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2010 Supervisory CommitteeAl Eldridge, ChairmanWayne Watanabe, SecretaryKathi Harper

Flight Plan Financial Services, Inc.Officers and Board of DirectorsBetty Burtis, ChairmanJim Barnfather, PresidentGeorge Bardizbanian

VOLUNTEERS & OFFICERS

BRaNCh & aTM LOCaTIONS

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Member Savings

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Loans to Members

2009 Loans ::::::::::::::::::::::::::::::::::::::::::::: $418,500,000

2009 Savings :::::::::::::::::::::::::::::::::::::::::: $750,500,000

Board of DirectorsChairman ..................................................... Hugh Jones1st Vice Chairman ...................................... Steve Considine2nd Vice Chairman ..................................... Roberta CourierSecretary/Treasurer ................................... Stan Swenson

George BardizbanianRoberta CurrierKathi HarperPhil HarrottNils JohnsonMitch Mroz

Mark RabinowitzBernie SlotnickDick UnderhillGeorgetta WolffBetty Burtis, EmeritusDick Lindsey, Emeritus

Ted HruskaHarry Lee

New Town

Rolling Meadows

Wilcox

Lake CharlesMelbourne

St. Augustine

Palmdale

Rancho Bernardo

Branch/ATM LocationCredit Union BranchATM LocationCredit Union RepresentativeFuture ATM LocationFuture Branch/ATM

McLean

Glen Burnie

Chantilly

Annapolis

GardenaPlant 1

Century City

Azusa

Los Angeles

LinthicumLinthicum Heights

Sykesville

Kearney Mesa

Colorado Springs

Arlington

Herndon

Metro El Monte

Irving

El Segundo

RedondoBeach Carson

ApopkaMaitland

Buffalo

Clearfield

Salt Lake City

204 Bldg

902Bldg

ES-1Bldg

ES-4Bldg

E2 Bldg

S Bldg

PROGRESS

2009 Assets :::::::::::::::::::::::::::::::::::::::::::: $850,700,000

Graphicdesign 21897 3/11

annual Report

This abbreviated annual report is intended to provide summary infor-mation pertaining to the performance of Northrop Grumman Federal Credit Union. To view the complete inde-pendent auditor’s report prepared by Turner, Warren, Hwang & Conrad Certified Public Accountants, go to www.ngfcu.us or call 800-633-2848 to request a copy.

Founded in 1946 by and for Northrop employees, NGFCU has continuously evolved through 65 years of building strong mem-ber relationships bound together by shared visions and values derived from Northrop Grumman Corporation. Proud of its past and prepared for the future, Northrop Grumman Federal Credit Union has kept its sights firmly focused on the ever changing Northrop Grumman Corporation landscape cognizant of the important role that effort plays in fulfilling the distinctive and changing financial service requirements of the membership at large.

While 2010 was a challenging year for many businesses in the financial services industry due to the turbulent economy, the Northrop Grumman Federal Credit Union sustained its trend of vibrant growth trajectories. The strong growth was once again achieved as NGFCU members continued to recognize the value, security and long term advantages of keeping their money safe-ly deposited in an NGFCU savings program. By the end of 2010, the appeal of attractive dividend rates resulted in member sav-ings growing by an astonishing 12%, closing the year at $750.5 million. Prudent member borrowing patterns, concerns with the general economy, difficulties within the auto sales market, the continued slow pace of home sales, and a general aversion to accumulating more debt, resulted in loans to members at NGFCU dropping a modest 1% to $418.5 million. The net result of all of this financial activity ended in assets growing by 10% to close the year at $850.7 million.

