Frontwave Credit Union's Annual Report for 2018
Banking | Lending | Saving | Planning
Annual Report 2018
Chairman’s Report
With great pleasure I am writing the first annual Chairman’s Report for our newly named credit union. In 2018, after many months of intense planning and painstaking preparation, we officially became Frontwave Credit Union. The change is intended to identify better with potential new members who, we learned, incorrectly perceived that military affiliation is a prerequisite for membership. We want everyone who lives, works, or worships in San Diego, Riverside, and San Bernardino Counties to know that Frontwave is here to help them achieve their financial goals. At the same time I want to assure our current members that we are the same caring, professional credit union that has served you for many years. Frontwave continued to grow in 2018. We opened three new branches: one at Pacific Plaza on Camp Pendleton, a second in Wildomar, and the third in Escondido. For the growing number of members who manage their finances on the go, we launched new mobile and online banking platforms. Through personal contact with a friendly representative in a branch, or our call center, or through our mobile and online platforms, Frontwave is here for you. Your credit union continued to grow financially as well. Compared to 2017, total income increased 9.8% to $50.7 million. During the same period, total assets increased 1.6% to $819 million, while loans increased 4.8% to $556 million. On the expense side, tuition reimbursements were $44,858, not a large amount considering that our assets are $819 million, but it is 263% higher than the previous year. Frontwave encourages our employees to seek advanced education by taking advantage of our tuition reimbursement benefit. We hope that more highly educated Frontwave Credit Union’s assets increased $12.6 million, a 1.56% increase from 2017, ending the year at $818.8 million. Gross loans increased by $25.3 million, a 4.77% increase over 2017, and ended the year at $556.1 million. The majority of this growth was in indirect auto loans, with an $18.6 million increase (47.82% over 2017), used auto loans with a $15.7 million increase (35.37% over 2017) and commercial real estate loan participations, with a $13.4 million increase (114.25% over 2017). Total shares grew by $17.7 million (up 2.61% from 2017) to $696.5 million. The majority of this growth was in share draft accounts, with an $11.1 million increase or 10.33%, regular shares with a $9.7 million increase or 6.83%, and dividend share drafts, which increased $2.4 million or 2.75%. With loan growth outpacing share growth during 2018, the ratio between the two saw upward movement from 78.20% at the end of 2017, to 79.84% at the end of 2018. The credit union’s ratio of net worth to total assets, which measures the financial strength of the credit union, ended the year at 14.12% up from 13.85% at the end of 2017 2 . The average for the U.S. Credit Union Industry was 11.30% at the end of 2017, with the NCUA considering anything above 7.00% to be “well capitalized.” A high net worth provides the credit union with protection from uncertainties in the economic environment. This protection enables the credit union to offer competitive rates, open additional branches, and improve and expand services to its members. Throughout 2018, the Federal Reserve Bank (FRB) made four 0.25%, rate increases 1 . These increases helped to amplify credit union earnings during the year. The credit union ended 2018 with a net
employees will lead to more capable employees, but our goal is that they become more capable members of our communities. Despite the expenses associated with branding and new branches, we remained an exceptionally sound institution with a capital ratio of 14.12%. Frontwave takes care of its members, particularly when times are tough. During the 2018 government partial shutdown, we provided 16 no-interest loans amounting to $33,423, approved 21 free Skip-a-Pay requests, and granted 3 loan payment requests. Frontwave is off and running with a new name and brand. Underneath, however, we are the same helpful credit union that has served our members for over 66 years. Stay on board; it promises to be a rewarding ride. We are your financial partners. Rain or shine, we are with you… Dream big. We got you. Richard Rothwell Chairman of the Board
Treasurer’s Report
income of $4.0 million, up $1.3 million or 49.41% from 2017. The return on average assets (ROAA) for the year was 0.49%, up from the 2017 ROAA of 0.34%. Interest income from loans improved by $1.7 million or 7.82%, due to a combination of loan growth and an increased average loan yield from 4.33% during 2017, to 4.46% in 2018. Share dividend expense increased by $250.7 thousand in 2018, or 10.88% from 2017. This increase in dividend expense was primarily due to increasing share certificate rates, combined with the growth of lower yielding share, share draft, and money market accounts. This resulted in an increase in average cost of funds from 0.35% in 2017, to 0.37% in 2018. Investment income increased $849.9 thousand or 19.40% from 2017. This was primarily due to rising rates paid on cash at the Federal Reserve, and maturing bank and credit union certificates reinvested into higher paying bonds, resulting in an average yield of 2.74%, increasing 57 basis points from 2017’s yield of 2.17%. Non-interest income increased $1.9 million or 9.95% over 2017. Total operating expenses increased by $3.0 million or 7.18% during 2018, with the biggest increases in salary and benefit expenses ($1.5 million), an 8.26% increase over 2017, and data processing expenses $925.1 thousand or 50.06% increase over 2017. Gary Greving Treasurer
