2013 ANNUAL REPORT

A Winn ing YearA Winn ing Year

Our Mis sionHelping our members prosper—helping our communities thrive.

Our PurposeFreedom First is a member-owned, democratically operated, not-for-profi t organization managed by a volunteer board of directors, with the specifi ed mission of meeting the credit and savings needs of consumers, especially persons of modest means. The purpose of this Credit Union is to promote thrift among its members by aff ording them an opportunity to accumulate their savings and to create for them a source of credit for provident, business, or productive purposes.

Our TeamMore than 160 people who embody our mission as they live, work, play, and serve in Virginia’s Valley Region. Freedom First staff , management, and all-volunteer board are dedicated to helping their fellow members prosper and helping their communities thrive.

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Co ach es’ Note s: Re por t fr om the Ch airman and President/CEO

Freedom First and our community and members benefi ted from a very successful year in 2013. We outpaced our peers in loan growth, deposit growth, and earnings, while surpassing 2012 service scores.

The nation’s economy continued its slow but steady recov-ery from the Great Recession that began in 2008, and credit unions—community-focused credit unions like Freedom First in particular—continued to be the fi nancial institutions of choice for members who recognize the value of banking locally.

Your Credit Union has spent the years since 2008 building, expanding, and refi ning our community focus so that it’s not a catchphrase or a task in a to-do list, but inherent to our cul-ture and our mission: helping our members prosper—helping our communities thrive. Not a day passes that we don’t see our eff orts validated by our members, who respond in surveys, in letters, on social media, and in person how they have ben-efi ted from their membership in Freedom First. In 2013, our eff orts were also validated by our national trade association, which named your Credit Union the National Community Credit Union of the Year!

Our continued success relies on our forward-thinking man-agement and directors, who took on several projects in 2013 with both immediate impact and long-term growth in mind. We refreshed our logo and added a tagline as part of a larger brand awareness campaign. We opened a new branch in Daleville, Botetourt County; relocated our Towers branch into a larger space and added a convenient drive-up ATM in the busy parking lot there; and broke ground on the West End branch, a project that embodies our collaborative spirit and community focus.

The 2013 project with potentially the most lasting change is the one least visible to our members. The Board of Directors

modernized Freedom First’s model of governance to refl ect the ongoing changes in the industry and the Credit Union (see committee report on page 18). The goal is to bring varied community voices to the table as Directors, voters, and advisors, with new perspectives enabling dynamic conversa-tions, and planning that refl ects the changing needs of our ever-evolving membership.

The projects your Credit Union completed and accolades we earned in 2013 are cause for celebration. We congratulate our management for bringing these projects to fruition, our staff for implementing them every day in our branches and behind the scenes, and our members for choosing to “bank for good” with Freedom First.

The drive to execute these projects and reach these goals is the same drive that keeps us from being satisfi ed with last year’s accomplishments. In 2014, your Credit Union will launch a full suite of business banking services to comple-ment our successful commercial lending program. And we will continue to return dividends to our members in the form of competitive rates, programs that matter and truly eff ect change, and projects that make banking with Freedom First easier and more convenient.

Paul PhillipsPresident/CEO

Nelson ShibleyChairmanN l Shibl

4

Reaching for Our Critical Goals

Critical Goal 1: Remain Safe and Sound. Net worth, the primary measure of safety and soundness, ended the year at 10.4% of assets and well above the regulatory threshold of 7.0%. Net income increased at nearly twice the rate of our peers; asset quality as measured by loan delinquency was in line with peer. Both the National Credit Union Administration and our external auditors (Nearman, Maynard, Vallez, CPAs) validated our safety and soundness and off ered a clean unmodifi ed audit opinion (see report beginning on page 12).

Net Income

2013$3.186M

$0M $1M $2M $3M $4M

2012$3.26M

Net Worth

0% 3% 6% 9% 12% 15%

201310.4%

201210.4%

Critical Goal 2: Be a Great Place to Work. Freedom First’s success hinges on having a highly skilled, highly motivated, and highly engaged workforce. To attract and retain top talent, we have worked hard to install a competitive compensation and benefi ts framework and eff ective training program while providing employees with best-in-class systems and a posi-tive work environment. We use several Member Loyalty Group surveys to capture employee engagement and sentiment: 1) the Department Net Promoter Score (NPS) ended the year at 70%, 5% above goal; 2) our overall Employer NPS decreased from 58% in 2012 to 45% in 2013; and 3) we outperformed all other credit unions participating in the Internal NPS Benchmark survey. We remain committed to continuous improvement and shared accountability among our board, management, and staff .

5

Members selected at random from the general membership.

Source: Satmetrix 2013 Net Promoter® Benchmark Study of U.S. Consumers-NPS®

Relational NPS

Freedom First 2012 Score: 49%

20

13

Go

al

0% 10% 20% 30% 40% 50% 57%

Banking Industry

Average: 37%

Freedom First 2013 Score: 53%

Health Insurance

Industry Average: 14%

Members selected at random following an interaction with the Credit Union.

Transactional NPS

20

13

Go

al

0% 20% 40% 60% 77%

Freedom First 2013 Score: 69%

Freedom First 2012 Score: 67%

Critical Goal 3: Improve the Financial Lives of Our Members.Loans and deposits grew signifi cantly, indicating that our products and pricing remain highly competitive. The overall service experience as measured by NPS continued to increase, but remains short of our aggressive goal. We have integrated Freedom First Insurance, LLC,1 more fully into our overall sales and service processes, resulting in increased sales and revenue growth. Freedom First Wealth Management2 expanded its team in 2013 and changed its broker/dealer relationship to LPL Financial, one of the nation’s leading diversifi ed fi nan-cial services broker-dealers. Members now have access to a wider range of fi nancial products and investment monitoring technology.

Net Promoter Scores

1 Insurance products are not sold by or products of Freedom First Federal Credit Union. 2 Securities off ered through LPL Financial, member FINRA/SIPC. Insurance products off ered through LPL Financial or its licensed affi li-ates. Freedom First Federal Credit Union is not a registered broker/dealer and is not affi liated with LPL Financial. The investment prod-ucts sold through LPL Financial are not insured Freedom First Federal Credit Union deposits and are not NCUA insured. These products are not obligations of Freedom First Federal Credit Union and are not endorsed, recommended, or guaranteed by Freedom First Federal Credit Union or any government agency. The value of the investment may fl uctuate, the return on the investment is not guaranteed, and loss of principal is possible. The LPL Financial representatives associated with this website may discuss and/or transact securities business only with residents of the following states: Maine, North Carolina, Pennsylvania, and Virginia.

continued on next page

6

Reaching for Our Critical Goals (cont.)

Critical Goal 4: Increase the Economic Vitality and Quality of Life in Our Community. Our community development activities and their impact continue to expand and increase. Aff ordable hous-ing lending, Responsible Rides loans, and FHLB set-aside loan programs all increased in 2013 over 2012. We launched a workforce development loan in partnership with CDS Tractor-Trailer Training, and we developed the American Dreamer path to citizenship loan after winning the $100,000 Opportunity Finance Network/Wells Fargo NEXT Seed Capital Award. See “Home Runs,” page 11, for awards and recognition of our program successes.

Critical Goal 5: Be a Leader in Corporate Governance. The Credit Union added this goal in 2013 following a rigorous consultant review and the formation of a Gov-ernance and Ethics Committee. See page 18 for details.

7

RBIs: Impact Banking Prod ucts and Servi ce s

A snapshot of Freedom First’s suite of Impact Banking programs and products: designed to meet the fi nancial service needs of low- and moderate-income members.

Re sponsibl e RidesWe brought management of this award-winning program in-house in 2012, and increased the number of loans from 31 in 2012 to 81 in 2013.

Micro Loa nsFew traditional fi nancial institutions off er loans of less than $3,000, so borrowers often have to turn to alternative lending sources that charge high interest rates. Freedom First granted $927,525 in micro-loans to 603 borrowers in 2013—4.7 times as many as in 2012 at an average of $1,538 per loan.

Cr edit Buil der Loa nsFreedom First members with zero or damaged credit had an average credit score of 630 in 2013 after only 6 months of Credit Builder participation.

