ANNuAL REPORT 2012

FORGING AHEAD

7800 East Imperial HighwayDowney, CA 90242

Ph. 800.950.7328

www.fpcu.org

fINANCIAL PARTNERS OuR VIsION

CREDO

uilding lifetime financial partnerships.

e are caring professionals who pledge to

provide the highest level of personalized service

to members and fellow partners by proactively

identifying their needs and tailoring a solution

that will ultimately best serve the member.

Each partner will embody our vision of “building

lifetime financial partnerships” by collaborating

to create a memorable service experience that is

genuinely warm, caring and welcoming. We will be

distinguished by our integrity, care, commitment

and passion for excellence.

B

W

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CONtENt

Chairman & President’s Message

Key Achievements

2012 by the Numbers

treasurer’s Report

supervisory Committee Report

statement of Financial Condition

statement of Income

Board of Directors

Executive Management

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fINANCIAL PARTNERS OuR VIsION

CREDO

4 2012 Annual Report

t he economy is showing signs of new life and our growth is steadily on the rise. Yet with each new breath of growth comes a fresh challenge of mastering technological advances and regulatory changes. The leadership at Financial Partners Credit Union is determined in tackling each new challenge with renewed commitment to our vision of “building lifetime financial partnerships” with you, our member owners. So as we celebrate the successes in 2012, we are enthusiastically forging ahead never being satisfied with yesterday when there are always new peaks to conquer tomorrow.

In 2012 Financial Partners Credit Union’s assets grew by 7.3% ending the year at $794 million. The lending engine steamed full-speed ahead

originating over $376 million in loans—the highest origination year in the credit union’s history. This was in large part due to stellar originations in first mortgages, business loans, and credit cards. On the depository side, the credit union has continued to grow. Liquid deposits grew by $33 million and the checking portfolio segment grew to $127 million.

The success of this past year was returned back to members in the form of faster, more convenient services, higher dividends on savings accounts, and lower rates on loans. We reached out to members and helped many consolidate credit card balances and restructure overall borrowings to help lower their payments. Through consultative credit reviews, we helped many

Message fROM THE CHAIRMAN AND PRESIDENT

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members refinance their home or auto loans from other institutions at a much lower rate. We tracked these savings in 2012 to see how much money we could save members on their home and auto loans. These efforts resulted in over $10 million in savings to members.

We understand the value of putting money back in your wallet, but we don’t rest there. We strive to provide members with exemplary service to go with that savings. Once again our outstanding service performance record was validated this past year when an independent random survey of the members revealed 98% of Financial Partners Credit Union members are “satisfied or very satisfied.”

I n 2012 we enhanced mobile banking with additional new cutting edge technology. With over 8,000 members using mobile banking through their smartphones, we know it’s important to provide you the best and most up-to-date mobile solutions. FPCU Mobile provides the ability to deposit checks using your phone’s camera with Mobile Deposit. You can now pay bills anywhere, anytime with Mobile Bill Pay and transfer funds to anyone with the new Send Money function.

W e also introduced new and improved card services. FPCU introduced a reloadable debit card that provides the convenience and access of a checking account with the additional security of knowing there are no overdraft fees. It is the perfect card for traveling, online purchases, and

educating your kids and grandkids about financial responsibility. We also introduced a Platinum Rewards credit card. Using your Rewards Card for shopping, dining and everyday purchases lets you earn points towards merchandise, gift cards and travel. All it takes is one qualified purchase per year and your points will never expire.

t his past year we supported many important causes that positively impacted the communities in which we serve. Just a few examples include the Downey Chamber Street Fair and annual Christmas Parade; local home buyer and wealth management seminars; the Columbia Memorial Space Exhibit on asteroids; the Boeing Golf Tournament and annual $5,000 scholarship; and through the participation in Credit Unions for Kids we donated over $27,000 to both Children’s Hospital Orange County and Los Angeles.

On behalf of the Board of Directors and Management Team, we thank you for your continued membership. We encourage you to spread the word to friends, family, and community members about the exceptional value and personal service you receive at Financial Partners Credit Union. We consider it a privilege to serve you, our member owners!