Need more info? Check out frontwavecu.com . Source: 1. https://www.federalreserve.gov/newsevents/pressreleases/monetary20180221a.htm 2. https://www.creditunions.com/videos/videocontent/4q18-trendwatch/
Condensed Statement of Financial Condition Assets 12/31/18
Total Assets
12/31/17 85,963,811 475,354,340 43,747,102 11,698,428 (4,606,766) 160,813,366 6,551,641 26,911,178 806,163,272 678,776,689 52,038,128 59,625,218 (3,000,294) 18,723,530 806,163,272 22,317,739 4,381,745 19,453,799 46,153,284 (17,034,403) (22,144,441) (2,035,124) 7,277 4,946,592 (2,300,483) 2,646,109
Cash, prepaids, receivables & other assets..$ 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 ...............................................$ Liabilities and Equity Shares of members............................................$ Reserves................................................................ Undivided earnings............................................ Unrealized gain/(loss) on AFS Investments. Other liabilities................................................... Total Liabilities & Equity .......................$ Proft and Loss Analysis Interest from loans.............................................$ Interest from investments................................ Other income...................................................... Total Income ...........................................$ Compensation and benefit expenses........... Office operating costs....................................... Education and promotion............................... Other non-operating income (expense)...... Available for dividends..................................... Less dividends paid........................................... Net Income ...............................................$
67,118,735 487,325,533 43,727,623 25,063,367 (4,649,454) 164,618,015 6,864,469 28,709,473 818,777,760 696,521,851 52,038,128 63,578,666 (4,633,718) 11,272,833 818,777,760 24,062,638 5,231,654 21,390,123 50,684,415 (18,567,201) (23,152,713) (2,478,825) 0 6,485,676 (2,532,227) 3,953,449
$818,777,760
$806,163,272
2018 2017
Loans
$556,116,523
$530,799,870
2018 2017
Shares
$696,521,851
$678,776,689
2018 2017
Net Income
$3,953,449
$2,646109
2018 2017
Other Loans: 6%
Share Certificates: 14%
Auto Loans: 39%
Checking: 30%
Unsecured Visa: 11%
IRA: 5%
HELOC/2nd Mortgage: 3%
Regular Shares: 22%
Residential Mortgage: 40%
Money Market: 28%
Share Portfolio
Loan Portfolio
The Supervisory Committee’s major responsibilities are to safeguard our members’ assets, ensure an independent audit is performed annually, and verify members’ accounts. In 2018, the Committee performed its duties in collaboration with the credit union’s Internal Audit and Compliance Department, Certified Public Accountants, the National Credit Union Administration (NCUA), and the California Department of Business Oversight (DBO). In 2018 Frontwave Credit Union changed its fiscal year- end from June to December and as a result, it completed two financial statement audits, one for the twelve months ending June 30, 2018, and a second one for the six months ending December 31, 2018. The Supervisory Committee engaged the auditing firm of Turner, Warren, Hwang & Conrad to perform these independent audits of Frontwave Credit Union’s financial statements. We are pleased to inform you that the audits for 2018 were completed successfully. Frontwave Credit Union’s financial statements comply with generally accepted accounting principles and fairly represent the financial condition of the credit union. Based on the results of these financial audits, Frontwave Credit Union’s internal audits, and examinations conducted by the Supervisory Committee Report
NCUA and DBO, the Committee finds that Frontwave Credit Union is a financially sound organization and substantially in compliance with credit union regulations. In addition, the Committee commends the management team and Board of Directors for their diligence and support, and their dedication to the welfare of our membership. The Supervisory Committee continues to fulfill its duties to protect our members’ interests in compliance with policies, procedures, and all relevant laws and regulations. For insight into the 2018 financial performance of Frontwave Credit Union, please refer to the Statement of Financial Condition, published in this Annual Report. Finally, the Supervisory Committee wishes to express its condolence at the passing of Mr. Charles William Chain, who served the Committee for many years as a Committee Member and Chairman. The Supervisory Committee would also like to extend its sincere thanks and appreciation to Mr. Pat Bromley for his many years of service to the Committee as a Member and Interim Chairman. William Shute Chairman, Supervisory Committee
2018 LEADERS
Richard Rothwell Chairman
Michael Brigagliano Vice Chairman
Gary Greving Treasurer
James Cothran Secretary
George Hoagland Director
Gerald Polyascko Director
Marlon Ramos Director
Brian Sutton Director
Joseph Mitlieri Director
Bill Birnie President/CEO
WEBSITE frontwavecu.com MEMBER SOLUTIONS 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/Temecula Parkway Temecula/Winchester Twentynine Palms Wildomar Yucca Valley
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