Working together to create value

On behalf of the Board of Directors, I would like to present Arizona Federal’s 2008 Annual Report. In spite of one of the most challenging years in the history of Arizona Federal, this Board, elected by you, remained steadfast in our commitment to ensuring the safety and soundness of your credit union. Our mission is to build a meaningful value proposition for the members of our not-for-profit financial cooperative.

Like many other financial institutions, we experienced losses in 2008. In fact, we experienced record losses. But we did so by serving our members - not by participating in sub-prime mortgage loans, making high-risk investments, or otherwise acting out of greed as several other institutions have been described as doing.

As our members go, so goes this credit union. And simply put, this year was the most challenging year of many of our members’ financial lives. Rising gas prices, declining home values, rising unemployment and many other factors contributed to financial hardships to levels that most of us have never seen. As a result, many of our members found themselves unable to make their loan payments, and loan losses began to add up. As 2008 closed, our loan loss tally was a five-fold increase over the previous year – contributing heavily to an operating loss of approximately $116 million.

Our net earnings before loan losses increased to $54 million in 2008, a 29% increase over the prior year. This is a strong indication that the credit union is continuing to provide you with products and services that you value, and that you utilize. This “economic engine,” along with increased credit quality, significant efforts to reduce loan losses, enhanced revenue opportunities, and many initiatives underway to reduce operating expenses give us great confidence that despite a challenging 2008, Arizona Federal is here to stay. We’ve proudly served our member-owners since 1936, and we’ll continue to do so in the future based on sound economic principles, professional staff and a philosophy of “people helping people.”

It has been my honor and pleasure to serve as Chairperson for the last three years. Upon completion of my term, I will remain a member of the board committed to focusing on serving our member-owners, restoring net worth and creating value for our membership. On behalf of the Board of Directors, I sincerely thank you for your participation in Arizona Federal and look forward to meeting the challenges of 2009.

Cathleen Gleason
Board Chair