NORTHROP GRUMMAN FEDERAL CREDIT UNION

B O A RD OF D IR ECTORS Steve Considine, Chairman Mark Rabinowitz, 1st Vice Chairman Patrick Creighton, 2nd Vice Chairman Stan Swenson, Secretary/Treasurer Bernie Slotnick Kathi Harper Dick Underhill Georgetta Wolff Nils Johnson Eric Scholten, Volunteer at Large Hugh Jones Betty Burtis, Emeritus Mitch Mroz Dick Lindsey, Emeritus SUPERVISORY COMMITTEE Wayne Watanabe, Chairman Matthew Barrett, Secretary Ted Hruska Elizabeth Romo FLIGHT PLAN FINANCIAL SERVICES, INC. Officers and Board of Directors States w/branches States w/atms Annapolis, Annapolis Junction, Glen Burnie, Linthicum, & Linthicum Hts, MD States w/site Visits Location w/branch & ATM Location w/atm & visited Sites visited annually Omaha, NE Salt Lake City & Clearfield, UT Colorado Springs, Boulder, Aurora, CO Sykesville, MD Rolling Meadows, IL Buffalo, NY Topeka & Leavenworth, KS McLean & Herndon, VA Cincinnati, OH Sacramento, CA San Jose, Sunnyvale, & Livermore, CA Chantilly, VA Falls Church, VA Charlottesville, Richmond, & Chester, VA Las Vegas, NV Ft. Irwin, CA Santa Barbara, CA Woodland Hills, CA Atlanta, GA Warner Robbins, GA St. Augustine, FL Apopka & Orlando, FL Rancho Bernardo & Kearney Mesa, CA Palmdale, CA Sierra Vista, AZ Azusa, CA El Segundo, Redondo Beach, Hawthorne, & Carson, CA Huntsville, AL Irving, TX Lake Charles, LA Oklahoma City, OK Melbourne, FL Box 47009 B R A N C H & AT M L O C AT I O N S Gardena, CA 90247-6809 Betty Burtis, Chairman Jim Barnfather, President NORTHROP GRUMMAN FEDERAL CREDIT UNION VOLUNTEERS & OFFICERS ANNUAL REPORT Assets in millions 966.2 850.7 914.4 879.3 906.9 771.4 Assets...966,201,430 Member Savings in millions 855.1 821.0 798.1 This abbreviated annual report is intended to provide summary information pertaining to the performance of Northrop Grumman Federal Credit Union. To view the complete independent auditor s report prepared by Turner, Warren, Hwang & Conrad Certified Public Accountants, visit www.ngfcu.us or call 800.633.2848 to request a copy. 750.5 767.9 672.1 Savings... 855,146,939 Loans to Members in millions 427.2 423.0 424.5 431.4 429.5 397.3 Loans...429,496,443

REPORT TO MEMBERS continued the slow but steady improvements in the economy, aided by the benefits of increased consumer and business spending, a stronger housing market and lower fuel costs. This is leading most economists to forecast continued growth. The year also demonstrated your Credit Union s strengths, which include serving members with a common employer bond. As you will see, employer-based credit unions are becoming increasingly rare. United States credit union membership exceeded 100 million members at the end of. In addition to the membership growth, assets grew to over 1.1 trillion. Despite this growth, the number of credit unions has steadily declined at about 3% annually since 2000. The result of accelerating asset growth and declining number of institutions means the average credit union in was three times larger in inflation-adjusted current dollars, from 60 million in assets in 2000 to almost 180 million in. Credit unions are achieving this growth in many ways, but primarily through expanding their eligible fields of membership. By definition, credit unions are not-for-profit financial cooperatives that serve their member owners, who together share a common bond. In 2000, 67% of credit unions had single or multipleemployer based membership eligibility. But in, a much smaller 36% of credit unions had members who qualified through their employer. Today, there are proportionately more credit unions without employer or company-based membership bonds. This makes your Northrop Grumman Federal Credit Union both increasingly unique and more valuable to you, our member. The sponsor employees that make up our membership tend to be high achievers, with more education and greater income than the population at-large. Accordingly, the collective deposits also tend to be larger than average and the loans made to our members carry a lower risk of default. As a result, the Credit Union is able to generate more income per member. When you add our rigorous fiscal management, Northrop Grumman Federal Credit Union is a powerful financial engine that can generate more value to our member owners than a credit union that has a more average population.

The focused employer-based common bond formula is reflected in our fiscal achievements. We have chosen to stay with this formula out of the concern a change could reduce the value of our members investment. Increasingly, our dedication for member value is what separates your Credit Union from most others. Collectively as a membership, we were able to achieve the following in : Investment income per member at almost five times the national average Fee income per member at about half the national average Gross income growth of 12%, more than three times the national rate Net income growth of 31%, four times the national rate A non-interest expense to income ratio that is less than the national average The result of higher income and stringent expense controls means our members traditionally receive more value through their participation. Enhanced member value is what sustains the growing participation rate of our membership. That is why our higher-yield Term Deposits are up almost 8% in total balances, while the credit union industry declined by more than 1%. It is also why our real estate and new vehicle loan balances grew faster than national averages in. While we are proud of these achievements, we are humbled by both the support of our high performing members and their expectations for superior financial service and value. Accordingly, our ultimate objective remains to continue to exceed these expectations. Your Credit Union has carefully chosen not to pursue growth for growth s sake. Instead, our priority is to provide higher member value and service, for our members benefit. For the Board of Directors, Steve Considine Chairman Stan Swenson Secretary/Treasurer

CONSOLIDATED STATEMENT OF FINANCIAL CONDITION December 31, ASSETS Cash and cash equivalents... 29,945,554 Securities available-for-sale... 482,084,818 Other investments... 250,000 Loans to members... 429,496,443 Accrued interest receivable... 3,024,871 Property and equipment... 7,008,281 NCUSIF deposit... 7,966,511 Other assets... 6,424,952 Total Assets 966,201,430 LIABILITIES AND MEMBERS EQUITY Members shares... 855,146,939 Borrowed funds... Accrued expenses and other liabilities... 8,113,416 Total Liabilities 863,260,355 Members equity... 102,941,075 Total Liabilities and Equity 966,201,430

CONSOLIDATED STATEMENT OF INCOME For the year ended December 31, INTEREST INCOME Interest on loans to members... 18,958,826 Interest on investments and cash equivalents... 10,105,356 INTEREST EXPENSE Total Interest Income 29,064,182 Dividends on members shares... 5,373,391 Interest on borrowed funds... Total Interest Expense 5,373,391 Net interest income... 23,690,791 Provision (credit) for loan losses... 629,696 Net interest income after provision (credit) for loan losses... 23,061,095 NON-INTEREST INCOME Fee income... 1,996,472 Other-than-temporary impairment losses... (62,614) Less portion of other-than-temporary impairment losses recognized in other comprehensive income... 62,614 Net impairment losses recognized in earnings... Net realized gain (loss) on sale of securities available for sale... 57,732 Other non-interest income... 2,645,021 NON-INTEREST EXPENSE Total Non-Interest Income 4,699,225 Compensation and benefits... 10,184,877 Operations... 9,580,864 Occupancy... 1,397,361 Total Non-Interest Expense 21,163,102 NET INCOME 6,597,218