GECU OF EL PASO

2004 ANNUAL REPORT BOARD OF DIRECTORS MANAGEMENT TEAM

Manuel R. Ybarra, Harriet May, Chairman of the Board President and CEO

Gregory J. Watters, Fermin Acosta, Jr., Vice Chairman Senior Vice President, Administrative Services Frank Garcia, Secretary/Treasurer Rudolf Kuehne, Senior Vice President, Harriet May, Data Processing President/CEO Crystal Long, John Fernandez Senior Vice President, Consumer Loans and Annie Koch Remote Services

Luis Mata Steven G. Lutz, Senior Vice President, Robert C. Nagel Chief Financial Officer

T. C. Prewitt Musette Bracher, Vice President, Marketing

ADVISORY MEMBERS Arturo Moreno, Vice President, Jose I. Quiñonez, Jr. Business Services

Maria Appelzoller Al Perez, Vice President, Art Werge, Jr. Sales and Service Operations

Janie Shockley, Vice President, AUDIT COMMITTEE Human Resources

Gregory J. Watters, Barbara Franco, Chairman Director, Internal Audit Frank Garcia

Luis Mata It was a year when taking a closer look meant not

only looking with our eyes, but with our minds and CREDIT COMMITTEE

Fermin Acosta, Jr., Chairman hearts at what we value the most… the financial well-

Harriet May

Crystal Long being of our member-owners. 1

The spirit of GECU and our CHAIRMAN’S REPORT

philosophy of "people helping Taking a Closer Look A Focus on Governance

Your Board of Directors, who represent you, the members, honored me nearly one year ago, by people," is exemplified by our electing me Chairman of the Board. My pledge to you is to continue to strengthen the Board’s leadership responsibilities, internalize the Board’s stewardship responsibilities, and fulfill the Board’s duties of providing the general direction and policy guidance to our professional team of employees volunteer Board of Directors. led by President and Chief Executive Officer Harriet May. In furtherance of these responsibilities, the Board’s vision for the credit union is one of improving the quality of life of our members while ensuring the long-term success of your credit union. Our aim is to provide our member-owners a not-for-profit financial institution with a full range of financial services dedicated to the credit union philosophy of “people helping people.”

Your Board of Directors brings to the credit union the strength of a range of experience in the financial, management and government sectors. These unpaid volunteers give to your credit union valuable leadership skills to represent the needs of our members -- whether it’s a new car, a home, financial security, or access to cash. Your Board of Directors translate those needs into direction and policies that are consistent with the law and sound financial principles. In turn, our professional staff transforms the Board’s direction and policies into lending programs, savings programs, or new facilities.

Your credit union experienced an exceptional year in 2004. Financial performance was sound, asset quality was positive, earnings were strong and membership growth was steady. Your credit union’s total assets topped the $1 billion level. Nearly one out of every three El Pasoans is a member-owner of our credit union. GECU’s full range of services is keeping up with today’s need for convenience and dependability, fitting of El Paso’s largest locally- owned financial institution. Credit goes to our team of professionals, who diligently worked on projects to improve the quality of your life, while maintaining the financial soundness of your credit union.

As we look forward to another exciting year, let me assure you that your Board of Directors is always focused on what’s important to you, GECU’s member-owners.

Manuel R. Ybarra, Chairman of the Board

Standing (L-R): John Fernandez, T.C. Prewitt, Luis Mata, Robert C. Nagel, Gregory J. Watters, Jose I. Quiñonez, Manuel R. Ybarra. Seated (L-R): Frank Garcia, Annie Koch, Harriet May, Maria Appelzoller, Art Werge, Jr. 3

GECU’s low-cost mortgage loans helped the Vargas family purchase a larger home without raising their monthly payment.

