2008Annual Report

People Over Profit

“People Over Profit” are the words often used to describe the credit union philosophy. This philosophy underpins every decision considered by volunteers and management. Many of the problems facing the economy were created when leaders of financial institutions put profit before their customer’s well-being and the long-term financial health of their company. Financial giants such as Washington Mutual, Lehman Brothers, and Bear Sterns are all out of business because they took excessive risks to satisfy their insatiable need for greater and greater short term profits.

Although credit unions did not cause the financial crisis, we are not immune to the effects. On March 20, 2009 our regulator, the National Credit Union Administration (NCUA), placed two large corporate credit unions into conservatorship. Corporate credit unions operate much differently than Freedom First. They do not serve people; they serve many of the 8,000 credit unions by providing settlement, investment, and loan services. The NCUA’s actions have made it necessary for all credit unions to recapitalize the share insurance fund. After consultation with our auditors, the decision was made to recognize a large portion of the recapitalization expense in 2008 and the balance in 2009. It is important to understand that Freedom First did not

Joint report from chairman and president/ceO

Bad Times For Banks

Means Boom Times

For Credit Unions.

–TIME

HeadlinesHEADLINE

cause these losses, but is required by our regulator to share in the recapitalization expense. The Credit Union remains well capitalized and financially strong. Member shares are insured up to at least $250,000 by the NCUA, which is backed by the full faith of the United States Government.

Despite unprecedented stress in financial markets, Freedom First enjoyed positive results in 2008. As you can see from the performance graphs, loans increased nearly three times the national average while loan delinquency remained below peer. We do not own any “toxic assets,” and prior to posting the extraordinary recapitalization expense, net income was two and one-half times the peer group average. The auditing firm of Nearman, Maynard, Vallez, CPAs & Consultants, P.A. completed their annual audit and once again issued a favorable unqualified opinion.

As promised, a new full service branch was opened near Crossroads Mall in Roanoke. The new branch is both esthetically pleasing and functionally efficient. The response from members and the surrounding community has been overwhelmingly positive. We are also excited to announce the formation of Freedom First Insurance, a wholly-owned subsidiary of the Credit Union. As an independent insurance agency we are able to compare insurance quotes for you from any of our fifteen highly rated insurance carriers. Our team of insurance professionals will meet with you personally to review your auto, home, and recreational vehicle coverage ensuring you receive the best insurance coverage at the lowest possible price.

0.0

0.3

0.6

0.9

1.2

1.5

1.191.39

Per

cent

age

Delinquent Loans/ Total Loans

0

2

4

6

8

10

12

9.15

11.39

Per

cent

age

Net Worth/Total Assets

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.80

0.29

Per

cent

age

Return on Average Assets

0

5

10

15

20

16.36

8.11

Per

cent

age

Asset Growth0

5

10

15

20

25

20.53

6.88

Per

cent

age

Loan Growth

Ditch Your Bank For

A Credit Union.

–MSN Money

HeadlinesHEADLINE

Freedom First Peer Average

Graphs do not reflect recognition of extraordinary charge from impairment of NCUSIF

Our commitment to corporate social responsibility took a giant stride forward with the creation of the new outreach coordinator position. The outreach coordinator works with members and area non-profits to identify needs within the community. Social finance programs are then developed to address such pressing issues as affordable housing, transportation, and financial education to name a few. One such program is the new Money Mondays financial education work-shops. The outreach coordinator helped bring several area credit unions together and create three educational workshops focusing on budgeting, borrowing, and saving. These monthly workshops at Virginia Western Community College are open to the public free of charge. Visit our website for more details.

The Board of Directors and Management Team completed an intensive strategic planning process culminating in the creation of a new Mission and Vision for the Credit Union. Six core values were also adopted to serve as decision filters, guiding

volunteers and management through the complex process of managing a $250 million financial cooperative. We encourage you to read the new Mission, Vision, and Values to gain a better understanding of what we believe captures the ultimate purpose of the Credit Union and what values are most important in guiding us forward.

We believe our performance serves as a testament to our common sense approach and “People Over Profit” philosophy. We know that our success is your success and are grateful for your continued support.