Payday Alte rnative Loa ns(PAL)Freedom First issued 368 PAL loans in 2013, saving borrowers $47,858 in interest and fees over high-interest alternative lending sources.

Bor row & SaveBorrow & Save holds half of loan proceeds in reserve until the disbursed amount is paid off . Borrowers recognize the value of savings when their loan is paid off and the secured balance is released. Many borrowers begin with a zero credit score and develop responsible spending and saving habits; accounts in 2013 saved borrowers $172,250.

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edom First gra013—4.7

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average credit score after

6 months of Credit Builder

participation

630

$927,525to 603 borrowers through

micro loans in 2013

Responsible Ridesincreased loans 261% from 2012

8

in home loans

to 34 lower income borrowers

in 2013, independent of

standard fi rst-time homebuyer,

FHA, VA, VHDA, and USDA

home ownership programs

$3 millionAff ordable housing

awarded in 2013

$113,996

Down payment

assistancewith matches up to 5:1

Aff or dab le Hou singDown payment assistance is off ered together with fi nancial education and credit counseling by staff who have under-gone the Credit Union Financial Counseling Certifi cation Pro-gram (FiCEP) through the Credit Union National Association.

We off er a full complement of fi rst-time homebuyer options and programs in conjunction with FHA, VA, VHDA, and USDA. Our aff ordable housing portfolio loan program is in addition to those more widely available opportunities, for families who fail to meet those stringent guidelines but have demonstrated the will and capacity necessary to become homeowners.

FHLB Set-Aside ProgramsFreedom First engages in fi nancial education and counsel-ing in addition to deploying Federal Home Loan Bank funds for forgivable loans that address the following community needs:

• Aff ordable housing• Accessibility rehabilitation • Energy weatherization and energy-effi ciency • Homelessness prevention through communication with local code enforcement agencies• Veterans purchase and rehabilitation

Financial EducationOur full-time fi nancial educator served 1,881 people in 2013 at no charge through partnerships, Money Mondays, and one-on-one counseling.

Impact Banking Prod ucts and Servi ce s contd.

9

Teamwor k: Servi ce and Co mm unit y Invest ment

hours of community service

in 2013

3,078Freedom First was the

premier sponsor of the fi rst

annual Superhero Race to

benefi t Family Promise

of Greater Roanoke.

$106,878in donations of time, money,

and scholarships in 2013

2013

Community Work Day

Agencies

Advancement Foundation

Big Brothers/Big Sisters of SWVA

Botetourt Food Bank

Boys & Girls Clubs of SWVA

Children’s Trust

Feeding America Southwest Virginia

Habitat for Humanity

New River Family Shelter

Rescue Mission

Salvation Army

Warm Hearth Village

Community Investment GrantsOur award-winning grants program gave a record $35,000 to nine deserving community action agencies in 2013.

The Advancement Foundation

$5,000 to fund a business enterprise development program.

City of Salem Farmers’ Market

$5,000 in matching funds for electronic benefi t transfer (EBT) users purchasing locally grown produce and food items.

Commonwealth Catholic Charities

$5,000 to establish and equip a computer lab to facilitate English and computer literacy instruction to refugees.

Historical Society of Western VA/O. Winston Link Museum

$2,000 to fund Adventures in Photography, an educational program at Roanoke’s Lucy Addison Middle School.

The Hope Center

$3,000 to support establishing and operating an adult day-care facility for 20 seniors in rural Catawba.

New Horizons Healthcare

$5,000 to expand its Happy Healthy Cooks program into additional local elementary schools.

Salem Area Ecumenical Ministries

$2,000 to fund ACT Packs for Children, a summer “feed and read” program for low-income students.

Unbridled Change

$5,000 for Take Back the Reins, a therapeutic horseback rid-ing program for low-income survivors of domestic abuse.

Warm Hearth Village

$3,000 to furnish handheld adaptive computers and special-ized software for assisted living residents.

