Sample Financial Statements Section No.

900

Page No.
PURPOSE 1
FREQUENCY OF REPORT DISTRIBUTION 2
REPORTS REQUIRED BY THE NCUA 2
FORMAT OF FINANCIAL REPORTS 3
DESCRIPTION OF FINANCIAL REPORTS 3
STATEMENT OF FINANCIAL CONDITION 3
Figure 9-1 4
Figure 9-2 5
STATEMENT OF INCOME 6
Classifying Outstanding Loans 6
Other Loan Information 6
Miscellaneous Information 6
SUPPORTING SCHEDULES FOR FINANCIAL
STATEMENTS 6
Figure 9-3 7
STATEMENT OF CHANGES IN MEMBERS’ EQUITY
(EXCLUDING SHARES) 8
STATEMENT OF COMPREHENSIVE INCOME 8
Figure 9-4 9
Figure 9-4A 10
INSTRUCTIONS FOR PREPARING REQUIRED
FINANCIAL STATEMENTS 11
STATEMENT OF CASH FLOWS 19
NOTES TO THE FINANCIAL STATEMENTS 19
Illustration of The Use of Notes To The Financial
Statements 20
Figure 9-5A 21
Figure 9-5B 22
Figure 9-5C 23
Figure 9-5D 24
OUR FCU NOTES TO FINANCIAL STATEMENTS,
DECEMBER 31, 200X 25

PURPOSE tion at their regular meetings. Suggested

statements include:
Financial reports disclose a summary of the
credit union's financial condition and results of • Statement of Financial Condition,
operations as of a specific date or time period
to the members and other users. Display a • Statement of Income, and
copy of the reports so members may review
the financial condition of their credit union, and • Statement of Changes in Members’ Equity.
potential members can make an informed de-
cision on the likelihood of future dividends.
Submit copies to the directors for considera-

December 2002 Accounting Manual for Federal Credit Unions

Page 1
 Section 900 Sample Financial Statements

In addition, credit unions who obtain an inde- Statement of Cash Flows and Statement of
pendent accountant’s opinion on their financial Comprehensive Income or alternative presen-
statements must display annually the audited tation of comprehensive income.

FREQUENCY OF REPORT DISTRIBUTION

NAME OF REPORT FREQUENCY APPLICABLE TO

Statement of Financial Condition Monthly All FCUs

Statement of Income Monthly All FCUs

Statement of Changes in Mem- Quarterly or at the end of All FCUs

bers’ Equity the regular share account
dividend period –- if the
dividend period is longer
than quarterly

Statement of Cash Flows At least annually All FCUs who obtain an

independent accountant’s
opinion on their financial
statements

Statement of Comprehensive In- At least annually All FCUs who obtain an

come (or alternative presentation) independent accountant’s
opinion on their financial
statements

REPORTS REQUIRED BY THE NCUA tain an informational return. NCUA is no

longer obligated to file a consolidated Form
Federal credit unions submit periodic Call Re- 990. The Federal Credit Union Act (FCUA)
ports to the NCUA as and when the Admini- exempts federal credit unions from federal,
stration may require. The NCUA Rules and state, and local income tax. The tax exemp-
Regulations specify when reports are required. tion falls under Section 501(c)(1) of the Inter-
nal Revenue Code. Organizations falling
Federal Credit Unions also post financial under the 501(c)(1) code exemption do not
statements at the credit union for members or have to file an informational return or make
may issue financial statements in its annual such a return available for inspection.
report. For credit unions under $10 million in
assets, these financial statements should fol-
low the prescribed form herein, a similar for-
mat, or be prepared consistent with GAAP.

Individual federal credit unions are not re-

quired to file statements with the IRS or main-

December 2002 Accounting Manual for Federal Credit Unions

Page 2
Sample Financial Statements Section No. 900

FORMAT OF FINANCIAL REPORTS presentation. Notes should include descrip-

tions of the transactions’ effects on the finan-
NCUA does not provide financial statement cial condition. Also, the statement should
forms but suggest these standard formats to identify by note or otherwise:
ease submission of financial reports other
than the Call Report. These formats include: • All significant accounting principles;

• Statement of Financial Condition, • Restricted cash separately from unre-

stricted cash;
• Statement of Income, and
• Nature and extent assets are pledged as
• Statement of Changes in Members’ Equity. collateral on borrowed funds;

The Supporting Schedules for Financial • Nature and extent specific liabilities have a
Statements illustration enables credit unions to preferred lien on assets;
provide a further breakdown of line items on
the Statement of Financial Condition and/or • Contingent losses;
the Statement of Income.
• Specific details relating to pension plans;
For the Statement of Cash Flows and the
Statement of Comprehensive Income, refer to • The number and aggregate dollar amount
the illustrative statements included at the end of member business loans; and
of this section. Management should work with
your independent accountant to develop an • Other significant events or activities that
appropriate format. Credit unions may adopt a will provide full and fair disclosure.
report format designed to satisfy their particu-
lar needs provided it accomplishes full and fair The amount entered for "Undivided Earnings"
disclosure. will be the account balance after the following
entries are made:

DESCRIPTION OF FINANCIAL RE- 1) Closing the income and expense accounts

PORTS into the Net Income (Loss) account, and

STATEMENT OF FINANCIAL CONDITION 2) Transferring the balance of the Net Income

(Loss) account to Undivided Earnings.
The Statement of Financial Condition, shown
in Fig. 9-1 reports the credit union’s financial At the close of an accounting period, prepare
condition as of a given date (month end). It is the Statement of Financial Condition from the
organized into three sections: assets (prop- post-closing trial balance since this trial bal-
erty), liabilities (obligations), and shares and ance reflects the closing entries made to the
equity (ownership). Total assets must equal Undivided Earnings account.
total liabilities and equity.
If management elects not to close its account-
Statement preparers must follow basic ac- ing records at the close of a dividend period,
counting concepts and measurement princi- prepare the reports with interim adjustments
ples and standards. Include notes (if made on a work sheet basis. This is neces-
necessary, on a separate attachment) to iden- sary to give effect to the entries 1) and 2) as
tify any material transactions of an irregular
nature and/or any significant changes in ac-
counting practices adopted since the previous