Paul PhillipsPresident / CEO

Nelson ShibleyChairman

Join

t R

epo

rt

fro

m C

hai

rm

an a

nd

Pr

esid

ent/

CEO

Credit Union PhilosophyWe support the cooperative principles of self-help, self-responsibility, democracy, equality, equity, and solidarity.

Integrity and RespectIntegrity and respect guide our business practices and our relationships with our employees, our members, our business partners, and our community.

Social ResponsibilityWe strive to be a leader in corporate social responsibility through business practices, products and services that serve our members well while contributing to the well-being of local communities.

AccountabilityWe build trust that fosters organizational success and sustainability through our commitment to social and financial accountability.

CollaborationWe build relationships that are fair, equitable, and cooperative.

InnovationWe address challenges with creativity and spirited teamwork.

Helping People ProsperOur talents and resources help you achieve financial prosperity.

VisionMission

Core Values

Financial FreedomDream big! There is no limit to your potential. Our long-term vision is to serve as a catalyst, helping people and communities break through barriers to financial freedom.

The Credit Union’s Supervisory Committee, appointed by your Board of Directors, is given the responsibility to determine whether the operations of the Credit Union are carried out in accordance with the Federal Credit Union Act and the regulations of the National Credit Union Administration. We meet regularly to evaluate internal controls and to ensure that the Credit Union assets are safeguarded. In addition, we monitor the performance of Credit Union employees and elected officials and audit compliance with official policies and procedures.

The Supervisory Committee engaged the services of Nearman, Maynard, Vallez, CPAs & Consultants, P.A., a certified public accounting firm. Their audit report included an unqualified opinion as to the fair presentation of the Credit Union’s financial statements. Based on their report

and our own observations, we can report to you that Freedom First Federal Credit Union continues to maintain the highest level of financial safety and soundness.

All of us on the Supervisory Committee are proud to volunteer our time to serve you, the members of Freedom First Federal Credit Union. If you need assistance, or experience difficulties which cannot be resolved through normal channels, we encourage you to contact us directly or via any Credit Union branch manager. Thank you for your continued cooperation.

Lois Evers Chairperson, Supervisory Committee

The Nominating Committee used the Credit Union news-letter and website to inform the membership of the Credit Union’s nomination and election process. This year, there were no at-large candidates, and no members sought nomination by petition.

Therefore, in accordance with Article V, Section 2 of the Bylaws and the official Elections Policy of the Freedom First Federal Credit Union, I hereby declare the elec-tions closed and the following three incumbent Directors

are hereby elected without challenge – Nelson Shibley, Roger Journell and Thomas Chapman. Each of these three Directors will serve a three-year term beginning this month. The Nominating Committee offers its congratula-tions to our newly-elected Directors.

Respectfully submitted,Tim Sutphin Chairman, Nominating Committee

supervisory committee report

nominating committee report

Committee Reports

Committee Reports

Find Your Financial Freedom

Helping People Prosper

I am pleased to present to you the Annual Treasurer’s Report for Freedom First Credit Union for the year ended December 31, 2008. Last year, I described the very successful year we had in 2007. Now in 2008, I can report this year was just as positive and beneficial to our members. A review of the Financial Statements indicates the following highlights:

Total Assets grew from $214.5 million to $249.7 million, an increase of $35.2 million or 16.4 percent. The largest component of assets is Loans to Members which grew by $37.4 million or 20.4 percent. The growth of the Credit Union is largely dependent on our ability to attract and maintain members by providing outstanding services. Member deposits, the number one source of equity, grew by 2.6 percent or $4.9 million, which is further evidence of

your commitment to the Credit Union. The final reflection of our Credit Union strength is the bottom line. During 2008, Total Revenues were $18.4 million while Total Expenses were $16.5 million, leaving us with a Net Income of slightly more than $1.8 million. When coupled with other recoveries, Net Worth rose to $22.8 million or 9.15 percent of Total Assets.

As we look ahead in 2009, a time of uncertainty and confusion lies before us. Freedom First is well prepared to help you meet those challenges and provide a solid foundation for your financial security. On behalf of myself and all Credit Union members, I want to express my thanks and appreciation to the management and staff for their hard work and diligence.