“We are so grateful to be affi liated with an organization that supports and believes in the health and well-being of the people in our community.” ~Heather Quintana, Happy Healthy Cooks

10

Roo kies: Academic Sch ol arships

ScholarshipsFreedom First awarded $9,500 in academic scholarships in 2013 to college-bound seniors and undergraduates whose academic achievement, work ethic, and civic involvement mirror Freedom First’s mission and principles.

Charles Perkins Scholarships: $3,000

This scholarship was distributed among three students: Kendall Jenkins (Glenvar High School/UVA); Derek Litvak (William Fleming High School/Virginia Tech); and Emily McKnew (Salem High School/Virginia Western Community College/Christopher Newport University).

Fritz Kehn Scholarship: $1,000

Lucas Tyree (Salem High School/University of Hawaii) won this scholarship for the fourth year in a row. He is attending graduate school at Yale University and plans to return to Virginia to teach sustainable agriculture practices to the Monacan tribe when he graduates.

City of Salem/Frank Turk Scholarship: $1,000

Jonathan Orr (Salem High School/National College) received this scholarship.

Torie Phillips Memorial Scholarship: $1,000

Logan Lumsden (Lord Botetourt High School /Radford Uni-versity) was awarded this scholarship in recognition of her exemplary character and academic achievement. She plans to study nursing.

FFCU Cabell Brand “Common Good” Scholarship: $1,000

Tammy Parece (Virginia Tech) earned this scholarship.

Virginia Tech Scholarship Fund: $2,500

Freedom First contributes $2,500 to this fund each year.

11

Home Runs

Citi Leadership Program for Opportunity Finance

(Nicole Pendleton, Community Development Analyst, for her promise as an emerging leader in the CDFI industry)

Speaking Engagements

Federal Reserve Bank of Richmond

• The Case for Ending Homelessness: Taking a Comprehensive Community Approach• Building Capacity: The Structure and Growth of Community Development Banks National Federation of Community Development Credit

Unions

• Small-Dollar Loans: Impactful and Sustainable Solutions• Borrow & Save: Breaking the Cycle of High-Cost Borrowing through Savings Mobilization• Tools and Strategies for Writing Successful Grant Applications

Opportunity Finance Network

• Credit Union Alternatives to High-Cost Payday Loans• CDFI Partnerships With Municipalities and the Private Sector

Roanoke Regional Housing Network Symposium

• From Purchase to Rehab: Show Me the Money

Credit Union Awards

Desjardins Adult Financial Education Award (Virginia Credit Union League)

Dora Maxwell Award for Social Responsibility (VACUL)

Create Jobs for USA (Opportunity Finance Network and Starbucks: $20,025 to develop small business loans)

Credit Unions Care Foundation of Virginia ($5,000 to expand Responsible Rides)

Wells Fargo NEXT Seed Capital Award (OFN, the Kresge Foundation, and the John D. and Catherine T. MacArthur Foundation: $100,000 to develop the American Dreamer Loan for refugees and immigrants)Diamond Award (CUNA Marketing and Business Develop- ment Council, for our 2011-2012 Community Impact Report)

Individual Awards

Eugene H. Farley, Jr. Award of Excellence (Paul Phillips, President/CEO, by VACUL in recognition of his outstanding contributions to the credit union movement) Credit Union Rock Star (Paul Phillips, by Credit Union Magazine for his leadership in transforming Freedom First into the largest CDFI in Virginia)

National Community Credit Union of the Year

This prestigious award from Credit Union National Association (CUNA) recognizes and honors community credit unions that consistently excel in the advancement of the ideals of the credit union movement, are proactive in their community, and provide a wide array of services that meet the needs of their diverse communities.

“Freedom First has been called ‘a community development company that’s also in the banking business’ and it’s an apt description,” says Paul Phillips, President/CEO. “Winning the national Community Credit Union of the Year award validates our eff orts and strengthens our commitment to our members and the communities we share.”

12

Supervisory CommitteeFreedom First Credit UnionRoanoke, Virginia

Report on the Financial StatementsWe have audited the accompanying consolidated fi nancial statements of Freedom First Credit Union, which comprise the balance sheets as of March 31, 2013 and 2012, and the related statements of income, changes in members’ equity, comprehensive income, and cash fl ows for the years then ended, and the related notes to the consolidated fi nancial statements.

Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these consolidated fi nancial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the prepara-tion and fair presentation of the consolidated fi nancial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these consolidated fi nancial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated fi nancial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Credit Union’s preparation and fair presentation of the consolidated fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the eff ectiveness of the Credit Union’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appro-priateness of accounting policies used and the reasonableness of signifi cant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated fi nancial statements. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated fi nancial statements referred to above present fairly, in all material respects, the fi nancial position of Freedom First Credit Union as of March 31, 2013 and 2012, and the results of its operations and its cash fl ows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Nearman, Maynard, Vallez, CPAsMiami, FloridaMay 8, 2013

Scor eboa rd: Indepe ndent Audit or s’ Re por t

13

Co nsol idate d State ment of Financial Co ndit ion

2013 2012

Cash and cash equivalents $ 5,358,325 $ 4,459,695Investments: Available-for-sale 13,264,840 212,379 Other 24,750,982 38,722,594 Federal Home Loan Bank (FHLB) stock 1,498,100 1,488,300 Loans held-for-sale 2,617,891 2,412,098 Loans receivable, net of allowance for loan losses 236,666,576 210,601,910 Accrued interest receivable 842,891 708,452Premises and equipment, net 9,553,977 8,895,901National Credit Union Share Insurance Fund deposit 2,140,201 2,000,033Assets acquired in liquidation 790,147 558,170 Other assets 12,432,934 8,729,498

Total Assets $ 309,916,864 $ 278,789,030

March 31,ASSETS

2013 2012

Liabilities

Members’ share and savings accounts $ 240,195,595 $ 219,108,777Borrowed funds 25,500,000 20,500,000Interest payable 84,653 86,624Accrued expenses and other liabilities 4,703,885 2,595,026 Uninsured secondary capital 9,278,000 9,278,000 Total liabilities 279,762,133 251,568,427 Commitments and contingent liabilitiesMembers’ Equity

Regular reserve 5,751,716 5,751,716Undivided earnings 23,745,972 20,866,578 Accumulated other comprehensive income (loss) 57,092 2,358Equity acquired in merger 599,951 599,951 Total members’ equity 30,154,731 27,220,603

Total Liabilities and Members’ Equity $ 309,916,864 $ 278,789,030

March 31,LIABILITIES AND MEMBERS’ EQUITY

14

Co nsol idate d State ments of Income

2013 2012

Interest Income

Interest on loans receivable $ 12,708,425 $ 12,232,937 Interest on investments 142,813 45,959 Interest income 12,851,238 12,278,896Interest Expense

Dividends on members’ share and savings accounts 1,025,141 1,188,666 Interest on borrowed funds 1,103,515 1,107,202 Interest expense 2,128,656 2,295,868

Net Interest Income 10,722,582 9,983,028

Provision for Loan Losses 1,530,678 1,381,266Net Interest Income After Provision for Loan Losses 9,191,904 8,601,762Non-Interest Income

Fees and service charges 4,054,417 3,830,860 Other non-interest income 2,908,142 2,659,849 Gain on sale of mortgage loans, net 963,687 409,384 Gain on disposition of assets acquired in liquidation, net - 87,012 Gain on disposition of premises and equipment, net - 2,250 Non-interest income 7,926,246 6,579,971

17,118,150 15,181,733

Non-Interest Expense

Compensation and employee benefi ts 7,882,979 7,291,827 Operations 3,138,164 2,766,5873 Loan servicing 1,012,425 728,897 Education and promotion 893,047 684,537 Occupancy 670,193 577,308 NCUA assessment 203,319 481,800 Professional and outside services 190,733 210,914 Loss on disposition of assets acquired in liquidation, net 247,896 - Non-interest expense 14,238,756 12,741,870

Net Income $ 2,879,394 $ 2,439,863

March 31,

15

Co nsol idate d State ments of Membe rs’ Equit y and Co mprehe nsive Income

Balance, March 31, 2011 $ 5,751,716 $18,426,715 $ ( 398,195) $ - $ 23,780,236

Net income - 2,439,863 - - 2,439,863Change in unrealized gain/(loss) on securities - - ( 8,874) - (8,874)Change relating to pension plan accounting - - 409,427 - 409,427Equity acquired in merger - - - 599,951 599,951

