Transcription
2018ATOREPLRUANN
2018 ANNUAL REPORT 1DEDICATED TO SERVING OUR MEMBERSSINCE OUR INCEPTIONOver 71 years ago, the employees of theWorld Bank and the International MonetaryFund came together to find a convenient andaffordable way to save and borrow — and BankFund Staff Federal Credit Union was created.As a cooperative, we have the opportunity totailor our products and services to the uniqueneeds of our members. Today, we remain trueto our original mission of providing the bestvalue available in financial services to those weserve, but we must also adapt. The competitivelandscape is redefining banking and weare committed to reshaping your memberexperience so that we may remain your financialpartner in a digital world.
2 BANK-FUND STAFF FEDERAL CREDIT UNION2018 ANNUAL REPORT 3TABLE OF CONTENTS4Summary of Financial Statements — 2018 vs 20176Leadership — Board and Management9Message from the CEO and the Board President13 Financial Results16 Credit Committee Report17 Supervisory Committee Report18 Success in Numbers
4 BANK-FUND STAFF FEDERAL CREDIT UNIONSUMMARY OF FINANCIAL STATEMENTS2018 vs 20172018 ANNUAL REPORT 5(In Thousands, US )20182017% ChangeSTATEMENTS OF FINANCIAL CONDITIONCash and Cash EquivalentsInvestmentsLoans (Net of Allowance for Loan Losses)Loans in ProcessOther AssetsTotal AssetsDepositsOther LiabilitiesMembers’ EquityTotal Liabilities and Members’ Equity 8,83739,383593,9114,971,837 03)3.782.8219.5210.803.78 136,53326,935109,597(1,331)19,43372,49157,870 8STATEMENTS OF INCOMEInterest IncomeInterest Expense (Dividends)Net Interest IncomeProvision for Loan LossesNoninterest IncomeNoninterest ExpenseNet IncomeKEY EQUITY RATIOSMembers’ Equity to DepositsMembers’ Equity to Total Assets13.66%11.95%OTHER HIGHLIGHTSMortgage Servicing PortfolioOperating Expense to AssetsMembersMobile Banking UsersOnline Banking Users 242,4461.52%88,41332,83445,351 Fully audited financial statements are available at BFSFCU.org.
6 BANK-FUND STAFF FEDERAL CREDIT UNION2018 ANNUAL REPORT 7LEADERSHIP: BOARD OF DIRECTORSKerry Mack, PresidentVan Pulley, Vice PresidentAnne-Marie Gulde-Wolf, SecretarySENIOR MANAGEMENTDaniel Hardy, TreasurerEli Vazquez, CEOShidan Derakhshani, DirectorHeidi Hennrich-Hanson, DirectorChristian Mulder, DirectorStephanie G. Day, COOPam O’Connell, DirectorChristopher Towe, DirectorTodd Aspell, CFSOElizabeth Lin Forder,Counsel To The BoardTimothy W. Elmore, CIO
8 BANK-FUND STAFF FEDERAL CREDIT UNION2018 ANNUAL REPORT 9MESSAGE FROM THE CEO AND THEBOARD PRESIDENT2018 was a year of change in the financial markets.After years of unprecedented financial stimulus,the Federal Open Market Committee (FOMC) moreaggressively raised short-term interest rates. Thereason for this monetary tightening was to removestimulus due to concerns about potential inflation andthe economy approaching full employment. The onemonth U.S. Treasury bill yield rose from 1.29% at thebeginning of the year to 2.44%. The 10-year U.S.Treasury note yield, an important driver of long-termmortgage rates, started the year yielding 2.46%,rose to a high of 3.24% in early November, and byyear-end dropped to 2.69%. Clearly, interest rateshave a significant impact on financial institutionsand our members which is why it leads our annualmessage introduction.Despite this volatility and throughout the year,BFSFCU remained a safe haven for our members tomaintain deposits and served as a source of fundingfor member borrowing needs. Our member depositsgrew by over 119 million while loans outstandingincreased by over 85 million. Total dividends paidto members in 2018 increased by over 37%. Loansgranted to BFSFCU members, including advanceson lines of credit and credit cards, exceeded 1.15billion in 2018.Return on assets improved by almost 43% to a fiveyear high of 1.19%. Member capital grew by 76basis points to a five-year high of 11.94%. Strongcost control and sound underwriting continued tomaintain our expense to asset ratio, efficiency ratiosand loan loss ratio at favorable industry-leadinglevels. This financial success was due largely to theongoing loyalty and support of our member-ownerswho continued to turn to BFSFCU for their savingsand borrowing needs. In appreciation of this loyaltyand to celebrate this success, the Board of Directorsapproved a distribution of 12,500,000 on January18th, 2019 — our 24th annual supplemental dividend.Success in 2018 was not defined only by financialmeasures. While financial success is important to ourinstitution, we must remain committed to investingin initiatives that improve the service and value wedeliver to our members. Continuous improvement inour member satisfaction ratings will be supported by
