This is Frontwave Credit Union's Member Newsletter for First Quarter 2019
Annual Report 2020
Banking | Lending | Saving | Planning
Dream big. We got you. SM
Chairman’s Report
2020 proved to be an unprecedented year. The COVID-19 pandemic presented an indiscriminate crisis from both a health standpoint and a financial standpoint for many. Our Membership, employees and volunteers have all been impacted by the historic events we have been living through. Our heartfelt condolences go out to all those we’ve lost and to those who continue to be impacted. Early in 2020, there were a lot of unknowns about how Frontwave Credit Union would navigate the pandemic and best serve the Membership. As Board Chairman, I am proud to report to the Membership that our management team, staff and volunteers all rose to the challenge without hesitation. The “can do” spirit of Frontwave Credit Union turned an uncertain year into one of the best years for Frontwave. One of the very first challenges to our community was the mandatory shut down of many local businesses. Our Members needed help and in response, Frontwave quickly rolled out the government sponsored Paycheck Protection Program, injecting much needed cash into local businesses. To date, Frontwave has funded over $10 million dollars to businesses in our local communities and continues to build upon the program. As the global economy faltered, interest rates began to fall. The management team and staff saw this drop in interest rates as an opportunity to help our Members save money and at the same time realize the benefits of home ownership. This drop in interest rates allowed homeowners and prospective home buyers the opportunity to lower their monthly mortgage payments or to qualify for home ownership. In 2020, Frontwave Credit Union grew our Real Estate portfolio to over $344 million, with over $51 million of that being VA loans to best serve our Veterans and Active-Duty Members. Our Membership also grew, rising from just over 109,000 Members in 2019 to more than 111,000 Members at the end of 2020. The
growth of our Membership, coupled with the impacts of the pandemic, contributed to a significant rise in share growth from 7.71% in 2019 to 25.5% in 2020. Further gains were also reflected in our asset growth, from 7.17% in 2019 to 23.2% in 2020, and an increase in equity growth from 2.57% in 2019 to 6.27% in 2020. The spirit of volunteerism at Frontwave Credit Union is strong. In 2020, we saw an overwhelming outpouring of interest from our Members to volunteer for both Board and Supervisory Committee appointments. At no time in the credit union’s history have this many well qualified volunteers stepped up to help guide the credit union and represent you, the Membership. Our 2021 election gave our Members an opportunity to choose who best to represent the voice of the Membership. These volunteers have diverse backgrounds and deep connections with our civilian community, the Marine Corps, and all areas our charter serves. Your credit union is strong, diverse, and focused on delivering on our promises to you. We will continue to face challenges head on and find opportunities to prosper. Continue to Dream big. We got you! Michael Brigagliano Chairman of the Board
Treasurer’s Report
2020 was a tumultuous year, yet Frontwave Credit Union finished strong. Asset growth continued to grow year over year; total assets increased $203.3 million or 23.2% over 2019. The loan portfolio increased $34.2 million or 5.6% for the year; residential real estate lending drove most of the growth with a net increase of $57.3 million or 19.9%. Direct and indirect auto lending decreased 9.6% or $19.3 million primarily due to people holding on to their funds due to the uncertainty of the pandemic. Similar to asset growth, deposit balances increased at a faster pace than previous years, growing $191.1 million or 25.5% over 2019. Deposit growth primarily occurred in savings and checking accounts, accounting for 73.3% of the net growth. Money Market accounts, certificates, and IRAs made up the other 26.7% of the growth. Net Income grew at a slower pace than asset growth, thus causing a decrease in our Net Worth Ratio from 12.89% at 2019 year-end
to 10.82% at 2020 year-end. We remain very well capitalized according to NCUA (which uses percentages over 7% as its benchmark). Total operating expenses decreased by 7.8% compared to the previous year, primarily due to the minimization of resources needed to run daily business operations in light of the pandemic and the completion of our rebranding efforts. Theprimary key ratios that aremonitored for financial performance all exceeded the annual expectation. Our Efficiency Ratio came in at 78.83% compared to the budgeted 79.56%. Return on Average Assets was 0.41% compared to a goal of 0.20%, Net Charge-Off was 0.51% compared to a budget of 0.72%, and Equity Growth ended strong at 6.27% compared to a goal of 1.71%. Kelley L. Mayer, CPA Treasurer
Our value, and values, run deep. Our committment to our Members and our communities — and their financial success — remained as strong as ever in 2020. Whether you’re just starting out or getting ready to kick it into high gear, we help make things possible. 16 FREE FINANCIAL SEMINARS HOSTED IN 2020 454 SEMINAR ATTENDEES IN 2020 38,209 hours OF FINANCIAL EDUCATION TAUGHT IN 2020
Voted San Diego’s Best Credit Union & Best Mortgage Company!