Balance, March 31, 2012 5,751,716 20,866,578 2,358 599,951 27,220,603

Net income - 2,879,394 - - 2,879,394Change in unrealized gain/(loss) on securities - - 54,734 - 54,734

Balance, March 31, 2013 $ 5,751,716 $ 23,745,972 $ 57,092 $ 599,951 $ 30,154,731

Regular Reserve

UndividedEarnings

AccumulatedOther

ComprehensiveIncome (Loss)

EquityAcquired In

Merger Total

MEMBERS’ EQUITY

2013 2012

Net Income $ 2,879,394 $ 2,439,863

Other Comprehensive Income or (Loss)

Net unrealized holding (losses)/gains on securities arising during the year 54,734 (8,874) Adjustment due to pension plan accounting - 409,427 54,734 400,553

Comprehensive Income $ 2,934,128 $ 2,840,416

March 31,COMPREHENSIVE INCOME

16

Co nsol idate d State ment of Ca sh Fl ows

March 31,

2013 2012

Operating Activities

Net income $ 2,879,394 $ 2,439,863 Adjustments Provision for loan losses 1,530,678 1,381,266 Depreciation and amortization of premises and equipment 852,797 660,821 Gain on disposition of premises and equipment, net - (2,250) Gain on sale of mortgage loans, net (963,687) (409,384) Loss (Gain) on disposition of assets acquired in liquidation, net 247,896 (87,012) Amortization of investment premiums/discounts 226,547 1,259 Amortization of deferred loan origination fees/costs 1,134,737 835,113 Changes in operating assets and liabilities Loans held-for-sale (205,793) (2,412,098) Accrued interest receivable (134,439) 68,869 Other assets (3,703,436) 4,857,790 Dividends payable (1,971) (19,873) Accrued expenses and other liabilities 2,108,859 978,596 Net cash provided by operating activities 3,971,582 8,292,960

Investment Activities

Purchases of: Available-for-sale securities (13,385,647) - FHLB stock (9,800) - Premises and equipment (1,510,873)) (2,870,071) Proceeds from: Maturities, paydowns, and sales of available-for-sale securities 161,373 280,832 Sale of FHLB stock - 423,600 Sale of premises and equipment - 80 Sale of mortgage loans 46,513,087 25,924,843 Net change in: Other investments 13,971,612 (24,634,798) Loans receivable, net of charge-off s (74,359,626) (28,652,991) Assets acquired in liquidation (479,873) 832,837 NCUSIF deposit (140,168) 72,520 Merger activity - 599,951 Recoveries on loans charged off 80,145 373,072Net cash used in investing activities (29,159,770) (27,650,125)

continued on next page

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2013 2012

Financing Activities

Net change in members’ share and savings accounts 21,086,818 20,303,181 Gross borrowing during the audit period 7,500,000 - Gross repayments during the audit period (2,500,000) -Net cash provided by (used in) fi nancing activities 26,086,818 20,303,181

Net Change in Cash and Cash Equivalents 898,630 946,016Cash and Cash Equivalents at Beginning of Year 4,459,695 3,513,679Cash and Cash Equivalents at End of Year $ 5,358,325 $ 4,459,695

Supplemental Cash Flow Disclosures

Dividends and interest paid $ 2 ,130,627 $ 2 ,315,741 Loans receivable transferred to assets acquired in liquidation $ 442,566 $ 457,170

Cash received in merger $ 838,034Acquired assets, net of cash received 7,896,123Assumed liabilities (8,134,206)

Equity acquired in merger $ 599,951

March 31,

Supplemental Schedule of Noncash Investing and Financing Information

Except for the cash received, the balances acquired in the merger as described in Note 13 of these consolidated fi nancial statements are not included in the above because no cash was paid. Rather, only the transactions impacting cash fl ows after the date of acquisition are refl ected in the corresponding sections (operating investing and fi nancing) above.

The following schedule describes the Credit Union’s noncash investing and fi nancing activities relating to the merger during the fi scal year ended March 31, 2012.

