. Reflected in the portions of the allowance for loan losses is an

amount for imprecision or uncertainty that incorporates the range of probable outcomes inherent in

estimates used for the allowance for loan losses, which may change from period to period. This amount is

the result of management's judgment of risks inherent in the portfolio, economic uncertainties, historical

loss experience, and other subjective factors including industry trends calculated to better reflect the Credit

Union's view of risk in the loan portfolio. No single statistic or measurement determines the adequacy of

the allowance for loan losses. Changes in the allowance for loan losses and the related provision expense

can materially affect net income.

Loans by Segment. The total allowance for loan losses reflects management's estimate of loan losses inherent

in the loan portfolio at the statement of financial condition date. The Credit Union considers the allowance

for loan losses to be adequate to cover loan losses inherent in the loan portfolio at December 31, 20XX.

The following table presents the changes in the allowance for loan losses by portfolio segment.

Allowance for Loan Losses: Business Consumer Real Estate Total

Balance, beginning of year 2,051$ 145,940$ 106,143$ 254,134$

Loans charged off - (294,448) - (294,448)

Recoveries - 71,183 14,249 85,432

Provision for loan losses 2,324 179,374 50,652 232,350

Balance, end of year 4,375$ 102,049$ 171,044$ 277,468$

Business Consumer Real Estate Total

Loans to Members:

Ending balance: individually

evaluated for impairment -$ 256,097$ 185,540$ 441,637$

Ending balance: collectively

evaluated for impairment 3,910,597 27,311,421 33,104,923 64,326,941

Total ending balance 3,910,597$ 27,567,518$ 33,290,463$ 64,768,578$


December 31, 20XX

Sample Credit Union


Loans to Members


Allowance for Loan Losses

16


Credit Quality Information

The following table presents performing and non-performing loans based on payment for the year ended

December 31, 20XX.


Performing 3,910,597$ 27,458,721$ 32,917,279$ 64,286,597$

Non-performing - 108,797 373,184 481,981

Total 3,910,597$ 27,567,518$ 33,290,463$ 64,768,578$

Age Analysis of Past Due Loans Receivable by Segment. Following is a table which includes an aging analysis

of the loans to members that are past due as of December 31, 20XX:


30-59 days past due -$ 390,888$ 943,423$ 1,334,311$

90-179 days past due

(nonaccrual) - 240,350 511,138 751,488

180-364 days past due

(nonaccrual) - 14,786 95,240 110,026

Greater than 365 days

past due (nonaccrual) - - - -

Total loans past due - 646,024 1,549,801 2,195,825

Current and less than

30 days past due 3,910,597 26,921,494 31,740,662 62,572,753

Total 3,910,597$ 27,567,518$ 33,290,463$ 64,768,578$

Impaired and Nonaccrual Loans. The Credit Union considers a loan to be impaired when, based on current

information and events, the Credit Union determines that the Credit Union will not be able to collect all amounts

due according to the loan contract, including scheduled interest payments. Determination of impairment is treated

the same across all classes of loans. The Credit Union determines impairment based on a 90 day default period

and all loans classified as troubled debt restructurings.

When the ultimate collectability of the total principal of an impaired loan is not in doubt and the loan is on

nonaccrual status, contractual interest is credited to interest income when received, under the cash basis

method.

The Credit Union generally places loans on nonaccrual status when the full and timely collection of interest

or principal becomes uncertain, part of the principal balance has been charged off and no restructuring

has occurred, or the loans reach a certain number of days past due.

Credit Quality Information

Age Analysis of Past Due Loans to Members by Segment

Sample Credit Union


December 31, 20XX

17


When the Credit Union places a loan on nonaccrual status, the Credit Union reverses the accrued unpaid

interest receivable against interest income and accounts for the loan on the cash or cost recovery method,

until it qualifies for return to accrual status. Generally the Credit Union returns a loan to accrual status when

all delinquent interest and principal becomes current under the terms of the loan agreement or the loan is

both well-secured and in the process of collection and collectability is no longer doubtful.

The Credit Union has determined that the entire balance of a loan is contractually delinquent for all classes

if the minimum payment is not received by the specified due date on the member's statement. Interest

and fees continue to accrue on past due loans until the date the loan goes into nonaccrual status, if

applicable.

At December 31, 20XX, the Credit Union had loans totaling $481,981 in non-accrual status. If interest on those loans

had been accrued at their original rates, accrued income would have been $8,443 as of December 31, 20XX.

Troubled Debt Restructures by Segment. Following is a table which includes an aging analysis

of the loans to members that are past due as of December 31, 20XX:


Performing -$ 256,097$ 185,540$ 441,637$

Non-performing - - -

Total -$ 256,097$ 185,540$ 441,637$

The Credit Union had 42 troubled debt restructures (TDR) totaling $441,637 as of December 31, 20XX.

Of that amount, 18 TDRs or $121,484 were initiated during 2018. The TDR portion of allowance for

loan loss was $23,673 as of December 31, 20XX.

Note 6 - Property and Equipment

December 31,

20XX

Land and improvments 319,039$

Buildings and improvements 3,598,035

Furniture and equipment 1,494,490

Total property and equipment 5,411,564

Accumulated depreciation 1,827,265

Total 3,584,299$

Depreciation expense amounted to $316,429 for the year ended December 31, 20XX.

Troubled Debt Restructures by Segmentation

Sample Credit Union


December 31, 20XX

18

Note 7 - Members' Shares and Savings accounts

The composition of members' share and savings accounts by type is as follows:

December 31,

20XX

Regular shares 36,009,646$

Share draft accounts 11,514,819

High yield accounts 15,043,409

Christmas club 211,619

IRA accounts 2,038,143

Business high yield accounts 601,225

Certificates of deposits 11,193,707

IRA certificates 3,194,770

Total members' share and savings accounts 79,807,338$

The aggregate amounts of members' share and savings accounts over $250,000 were $1,523,341.

for the year ended December 31, 20XX.

Scheduled maturities of share and IRA certificates are as follows:

Amounts maturing:

December 31,

20XX

In one year or less 8,498,376$

After one year through two years 4,093,540

After two years through three years 742,824

After three years through four years 1,053,737

Total 14,388,477$

Note 8 - Borrowed Funds

The Credit Union maintains a line of credit with Alloya Federal Credit Union at a rate to be

determined by the lender when funds are borrowed. At December 31, 20XX, the Credit Union

had no outstanding balance on the line of credit but could borrow up to $4,000,000. The line of credit is

collateralized by substantially all of the Credit Union's assets.

Note 9 - Pension Plan

The Credit Union has a post-retirement health care benefit available to employees. The Credit Union

will provide an employee who retires between the ages of 60 to 65 with full health care until the age

of 65, if the employee also has given service to the Credit Union for at least 20 years. At age 65 the

Credit Union ceases paying the employee's health care and pays the employee $80 per month. The

Credit Union has recorded a liability related to the post-retirement benefit plan in the amount of

$509,641

Sample Credit Union


December 31, 20XX

19

Note 9 - Pension Plan (Continued)

As of December 31, 20XX, net periodic post-retirement benefit cost was approximately $41,100.

Service cost was approximatley $13,600, and interest cost was approximately $27,600 for the year

ended December 31, 20XX.

A 5.0% annual rate of increase in the per capita costs of covered healthcare benefits was assumed

for the year ended December 31, 20XX. A weighted average discount rate of 5.00% was used to

determine the APBO (Anticipated Post-Retirement Benefit Obligation) for the year ended December

31, 2018.

The Credit Union paid benefits of approximately $44,600 to retirees under the post-retirement healthcare

plan during the year ended December 31, 20XX.

The Credit Union expects the benefits to be paid by the plan in the ensuing five years and

five years thereafter as follows:

Years Ending

December

31st

2019 55,673$

2020 66,044

2021 68,132

2022 63,143

2023 66,156

Five years thereafter 174,901

494,049$

The Credit Union has a 401(k) plan available to employees with one year of service who have attained

the age of 19 at the anniversary date of the plan. The plan provides that the Credit Union will contribute

8% of each participant's total compensation to the plan. Employees can also contribute up to the maximum

allowed by the Internal Revenue Service. Total expenses for this plan for year ended December 31, 20XX

was $101,185

Note 10 - Off Balance Sheet Activities

The Credit Union is a 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 the amount recognized in the financial statements.

The Credit Union's exposure to credit loss is represented by the contractual notional amount of these

instruments. The Credit Union uses the same credit policies in making commitments as it does for loans

recorded in the financial statements


Sample Credit Union

December 31, 20XX

20

Note 10 - Off Balance Sheet Activities (Continued)

The following financial instruments were outstanding whose contract amounts represent credit risk:

December 31,

20XX

Home equity lines of credit 2,078,626$

Overdraft protection 2,818,280

Other lines of credit 675,131

Credit cards 4,175,962

Total unfunded commitments under lines of credit 9,747,999$

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. Since many of the commitments are expected to

expire without being drawn upon, the total commitment amounts do not necessarily represent future cash

requirements. The Credit Union evaluates each member's creditworthiness on a case by case basis. The

amount of collateral obtained, if deemed necessary by the Credit Union, upon extension of credit is based

on management's credit evaluation of the member. Collateral held generally consists of real estate.

Unfunded commitments under lines of credit, revolving credit lines, and overdraft protection agreements

are commitments for possible future extensions of credit to existing members. These lines of credit are

uncollateralized and usually do not contain a specified maturity date and may not be drawn upon to the total

extent to which the Credit Union is committed.

Note 11 - Legal Contingencies

The Credit Union is a party to various legal actions normally associated with financial institutions, the

aggregate effect of which, in management's opinion, would not be material to the financial condition.

Note 12 - Regulatory Capital

The Credit Union is subject to various regulatory capital requirements administered by its regulator. Failure

to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary,

actions by regulators that, if undertaken, could have a direct material effect on the Credit Union's financial

statements. Under capital adequacy regulations and the regulatory framework for prompt corrective action,

the Credit Union must meet specific capital regulations that involve quantitative measures of the Credit

Union's assets, liabilities, and certain off balance sheet items as calculated under GAAP. The Credit

Union's capital amounts and net worth classification are also subject to qualitative judgments by the

regulators about components, risk weightings, and other factors.

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

maintain minimum amounts and ratios (set forth in the table below) of net worth (as defined in the

regulations) to total assets (as defined). Credit unions are also required to calculate a Risk Based Net Worth

(RBNW) requirement which establishes whether or not the Credit Union will be considered "complex"

under the regulatory framework. As of December 31, 20XX the Credit Union's RBNW ratio

was 5.24%. The minimum ratio to be considered complex under the regulatory framework

is 6.00%. Management believes, as of December 31, 20XX, that the Credit Union meets all capital adequacy

requirements to which it is subject.

December 31, 20XX

Sample Credit Union


21

Note 12 - Regulatory Capital (Continued)

As of December 31, 20XX, the most recent call reporting periods, the regulator categorized the

Credit Union as "well capitalized" under the regulatory framework for prompt corrective action. To be categorized

as "well capitalized", the Credit Union must maintain a minimum net worth ratio of 7.00% of assets and meet any

applicable RBNW requirement. There are no conditions or events since that notification that management

believes have changed the Credit Union's category.

Net losses and excessive asset growth may significantly affect the institution's capital adequacy.

The Credit Union's actual capital amounts and ratios are summarized as follows:

Amount Ratio Amount Ratio

December 31, 20XX 10,297,336$ 11.32% 5,455,989$ 6.00%

Amount Ratio

6,365,321$ 7.00%

In performing its calculation of total assets, the Credit Union used the quarter end option.

Note 13 - Related Party Transactions

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

executive officers. The aggregate loans at December 31, 20XX are $546,840. Deposits from related parties

at December 31, 20XX amounted to $61,981.

Note 14 - Subsequent Events

In accordance with FASB Accounting Standards Codification ™ Topic 855, Subsequent Events , the Credit Union has

evaluated subsequent events through January 1, 20XX which is the date these financial statements were issued.

There are no subsequent events requiring recognition.

December 31, 20XX

Actual To be Adequately Capitalized

Sample Credit Union


To be Well Capitalized Under the

22

The Board of Directors

Sample Credit Union

Sample City, Michigan

We have audited the financial statements of Sample Credit Union as of and for the

year ended December 31, 20XX, and our report, dated January 1, 20XX, which expressed an unmodified

opinion on those financial statements, appears on page 4. Our audit was conducted for the purpose of

forming an opinion on the financial statements as a whole. The selected financial ratios and graphical

representations are presented for purposes of additional analysis and are not a required part of the

financial statements. Such information has not been subjected to the auditing procedures applied in the

audit of the financial statements and, accordingly, we do not express an opinion or provide any assurance

on it.



St. Clair Shores, Michigan

January 1, 20XX

INDEPENDENT AUDITOR'S REPORT

ON SUPPLEMENTARY INFORMATION

PMB 377

31408 Harper Avenue


Financial

Standards

Group, CPA, LLC

23

The below graphs are comparing NCUA Call report data as of December 31, 20XX, 2017, 2016, and national peer averages:

Sample Credit Union

SUPPLEMENTAL INFORMATION

December 31, 20XX

0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40%

31-Dec-18

31-Dec-17

31-Dec-16

Peer

Delinquent loans

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

0.80%

Return on assets

Return on assets

5.00%

5.05%

5.10%

5.15%

5.20%

5.25%

5.30%

5.35%

31-Dec-18

31-Dec-17

31-Dec-16

Peer

Yield on average loans

0.00% 0.50% 1.00% 1.50% 2.00% 2.50%

31-Dec-18

31-Dec-17

31-Dec-16

Peer

Yield on average investments

0.00% 0.05% 0.10% 0.15% 0.20% 0.25% 0.30% 0.35% 0.40%

31-Dec-18

31-Dec-17

31-Dec-16

Peer

Cost of funds to average assets

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00%

31-Dec-18

31-Dec-17

31-Dec-16

Peer

Total loans to total shares

9.00% 9.50% 10.00% 10.50% 11.00% 11.50% 12.00% 12.50%

31-Dec-18

31-Dec-17

31-Dec-16

Peer

Net worth

24

Documents

Sample Credit Union - storage.googleapis.com€¦ · institutions were in excess of Federal Deposit Insurance Corporation (FDIC) and National Credit Union Association (NCUA) insurance