This is Frontwave Credit Union's Annual Report for 2023
Forging our own path since 1952. Banking • Lending • Saving • Planning
100% Commitment. Zero excuses. In 2023, we made financial dreams come true for our Members and the communities we serve.
8 AWARDS FROM THE CREDIT UNION NATIONAL ASSOCIATION
205,242 MARINE CONNECTIONS
MACQUEE BEST OF SHOW FROM THE MARKETING ASSOCIATION OF CREDIT UNIONS
5 AWARDS FROM THE AMERICAN ADVERTISING FEDERATION OF SAN DIEGO
$375K GIVEN BACK TO OUR LOCAL COMMUNITIES
200+ MILITARY & LOCAL ORGANIZATIONS SUPPORTED
THROUGH SPONSORSHIPS, EVENTS & VOLUNTEERISM
14
Voted Best Credit Union of the Desert and Best Bank of the Morongo Basin
RANDOM ACTS OF KINDNESS FOR OUR COMMUNITY MEMBERS
45,505 HOURS OF FINANCIAL EDUCATION TAUGHT IN 2023
Chairman’s Report
Each year the Board of Directors and senior management conduct a strategic planning session to assess where we are, review and refine our strategic direction and identify our Key Strategic Objectives. For the past several years and rolling into 2024, those Key Strategic Objectives have remained the same. Create a high-performing culture. It truly is all about people! Our Dream Makers are, without a doubt, our greatest asset. We are committed to attracting, hiring and growing the best talent available. We provide them with strong leadership, coaching and the tools they need to be wildly successful. Our efforts in 2023 resulted in one of the lowest employee turnover ratios in our history. Operational Excellence. To be a trusted partner and help you make your financial dreams come true, we have to be exceptionally good at what we do. Effective training, seamless processes and a Member-first perspective are paramount. Digital First. The average age of a Frontwave Member is 35. That’s 20 years younger than the industry average! Given that a high percentage of our Members are “digital natives,” we are embracing and delivering digital platforms that are user- friendly and intuitive and make banking with us easier in the areas that matter most to you. Member Loyalty. If we perform well in the first three initiatives, we will generate an engaged Membership that considers Frontwave their primary financial institution. Engaged Members utilize more of our products and services and the benefit of that engagement is plowed right back into your not-for-profit financial cooperative – Frontwave Credit Union. This allows us to amplify our investments in talent and technology to continuously evolve and innovate. Diversify Revenue. Diversification is the bedrock of a sound investment strategy. It is also an important facet of our business model. Environmental, regulatory, legislative and consumer changes are happening at a rapidly increasing pace. A strong bedrock affords us the time to innovate and adapt to an ever- changing environment.
Each year we aggressively pursue new initiatives to elevate the value of your membership in our cooperative. Each year we face new challenges that test our tenacity and resolve. And, most importantly, each year we remain true to our core values and our mission to help you make your financial dreams come true. In a year full of challenges from virtually every quarter, we began laying the foundation for and delivering immediate benefits to the financial well-being of our Members. Some highlights of our 2023 accomplishments include: Opened a new branch at the School of Infantry. The new branch is conveniently located near the main entrance to the area exchange. Launched “Quick Apply” for Savings Account. “Quick Apply” allows Members the opportunity to open a new savings account through our online and mobile banking platforms. Established unique login credentials for joint Members. This was an important first step to several other initiatives that will increase convenience, enhance the security of your accounts and deter credit and debit card fraud. We strongly encourage all Memberships with joint Members to set up unique credentials for the joint Member. Launched card controls. Members can now turn on and off credit and debit cards to dramatically reduce fraudulent activity. Unlike other institutions, Frontwave utilizes unique card numbers for joint Members. Once you establish unique credentials for your joint Member, you will each be able to independently manage your cards. Turn them on when you need them and off when you don’t. You truly are at the forefront of everything we do. We take tremendous pride in serving our military installations, our communities and YOU, our Members! Thank you for your loyal Membership with Frontwave Credit Union! Brian Sutton Chairman of the Board
Treasurer’s Report
Frontwave continued to focus on helping members meet their short and long-term financial goals by offering a variety of savings, investing and financing options. Interest rates continued to increase in 2023 albeit at a slower pace than the prior year. The Federal Funds Effective Rate, which is set by the Federal Government and serves as a basis for Prime, surpassed 5% in the second half of the year but now appears to be at its peak for this rate cycle with rate cuts expected in 2024. The last time the Federal Funds rate was over 5% was more than two decades ago in early 2001. Higher rates have been a headwind for overall growth and have resulted in a reduction in loan demand and increased dividends for our members. Although there was competition amongst Credit Unions for member deposits, Frontwave Credit Union was successful at attracting new member deposits by offering great rates on Share Certificates. This resulted in deposit growth of 10.84% in a year where many other financial institutions saw their deposits shrink. As a result of this growth and higher rates, dividends on member deposits increased significantly in 2023. Frontwave returned dividends of $13.1 million to its members, which was nearly three times the amount paid in the prior year. As a result of strong deposit growth, total assets grew 5.22%