Consolidated Statement of Cash Flows, continued

18

De sign ate d Hitt ers: Co mm itt ee Re por ts

Supervisory Committee Report The Credit Union’s Supervisory Committee has the respon-sibility to determine that the operations of the Credit Union are carried out in accordance with the Federal Credit Union Act and the rules and regulations of the National Credit Union Administration. This year, we have directed an emphasis on internal controls, consumer compliance, fraud prevention, the Bank Secrecy Act, and other new rules that aff ect the Credit Union.

The Supervisory Committee engaged a certifi ed public ac-counting fi rm to perform a fi nancial audit of the consolidated fi nancial statements of the Credit Union and a verifi cation of member accounts. Their fi nancial audit report included an unmodifi ed opinion based on risk assessments and reviews of our internal controls and accounting procedures and presenta-tions. Based on their report and our own observations, we can report to you that Freedom First Federal Credit Union contin-ues to maintain a safe and sound fi nancial institution.

The Supervisory Committee would like to thank you for your cooperation and support of the Credit Union.

Emily Faye Poff Chair, Supervisory Committee

Governance and Ethics Committee Report Following recommendations made by an outside consulting group and approved by the Board of Directors in 2012, the Governance and Ethics Committee spearheaded a series of changes designed to improve the governance of your Credit Union. The following improvements are now in place:

• Board members now participate in a regularly scheduled self-assessment designed to identify strengths and areas of need based on our constantly changing economic and social environments. • Board and senior staff annually identify optimal board composition in terms of diversity, skill, knowledge, sector, industry, geographic, and demographic goals for board composition. • Board member term limits allow for a renewal of leader- ship based on optimal board composition.

• The Nominations and Elections Committee has been encouraged and empowered to create a slate of candi- dates most suitable for board service. • New nomination and election procedures are designed to modernize and increase member participation in the voting process. • Participation on Board committees is now possible for anyone (non-board members) with the skills and compe- tency needed by that committee.

Finally and perhaps most importantly, the Board of Directors has adopted a fi fth critical goal for Freedom First Federal Credit Union, thus elevating the importance of competent and rele-vant leadership in today’s rapidly changing world. That goal is “To be a leader in corporate governance.” Given the magnitude of change put in place in 2013, your Board of Directors is well on its way to reaching that goal.

Dan MerendaChair, Governance and Ethics Committee

Nominations and Elections Committee Report In response to feedback from members and discussions from the Credit Union Planning Session, the Committee engaged in a deliberate and thorough search for interested and qualifi ed candidates to present to the Board for this year’s election. As a result of that search, 12 members showed interest in the 3 open positions. Using a new, more robust screening process, we completed the task with six highly qualifi ed nominees: Joseph Coyle, Ken Ferris, Dan Merenda, Bruce Phipps, Frank Turk, and Clint White.

As indicated at the 2013 annual meeting, on the Credit Union’s website, in mailings to members, in the Credit Union news-letter, in branch notices, and at employer and other group meetings, such as for General Electric retirees, there will be no voting at the 2014 annual meeting. Instead, voting will be accomplished online, by telephone, and by request for printed ballots from April 1-May 3, 2014.

The independent election vendor will present the election results to the Credit Union’s Supervisory Committee, which will inform the Board Secretary, who will then announce the

$1 million due to increased costs of operation. Many of these costs represent reinvestment in providing the best possible services to the membership.

Our Credit Union has been examined by NCUA, our regulator; and audited by Nearman, Maynard, Vallez, CPAs, a licensed in-dependent public accounting fi rm; both of which attest to the safety and soundness of Freedom First. The future continues like the weather: partly cloudy, representing the uncertainty of the economy, but mostly sunny coming from the confi dence that membership has in the Credit Union, Board, and man-agement to provide high-quality services in a safe and sound manner.

Consolidated Financial Statements for Freedom First Feder-al Credit Union are shown below. Questions regarding this information may be forwarded to Credit Union Management or me. On behalf of myself as your Treasurer, and the entire credit union family, I want to express our sincere appreciation to the management and staff of Freedom First. Without their diligence and eff orts this success would not be possible.