10 BANK-FUND STAFF FEDERAL CREDIT UNIONongoing investments in our staff and member-facingtechnology. We recognize that the stability and futuregrowth of our Credit Union depend on the patronageand loyalty of our members, so investing for the futureis an ongoing effort.We strive to be the preferred financial institution for allour members by delivering exceptional value throughbetter rates and lower fees, and providing a superiormember experience at every interaction. Our 2018initiatives reflected this commitment, as we continuedto focus on elevating the member experience whileproviding exceptional financial value by:Raising our base deposit rates on many shareaccounts and share certificates.Consistently offering among the lowest mortgagerates in the market and helping members savethousands through our HomeAdvantage Program.In 2018, our members received 396,000 incash rewards from the purchase and/or sale oftheir homes through realtors participating in ourHomeAdvantage Program. And, over the life ofthis program, our members have benefited fromover 4.8 million in rebates.Returning over 1,013,000 to members throughour ATM Surcharge Rebate Program.Saving our members an estimated 1.5 millionon car purchases with our car buying servicepowered by TrueCar.2018 ANNUAL REPORT 11Introducing the new BOLD Visa Platinum CreditCard with one of the lowest rates in the marketplace.In addition to exploring ways to reward our members’loyalty, we have continued to enhance the memberexperience through process efficiencies and bettersolutions to meet our members’ unique needs by:Maintaining our mortgage loan processing timesat industry-leading levels. On average, BFSFCUmortgage loan processing times are 30 businessdays. These processing times remain best in class— much lower than many banks and credit unions.Upgrading our consumer loan application processby deploying a new system with greater real-timeapprovals and digital documents.Improving our in-branch new membershipopening experience through new technology and aconvenient online appointment tool.Launching new payment options and improvingexchange rates on international payments.As we look to 2019 and beyond, we are makingsignificant investments in enhancing the memberexperience by improving how our members accessaccounts and services through our website and mobileapps, as well as phone, e-mail and in-person channels.We understand that in order to stay relevant and riseabove the competition in an increasingly digital world,we must dedicate significant resources to the ongoingmodernization of our technology-based services.Major initiatives for 2019 include consolidating ourdebit and credit card processing into a single platformthat will provide a multi-functional card mobile appand a more seamless member experience. We willalso initiate the replacement and consolidation of ourmobile and online banking platforms into a unifieddigital platform. This digital solution will provideenhanced alerting, mobile payment capabilities, anda more personal member experience. We will alsoinvest in new technology that will further simplifymember authentication in our call center.We thank you for the privilege of serving you and yourfinancial service needs. The Board, Management, andStaff of BFSFCU remain committed to being your financialpartner and to delivering the exceptional products andservices you deserve from your Credit Union.KERRY MACKPresident, Board of DirectorsELI VAZQUEZManaging Director and Chief Executive Officer