Accounting Manual for Federal Credit Unions December 2002

Page 3
 Figure 9-1: Statement of Financial Condition

STATEMENT OF FINANCIAL CONDITION AS OF December 31, 200X

Internal Use Only 70089 OUR FEDERAL CREDIT UNION
Report Type Charter # or Ins. Cert. #

ASSETS LIABILITIES AND EQUITY

LOANS, CASH and Dollar Acct. Dollar Acct.
INVESTMENTS Amount Code LIABILITIES Amount Code
1. Cash and cash equivalents 53,778 10. Borrowed Funds Maturity <1 yr. Maturity > 1 yr.
Cash and due from banks 53,778 Notes Payable
Federal funds sold Reverse Repo
Short-term, interest-bearing funds in other financial institutions Other
Maturity
2. Securities 1 yr. or less Maturity > 1 yr. 11. Accrued Dividends/Interest Payable
18,658
Trading Accounts 12. Other Accrued Expenses and Accounts Payable 1,777
Available-for-Sale TOTAL LIABILITIES 1,777
Held-to-Maturity 18,658 18,658 13. All Other Liabilities and Contingencies
3. Other Investments $1,051,598 $1,051,598 14. Members’ Shares and Savings Accounts [Sum a) through f)] 1,632,158
Shares, Deposits & CDs in Corporates 18,642 a) Share Certificates
Shares, Deposits & CDs in CUs, Banks, and S&Ls 1,032,956 b) Share draft accounts
Shares in Central Liquidity Facility c) IRA/Keogh & Retirement Accounts
Other d) Other Member Savings 1,632,158
4. Loans Held-for-Sale e) Member’s deposits (SCU’s only)
5. Loans Receivable, Net 852,725 f) Non-member savings
Commercial and Agricultural EQUITY
RE to Members (first lien), original maturity > 12 Years 127,013 15. Reserves 47,982
Fully Secured 92,630 Regulatory/Statutory Reserves 47,982
Other Loans to Members 634,718 Investment Valuation Reserve (SCU’s Only)
Total Loan to Members [Sum i) through iv)] 854,361 Special Reserves
All Other Loan Accounts (not included above) Other Reserves
(Less) Allowance for Loan Losses 1,636 16. Uninsured Secondary Capital (CDCUs)
OTHER ASSETS 17. Undivided Earnings (Post-Closing) 315,753
6. NCUSIF Deposit 15,108 18. OCI--Accumulated Unrealized G/L on AFS
7. Land and Buildings, Net TOTAL MEMBER’S EQUTIY
8. Other Fixed Assets, Net 3,555 TOTAL LIABILITIES AND EQUITY $1,997,670
9 All Other Assets 2,248 Fair value of Held-to-Maturity Securities
TOTAL ASSETS [Sum bolded items] $1,997,670 U.S. Government Obligations
Federal Agency Securities
Other HTM Securities
Figure 9-2: Statement of Income

STATEMENT OF INCOME FOR THE PERIOD ENDED December 31, 200X

Acct.
Internal Use Only Code 70089 OUR FEDERAL CREDIT UNION
Report Type No. 100 Charter # or Ins. Cert. # Refer to accompanying Statement of Undivided Earnings for change in Undivided Earnings

INTEREST INCOME Month TD Qtr-TD YTD CLASSIFICATION OF LOANS O/S

19. Interest on Loans (Gross) 3,422 10,266 41,062 Degree of Delinquency Dollars Number
20. Less: Interest Refunded 52. Current and < 2 mons.
21. Income from Trading Securities 53. 2 to less than 6 mons.
22. Income from Debt Securities 2,195 6,586 26,343 54. 6 to less than 12 mons.
23. Other 55.. 12 mons. and over54
24. Total Interest Income [Sum above lines) 5,617 16,852 67,405 56. Total Loans [Sum 51.-54.]
INTEREST EXPENSE MISCELLANEOUS INFORMATION
25. Dividends 2,553 7,659 30,637 57. Number of members at end of month 597
26. Interest on Borrowed Money 57 58. Number of potential members 1,800
27. Total Interest Expense [Total Previous Two Lines] 2,553 7,659 30,637 OTHER LOAN INFORMATION
28. Net Interest Expense [Total Interest Income less above line] 3,064 9,193 36,768 59. Loans sold and being serviced
29 Less: Provision for Loan Losses 60. RE loans made during year
30. Net Interest Income After PLL 3,064 9,193 36,768 61. Total loans made during year 302,369 79
OTHER NON-INTEREST INCOME 62. Loans since organization
31. Net gain (loss) on sale of available-for-sale securities 63. Total loans charged-off YTD
32. Net gain (loss) on trading securities 64. Recovery of loans charged-off YTD
33. Member service fees 65. Net loans charged-off YTD
34. Loan servicing fees
35. Insurance commissions We certify, to the best of our knowledge and belief, this
36. Net gains on sale of loans statement and the related statements are true and correct
37. NCUSIF Refund and present fairly the financial position and the results
38. Other Income 11,875 11,875 of operations for the periods covered.
39. Non-Interest Income (Total 30.-37.) 11,875 11,875
NON-INTEREST EXPENSES
40.. Employee Compensation and Benefits 819 2,459 9,835
41. Travel & Conference
42. Office Occupancy Expense 448 1,344 5,378 Certified Correct by: Telephone No.
43. Office Operation Expenses 97 290 1,162
44. Educational and Promotional 32 97 388
45. Loan Servicing Expense
46. Professional & Outside
47. Member Insurance 265 796 3,183 Treasurer/Manager Date
48. Operating Fees (Exam) 78 233 934
49. Miscellaneous Operating 73 217 870
50. Total Operating Expense [Total Previous 10 Lines] 1,812 5,436 21,750
51. NET INCOME 1,252 15,632 26,893 President/Authorized Officer Date
5
Section 900 Sample Financial Statements

described in the preceding paragraph. Then expenses, gains and losses accounts for the
prepare the financial reports in the same man- period identified in the column heading.
ner as though the books were closed.
Classifying Outstanding Loans
STATEMENT OF INCOME
Obtain this information from the Schedule of
The Statement of Income, shown in Fig. 9-2 Delinquent Loans and the Statement of Finan-
reflects all income, expenses, gains, and cial Condition. This portion of the Statement
losses. It segregates net interest income, of Income provides a breakdown of the num-
other operating income and expense, and non- ber and amount of delinquent loans out-
operating income and expense. The provision standing.
for loss expenses is applied to net interest in-
come. Other Loan Information