EARNED PETER BARRON STARK AWARD FOR WORKPLACE EXCELLENCE
208 LOCAL BUSINESSES HELPED IN 2020
$7.06 million PAYCHECK PROTECTION PROGRAM LOANS FUNDED IN 2020
55,307 MARINE CONNECTIONS IN 2020 FOR GROUP & INDIVIDUAL TRAINING & EDUCATION
Financial Highlights
Assets (in millions) 2017 $806
Members 2017
101,281
$819
2018
2018
106,225
$877
2019
109,197
2019
2020 $1,080
2020 111,371
Shares (in millions)
Loans (in millions)
$531
2017
2017
$679
2018
2018
$556
$697
$614
2019
2019
$750
$941
2020
2020
$648
Capital (in millions)
Net Income (in millions)
2017
$2.65
2017
$108
2018
$111
2018
$3.95
2019
$121 $114
($2.55)
2019
$3.94
2020
2020
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 $
12/31/20 137,646,063 561,059,396 40,348,328 46,669,885 (6,562,574) 263,856,904 8,344,104 29,373,969 1,080,736,075
12/31/19 72,368,576 514,574,336 44,892,866 54,446,297 (5,411,634) 158,652,059 7,079,959 30,855,686 877,458,145 750,225,827 52,047,928 61,021,490 760,654 13,402,246 877,458,145 26,135,460 5,416,026 21,488,498 53,039,983 (18,958,457) (28,824,936) (4,022,652) 81,386 1,315,324 (3,872,500) (2,557,176)
Liabilities and Equity Shares of members
$
941,335,807 52,046,328 64,936,469
Reserves Undivided earnings Unrealized gain/(loss) on AFS Investments Other liabilities Total Liabilities & Equity
3,987,459 18,430,011 1,080,736,075
$
Profit and Loss Analysis Interest from loans Interest from investments Other income Total Income
$
28,330,510 4,317,737 21,976,572 54,624,819 (19,910,623) (24,688,320) (2,590,974) 688,054 8,122,956 (4,178,706) 3,944,250
$
Compensation & benefit expenses Office operating costs Education and promotion Other non-operating income (expense) Available for dividends Less dividends paid Net Income
$
$
Commercial Real Estate: 7%
Other Consumer Loans: 2%
Business Loans: 1%
Share Certificates: 15%
Checking: 34%
Unsecured Visa: 8%
Auto Loans: 28%
IRA: 4%
HELOC/2nd Mortgage: 3%
Regular Shares: 25%
Residential Mortgage: 51%
Money Market: 22%
Loan Portfolio
Share Portfolio
In spite of the many challenges brought on by the COVID-19 pandemic, throughout 2020, Frontwave Credit Union continued to safeguard member accounts and provide financial security and support, while reaching a record $1 billion plus, in assets! To insure Frontwave was being operated in a financially safe, sound and secure manner, the Supervisory Committee contracted the CPA firm of Turner, Warren, Hwang and Conrad to perform an independent Opinion Audit, as well as other data security, operational and regulatory audits. On a monthly basis, the Committee reviewed Frontwave’s internal Audit and Compliance Department’s management of contracted audits, as well as the performance of internal branch, regulatory and operational audits. The Audit and Compliance Department was also responsible for continued compliance with the Bank Secrecy Act, and monitoring accounts for suspicious or fraudulent behavior or transaction activity. With the surge of unemployment benefit fraud and other types of fraud influenced by the pandemic, the volume of activity for the Audit and Compliance and Fraud Departments reached record highs. Both Departments managed the increased fraudulent activity in an exemplary manner. Last year there were no state or federal agency exams conducted. This speaks well of Frontwave, as it is considered an indicator within the credit union industry that Frontwave is being well Supervisory Committee Report
managed and is financially sound. Not surprisingly, Frontwave has been scheduled for a DFPI/NCUA Joint Agency Exam in early 2021. Currently the 2020 Opinion Audit is ongoing. However, the Committee has no reason to doubt that both the Joint Agency Exam and the Opinion Audit will reveal that Frontwave’s financial statements comply with generally accepted accounting principles and that the overall financial condition, management and operation of the credit union are performing well. For insight into the 2020 financial performance of Frontwave Credit Union, please refer to the Statement of Financial Condition, published in this Annual Report. The Committee’s mission to protect Member accounts and insure compliance with policies, procedures, and all relevant rules, regulations and laws, will continue to be its priority. Finally, the Supervisory Committee wishes to thank the Board of Directors, Executives, Management and support staff for their diligence, support, and dedication to the well-being of our Membership and of Frontwave Credit Union. Dream big. We got you! Robert Ross Chairman, Supervisory Committee
2020 LEADERS
Michael Brigagliano Chairman
James Cothran Secretary
Gary Greving Director
Kelley Mayer Treasurer
Brian Sutton Vice Chairman
George Hoagland Director
Bill Birnie President/CEO
Joseph Mitilieri Director
Richard Rothwell Director
Gerald Polyascko Director
WEBSITE frontwavecu.com MEMBER SOLUTION CENTER 800.736.4500 EXPRESS LINE 800.829.7676
LOCATIONS
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