oTotal Assets – Up 5.73%

oLoans – Up 6.97%

oShares – Down 3.94%

oCapital – Down 1.26%

oROA – Down 38%

oMembership – Down 2.45%

oTotal Net Income – Down 35.78% (approx. $5.1M dollars)

The upward trend of loan development is solid. It is showing that the product stratification is likely very good and the corresponding loan rates are competitive. However, there are some sustainability issues of greater importance within these annual trends. Of most significance are the trends of ROA and membership. The declining membership may indicate that the credit union is not providing the service, product diversifaction or competitive rates necessary to grow its membership. Without member growth, any credit unions' sustainability is at risk. The large decline in ROA in 2006 is also a cause for concern. But we can again look at the numbers to see if this is a one time problem or possibly another issue of sustainability for 2007 and beyond.

For isolated ROA problems we can start with charge offs. With an increase over 2005 of 38%, there could have been some isolated charge-off issues for Wings Financial. However, the charge-offs are likely to continue as delinquency rose 37% in 2006 and 29% in the fourth quarter of 2006. And as any lender will tell you, today's 30 day delinquencies are tomorrow's losses. In the seven states that Wings Financial Credit Union has branches (Calif., Hawaii, Ga., Mich., Minn., Tenn., Wash.), the credit unions in those states saw a 4.61% decline in their ROA for 2006 and 14.3% decline in their home state of Minnesota. Therefore; economic trends may be partly to blame for the reduced ROA, but economic trends are usually long term issues. Finally, we can look at the earning trends to try and estimate the future trend of the ROA.

In the Earning Trends chart, we can see that the gross income did not keep pace with the rising costs of funds in 2006. Both of these areas showed small increases in the fourth quarter of 2006. The provision of loan loss rose substainially in both 2006 and in the 4th quarter. Operations expenses were up nearly 6% in 2006. Much of this expense was specifically generated by an increase in salaries and benefits. The average salary/benefits per full time employee jumped 14.7% to an average of $66,241. This figure is over $13,326 more than the average employee makes in the 7 states that Wings Financial Credit Union has their branches. The above average pay adjustment, 3.95% versus the 14.7%, was roughly equal to 28% of the 2006 decline in net revenue. The disparity of salary and benefits for the two credit unions is over $8,000 per employee. This could be significant as it may create a strong philosophical conflict between the merging credit unions executive staff and board.

If the members or the executive staff at any credit union feels that a merger could be in the best interest of the future of members, there should be the preliminary due diligence of every potential merger partner, even if it means reviewing hundreds of credit unions. It is the responsibility of every credit union, when contemplating a merger to find the best fit for the members, staff, and community. Even in a situation where Continental Federal Credit Union was actively seeking the best merger partner, the key performance metrics and trends of Wings Financial Credit Union does not appear to fit with being a top partnership option for the members of Continental Federal Credit Union.