Three columns are provided on the form for This portion of the Statement of Income
recording income, expenses and gains or discloses a breakdown of the number and
losses: amount of:

1) Current month, • Loans sold and serviced by the credit un-

ion;
2) Quarter-to-date, and
• Real estate loans made in the current year;
3) Year-to-date.
• Total loans made in the current year; and
If the books are closed just once in a year,
only the Year-to-Date column reports amounts • Total loans made since the credit union’s
of income, expenses, gains, and losses. If the organization.
books are closed quarterly or at the end of the
regular share account dividend period, or if the Also, it reports the total amount of charged-off
dividend period is longer than quarterly, the loans, recoveries, and net charged off loans
Year-to-Date column reports the calendar year year-to-date.
cumulative totals through the date the books
were last closed plus the amounts of income, Miscellaneous Information
expenses, gains, and losses after the last clos-
ing date. This section reports the number of members of
record and the number of potential members
Report operating expenses in the Year-to-Date as of the month end.
column based upon totals for each grouping of
expense accounts. For example, the single SUPPORTING SCHEDULES FOR FINAN-
reported amount for Office Occupancy Ex- CIAL STATEMENTS
penses includes the total of expense accounts
such as rent, utilities, real estate taxes, build- Use this form, shown in Fig. 9-3 to provide ad-
ing maintenance, etc. ditional information for any line item on either
the Statement of Financial Condition or the
Income and expenses in the current Month Statement of Income. For example, Cash may
and Quarter-to-Date columns represent the consist of Cash-Checking Accounts, Petty
net postings for the current month and the cur- Cash, and Cash Fund. If this
rent quarter-to-date as shown in the income,

December 2002 Accounting Manual for Federal Credit Unions

Page 6
Sample Financial Statements Section No. 900

Figure 9-3: Supporting Schedules for Financial Statements

SUPPORTING SCHEDULES FOR

70089 FINANCIAL STATEMENTS December 31, 200X
Charter # or Ins. Cert. # Date
OUR FEDERAL CREDIT UNION

Ref. Acct. Balances

Schedule No. Account Title No. Debit Credit

A 1. Cash-Checking Accounts 49,028

Petty Cash 250
Cash Fund 4,500
Balance 53,778

B 6. Furniture and Equipment 5,750

Allowance for Furniture and Equip-
ment 2,195
Balance 3,555

K 33. Rent 4,250

Utilities 1,000
Other Office Occupancy Expenses 128
Balance 5,378

Etc.

Accounting Manual for Federal Credit Unions December 2002

Page 7
Section 900 Sample Financial Statements

is the first supporting schedule, label it Sched- Several formats are permitted for the presen-
ule A on the Statement of Financial Condition tation of this statement. For illustrative pur-
and on the Supporting Schedules for Financial poses, Fig. 9-4 includes the presentation of
Statements. Refer to the Statement of Finan- comprehensive income within the Statement of
cial Condition. The account number is the Member’s Equity. Use this format or a permis-
general ledger account number. Use the re- sible alternative format to report comprehen-
maining two columns for balances or appropri- sive income. Management may confer with an
ate dollar amounts. independent accountant concerning the best
format for the credit union.
STATEMENT OF CHANGES IN MEMBERS’
EQUITY (EXCLUDING SHARES) Comprehensive income is “the change in
credit union’s equity (net assets) during a pe-
This statement is shown in Fig. 9-4. Prepare riod, from transactions and other events and
and display this statement with the regular fi- circumstances from non-owner sources (ex-
nancial reports at least quarterly or at the end cluding shares). It includes all changes in eq-
of the regular share account dividend period, if uity, except those resulting from investments
the dividend period is longer than quarterly. by owners (excluding shares) and distributions
Management may also incorporate this state- to owners (excluding share dividends).” An
ment with other financial reports at any time. example of a component of comprehensive
income is the change in Accumulated Unreal-
The statement reports changes in members’ ized Gains or Losses on Available-for-Sale
equity (excluding shares) during the reporting Securities.
period. It shows the total increases and total
decreases in each equity (ownership) account. To avoid double-counting items displayed as
Base the report on an analysis of the debits part of other comprehensive income in the pe-
and credits during the reporting period in cer- riod, or earlier periods, preparers must make
tain "Equity" general ledger. various reclassification adjustments to com-
prehensive income. For example, the pre-
STATEMENT OF COMPREHENSIVE parer must deduct gains on investment
INCOME securities realized and included in net income
of the current period through other compre-
As stated in Section 200 of this manual, fed- hensive income of the period when they are
eral credit unions with an annual opinion audit included in net income –- because they are
by an independent accountant must prepare also included in other comprehensive income
the Statement of Comprehensive Income at as unrealized holding in the period the gains
least annually. Management may prepare it arose. This reclassification adjustment will
more frequently, but then an annual report avoid double-counting the gains in compre-
should be prepared as of each year-end. hensive income.
Federal credit unions without an opinion audit
may also prepare this statement.