12 BANK-FUND STAFF FEDERAL CREDIT UNION2018 ANNUAL REPORT 13FINANCIAL RESULTSTotal assets increased 3.78% to 4.97 billion from 4.79 billion at year-end 2017. Net loans increased3.34% to 2.80 billion, reflecting a continued demandfor first mortgage loans amid the increasing interestrate environment and lower housing inventory.Total deposits increased 119.4 million, or 2.82%, to 4.35 billion from over 4.23 billion at year-end 2017.Our savings accounts experienced the largest depositincrease of approximately 57.6 million, or 6.42%.Revenue, defined as interest income and noninterestincome, was 156.0 million for the year endedDecember 31, 2018, as compared to 131.5 millionfor the same period last year. This increase of 24.5million was primarily driven by rising market interestrates. Investment income increased by 12.9 millionand loan interest income increased by 8.0 million;further, the Credit Union received a one-time rebate of 2.1 million from the NCUA for prior assessments oninsured credit unions, and experienced a 1.5 millionincrease in noninterest income.Dividend expense increased significantly by 7.4million in 2018 to 26.9 million compared to 19.5million in 2017. This increase in dividend expensewas a result of increases to deposit rates across allproducts throughout the year. The Board of Directorsapproved a supplemental dividend of 12.5 million.Noninterest expenses, or operating expenses,increased by 4.8 million, or 7.08%, compared to2017. Cost control efforts continued throughout2018 to minimize operating expenses; however,expenses associated with supporting a growingmembership and regulatory requirements continueto drive year-over-year increases. Higher credit cardusage and higher utilization of rewards by memberscontributed 3.3 million to this year-over-yearvariance. Our expense ratio increased from 1.49% in2017 to 1.52% in 2018.In 2018, the qualitative and economic factors ofthe general reserve were reviewed and updatedto incorporate aspects of the current economicenvironment. This analysis led to a decrease in therequired reserves of approximately 20 basis points,or 4.7 million, compared to the prior year, and thedecrease in our provision for loan loss of 6.9 million.
14 BANK-FUND STAFF FEDERAL CREDIT UNION2018 ANNUAL REPORT 15Net charged-off loans were 3.4 million for the yearended December 31, 2018, compared to 3.9 millionfor the same period last year.total investment portfolio yield for the period endedDecember 31, 2018, was 1.93% versus 1.34% ayear ago.Net income grew to 57.9 million in 2018 as comparedto 38.6 million in 2017, an increase of 19.3 million.CAPITAL STRENGTHCurrently, our reserve ratio, defined as the allowancefor loan losses to gross loan balances outstanding, is0.80%, a 20 basis point reduction from 1.00% as ofDecember 31, 2017.LIQUIDITY AND INVESTMENTSThe Credit Union’s goal is to maintain a liquidity levelsufficient to accommodate potential fluctuationsin deposits and loan demand. The cash and cashequivalents position decreased 21.4 million, or9.23%, relative to 2017 balances as we investedexcess cash into short-term liquid investments withhigher yields than cash.Investments, which are composed primarilyof U.S. Treasury and U.S. government agencysupported mortgage-backed securities, increasedapproximately 117 million compared to 2017. Theinvestments balance was 1.87 billion at December31, 2018, compared to 1.75 billion a year ago. TheMembers’ Equity, or capital, and the related capitalratio are primary indicators of a financial organization’sstrength and soundness. Members’ Equity to TotalAssets was 11.95% at December 31, 2018, andcontinues to exceed the NCUA’s “well capitalized”threshold of 7.00%. The Credit Union’s capitalbase increased 57.9 million, or 10.80%, in 2018and continues to demonstrate our commitment toensuring the organization’s ongoing financial viability,while investing in improvements and expansion ofservices to members.NCUA EXAMINATION / EXTERNAL AUDITOur NCUA examiners completed their most recentexamination of the Credit Union effective June 30,2018. In addition, independent public accountants,CliftonLarsonAllen LLP, completed their audit for theperiod January 1, 2018 to December 31, 2018, andtheir complete report containing the entirety of ouraudited financial statements can be found on ourwebsite at BFSFCU.org.