PRESIDENT’S REPORT

During 2004, we took every opportunity to ask our members to “Take A Closer Look” at all the benefits, products and services available through the credit union they own. We, too, spent a lot of time taking a closer look at our members’ needs. Using professional research tools, such as our annual Member Satisfaction Survey and our daily transaction surveys, we studied your feedback about the financial products we offered, as well as the quality of service Angie and Victor Vargas and their you received in our lobbies and on the telephone. While pleased with the confidence you have placed in us, we two daughters Victoria and Elisa continued to look for more efficient and innovative ways to serve you.

As our community continued to grow further East, it became abundantly clear that we needed a facility closer to members’ homes. In response, we opened a new, state-of-the-art drive-thru at 3037 Trawood Drive, featuring 12 drive-thru lanes, three drive-up ATM units and one night depository. Since opening in April 2004, transaction volumes have increased rapidly, and wait times have been reduced at our other East Side branches.

With the rapid growth on El Paso’s far west side, we knew we needed to expand our services on that side of town. We broke ground on a new office at 1500 North Resler Drive on April 20, 2004. Construction is now almost complete and we are planning an official grand opening toward the end of the first quarter 2005.

Our Viscount office has served us well as our corporate headquarters since 1968, but we’ve been “bursting at the seams” for several years. After an extensive search, we purchased new property in Central El Paso at the corner of Edgemere and Airway (formerly the Far West Rodeo). The demolition of the existing building is nearly complete and construction of a new corporate facility will begin shortly, with completion anticipated in mid-2006.

Looking to help more members realize the American dream of home ownership, we partnered with Fannie Mae (FNMA) to offer more mortgage loan opportunities, including loans that require little or no down payment. I am pleased to report that through this expanded relationship, our mortgage loan production between April and December 2004 doubled ove r last year, a clear indication that more members are realizing the dream of home ownership.

Our industry faced new legislative challenges in 2004 and will continue to do so through 2005. Bankers have revived the argument that credit unions have an unfair tax advantage and are pouring millions of dollars into renewed efforts to eliminate our tax-exempt status and our very existence. Individual credit unions, local credit union chapters, state leagues and national credit union organizations must continually share their stories of “people helping people” with government officials and the press – even with their own members – if we are going to retain our tax-exempt status and continue to provide members with affordable financial services. We fought this battle before and won, and the only way we will win again is by making our legislators “Take a Closer Look” at what we do that truly sets us apart from other financial institutions.

As we look to the future, we must stay focused on our mission to serve our members and our communities with convenient locations and quality, affordable financial services. GECU exists to serve our member-owners and we will continue to work hard to meet your growing needs.

Harriet MaY, President and CEO 5

Perspectiva, a locally-owned architectural firm, is experiencing tremendous growth. A business loan from GECU is helping the four owners expand their successful partnership. CREDIT COMMITTEE REPORT

Two-Thousand Four was a phenomenal year at GECU. Loan volumes reached new heights as members borrowed over half a billion dollars to improve their financial position.

Here is a snapshot of our loan activity over the last twelve months: I GECU’s loan portfolio increased over $122 million or 15.8%, ending the year at $902,75 0,385, with an average loan-to-deposit ratio of 93.53%. I Indirect Lending led the way with $282 million in automobile loans. I SmartCall funded loans totaling $77 million. I The Mortgage Department followed suit with nearly $27 million in first-lien mortgages and over $31 million in home equity loans. I GECU reduced interest rate risk by selling over $30 million in mortgages to Fannie Mae, while retaining the servicing side of the loans and the relationship with our members. I SmartBranch (Internet) loans exceeded $7.5 million. I Business Services funded over $8 million in small business loans.