December 2002 Accounting Manual for Federal Credit Unions

Page 8
Figure 9-4: Statement of Changes in Members’ Equity (Excluding Shares)
(FCU 109D)

STATEMENT OF CHANGES IN MEMBERS’ EQUITY (Excluding Shares)

FOR THE PERIOD ENDED December 31, 200X
OUR FEDERAL CREDIT UNION 70089
Charter # or Ins. Cert. #

UNAPPROPRIATED
TOTAL TOTAL COMPREHENSIVE INCOME APPROPRIATED EARNINGS EARNINGS
COMPREHENSIVE ACCUMULATED OTHER REGULAR OTHER UNDIVIDED EARNINGS
INCOME COMPREHENSIVE INCOME RESERVES RESERVES (ACCT. NO. 940)
(ACCT. 931)

64. Beginning balance 336,842 0 47,982 0 288,860

Comprehensive income:
65. Net income 26,893 26,893 26,893
66. Other comprehensive income
a) Unrealized gain or loss on AFS
securities, net of reclassification
adjustment (below)1 0 0
b) Other comprehensive income 0 0
67. Comprehensive income: 26,893 26,893

68. Transfers:
a) Required Transfer to Regular -- -- --
Reserve
b) Provision for Loan Losses -- -- --
c) Other Transfers -- -- --
d) Net Transfers 0 0 0

69. Uninsured Secondary Capital (CDCUs) -- --

70. Ending Balance 363,735 0 47,982 0 315,753

FCU 109D

1
Disclosure of reclassified amount:
Unrealized holding gains and losses during period 0 Figure 3-4A better illustrates comprehensive income effect; This figure includes no comprehensive income
Less: reclassification adjustment for amounts adjustments.
included in net income 0
Net unrealized gains/losses on securities 0

9
Figure 9-4A: Statement of Changes in Members’ Equity (Excluding Shares) (Illustrating Comprehensive Income)

STATEMENT OF CHANGES IN MEMBERS’ EQUITY (Excluding Shares)

FOR THE PERIOD ENDED December 31, 200X
OUR FEDERAL CREDIT UNION 70089
Charter # or Ins. Cert. #

UNAPPROPRIATED
TOTAL TOTAL COMPREHENSIVE INCOME APPROPRIATED EARNINGS EARNINGS
COMPREHENSIVE ACCUMULATED OTHER REGULAR OTHER UNDIVIDED EARNINGS
INCOME COMPREHENSIVE INCOME RESERVES RESERVES (ACCT. NO. 940)
(ACCT. 931)

66. Beginning balance 336,842 0 47,982 0 288,860

Comprehensive income:
67. Net income 26,893 26,893 26,893
68. Other comprehensive income
a) Unrealized gain or loss on AFS
securities, net of reclassification
adjustment (below)1 (7,500) (7,500)
b) Other comprehensive income 0 0
69. Comprehensive income: 19,393 19,393

70. Transfers:
a) Required Transfer to Regular -- -- --
Reserve
b) Provision for Loan Losses -- -- --
c) Other Transfers -- -- --
d) Net Transfers 0 0 0

71. Uninsured Secondary Capital (CDCUs) -- --

72. Ending Balance 356,235 0 47,982 0 308,253

1
Disclosure of reclassified amount:
Unrealized holding gains and losses during period (7,500)
Less: reclassification adjustment for amounts
included in net income 0
Net unrealized gains/losses on securities (7,500)
Sample Financial Statements Section No. 900

INSTRUCTIONS FOR PREPARING THE STATEMENTS OF FINANCIAL CONDITION,

STATEMENT OF INCOME, SUPPORTING SCHEDULES FOR FINANCIAL STATEMENTS,
AND STATEMENT OF CHANGES IN MEMBERS’ EQUITY.
Refer to Figures 9-1, 9-2, 9-3 and 9-4.

ASSETS

ITEM TITLE and DESCRIPTION

1- Cash and cash equivalents. Cash on hand, petty cash, checking accounts; federal
funds sold; and short-term, interest-bearing funds in other financial institutions, etc.

2- Securities.

Trading Securities. The fair value of securities held principally for sale in the near
term (within hours or days).

Available-for-Sale Securities. The fair value of securities not meeting the GAAP-
criteria for held-to-maturity or trading (sale within months or years).

Held-to-Maturity Securities. The amortized cost of investments management has the

positive intent and ability to hold to maturity. Exclude prepaid securities or securities
otherwise settled in such a way management would not recover substantially all of its
recorded investments.

3- Other Investments. Shares, Deposits & CDs in Corporates; CUs, Banks, and S&Ls;
Shares in CLF; and Other Deposits not meeting the definition of a cash equivalent (ma-
turity generally greater than 3 months.)

Shares, Deposits, and Certificates Invested in Corporate Central Credit Unions.

The total amount of shares, deposits, and certificates invested in Corporate Central
Credit Unions. Do not include special share accounts established in a corporate cen-
tral credit union to fund the corporate central’s Central Liquidity Facility stock subscrip-
tion; report such accounts in item 4-d. Add the amounts reported in columns: “Maturity
1 Yr. Or Less” and “Maturity Greater Than 1 Yr.” to equal the amount in “Dollar
Amount”.

Shares, Deposits, and Certificates in Other Credit Unions, Banks, S&Ls, and Mu-
tual Savings Banks. The amount of outstanding shares, deposits, and certificates of
other credit unions, banks, S&Ls and MSBs. Add the amounts reported in columns:
“Maturity 1 Yr. Or Less” and “Maturity Greater Than 1 Yr.” to equal the amount in “Dol-
lar Amount”.

Accounting Manual for Federal Credit Unions December 2002

Page 11
Section No. 900 Sample Financial Statements

Shares in Central Liquidity Facility. The total amount of shares invested directly or
indirectly in the Central Liquidity Facility. Credit unions with access to the Central Li-
quidity Facility (CLF) through a CLF Agent should include the amount of their “CLF
Stock Reimbursement” (a special share account in a corporate central to fund the cor-
porate central’s CLF stock subscription). A corporate central credit union that is a
member of a CLF Agent Group should include the amount it invested in its Agent
Group Representative (AGR) to reimburse the AGR for purchasing CLF stock on its
behalf.

All Other Investments. All investments (not securities) not reported above. Include
loans to other credit unions, investments and loans to CUSOs. Do not include CLF in-
vestments or NCUSIF deposit.

4. Loans Held for Sale. The value of loans either identified for sale at origination or sub-
sequently, for which there has been a decision to sell.

5. Loans Receivable, Net. The value of portfolio loans outstanding less the Allowance
for Loan Losses.

Commercial (Business Loans) and Agricultural. Report the total amount of loans
over $50,000 (aggregate to one borrower or associated member) for business, inven-
tory, and commercial purposes; plus all loans for the purpose of farming, raising live-
stock, or the purchase of farm equipment or loans secured by farmland, equipment or
crops.

Real Estate Loans. Report the total amount of real estate loans to members out-
standing as of the report date. Report only those loans with original maturities in ex-
cess of 12 years.

