Navy Federal Credit Union 2012 Annual Report Download - page 15

Navy Federal Credit Union10 Leading with Vision. Achieving Results. 11
2012 Financial Section
NOTE 2: RESTRICTIONS ON CASH
Navy Federal maintained a cash balance of $6.7 million as of December 31, 2011 with corporate credit
unions in the form of membership shares. These shares were not insured by the NCUSIF and required
three years’ notice prior to withdrawal. Navy Federal made a request to withdraw these shares in 2009
and subsequently closed out its membership with the corporate credit unions during 2012, leaving a
zero balance of membership shares as of December 31, 2012. As of December 31, 2011, Navy Federal
still maintained a cash balance of $50,000 as collateral for a line of credit with a corporate credit union,
which was also withdrawn during 2012, leaving a zero balance as of December 31, 2012.
All restricted cash amounts except membership capital shares are classified as “Other assets” on the
Consolidated Statements of Financial Condition.
NFFG had $1.0 million and $1.1 million set aside in restricted cash at December 31, 2012 and 2011,
respectively, as part of the agreement it entered into with Charlie Mac, LLC. See Note 8 for details.
NOTE 3: INVESTMENTS
Navy Federal’s HTM and AFS securities as of December 31, 2012 and 2011 were as follows:
(dollars in thousands) Weighted
Average
Yield
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
(Losses)
Estimated
Fair Value
December 31, 2012
Held-to-maturity
U.S. government and federal
agency securities 2.47% $ 440,256 $ 15,612 $ — $ 455,868
Residential mortgage-backed
securities 0.62% 29,496 126 — 29,622
Total held-to-maturity 469,752 15,738 — 485,490
Available-for-sale
U.S. government and federal
agency securities 2.30% 5,998,082 304,812 (1,106) 6,301,788
Residential mortgage-backed
securities 2.12% 4,512,747 163,130 (1,884) 4,673,993
Commercial mortgage-backed
securities 2.90% 13,969 1,019 — 14,988
Bank notes 2.33% 1,525,505 55,037 (791) 1,579,751
Municipal securities 3.33% 95,952 2,412 (289) 98,075
Mutual funds -0.07% 10,939 — (11) 10,928
Total available-for-sale 12,157,194 526,410 (4,081) 12,679,523
Total securities $ 12,626,946 $ 542,148 $ (4,081) $ 13,165,013
Pension Accounting and Retirement Benefit Plans
Navy Federal has defined benefit pension plans, 401(k) and 457(b) savings plans, and a non-qualified
supplemental retirement plan. Navy Federal also provides a contributory group medical plan for retired
employees. Navy Federal accounts for its defined benefit pension plans in accordance with ASC 715,
Compensation—Retirement Benefits. See Note 17 for details.
Income Taxes
Pursuant to the Federal Credit Union Act, Navy Federal is exempt from the payment of federal and state
income taxes. NFFG is a limited liability corporation, and thus is an entity “disregarded for federal tax
purposes” under the Internal Revenue Service Revenue Ruling.
Dividends
Dividend rates on members’ accounts are set by the Board of Directors, and dividends are charged to
expense. Dividends on all share products are paid monthly.
Reclassifications
Certain amounts in the prior year have been reclassified to conform to the current year presentation.
New Accounting Pronouncements
In April 2011, the FASB issued Accounting Standards Update (ASU) 2011-02, A Creditor’s Determination
of Whether a Restructuring is a Troubled Debt Restructuring, eective for the year ended December
31, 2012. The purpose of this ASU was to address diversity in practice issues and help creditors in
determining whether a creditor has granted a concession and whether a debtor is experiencing financial
diculties for the purpose of determining whether a restructuring constitutes a TDR. The adoption of this
ASU did not significantly impact Navy Federal’s consolidated financial statements.
In April 2011, the FASB issued ASU 2011-3, Transfers and Servicing: Reconsideration of Eective Control
for Repurchase Agreements, eective for the year ended December 31, 2012. This ASU removed one of
the criteria considered to meet FASB’s definition of eective control, one of the factors required for sales
accounting treatment of repurchase agreements. The adoption of this ASU did not impact Navy Federal’s
consolidated financial statements.
In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement
and Disclosure Requirements in U.S. GAAP and IFRSs, eective for the year ended December 31, 2012.
The adoption of this ASU did not impact Navy Federal’s consolidated financial statements.
In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income, eective for the
year ended December 31, 2012. It requires that all items that meet the definition of comprehensive income
be reported in a financial statement for the period recognized. Navy Federal has chosen to report its
components of comprehensive income in a separate statement. See the Consolidated Statements of
Comprehensive Income.