THE CHART BELOW CATEGORIZES In 2004, bankruptcies continued to rise SOME OF THE LOANS MADE IN 2004: significantly across the nation. GECU experienced an increase as well, with a 6% Loan Type Number of Loans Loan Totals increase in bankruptcy filings. The Bankruptcy New Autos (At Dealerships) 7,375 $200,686,143 Abuse Prevention and Consumer Protection Used Autos (At Dealerships) 4,985 81,610,020 Act, intended to deter bankruptcy abuse, again New Autos (Lobby/SmartCall) 3,589 55,204,335 failed to pass in the United States Senate. As a Used Autos (Lobby/SmartCall) 2,435 22,643,011 stop gap measure, our lending staff will continue to look closely at the bankruptcy Other Installment Loans 13,722 62,318,896 indicator score shown on credit reports for Mortgage Loans (1st Lien) 392 26,913,654 additional underwriting guidance. Home Equity Loans 874 31,851,426 Credit Card Advances 744,757 61,040,370 GECU’s success in 2004 was a direct result of Member Business Loans 60 8,115,331 our member-owners “Taking A Closer Look” at the products and services offered at your credit union. We appreciate the trust and confidence you have placed in us and look forward to serving you Rodolfo Uria, throughout 2005. Lorenzo Aguilar, Martin Needle, Eugenio "Pacelli" Mesta Fermin Acosta, Jr., Chairman Harriet May Crystal Long 7

A Family Account MasterCard gives your loved ones access to credit for everyday uses or in an emergency.

AUDIT COMMITTEE REPORT

Once again it is my pleasure to report that your credit union is financially sound. Your commitment to, and confidence in, your member-owned credit union resulted in a very successful year for GECU.

The Audit Committee, made up of three volunteer member-owners, oversees the Internal Audit Department which conducts comprehensive internal audits throughout the year ensuring: 1) accounting records and reports are prepared promptly and accurately reflect operations and results; 2) established internal controls are effectively maintained and adequately protect the credit union, its assets, members, management and employees; 3) each area of the credit union is carrying out the plans, policies and procedures for which it is responsible as directed by the Board of Directors.

The Audit Committee also oversees the annual comprehensive year-end audit conducted by the independent certified public accounting firm of Lauterbach, Borschow & Company, P.C. Their examination was conducted in accordance with generally accepted auditing standards as issued by the American Institute of Certified Public Accountants.

As a result of the internal and independent audits, the Audit Committee believes the financial statements included in the 2004 Annual Report fairly present the financial condition and earnings of Government Employees Credit Union of El Paso for the year ended December 31, 2004.

Gregory J. Watters, Chairman

Frank Garcia Luis Mata 9

Through a new partnership with MEMBERS Trust Company, GECU members now have access to a full range of affordable trust services. RETURN TO MEMBERS

Interest - CDs ...... 48.12% Life Savings $ 214,176 1.35 % Life Savings...... 1.35% Dividends - Shares 2,945,445 18.59% Interest - MMA 1,014,513 6.40% Interest - Checking 1,007,129 6.36% Interest - IRAs 3,039,665 19.18% Interest - CDs 7,626,266 48.12% Total Return to Members $ 15,847,194 100.00%

Interest - IRAs...19.18% Interest - Checking...... 6.36% Interest - MMA...... 6.40% Dividends - Shares...... 18.59%

DISTRIBUTION OF EARNINGS

Operating Expenses...... 32.80% Return to Members $ 15,847,194 22.35% Employee Compensation Reserves...... 13.29% and Benefits 22,371,044 31.56% Judy Monteleone, Operating Expenses 23,249,593 32.80% Trust Officer/Agency Manager Reserves 9,421,160 13.29% Total Earnings $ 70,888,991 100.00%

Return to Members...... 22.35%

Employee Compensation and Benefits...... 31.56% 11

STATEMENTS OF FINANCIAL CONDITION STATEMENTS OF INCOME December 31, 2004 and 2003 Years Ended December 31, 2004 and 2003