Share Secured Loan Balances (Fully Secured by Shares). Report the amount of
loans to members outstanding as of the report date that are completely secured by
pledged shares.

All Other Loans to Members. This amount should be the residual of loans to mem-
bers after deducting commercial and agricultural loans, real estate loans, and share
secured loan balances fully secured by shares have been deducted. Include loans
classified as collateral in process of liquidation.

Total Loans to Members. All loans to members (including commercial loans, agricul-
tural loans, real estate loans and share secured loans) outstanding as of the report
date. Do not include loans to other credit unions. Report these in the investments sec-
tion.

All Other Loan Accounts. All other loan accounts such as loans purchased, in whole
or in part, from other credit unions, any note or contract receivable resulting from the
sale of assets and similar accounts, if any. Include loans subject to repurchase
agreements and nonmember loans. Do not include loans to other credit unions. Re-
port these in the investment section.

December 2002 Accounting Manual for Federal Credit Unions

Page 12
Sample Financial Statements Section No. 900

(Less) Allowance for Loan Losses. This item, if applicable, represents the amount
estimated by management for existing probable losses inherent in the loan portfolio.

6- NCUA Share Insurance Capitalization Deposit. The outstanding balance of the

credit union’s NCUA Share Insurance Deposit.

7- Land and Building (Net). The amount of land and building less depreciation on build-
ing, if any.

8- Other Fixed Assets, Net. All other fixed assets such as furniture and fixtures, lease-
hold improvements, less related depreciation items, if any

9- All Other Assets. All other assets of the credit union not included in the above items.
Includes such items as prepaid expenses and insurance, accounts receivable, accrued
income, etc.

Total Assets. Represents the sum of the amounts in items 1. through 9. bolded
above.

LIABILITIES/SAVINGS EQUITY

10- Borrowed Funds.

Notes Payable. The amount of the credit union’s liability for borrowed funds. Add the
amounts reported in columns: “Maturity 1 Yr. Or Less” and “Maturity Greater Than 1
Yr.” to equal the amount in “Dollar Amount”.

Reverse Repurchase Transactions. The outstanding balance of funds borrowed

from any source using securities as collateral. Add the amounts reported in columns:
“Maturity 1 Yr. Or Less” and “Maturity Greater Than 1 Yr.” to equal the amount in “Dol-
lar Amount”.

Other Borrowed Funds. All other borrowed funds outside the classifications above.
Include “Accrued Interest Payable” because it represents the amount of interest ac-
crued on all notes and borrowings

11- Accrued Dividends/Interest on Shares/Deposits Payable. The total amount of divi-

dends/interest on shares/deposits payable declared, and not paid, for the last dividend
period.

12- Other Accrued Expenses and Accounts Payable. All accounts payable such as un-
distributed payments, undistributed payroll deductions, etc.

Total Liabilities. Represents the sum of the amounts in items 10. through 12. bolded
above.

13- All Other Liabilities and Contingencies. All liability accounts not shown separately
above. Include such items as taxes payable, accrued expenses, deferred income, and
Unapplied Data Processing Exceptions, etc.

Accounting Manual for Federal Credit Unions December 2002

Page 13
Section No. 900 Sample Financial Statements

14- Total Savings/Shares/Deposits. The sum of amounts held in all sav-

ings/shares/deposits accounts of members and nonmembers. Includes share certifi-
cates, share draft accounts, public unit accounts, retirement plans, and special share
accounts such as Christmas and vacation accounts, if any. The sum of a) through f)
below.

a. Share Certificates and Time Deposits. The total amount of regular, money mar-
ket, jumbo, and other share certificates and time deposits held by credit union
members, if any. Add the amounts reported in columns: “Maturity < 1 Yr.” and
“Maturity > 1 Yr.” to equal the amount in “Dollar Amount”.

b. Share Draft Accounts. The total amount of share draft accounts held by credit
union members.

c. IRA/Keogh and Retirement Accounts. The amount of member funds deposited

for retirement purposes under a trust or custodial agreement.

d. Other Member Savings. Total member savings excluding share draft accounts,
share certificates, member deposits, and IRA/Keogh and retirement accounts.

e. Member Deposits. The amount of deposits (not shares) of members. For use by
state-chartered credit unions only.

f. Nonmember Savings. The total amount of nonmember deposits. Primarily appli-

cable to Community Development Credit Unions.

15- Reserves.

Regular/Statutory Reserve. The statutory (regular) reserve balance.

Investment Valuation Reserve (SCU’s only). Reserves to cover the excess of

book value over market value for held-to-maturity securities and investments (not
securities) other than those authorized for federal credit unions by Section 107 of
the FCUA. For use by state-chartered credit unions only.

Special Reserves. Any other reserves required by regulation, special agreement,

or other of the credit union’s supervisory authority.

Other Reserves. The sum of other reserve accounts created by management

such as reserve for contingencies, appropriated undivided earnings, etc.

16- Uninsured Secondary Capital. For low-income (community development) designated

credit unions only. The amount of secondary capital accounts accepted from organiza-
tional or institutional investors.

17- Undivided Earnings, Post-Closing. The total amount of accumulated income or sur-
plus. As a post-closing amount, it includes the net income (loss) from operations.

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Sample Financial Statements Section No. 900

18- Accumulated Unrealized Gain/Losses on Available-for-Sale Securities. The ac-

cumulated unrealized and unrecognized gains and losses (net) on securities classified
as available-for-sale.

Total Equity. Represents the sum of amounts in items 14 through 18.

Total Liabilities and Equity. Represents the sum of Total Liabilities and Total Equity
plus item 13.

Fair Value Of Held-To-Maturity Securities.

U.S. Government Obligations. The fair value of U.S. Government Obligations

management has the intent and ability to hold to maturity.

Federal Agency Securities. The fair value of Federal Agency Securities man-
agement has the intent and ability to hold to maturity.

All Other Investments. Identify all other securities in HTM with fair values less
than the booked amounts and report the fair value for the investment’s manage-
ment has the intent and ability to hold to maturity.

OPERATING INCOME

19- Interest on Loans (Gross). The total amount of income from interest on loans.

20- (Less) Interest Refunded. The total amount of interest refunded.

21- Income From Trading Securities. The total amount of income earned on trading se-
curities (excluding disposition gains or losses).

22- Income from Debt Securities. The total amount of income earned on debt securities,
available-for-sale and held-to-maturity.

23- Other Interest Income. Miscellaneous interest income not reported above.

24- Total Interest Income. Sum of items 18 through 23 above.

INTEREST EXPENSE

25- Dividends. The actual or estimated amount of dividends for the reporting period.

26- Interest on Borrowed Money. The interest expense for borrowed money.

27- Total Interest Expense. Sum of items 25 and 26.

28- Net Interest Income. The gross profit of the credit union (item 24 minus item 27).

29- Provision for Loan Loss. The current period Provision for Probable Losses and re-
lated costs on loans and other loan receivables.

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Section No. 900 Sample Financial Statements

30- Net Interest Income After Provisions for Losses. Gross profit less Provisions for
Loan Losses (item 28 minus 29).

OTHER NON-INTERST INCOME

31- Net Gain (Loss) on Available-for-Sale Securities. The amount the gain or loss on
disposition of available-for-sale securities.

32- Net Gain (Loss) on Trading Securities. The amount of gain or loss on disposition of
trading securities.

33- Member service fees. Service fees collected from members, excluding those on loan
servicing.

34- Loan Servicing fees. Fees collected on the servicing of loans.

35- Insurance commissions. Commissions earned on permissible insurance services to

members.

36- Net gains on sale of loans. The amount of gain or loss on disposition of loans.

37- NCUSIF Refund. Refunds received as authorized by the NCUA Board on the NCUSIF
deposit.

38- Other Income. All operating income other than interest on loans, income from invest-
ments, and gain or loss on trading accounts.

39- Non-Interest Income. Total 31.-38.

NON-INTERST EXPENSE

40- Employee Compensation and Benefits. Compensation is the total amount of sala-
ries paid to credit union employees, including the treasurer, if paid. Also includes
sponsor reimbursement when employees are on the sponsor company’s payroll.
Benefits are all expenses relating to employee benefits. Includes pension plan costs,
employer’s social security taxes, unemployment compensation taxes, and other bene-
fits provided to employees.

41 Travel and Conference Expense. The amount of authorized expenses incurred by

employees and officers for travel and attendance at conferences and other meetings.

42- Office Occupancy Expense. All expenses relating to office occupancy including rent,
utilities (except telephone), building depreciation, if owned, real estate taxes, and
leasehold improvements amortization.

43- Office Operation Expense. All expenses relating to office operations including com-
munications, stationery and supplies, insurance, furniture rental and/or maintenance,
depreciation, bank service charges, etc.

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Sample Financial Statements Section No. 900

44- Educational and Promotional Expense. Includes advertisements or notices in

newspapers, periodicals, radio, or television; publicity for member education; and other
promotional expenses.

45- Loan Servicing Expense. All expenses incurred in servicing loans such as collec-
tions, credit reports, recording fees, chattel lien insurance, etc.

46- Professional and Outside Services. Expenses incurred for such items as legal fees,
audit fees, accounting services, and management and consultant fees.

47- Member Insurance. The cost of members’ insurance, including premiums paid for life
savings insurance, annual share insurance premium and borrowers protection insur-
ance.

48- Operating Fees. The NCUA annual operating fee, state supervision fee, and the cost
of periodic examinations assessed by the supervisory agency, if any.

49- Miscellaneous Operating Expense. Includes all miscellaneous operating expenses

not separately listed.

50- Total Operating Expenses. Sum of all operating expenses. Items 39 through 50.

51- Net Income (item 30 plus items 39 and minus 50). The net profit or loss.

CLASSIFICATION OF LOANS OUTSTANDING

52-56 Classification of Loans Outstanding. The number and amount of delinquent loans:
current and less than 2 months delinquent; 2 and less than 6 months delinquent; 6 and
less than 12 months delinquent; and 12 months and more delinquent. Obtain informa-
tion on delinquent loans from a delinquent loan schedule as of the report date.

57- Number of Members at End of Month. The actual number of members on record.
Do not enter the number of accounts.

58- Number of Potential Members. The number of actual members plus persons in the
field of membership who have not joined the credit union. If utilizing field of member-
ship data stated in terms of families, use an average of three persons per family to es-
timate the total individual potential membership.

59- Loans Sold and Being Serviced by the Credit Union. The number and outstanding
dollar amount of loans sold to others serviced by the credit union.

60- Real Estate Loans Made During Current Year. The number and dollar amount of
real estate loans (first liens with original maturities over 12 years) made during the cur-
rent year.

61- Total Loans Made During Current Year. The total number and amount of loans
made during the current year.

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Section No. 900 Sample Financial Statements

62- Loans since organization.

63- Total Loans Charged Off Year-to-Date. The total amount of loans charged off year-
to-date.

64- Recoveries on Loans Charged Off Year-to-Date. The total amount of recoveries on
previously charged off loans year-to-date.

65- Net Loans Charged Off Year-to-Date. Net charge offs year-to-date; item 63 less item
62. This amount may be negative.

MEMBER’S EQUITY AND COMPREHENSIVE INCOME

66- Members’ Equity Balance, Beginning of Period. The beginning of period balances
for the accumulated other comprehensive income, statutory reserve, other reserves,
and undivided earnings. These balances may be translated from the previous period’s
Statement of Financial Condition, line items 15, 16, 17, and 18. Although NCUA con-
siders shares part of equity, they are excluded in consideration of the Changes in
Members’ Equity (excluding shares).

67- Net Income/Loss. The amount shown on the Statement of Income, Line item 51.

68- Other Comprehensive Income.

a. Unrealized gain or loss on AFS securities, net of reclassification adjustment.

Accumulated unrealized gains or losses corresponding to available-for-sale securi-
ties. Line item 68 should equal line item 18 on the Statement of Financial Condi-
tion.

b. Other Comprehensive Income.

69- Comprehensive Income. Total of line item 51, net income, and line item 68 b. other
comprehensive income. Includes all changes in equity during a period except those
resulting from investments by owners (excluding shares) and distributions to owners
(excluding share dividends).