and reached a new all-time high of $1.43 billion. Loans experienced a modest increase during the year due to lower demand as rates increased, however Frontwave continues to have a well-diversified loan portfolio. Slower loan growth improved the Credit Union’s liquidity position, which allows Frontwave to meet its cash and collateral obligations at a reasonable cost. Operating costs and Provision for Loan Loss expenses were also both higher in 2023 reducing Net Income to $4.2 million as compared to $5.6 million in the prior year. The resulting Return on Average Assets was 0.31%. Because net income was outpaced by growth in assets our Net Worth ratio fell slightly to 9.34% — still well above the regulatory threshold of 7.00% to be considered Well Capitalized. Although 2023 was an environment of change, Frontwave continued to experience impressive growth, and maintain a strong financial foundation with a focus on growth and member support. Kelley L. Mayer, CPA Treasurer
Financial Highlights
Assets (in millions) 2020 $1,081
Members 2020
111,371
2021
$1,176
2021
117,291
2022
$1,359
122,555
2022
2023
$1,430
2023
124,372
Shares (in millions)
Loans (in millions)
$648
2020
2020
$941
2021
2021
$636
$1,040
$941
2022
2022
$1,086
$1,203
2023
2023
$944
Capital (in millions)
Net Income (in millions) 2020
2020
$117
$8.36 $3.94
2021
$125
2021
$4.24 $5.58
2022
$133 $131
2022
2023
2023
Condensed Statement of Financial Condition Assets Cash, prepaids, receivables & other assets $ Regular loans to members Visa ® loans to members Purchased loans Less allowances for loan losses Investments NCUA Share Insurance Fund Fixed assets (net) Total Assets $
12/31/23 151,875,343 833,537,732 58,696,601
12/31/22 78,794,560 839,616,680 53,160,249 48,524,842 (4,958,674) 306,094,155 10,370,279 27,353,918 1,358,956,009 1,085,709,370 52,047,137 78,656,815 (44,946,540) 187,489,227 1,358,956,009 31,947,052 6,289,950 27,539,452 65,776,454 (23,544,658) (26,578,472) (2,864,747) (1,576,846) 11,211,730 (5,635,942) 5,575,788
51,971,059 (7,707,017) 304,003,373 11,229,831 26,273,826 1,429,880,748 1,203,417,728 52,046,638 81,444,759 (35,634,058) 128,605,681 1,429,880,748 41,974,964 7,614,687 27,311,539 76,901,190 (25,271,702) (32,486,032) (3,013,424) 4,824,656 20,954,688 ( 1 6 , 7 1 4 , 41 9 ) 4,240,269
Liabilities and Equity Shares of members
$
Reserves Undivided earnings Unrealized gain/(loss) on AFS Investments Other liabilities Total Liabilities & Equity
$
Profit and Loss Analysis Interest from loans Interest from investments Other income Total Income
$
$
Compensation & benefit expenses Office operating costs Education and promotion Other non-operating income (expense) Available for dividends Less dividends paid Net Income
$
$
Total Dividends Paid to Members
Total Membership
Total Assets
Total Income
+1.48% +5.22% +299.42% +16.91%
The Supervisory Committee is responsible for ensuring that the assets of Frontwave Credit Union are safeguarded, an independent audit is performed annually, and appropriate controls exist to ensure compliance with management’s objectives and regulatory requirements. The Supervisory Committee is made up of volunteer members who independently evaluate the strength, safety, and soundness of the credit union’s operations and activities. As an independent and objective body, the Supervisory Committee engages in regular monitoring of financial reporting, verification of membership account balances, compliance with legal and regulatory requirements, and oversight of independent auditors and internal controls. In 2023, the Supervisory Committee contracted with the Certified Public Accountant (CPA) firm of SingerLewak LLP to perform an independent opinion audit of the credit union’s financial statements. In their opinion, the financial statements were presented fairly in all material respects, and the financial position of Frontwave, as of December 31, 2022, and the result of operation and cash flows for the year ended were reported in accordance with Generally Accepted Accounting principles (GAAP). Supervisory Committee Report
The financial statements in this Annual Report are unaudited, since they reflect January through December 2023. The Supervisory Committee is satisfied that the records reflect Frontwave Credit Union’s financial condition and that it continues to operate with strong internal controls in accordance with board policies and the credit union procedures. The Supervisory Committee wishes to thank the Board of Directors, Executives, Management and employees for their diligence, support, and dedication to the wellbeing of our membership and of Frontwave Credit Union. The Supervisory Committee wishes to thank our members for your continued confidence and trust in Frontwave Credit Union. Robert Ross Chairman, Supervisory Committee
2023 LEADERS
Brian Sutton Chairman
Joseph Mitilieri Vice Chairman
Michael Brigagliano Director
Kelley Mayer Treasurer
Gary Greving Secretary
Sally Arnett Director
Gerald Polyascko Director
Richard Rothwell Director
Amanda Cook Director
Bill Birnie President/CEO
WEBSITE frontwavecu.com MEMBER SOLUTION CENTER 800.736.4500 EXPRESS LINE 800.829.7676
LOCATIONS
Barstow Camp Pendleton - Mainside Camp Pendleton - Pacific Plaza Camp Pendleton - SOI Escondido Oceanside - Fire Mountain Oceanside - Rancho Del Oro
San Diego - MCRD San Marcos Temecula - Winchester Twentynine Palms Wildomar Yucca Valley
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