Ron Westad
President/CEO

State of the Credit Union

2009 Third Quarter Update

While there are many positive reports in the media about signs of an impending economic recovery, that recovery is not far enough along to improve the financial conditions for a large number of our members. As we anticipated, our third quarter results came close to the breakeven point, but ultimately fell just short with a net loss of $5.6 million. The source of our challenges continues to be loan losses - as many of our members struggle through loss of wages, loss of employment, and other financial hardships.

While we remain hopeful of an economic recovery for everyone’s sake, we also remain committed to taking the necessary actions within our direct control to mitigate credit risk, enhance revenues, reduce expenses, and increase efficiencies. Recent actions have included changes to our loan underwriting criteria, notifying members of pending changes in terms to our Visa credit card accounts, increasing certain fees, closing select branches, foregoing increases in employee compensation, reducing executive compensation and benefits, and reducing dividend/interest rates paid on deposits to cite a few examples.

Of course, depending on your own circumstance, one or more of these actions may be viewed negatively or have an adverse impact. And while we endeavor to avoid such steps, simply put, these actions are necessary to strengthen the financial health of this not-for-profit cooperative. We will continue to take further actions as they become necessary, which may include further consolidation of our branch network.
Other financial results from this period include:

2009 year-to-date net operating loss of $42 million, as compared to $51 million loss for the same period in 2008
Total capital and reserves of $125 million, which is equivalent to 8.22% of total assets

Ultimately, our success is, was, and always will be tied to the financial health and success of our members – and we remain committed to serving your financial needs. Thank you again for your membership/ownership, and for your commitment to Arizona Federal Credit Union.

Sincerely,

Ronald L. Westad
President & CEO