16 BANK-FUND STAFF FEDERAL CREDIT UNIONCREDITCOMMITTEE REPORTPAUL B. BRAVERYChairMEMBERSStuart CohenJennifer ElliottHamish FlettHeather S. H. WoollsALTERNATE MEMBERSTatiana GudumacMeherji Madan2018 ANNUAL REPORT 17On behalf of the Credit Committee, it is a pleasureto report on another strong year in the lending area.Total gross loans outstanding at December 31, 2018,and December 31, 2017, were approximately 2.8billion and 2.7 billion, respectively. The Credit Union’sgross loans-to-deposits ratio was 64.96% at the endof 2018 compared to 64.75% at the end of 2017. Ourloan portfolio is comprised of 92.46% real estate loansand 7.54% consumer loans. Outstanding real estateand consumer loan balances as of year-end were 2.6billion and 213 million, respectively.The Credit Union experienced a significant decreasein the total amount of delinquent loans to 29.1million as of December 31, 2018, from 34.3 millionas of December 31, 2017. Delinquencies remain lowat 1.03% of total gross loans outstanding, down from1.25% a year ago.Reportable delinquent loans, defined by the NCUA asthose delinquent loans 60 days or more past due, were 13.4 million (0.47% of total gross loans outstanding)as of December 31, 2018, compared to 18.9million (0.69% of total gross loans outstanding) as ofDecember 31, 2017.I would like to thank the staff of the Lending ServicesDepartment, as well as the members and alternatemembers of the Credit Committee, for all of theirdedicated efforts on behalf of the Credit Union andits membership.SUPERVISORYCOMMITTEE REPORTRIAZ AHMEDChairMEMBERSPackiaraj MuruganNicholas PardoeHoneylet TuandaUnder the Federal Credit Union Act, the SupervisoryCommittee is responsible for confirming thatmanagement's financial reporting objectives have beenmet and that management’s practices and proceduressafeguard members' assets. In carrying out thisresponsibility, the Committee oversees the activitiesof BFSFCU’s Internal Audit department, evaluatesthe adequacy and effectiveness of internal controlsestablished by management, and obtains an annualaudit of the BFSFCU’s financial statements performedby an independent certified public accounting firm.The Committee engaged CliftonLarsonAllen LLP(CLA) to conduct an audit and express an opinion onBFSFCU’s financial statements for the period January1, 2018 through December 31, 2018. CLA completedtheir audit in accordance with generally acceptedauditing standards and their unmodified opinion, alongwith the Credit Union’s audited financial statements, isavailable on the Credit Union’s website: BFSFCU.org.We confirm that the auditors’ report is based oninformation obtained from the Credit Union’s recordsand through direct observation by the auditors, actingon behalf of the Supervisory Committee, and that, tothe best of our knowledge and belief, the statementscovered by their opinion are accurate.
18 BANK-FUND STAFF FEDERAL CREDIT UNION2018 ANNUAL REPORT 19 1.5 MILLION IN SAVINGS2018 SUCCESS IN NUMBERSON CAR PURCHASES THROUGH OUR CAR BUYING SERVICE37% INCREASE88,413IN TOTAL DIVIDENDS PAID TO MEMBERS 12,500,000SUPPLEMENTAL DIVIDENDTO MEMBERSCASH REWARDS 396,000THROUGH OUR HOMEADVANTAGE PROGRAMTOTAL MEMBERSATM 1,013,000RETURNED TO MEMBERSTHROUGH OUR ATM SURCHARGE REBATE PROGRAM 4.97 BILLIONIN TOTAL ASSETS
2018 ANNUAL REPORT 3Design, Patricia Hord.Graphik Design, www.phgd.comLeadership Portraits, Grant Ellis, World Bank Group’s Photo LabPhotography, iStock/ShutterstockPrinting, World Bank Group’s Printing & Multimedia Services
2018 BANK-FUND STAFF FEDERAL CREDIT UNION1725 I STREET, NW, SUITE 150WASHINGTON, DC 20006 USA202 212 6400U.S. TOLL-FREE 800 9BFSFCUBFSFCU.ORGWB FSC#
mortgage rates, started the year yielding 2.46%, rose to a high of 3.24% in early November, and by year-end dropped to 2.69%. Clearly, interest rates have a significant impact on financial institutions a