2004 2003 2004 2003 ASSETS Interest income Loans $ 49,893,850 $ 50,482, 997 Cash and cash equivalents $ 50,400,797 $ 74,034,904 Investments 1,933 ,133 1,992,526 Investments: 51,826,983 52,475,523 Securities available for sale 13,682,600 45,234,411 Interest expense Securities held to maturity 17,853,212 14,576,147 Members’ share and savings accounts 15,633,018 16,980,6 50 Other investments 6,379,093 4,768,304 Borrowed funds 186,883 40,884 Loans held for sale 631,400 2,882,315 Loans receivable, net 896,543,249 771,257,461 15,819,901 17,021,534 Accrued interest receivable 3,074,147 2,790,845 Net interest income 36,007,082 35,453,989 Accounts receivable and other assets 2,457,813 5,258,456 Provision for loan losses 4,057,818 4,450,571 Mortgage servicing rights 893,900 753,435 Property and equipment, net 25,464,357 16,380,236 Net interest income after provision for loan losses 31,949,264 31,003,418 NCUSIF deposit 8,527,837 8,107,137 Fees and other operating income Service fees 16,583,766 13,317,109 Total assets $ 1,025,908,405 $ 946,043,651 Loan late charge fees 701,504 491,624 Net (loss) on securities held for sale (519,361) 0 LIABILITIES AND MEMBERS’ EQUITY Net gain on sale of mortgage loans 950,556 1,352,811 Members’ share and savings accounts $ 929,649,229 $ 862,027,083 Net mortgage servicing income (loss) 65,456 (11,508) Other 1,252,418 1,075,957 Interest and dividends payable to members 887,567 832,410 FHLB advances 6,928,326 4,850,251 19,034,339 16,225,993 Accrued expenses and other liabilities 4,218,147 3,713,987 Operating expenses Compensation and benefits 22,371,044 20,825,342 Office operations 12,946,636 12,106,559 Total liabilities 941,683,269 871,423,731 Occupancy 2,116,517 1,960,551 Education, promotions and conferences 2,125,199 1,770,949 Commitments and contingencies Other, net 2,030,716 2,167,253 Members’ Equity 41,590,112 38,830,654 Retained earnings, restricted 84,225,136 74,619,920 Income from operations 9,393,491 8,398,7 57 Non-operating income Total members’ equity 84,225,136 74,619,920 Gain on sale of property and equipment 27,669 38 ,1 33

Total liabilities and members’ equity $ 1,025,908,405 $ 946,043,651 Net income $ 9,421,160 $ 8,436 ,890

For a full GECU 2004 Audit Report, please contact the office of President/CEO Harriet May. SHARES AND DEPOSITS MAIN OFFICE Share Accounts 7227 Viscount Boulevard Christmas Club Accounts Youth Savings Accounts Certificates of Deposit NORTHEAST OFFICE Money Market Accounts 5625 Transmountain Road Checking Accounts Senior Privilege Checking Individual Retirement Accounts WEST OFFICE Business Checking Accounts 5670 North Mesa Street

LOANS EAST OFFICES Personal Loans 10435 Vista Del Sol Drive New & Used Auto Loans 11987 Rojas Drive Home Mortgage Loans 3037 Trawood Drive (Drive-thru) Home Equity Loans Home Improvement Loans MasterCard ® Credit Cards LOWER VALLEY OFFICE Line of Credit Accounts 8936 Alameda Avenue Business Loans

DOWNTOWN OFFICE SPECIAL SERVICES 700 East San Antonio Street, SmartBranch ® 1st Floor, Federal Building (online services) www.gecu-ep.org SmartLine (24-hour account information ) MAILING ADDRESS SmartCall P. O. Box 20998 (call center for new accounts and loans) El Paso, Texas 79998-0998 ATMs

MasterMoney ® Check Card TELEPHONE NUMBERS Direct Deposit (915) 778-9221 Automatic Transfers Toll-Free 1-800-772-GECU (4328) (between GECU accounts) Safe Deposit Boxes WEB ADDRESS Night and Lobby Depositories www.gecu-ep.org

IRnet (International Remittance Network for international wire transfers)

Overdraft Privilege