Navy Federal Credit Union 2008 Annual Report Download - page 11

(dollars in thousands at year-end)
Consumer loans 2008 2007 (as restated)
Auto $ 5,975,114 $ 6,054,222
Other 2,110,468 2,017,148
NAVchek®lines of credit 264,724 250,773
Federal education loans 386,201 312,640
Vehicle leases 82,890 106,786
Credit card loans 4,159,310 3,425,403
Mortgage loans
Mortgage loan investments
Fixed rate 12,165,405 9,661,061
Variable rate 341,111 320,096
In process 2,779 7,419
Unamortized deferred income (63,408) (29,400)
Mortgage loans awaiting sale
Fixed rate 65,200 65,159
Variable rate ——
Unrealized losses —(95)
In process 1,323 2,923
Unamortized deferred income (1) (151)
Equity loans
Fixed equity 4,611,111 5,002,514
Home equity lines of credit 1,062,627 983,744
31,164,854 28,180,242
Less: Allowance for loan losses 512,479 256,277
Total loans to members $ 30,652,375 $ 27,923,965
NAVY FEDERAL CREDIT UNION
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2008 FINANCIAL SECTION
Navy Federal held $376.4 million and $224.3 million of Federal Home Loan Bank of Atlanta (FHLBA) stock
as of December 31, 2008 and 2007. FHLBA stock is a restricted investment and is carried at cost, which is
par value. As a member of the FHLBA, Navy Federal has access to a $10.7 billion line of credit facility.
All debt securities were reviewed individually to determine whether the unrealized losses associated with
them were caused by a decline other-than-temporary in the value of such investments. Navy Federal's method-
ology to determine whether these securities are other-than-temporary was based on the following factors:
Navy Federal's intent and ability to hold the security to recovery, the nature of the security, and the financial
condition of the issuer of the security.
Navy Federal has the ability to carry its available-for-sale and held-to-maturity investments until they recover
their value. These securities include both government securities issued by government corporations that are
explicitly backed by the full faith and credit of the U.S. Government, and also government-sponsored agency
securities. The unrealized losses associated with these investments are not a result of a change in the credit qual-
ity of the issuer: rather, the losses are reflective of changing market interest rates. Therefore, Navy Federal expects
to receive all contractual cash flows and believes that the current environment is not a permanent situation.
There are 67 available-for-sale securities and 37 held-to-maturity securities that are in an unrealized loss
position. The table below presents these investments’ fair value and associated gross unrealized losses separated
by the amount of time the investments have carried the loss.
At December 31, 2008 and 2007, there was no decline considered “other-than-temporary” in the value
of U.S. Government and federal agency securities owned by Navy Federal. Other Investments represent capital
required to maintain partnerships with credit union organizations.
Investments pledged as collateral for borrowed funds were $359.2 million and $871.6 million at December
31, 2008 and 2007, respectively.
Navy Federal's certificates of deposits and share deposits in corporate credit unions are fully insured. The
following table shows Navy Federal’s deposits and membership capital shares in the corporate credit unions:
(dollars in thousands at year-end) 2008 2007
Certificates of deposit $ 2,000 $ 1,636,811
Overnight investments — 330,000
Membership, capital shares 28,286 50,889
Share deposits 1 1
Total $ 30,287 $ 2,017,701
(dollars in thousands) 2008 2007
Balance, beginning of the year $ 256,277 $ 176,326
Provision charged to operations 654,822 283,902
Loans charged off (442,011) (230,877)
Recoveries 43,391 26,926
Balance, end of the year $ 512,479 $ 256,277
(dollars in thousands) Less than 12 months 12 months or longer Total
December 31, 2008 Fair value
Gross
unrealized
losses Fair value
Gross
unrealized
losses Fair value
Gross
unrealized
losses
Available-for-sale
securities $ 1,441,279 $ (61,250) $ 418,632 $ (19,906) $1,859,911 $ (81,156)
Held-to-maturity
securities 153,264 (4,489) 40,396 (1,811) 193,660 (6,300)
Total securities $ 1,594,543 $ (65,739) $ 459,028 $ (21,717) $ 2,053,571 $ (87,456)
A summary of the changes in the allowance for loan losses is as follows:
Note 5: Loans to Members and Allowance for Loan Losses
The composition of loans to members at December 31, 2008 and 2007 (as restated), was as follows: