Transmittal Letter 1 Message from the President 2

PART I: ABOUT THE BANK 4 A. Establishment 4 B. Mission & Purpose 4 C. Organizational Chart 5 D. The Shareholders 5 E. The Board of Governors 6 F. The Board of Directors 7 G. The Management 7

PART II. 2010 LENDING ACTIVITIES 8 A. Loan Approvals 8 B. Outstanding Loans by Type 8 C. Outstanding Loans by Shareholder 9 D. Loan Delinquency & Charge-offs 9

PART III. 2010 FINANCIAL PERFORMANCE 10 A. Performance Against Budget 10 B. Performance Against Previous Year 10 C. Asset Mix 11 D. Loan Mix 11 E. Revenue by Source 12 F. Major Expenses 12

PART IV. HISTORICAL PERFORMANCE 13

PART V. FINANCIAL RATIOS 17

PART VI. BOARD ACTIVITIES REPORT 18 A. Board of Governors 18 B. Board of Directors 18

INDEPENDENT AUDITOR’S REPORT Addendum

PACIFIC ISLAND DEVELOPMENT BANK 2010 ANNUAL REPORT PACIFIC ISLAND DEVELOPMENT BANK 2010 ANNUAL REPORT PACIFIC ISLAND DEVELOPMENT BANK Shareholders (7 governments)

Board of Governors (14 members)

Board of Directors (8 members)

President & CEO

Manager Manager Lending Administration

2010 2009 Shareholders Number Value $ Number Value $ Chuuk 251 $251,783 251 $251,783

CNMI 1,000 1,000,000 1,000 1,000,000

Guam 1,000 1,000,000 1,000 1,000,000

Kosrae 700 700,000 650 650,000

Palau 1,000 1,000,000 1,000 1,000,000

Pohnpei 1,000 1,000,000 1,000 1,000,000

Yap 1,000 1,000,000 1,000 1,000,000

Total 5,951 $5,951,783 5,901 $5,901,783

2010 ANNUAL REPORT Shareholders Executive Branch Rep. Legislative Branch Rep.

Chuuk Wesley Simina Singkoro Harper Governor Speaker, House of Rep. FSM State of Chuuk Legislature

CNMI Governor Representative CNMI CNMI Legislature

Guam Felix Camacho, Chairman Vicente Pangelinan Governor Senator Island of Guam Guam Legislature

Kosrae Robert Weilbacher Ilai Abraham Governor Senator FSM State of Kosrae Kosrae State Legislature

Palau Kerai Mariur, Secretary Secilil Eldebechel Vice President Delegate, HOD Republic of Palau Palau National Congress

Pohnpei John Ehsa, Vice Chairman Thomas Pablo Governor Director of Treasury & Admin. FSM State of Pohnpei Pohnpei State Government

Yap Sebastian Anefal Charles Chieng Governor Speaker FSM State of Yap Yap State Legislature

PACIFIC ISLAND DEVELOPMENT BANK PALAU CNMI KOSRAE Secilil Eldebechel Diego Benavente Gibson Siba Member Representative Senator House of Delegates CNMI Legislature Kosrae State Legislature

POHNPEI GUAM YAP Thomas Pablo Lourdes Perez Michael Gaan Director Director of Administration Director Dept. of Treasury/Admin Government of Guam Dept. of Res. & Dev.

Aren Palik CHUUK President & CEO Vacant Chairman of the Board of the Board

Name Position | Title Date of Hire Years of Service

Aren Palik President/CEO 10/22/2002 8 years Rosa Weilbacher Manager of Admin. 6/1/1999 11 years Antonio John Manager of Lending 4/1/2010 8 months

2010 ANNUAL REPORT APPROVED LOANS

Loan Type 2010 Number Amount 2009 Number Amount

Commercial Loans Agriculture 0 0 0 0 Fisheries 0 0 0 0 Tourism 0 0 0 0 Manufacturing 0 0 0 0 Services 12 1,098,937 5 315,107 Commercial 2 42,799 0 0 Sub-total 14 1,141,736 5 315,107

Residential Home Loans 1 56,800 3 287,776 Consumer Loans 42 426,112 18 238,300

Total 57 1,624,648 26 841,183

OUTSTANDING LOANS

Loan Type 2010 Number Amount 2009 Number Amount

Commercial Loans Agriculture 1 14,556 1 17,962 Fisheries 1 70,826 1 78,010 Tourism 8 1,218,164 7 1,262,423 Manufacturing 1 20,640 1 26,359 Services 37 2,876,472 37 2,434,669 Commercial 18 1,305,715 8 1,378,104 Sub-total 66 5,506,374 55 5,197,527