NADER MOGhADDAM President & Ceo

EARL S. WAshINGtONChairman of the Board

“At the end of the day, we understand that the only opinions that matter are those of our members.”

— NADER MOGhADDAM

“We stayed focused on core values as articulated in our vision of Building Lifetime Financial Parnerships.”

— EARL S. WAshINGtON

+ Launched Mobile Bill Pay and Send Money, our person-to-person mobile funds transfer solution

+ Created Platinum Rewards Credit Card allowing you to earn points towards travel and gifts

+ upgraded ATMs — no envelopes needed for deposits

+ Introduced Reloadable Debit Card with no credit checks and no fees

+ eSign allows members to sign loan documents electronically

+ Implemented After Hours Lending to allow members to submit loan applications 24/7

+ Began offering Balance financial fitness Program on www.fpcu.org, providing financial literacy tools and resources by phone and online

+ Made Banking By Phone easier to use and navigate

+ Launched facebook and Twitter accounts to connect socially with members and community

+ Broadened business lending to include Small Business Administration (SBA) loans

6 2012 Annual Report

sERVICE

98%

*Satisfied/Very Satisfied

Key ACHIEvEMENTS 2012 By THE NuMBERS

New members

GROWth

4,046

NET INCOME

2010 2011 20121.00M

2.25M

3.50M

4.75M

6.00M

+$700THOuSAND

$5.9 MILLION

VALuE

$10MillionSaved members

over $10 million in loans

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Highest origination in history

LOANs

$376Million

Seminars

EDuCAtION

210

EQuItY

8.95%

Net worth

ASSETS uNDER MANAGEMENt

+$19MILLION

2010 2011 2012

$192 MILLION

LOAN sERVICING PORtFOLIO

+$25MILLION

2010 2011 2012

1.100B

1.075B

1.050B

1.025B

1.000B

$1.08 BILLION

200M

150M

100M

175M

125M

t he 2012 Audited

Financial Statements

represent a robust year

for FPCU. Net Income for

the year was $5.9 million, one of the best financial

performances in the Credit Union’s entire history.

Financial Partners Credit Union worked diligently

to strengthen the income stream and balance

sheet by prudently managing credit losses, the

Asset/Liability structure, and expenses.

The Credit Union continued in the “Well

Capitalized” category, as defined by the NCUA,

while improving the net worth ratio to 8.95%

and growing assets by $54 million to reach $794

million. We, the Board of Directors, Management,

and all Financial Partners employees continue

to be committed to providing a better financial

future for the member-owners.

DON PLOG Treasurer

treasurer’s REPORT

F inancial Partners

Credit Union has the

responsibility to ensure

that your funds are safe

and that they are as productive as possible. The

Supervisory Committee is responsible to you,

the member, to ensure that your Credit Union

operates prudently and according to the rules and

regulations set forth by the State of California

Department of Financial Institutions (DFI) and the

National Credit Union Administration (NCUA).

To accomplish this, the Supervisory Committee

retained services of the independent audit firm

of McGladrey, LLP to complete Financial Partners’

audit and examine the consolidated financial

statements as of December 31, 2012. For three

consecutive years, the firm issued an unqualified

opinion in their Independent Auditors’ Report.

The summary of Financial Partners’ Consolidated

Statements of Financial Condition as of December

31, 2012 is included herein.

Based on our review and the result of the auditor’s

efforts, the Supervisory Committee believes the

credit union has maintained accurate and timely

accounting records, and applied the policies and

procedures established by the Board of Directors.

It is the opinion of the Supervisory Committee that

your Credit Union is in a strong financial position

and is operated in a safe and sound manner.