Notwithstanding the persistent economic challenges encountered in 2010, the Credit Union proudly continued its judicious expansion of new service outlets for members across

the Northrop Grumman landscape. New ATMs were introduced in the Northrop Grumman Aerospace Systems S and E2 Buildings at the Redondo Beach site. The Credit Union upheld its commitment to responding to ser-vice requests, when, at the request of Northrop Grumman Information Systems

December 31, 2010

aSSETSCash and cash equivalents $ 77,236,543

Securities available-for-sale 334,517,976

Loans to members 418,550,479

Accrued interest receivable 2,691,296

Property and equipment 7,219,532

NCUSIF deposit 7,176,198

Other assets 3,357,865

$ 850,749,889

LIaBILITIES aND MEMBERS’ EQUITY

Members’ shares $ 750,535,899

Notes payable 12,000,000

Accrued expenses and other liabilities 5,709,595

Total liabilities 768,245,494

Members’ Equity 82,504,395

$ 850,749,889

For the year ended December 31, 2010

INTEREST INCOME Interest on loans to members $ 22,303,699

Interest on investments and cash equivalents 10,946,976

33,250,675

INTEREST EXPENSE Dividends on members’ shares 10,293,155

Interest on borrowed funds 647,718

Total Interest Expense 10,940,873

NET INTEREST INCOME 22,309,802

PROVISION FOR LOaN LOSSES 3,644,763

NET INTEREST INCOME aFTER PROVISION FOR LOaN LOSSES 18,665,039

NON-INTEREST INCOME

Fee income 2,626,812

Other-than-temporary impairment losses on securities available for sale

Total other-than-temporary impairment losses (1,831,998)

Less portion of other-than-temporary impairment losses recognized in other comprehensive income 1,568,229

Net impairment losses recognized in earnings (263,769)

Net realized gain on sale of securities available for sale 1,658,397

Other non-interest income 2,047,619

6,069,059

NON-INTEREST EXPENSE Compensation and benefits 7,894,326

Operations 7,605,767

Occupancy 1,486,843

NCUSIF premium assessment 891,284

Temporary corporate credit union stabilization fund assessment 938,545

Total Non-Interest Expense 18,816,765

NET INCOME $ 5,917,333

CONSOLIDaTED STaTEMENT OF INCOME

employees, the Credit Union transferred its member service repre-sentative from San Pedro, California, when that site was closed, to the Carson, California, location. To enhance service to members at the new location, an NGFCU deposit-taking ATM was immediately installed in the site cafeteria. Additionally, company-requested NGFCU-sponsored education and outreach activities continued at Northrop Grumman Corporation sites in California, Maryland, Virginia, Illinois, Florida, Arizona, Nevada, Utah, Colorado, Oklahoma, Texas, Louisiana, Alabama, New York, and Ohio.

A major contributor to the Credit Union’s product success during 2010 was the NGFCU MasterCard. The NGFCU MasterCard offer-ing is a worthy alternative to competing credit card programs that surreptitiously boost fees and charges, and impose onerous terms to the detriment of the cardholder. Growing acceptance of the NGFCU MasterCard program has been driven by the applicant’s ability to choose from three distinctly attractive money-saving pro-grams and five different exclusive Northrop Grumman Corporation inspired card designs.

During 2011, the Credit Union will be taking major steps to upgrade to a state of the art enterprise banking platform that will feature improvements to the home banking site as well as the initiation of a mobile banking system. Additionally, concentrated efforts will be made to broaden the reach of NGFCU services to members within the Los Angeles Metro landscape.

Northrop Grumman Federal Credit Union continuously thrives on being your first choice for financial services and, to this end, strives for excellence in pricing, products and services. Through your val-ued participation, the Credit Union will continue to grow and remain positioned to provide support as you endeavor to build a desirable and productive lifestyle.

Thank you for your continued support and confidence.

For the Board of Directors,

Hugh Jones Chairman

Stanley R. Swenson, Jr. Secretary/Treasurer

REPORT TO MEMBERSCONSOLIDaTED STaTEMENT

OF FINaNCIaL CONDITION

Graphicdesign 21897 3/11

Ribbon cutting ceremony for the new NGFCU ATM at the S Bldg Cafeteria, NGC Aerospace Systems in Redondo Beach, California. Pictured left to right: Hugh Jones; Stan Swenson; Gary Ervin, Corporate Vice President and President of Northrop Grumman Aerospace Systems; and Jim Barnfather.