70- Transfers

a. Required Regular Reserve Transfer. The current period transfer of Undivided

Earnings to Regular Reserve consistent with requirements of Prompt Corrective
Action and based on net worth classification, (Item 15. on the Financial Condition).

b. Special Transfers. Other statutory or regulatory required transfers from undi-

vided earnings not provided for elsewhere.

c. Other Transfers. Discretionary appropriations of Undivided Earnings as deter-

mined necessary/expedient by the credit union board.

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Sample Financial Statements Section No. 900

d. Total Transfers. The total of items 70 a. through c.

71- Uninsured Secondary Capital (CDCUs). The capital portion of a CDCU’s subor-
dinated debt calculated on a sliding scale consistent with regulatory requirements.
Uninsured secondary capital is the matching funds required for CDCU’s
participating in the Treasury Department’s Community Development Financial In-
stitution’s Fund (CDFI).

72- Ending Balance. The end of period balances for accumulated other comprehen-
sive income, statutory reserve, other reserves, and undivided earnings. Cross-foot
statement to total ending balance column.

STATEMENT OF CASH FLOWS Also, share draft accounts and any other types
of share accounts management is basically
As stated in Section 200 of this manual, man- holding and disbursing cash on behalf of the
agement must prepare the Statement of Cash member.
Flows at least annually if they receive an
opinion audit by an independent accountant. NOTES TO THE FINANCIAL STATEMENTS
Management may prepare it more frequently
than fiscal year end. Federal credit unions Notes provide information that cannot be suffi-
without opinion audits may also wish to prepare ciently described within the body of the financial
the statement. statements without detracting from the clarity of
the statements. Do not use notes as a substi-
The Statement of Cash Flows illustration uses tute for proper accounting entries, accounting
the basic information illustrated for Our Federal classifications, valuations, or descriptions. Do
Credit Union from Figures 9-1, 9-2, and 9-3. not contradict items disclosed within the finan-
Report the cash effects of management's oper- cial statements.
ating activities, investing activities, and financing
activities. Explain the changes during the pe- Common types of notes are:
riod in cash and cash equivalents. Figures 9-5C
and 9-5D are illustrations of some of the pre- a) Explanations of creditors rights to specifi-
liminary work papers for the Statement of Cash cally pledged assets;
Flows.
b) Explanations of changes in accounting
There are two ways to report cash flows: methods or techniques;

1) Gross receipts and gross payments, or c) Disclosure of contingent assets and li-
abilities, restrictions on dividend payments,
2) Net receipts and/or payments. and executory contracts; and

Federal credit unions use the net/receipts or d) A description of accounting policies used.
payments method. Items qualifying for "net"
reporting are cash flows from all investments, Exercise caution when preparing notes to ac-
loans, and debt with original maturities of 3 company the financial statements. Readers
months or less (considered to be short term). may disregard notes if they are difficult to un-

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Section No. 900 Sample Financial Statements

derstand and read without further research and illustrative notes to the financial statements.
analysis. Independent accountants or another qualified
accounting professionals of your choosing can
Illustration of The Use of Notes To The Financial advise you further on the use and content of
Statements footnotes and related disclosures, especially
those credit unions seeking an opinion audit.
To continue with the credit union example set Most often these footnote disclosures are those
forth in this chapter, following are the related which the independent accountant would pre-
pare to accompany audited financial statement
on which he/she is rendering an opinion.

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Sample Financial Statements Section No. 900

Figure 9-5A: Illustration of Statement of Cash Flows

Our Federal Credit Union

Statement of Cash Flows
For the Year Ended December 31, 200X

Cash flows from operating activities:

Interest received 68,027
Fees and commissions received 11,875
Proceeds from sales of trading securities
Purchase of trading securities
Financing revenue received under leases
Dividends/Interest paid (30,637)
Cash paid to suppliers and employees (19,217)
Net cash from operating activities 30,048

Cash flows from investing activities:

Proceeds from sales of securities (other than trading securities)
Purchase of securities (other than trading securities) (18,658)
Loans made to members and principal collections, net (61,998)
Purchase of assets to be leased
Principal payments received under leases
Capital expenditures
Proceeds from sale of property, plant, and equipment
Other Investment Cash Flows
Return of NCUSIF investment 960
Net decrease in deposits in CUs, banks, and S&Ls 53,587
Investment in Corporate (18,642)
Net cash from investing activities (44,751)

Cash flows from financing activities:

Net increase in demand deposits, NOW accounts, and savings accounts 36,027
Net increase in federal funds purchased
Net increase in 90-day borrowings
Proceeds from issuance of non-recourse debt
Proceeds from issuance of 6-month note
Proceeds from issuance of long-term debt
Repayment of long-term debt
Other Financing Activity
Net cash from financing activities 36,027

Net increase in cash and cash equivalents 21,324

Cash and cash equivalents at beginning of year 32,454

Cash and cash equivalents at end of year 53,778

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Section No. 900 Sample Financial Statements

Figure 9-5B: Illustration of Reconciliation of Net Income to Net Cash From Operating Activities

Our Federal Credit Union

Statement of Cash Flows
For the Year Ended December 31, 200X

Net income 26,893

Adjustments to reconcile net income to net cash provided by operating ac-
tivities:
Depreciation-Land and Buildings
Depreciation-Furniture and Fixtures 1,328
Provision for probable loan losses 1,000
Loss on sales of securities (other than trading securities)
Gain on sale of equipment
Increase in trading securities
Increase in interest receivable 622
Increase in interest payable
Decrease in fees and commissions receivable
Increase in accrued expenses 205
Total adjustments 3,155

Net cash provided by operating activities 30,048

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Sample Financial Statements Section No. 900

Figure 9-5C: Illustration of Comparative Statements of Financial Condition

Our Federal Credit Union

Comparative Statements of Financial Condition
January 1 and December 31, 200X

12/31/0X 12/31/2X Changes

Assets:
Cash 32,454 53,778 21,324
Federal funds sold
Total cash and cash equivalents 32,454 53,778 21,324
Trading Securities
Available-for-Sale Securities
Held-to-Maturity Securities 18,658 18,658
Loans 794,363 854,361 61,998
Allowance for Loan Losses (2,636) (1,636) (1,000)
Interest receivable 2,870 2,248 (622)
Fees and commissions receivable
Investment in direct financing lease
Investment in Corporates 18,642 18,642
Investment in CUs, Banks, S&Ls 1,086,543 1,032,956 (53,587)
Investment in NCUSIF Deposit 16,068 15,108 (960)
Investment in Shares in CLF
Property, plant, and equipment, net 4,883 3,555 (1,328)
Other
Total assets 1,934,545 1,997,670 63,125