Residential Home Loans 4 336,681 3 285,530 Consumer Loans 56 537,753 17 201,403

Total 126 6,380,808 75 5,684,460

PACIFIC ISLAND DEVELOPMENT BANK OUTSTANDING LOANS BY SHAREHOLDERS

Shareholder Number of Loans Amount

Guam 17 1,513,861 Palau 8 1,201,288 Pohnpei 19 822,832 Yap 40 1,282,549 Kosrae 33 765,294 CNMI 8 714,363 Chuuk 1 80,621

Total 126 6,380,808

30.7%

15.1%

6.2%

2.6% 2.1% 1.5% 0.9% 1.8%

2003 2004 2005 2006 2007 2008 2009 2010

2010 ANNUAL REPORT Selected Key Items 2010 Budget 2010 Actual Variance ($)

Loans Receivable 6,300,000 6,380,807 80,807 Marketable Securities 2,107,847 2,091,357 -16,490 Total Assets 8,392,776 8,428,852 36,076 Stockholders’ Equity 6,589,776 6,439,788 -149,988 Retained Earnings(Deficit) 562,993 469,242 -93,751 Gross Revenue 793,800 662,382 -131,418 Total Operating Expenses 459,214 439,667 -19,547 Provision for Loan Losses 100,000 100,000 -0- Net Income 234,586 122,715 -111,871

Selected Key Items 2010 Actual 2009 Actual Variance ($)

Loans Receivable 6,380,807 5,685,460 695,347 Marketable Securities 2,091,357 1,894,291 197,066 Total Assets 8,428,852 7,709,502 719,350 Stockholders’ Equity 6,439,788 6,235,165 204,623 Retained Earnings(Deficit) 469,242 346,527 122,715 Gross Revenue 662,382 666,008 -3,626 Total Operating Expenses 439,667 387,045 52,622 Provision for Loan Losses 100,000 65,000 35,000 Net Income 122,715 213,963 -91,248

PACIFIC ISLAND DEVELOPMENT BANK ASSET MIX

LOANS RECEIVABLE INVESTMENT $ 6,080,808 SECURITIES 72% $ 2,091,357 25%

OTHER ASSETS $ 256,688 3%

2010 ANNUAL REPORT PACIFIC ISLAND DEVELOPMENT BANK Total Assets

9,000,000 $8.4m 8,000,000 $7.7m $7.1m 7,000,000 $6.9m $6.0m 6,000,000 $5.5m $4.9m 5,000,000 $4.4m 4,000,000 3,000,000 2,000,000 1,000,000 0 2003 2004 2005 2006 2007 2008 2009 2010

Loans Receivable

7,000,000 $6.3m 6,000,000 $5.4m $5.6m 5,000,000 $4.5m 4,000,000 $3.6m 3,000,000 $2.9m $2.1m 2,000,000 $1.5m 1,000,000 0 2003 2004 2005 2006 2007 2008 2009 2010

2010 ANNUAL REPORT Stockholder’s Equity

7,000,000 $6.3m $6.4m $5.7m $5.9m 6,000,000 $5.4m $5.1m 5,000,000 $4.4m $4.6m

4,000,000

3,000,000

2,000,000

1,000,000

0 2003 2004 2005 2006 2007 2008 2009 2010

PACIFIC ISLAND DEVELOPMENT BANK Gross Revenue

8,000,000

7,000,000 $.666 $.662

6,000,000 $.555 5,000,000 $.464

4,000,000 $.360 $.321 $.294 3,000,000 $.278

2,000,000

1,000,000

0 2003 2004 2005 2006 2007 2008 2009 2010

Total Operating Expenses

500,000

450,000 $.439 400,000 $.386 $.387 350,000 $.353

300,000 $.293 $.278 $.277 250,000 $.247 200,000

150,000

100,000

50,000

0 2003 2004 2005 2006 2007 2008 2009 2010

2010 ANNUAL REPORT Net Income Losses

250,000 $.214 200,000 $.164

150,000 $.123

100,000 $.078

50,000 $.027 $.013 $.019 0 2003 2004 2005 2006 2007 2008 2009 2010 -50,000 $-.273

Loan Charge Offs

35,000 32,797 30,000

25,000 20,000 20,000

15,000

10,000 8,707

5,000 0 0 0 0 0 0 2003 2004 2005 2006 2007 2008 2009 2010

PACIFIC ISLAND DEVELOPMENT BANK 2010 ANNUAL REPORT PACIFIC ISLAND DEVELOPMENT BANK 2010 ANNUAL REPORT