GARy W. MAChEEL Supervisory Committee Chairman

supervisory Committee REPORT

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10 2012 Annual Report

STATEMENT Of FINANCIAL CONDItION

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 68,367,738 $ 41,513,972

Investments:

Available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 156,077,667 $ 165,038,957

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 8,792,000 $ 3,840,668

Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 7,099,750 $ 3,124,350

Loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 530,054,884 $ 499,654,672

Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . .$ 2,061,704 $ 2,111,080

Premises and equipment, net . . . . . . . . . . . . . . . . . . . . . . . .$ 4,304,059 $ 4,766,512

NCUSIF deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 6,596,111 $ 6,277,741

Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,012,194 $ 14,041,064

Total assets $794,366,107 $740,369,016

Investments:

Members’ shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 671,193,891 $ 651,029,120

Borrowed funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,000,000 $ 15,000,000

Accrued expenses and other liabilities . . . . . . . . . . . . .$ 21,487,010 $ 9,063,873

Total liabilities $ 722,680,901 $ 675,092,993

Commitments and contingent liabilities

Members’ equity

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 65,608,205 $ 59,726,935

Equity acquired in merger . . . . . . . . . . . . . . . . . . . . . . . . .$ 5,503,067 $ 5,503,067

Accumulated other comprehensive income (loss) . . . . . . $ 573,934 $ 46,021

Total members’ equity $ 71,685,206 $ 65,276,023

Total liabilities and members’ equity $ 794,366,107 $ 740,369,016

A SSETS 2 0 1 12 0 1 2

L IABILITIES AND MEMBERS’ EquITy 2 0 1 12 0 1 2

INtEREst INCOME: Loans $ 24,724,365 $ 26,031,124

Investments and cash equivalents $ 1,536,686 $ 1,999,617

Total interest income $ 26,261,051 $ 28,030,741

INtEREst ExPENsE: Members’ shares $ 3,972,024 $ 4,678,033

Borrowed funds $ 610,316 $ 516,109

Total interest expense $ 4,582,340 $ 5,194,142 Net interest income (NII) $ 21,678,711 $ 22,836,599

PROVIsION FOR LOAN LOssEs $ 2,705,000 $ 2,025,000

NII after provision for loan losses $ 18,973,711 $ 20,811,599

NON-INtEREst INCOME: Overdraft income $ 2,522,231 $ 2,783,552

Financial services and insurance $ 1,643,292 $ 1,309,793

Debit card interchange income $ 1,629,122 $ 1,460,805

Service charges and other fees $ 565,091 $ 567,740

Gain on sale of loans $ 7,187,089 $ 3,459,447

Other $ (1,574,204) $ (97,576)

Total non-interest income $ 11,972,621 $ 9,483,761

NON-INtEREst ExPENsE: Salaries and benefits $ 13,547,989 $ 12,825,210

Operations $ 9,001,086 $ 8,759,219

Occupancy $ 1,889,356 $ 1,914,558

NCUSIF assessment $ 626,631 $ 1,569,435

Total non-interest expense $ 25,065,062 $ 25,068,422Net income $ 5,881,270 $ 5,226,938

STATEMENT Of INCOME

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BOARD Of DIRECtORs

suPERVIsORY COMMITTEE

Gary W. Macheel Chairman

Donna P. Clawson

Caryn Phillips

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1 Earl S. Washington Chairman

2 Joe Spetz Vice-Chairman

3 Don Plog Treasurer

4 Richard C. Seamans Secretary

5 Earl Beauvais

6 Alan Bergman

7 Ralph Crowther

8 Jack Shuler

9 Barbara A. Smith

10 Yves Pinkowitz Associate Board Member

11 Steve Koester Associate Board Member

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ExECutIVE MANAGEMENT

chieving our goals is the end-result of hard work, discipline and collaboration. Everyone, from your

Board of Directors and Supervisory Committee to the management team has been instrumental in achieving

this year’s success.

A

Nader Moghaddam President & CEO

Laura Szitar SVP, Human Resources & Administration

Mary Torsney SVP, Chief Financial Officer

Michael Patterson SVP, Chief Lending Officer

Wanda Williams SVP, Planning, Technology & Risk Management

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THE LEADERshIP BEHIND OuR PERfORMANCE

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Laurie Tyler VP, Sales & Member Service5

W e are enthusiastically forging ahead

never being satisfied with yesterday when

there are always new peaks to conquer

tomorrow.

7800 East Imperia l Highway • Downey, CA 90242 • Ph. 800.950.7328 • Web. www.fpcu.org

2012 fPCu