Liabilities and Equity

Federal funds purchased
Borrowings
Dividends payable
Accrued expenses 1,572 1,777 205
Other Liabilities
Share Drafts
All Other Share Accounts 1,596,131 1,632,158 36,027
Regular Reserve 47,982 47,982
Undivided Earnings 288,860 315,753 26,893
Total liabilities and equity 1,934,545 1,997,670 63,125

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Section No. 900 Sample Financial Statements

Figure 9-5D: Illustration of Statements of Income

Our Federal Credit Union

Comparative Statements of Income
For the Year Ended December 31, 200X

Interest Income: 12/31/0X 12/31/2X

Interest income 65,275 67,405
Total Interest Income $65,275 $67,405

Interest Expense:
Dividend/Interest expense 29,200 30,637
Total Interest Expense $29,200 $30,637
Net Interest Expense $36,075 $36,768
Less: Provision of loan losses
Net Interest Income After PLL $36,075 $36,768

Operating Expenses:
Operating expenses 24,000 21,750
Total expenses $24,000 $21,750

Other Operating Income:

Fees and commissions 10,346 11,875
Lease income
Total revenues $10,346 $11,875

Non-operating Income:
Net gain on sales of trading and other securities
Gain on sale disposition of assets
0 0
Net income $22,421 $26,893

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Sample Financial Statements Section No. 900

OUR FEDERAL CREDIT UNION

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 200X

Note 1-Significant Accounting Policies

Investments. Our Federal Credit Union has the intent and ability to hold all securities to maturity, and
as such, has classified such securities as held-to-maturity. Securities are stated at cost adjusted for
amortization of premiums and accretion of discounts. Available-for-sale securities, when purchased,
are carried at fair value as adjusted through member’s equity. The gains and losses on dispositions
are computed using the specific identification method.

Loans to Members. Loans are reported in the Statement of Financial Condition at book value. Inter-
est income is recognized over the term of the loan and is generally computed using the simple inter-
est method.

Allowance for Loan Losses. This account represents the amount set aside by management to ab-
sorb probable loan losses which exist as this financial statement date related to loans currently out-
standing. The Allowance for Loan Losses is derived from charges made to the Provision for Loan
Losses adjusted by charge-offs, and net of recoveries. The Allowance for Loan Losses represents
management's evaluation of various factors influencing the collectability of individual loans and man-
agement maintains it at a level adequate to absorb probable losses which exist today related to loans
currently outstanding.

Regular Reserve. The Our Federal Credit Union is required to maintain this statutory reserve in ac-
cordance with Section 116 of the Federal Credit Union Act. This required reserve represents an ap-
propriation of Undivided Earnings. These amounts are not available for the payment of dividends.

Furniture and Equipment. This account represents all other fixed assets. Furniture and Equipment is
stated at cost. Depreciation is computed over the estimated useful lives of the related assets using
the straight-line method of depreciation.

Income Taxes. The Our Federal Credit Union is exempt from federal and state income taxes in ac-
cordance with Section 501(c) of the Internal Revenue Code and Section 122 of the Federal Credit
Union Act.

Dividend Expense. The dividend rate is set by the board of directors on a quarterly basis for regular
share accounts and dividends are charged to the Statement of Income when declared.

Note 2-Investments

The carrying value and approximate fair value of held-to-maturity securities are as follows:

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Section No. 900 Sample Financial Statements

Carrying Fair
Value Value

Federal Agency Securities

U.S. Government Obliga-

tions

Other Securities 18,658.00 15,000.00

TOTAL 18,658.00 15,000.00

Note 3-Loans to Members

The composition of loans to members is as follows:

Commercial Loans
Real Estate Loans (over 12
years) $127,013.00
Lines of Credit to Members
Consumer Loans:
Automobile Loans
Education Loans
Unsecured Loans $634,718.00
Loans fully secured by 92,630.00 727,348.00
shares
Total Loans to Members $854,361.00

Note 4-Allowance for Loan Losses

A summary of the changes in the Allowance for Loan Losses is as follows:

Balance on January 1, 200X $636

Add:
Provision for Loan Losses
Expense --
Recoveries on Charged-off
Loans 1,000
Subtotal $1,636

Less:
Charged-off Loans --
Balance, December 31, 200X $1,636

Note 5-Other Assets

Other assets are summarized as follows as of December 31, 200X:

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Sample Financial Statements Section No. 900

Other Fixed Assets:

Furniture and Equipment $4,883.00

Less:
Allowance for Depreciation
of Furniture and Equip- 1,328.00 $3,555.00
ment
Accrued Interest on Loans 2,248.00
Other Assets $5,803.00
Total Other Assets

Note 6-Savings Accounts

A summary of savings accounts is as follows:

Percent
of
Total
Share Certificates
Money Market Certificate
Accounts --
Other Share Certificates -- --
Share Draft Accounts --
Other Member Savings:
Shares-Regular $1,632,158.00 100%
Total Savings/Shares/Depos-
its $1,632,158.00 100%

Note 7 - Related Party Transactions

Loans to credit union officials contain interest rates, terms, and collateral requirements comparable to
those of other members. The aggregate amount of these loans is not significant to the financial
statements. Employees of Our Company provide management and consulting services on a volun-
tary basis. The Our Federal Credit Union also uses the Our Company EDP facilities for processing
daily transactions and preparing payroll. Our Company charges a nominal rate for these services.
The Our Federal Credit Union does not consider the income or expense effects of these services to
be material to the financial statements.

Note 8 - Commitments and Contingent Liabilities

The credit union is a party to various miscellaneous legal actions normally associated with financial
institutions, the aggregate effect of which, in management’s and legal counsel’s opinion, would not
be material to the Our Federal Credit Union’s financial condition.

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