Frank P. Turk Treasurer

Treasurer’s Report

Board of directors

supervisory committeeNelson Shibley, ChairmanTim Sutphin, Vice ChairmanFrank Turk, TreasurerSusan Hall, SecretaryThomas ChapmanWeldon DinkelEmily Faye JewettRoger JournellHerb Scholz

Lois EversChairperson

Gerald BarnesIra HartmanJanette Markham

Treasurer’s Report / Board Of Directors & Supervisory Committee

Paul Phillipspresident/ceO

$0

$50

$100

$150

$200

$250

2008200720062005200420032002200120001999

ASSET GROWTH

$0

$50

$100

$150

$200

$250

2008200720062005200420032002200120001999

LOAN GROWTH

$0

$5

$10

$15

$20

25

2008200720062005200420032002200120001999

NET WORTH GROWTH

Financial Review

2007 2008*Before After

Adjustments AdjustmentsASSETSLoans (net) $183,524 $220,947 $220,947Cash and receivables 3,613 3,461 3,461Investments 11,492 5,828 5,828Other assets 15,918 19,416 18,079

Total Assets $214,547 $249,652 $248,315

LIABILITIES & NET WORTH Liabilities $ 3,564 $ 31,777 $ 31,820Member shares 190,052 195,030 195,030

Net Worth 20,931 22,845 21,465

Total Liabilities & Net Worth $214,547 $249,652 $248,315

2007 2008*Before After

Adjustments AdjustmentsINCOMEIncome from member loans $ 12,687 $ 14,028 $ 14,028Investment & other income 4,413 4,326 4,326Subsidiaries income 27

Total Income $ 17,100 $ 18,354 $ 18,381

EXPENSESOperating expenses $ 9,227 $ 10,839 $ 10,839Dividends & interest expenses 5,638 5,669 5,669Subsidiaries expenses 114NCUSIF impairment 1,293

Total Expenses $ 14,865 $ 16,508 $ 17,915

NET INCOME $ 2,235 $ 1,846 $ 466

STATEMENTS OFFINANCIAL CONDITION ($ Amounts in Thousands)

STATEMENTS OF INCOME ($ Amounts in Thousands)

* Consolidated results and financial position are adjusted to reflect the subsidiaries 2008 results and recognition of extraordinary charge from impairment of NCUSIF.

$20,000 Awarded in GrantsIn 2008, Freedom First awarded $20,000 in grants to the following organizations:

Women’s Resource Center of the New River Valley .............................................$5,000

Council of Community Services ..............................$5,000

New River Community Action ..................................$5,000

New River Valley Community Services.................................................$5,000

$7,000 Awarded in Scholarships• Charles Perkins Scholarship......... $1,000 each recipient

Rachel Gresham -Salem HSTiffany Renee Jordan -William Fleming High School

• Fritz Kehn Scholarship................... $1,000Destini Johnson -Staunton River High School

• Frank Turk Scholarship.................. $1,000Chris Fisher -Salem High School

• Tori Phillips Scholarship................ $1,000Kayla Gurley -Lord Botetourt High School

• Big Creek High School (Big Creek, WV) Scholarship ......... $500 each recipientAshley SheltonWhitney KoboskiAshley TillerScotty Hagerman

Freedom to Make a DifferenceOn Monday, October 13th, 2008, nearly 120 Freedom First employees volunteered in the local community.

Our staff lent a hand at the Rescue Mission, Greenvale School, Council of Community Services, New River Valley Community Action Clothing Bank, and Women’s Resource Center. At Freedom First, we believe we have an obligation to make a difference in our community.

Mailing address

P.O. Box 1999Salem, VA 24153

Branches

Blacksburg 1204 South Main Street Virginia Tech, Squires Student Center, College Avenue

Christiansburg 417 North Franklin Street

Roanoke 2125 Colonial Avenue, Towers Shopping Center 5102 Williamson Road Steel Dynamics Roanoke Bar Division (closed to the public)

Salem 1235 Electric Road 1900 Electric Road, Lewis Gale Hospital

Vinton 203 Virginia Avenue

OperatiOns center

5240 Valleypark DriveRoanoke, VA 24019

(540) 389-0244 local(866) 389-0244 toll-free

www.freedomfirst.com

FreedOM First insurance

6375-A Peters Creek RoadRoanoke, VA 24019

(540) 362-9781

First cOMMunity title

2847 Penn Forest Boulevard Bldg. D, Suite 203Roanoke, VA 24018

(540) 777-2550