Frank TurkTreasurer

19

12/31/2012 12/31/2013

ASSETS

Loans (net) $ 230,526 $ 257,750Cash 5,983 5,723Investments 28,786 24,156Other assets 26,594 27,456

Total Assets $ 291,889 $ 315,085

LIABILITIES & NET WORTH

Payables $ 29,488 $ 39,008

Secondary capital 9,278 -Member shares 223,587 243,387Net worth 29,536 32,690

Total Liabilities

& Net Worth $ 291,889 $ 315,085

CONSOLIDATED STATEMENT OF CONDITION

(UNAUDITED) $ Amounts in ThousandsCONSOLIDATED INCOME STATEMENT

(UNAUDITED) $ Amounts in Thousands

results at the Credit Union’s Annual Meeting on May 8, 2014. Elected candidates will offi cially take offi ce immediately after the Annual Meeting.

Gerald BarnesChair, Nominating Committee

Treasurer’s Report Once again, I am proud to report to you that as 2013 came to a close, Freedom First Credit Union was successful in its mission and in our number one goal of “safety and soundness” for all of our members and the Credit Union. During a time when the national, state, and regional economies seem confusing, taking steps ahead and then falling back a little, Freedom First continues to follow the Strategic Plan set before it by the Board and management.

Over the past 12 months, Total Assets have increased from $291,889,000 to $315,085,000, an increase of 8%; growth rate for loans was 12% compared to our peers at 7%; and shares were up 9% compared to 4% for our peers. Our Net Income de-creased by $81,000 to $3,186,000, which is rather extraordinary, especially when considering that expenses increased by almost

12/31/2012 12/31/2013

INCOME Income from member loans $ 12,519 $ 3,467

Investment & other income 7,885 7,779

Total Income $ 20,404 $ 21,246

EXPENSES

Operating expenses $ 13,578 $ 14,633Dividends & interest expenses 2,167 1,934Loan loss provision 1,392 1,493

Total Expenses $ 17,137 $ 18,060

NET INCOME $ 3,267 $ 3,186

BOARD OFFICERS

BOARD

Jared Poff

Director

Gerald Barnes

Director

Judith Harrison

Director

Roger Journell

Director

Dan Merenda

Director

Nelson Shibley

Chairman

Tim Sutphin

Vice Chairman

Frank Turk

Treasurer

Susan Hall

Secretary

20

ALCO (Finance) CommitteeJared Poff Frank Turk

Audit and Risk CommitteeSusan HallRoger Journell

Corporate Responsibility CommitteeThomas Chapman (former Director)Weldon Dinkel (former Director)Judith HarrisonJared Poff

Employee Relations CommitteeSusan HallJared Poff Nelson Shibley

Boa rd of Directo rs

21

SUPERVISORY COMMITTEE

LEADERSHIP TEAM

Jay Lanz

Supervisory

Committee

Michael Williams

Supervisory

Committee

Joseph Coyle

Supervisory

Committee

Ira Hartman

Supervisory

Committee

Emily Faye Poff

Chair, Supervisory

Committee

Paul Phillips

President/CEO

Harvey D. Brookins, Jr.

EVP/CDO

Keith Rickoff

EVP/CFO

Sarah Andrews

EVP/COO

Governance and Ethics CommitteeGerald BarnesDan Merenda

Lending CommitteeTim SutphinFrank Turk

Nominations and Elections CommitteeGerald BarnesSusan HallJudith Harrison

Blacks burg1204 South Main Street

Virginia Tech—Squires Student Center

Ch ris tiansburg417 North Franklin Street

Dal ev il le 1171 Roanoke Road

Roa noke5240 Valleypark Drive—Operations Center

5102 Williamson Road—Crossroads2221 Colonial Avenue—Towers Shopping Center

1210 Patterson Avenue—West End Center Steel Dynamics, Inc.

(exclusively serving the SDI workforce)

Sal em1235 Electric Road

1900 Electric Road—LewisGale Hospital

Vinto n203 Virginia Avenue

(540) 389-0244 / (866) 389-0244

www.freedomfi rst.com

Federally insured by NCUA.