Servin the education community 2013 Annual Report
the education community For us, it is an honor to support education. We are proud to serve the education community and the extraordinary people who share a remarkable commitment to making a difference every day. Like those who serve to educate others, we come to work each day striving for a better way grounded in our values, focused on our mission and aspiring toward our vision to be the premier financial services provider for the education community. For nearly 60 years, we have stayed true to that commitment and our core purpose of serving the education community. It is who we are and what we do. Through our shared values, core purpose and focus on listening, we will continue to grow with the education community. As long as there are lessons to plan, papers to grade, busses to drive, events to attend and students to educate, we will be here with a focus on one mission to grow by helping the members of the education community achieve their financial goals and dreams. We are committed to finding a better way by listening, helping and serving every day and each school year. TABLE OF CONTENTS Chairman & President/CEO s Report 3 Treasurer s Report 5 Supervisory Committee s Report 7 Independent Auditor s Report 9 Statements of Financial Condition 10 Statements of Income and Expense 11 Volunteers 13 Support Education 15 Locations 16
CHAIRMAN & PRESIDENT/CEO S REPORT Listening tolearn ROSEMARY BRINKLEY Chairman s of the education community teach us the importance of listening. The personal stories that we hear from our members every day, continue to help us fi nd a better way to serve them. Over the years, some members have shared the challenges of managing their fi nances during summer months when they go without paychecks. To help, we began offering members the option to skip summer auto loan payments. We also created a Summer Pay savings account that helps educators set aside money from each paycheck during the school year to help throughout the summer. Paying for college can be a concern for members whether they are parents, students or educators looking to develop professionally. We listened and responded by awarding scholarships to students at the school systems and community colleges we serve. We also began offering private student loans to help make the dream of a college education a reality for more of our members. With frequent news stories of retailer data breaches, a number of our members expressed a concern about identity theft. To help alleviate their worries, we took action and began offering a discount on LifeLock identity theft protection. In 2013 we held, and will continue to hold, regular seminars to help members learn how to safeguard their identities, manage their credit and protect their information while they are online. We are growing CHRIS CONWAY President/CEO with the education community by utilizing new technologies to meet you where you communicate and when you are on the go. In May of 2013, we celebrated educators by inviting members of the education community to Reminisce, Recognize and Reward on our Facebook page. The conversation was held in a modern medium, but the sentiments of appreciation expressed to members of the education community were timeless. We were honored to read the many stories of educators who shaped the lives of students and made a difference. More and more, we are using our mobile phones to do just about everything. In 2013, we introduced a mobile banking app, so members can check balances, make transfers, pay bills and deposit checks all with their smartphone. With mobile banking, you have the tools you need to quickly and easily get a clear picture of your fi nances, even if you are standing in line at the grocery store and need to make a quick transfer. We to you, so you do not need to fi nd the time in your busy schedule to come to us. During the day, we know our members are likely to be hard at work getting students to school, leading a classroom or learning on a community college campus. Our On-site Financial Services team comes to you on a regular basis and can help you open an account, process a transaction and even fi nalize an auto loan. After school, during evenings and on weekends, we are here to help as well. Our On-site Financial Services team regularly provides seminars at schools and during community events on topics such as saving for college, buying a home, purchasing an automobile and managing a budget. We are come listening, and always striving to fi nd a better way. For nearly 60 years, we have grown by helping the members of the education community achieve their fi nancial goals and dreams. We welcome your thoughts, comments or suggestions, and have a special email address dedicated to this purpose. Email us at: wearelistening@esfcu.org and let us know what you think. We are here to help and will always remain focused on our core purpose of serving the education community. It s a pleasure helping you! ROSEMARY BRINKLEY Chairman CHRIS CONWAY President/CEO Page 2
TREASURER S REPORT Growing,helping and serving It has been another strong year for. Net income in 2013 was $4.7 million and our Return on Assets ratio was a healthy 0.63%. The Credit Union ended 2013 with assets of $732.3 million and capital of $55.8 million, once again meeting the National Credit Union Administration s MAURICE C. ERLY Treasurer (NCUA) requirements of being well capitalized. Total member shares were $637.7 million and total member loans were $392.5 million as of the end of 2013. For additional details, you may refer to our Statements of Financial Condition and our Statements of Income and Expense on pages 10 and 11. Asset Growth $800 $700 $600 $500 $400 $300 $200 $100 $0 1973 $10.4 1983 Share Growth $43.5 $104.9 1993 $179.5 2003 $732.3 2013 Since 1955, our Credit Union has been growing by helping $800 the members of the education community. The graphs on this page display our decades of growth in assets, shares and loans. Over time, our growth has accelerated as additional county school systems and community colleges have joined us. More and more, members of the education community see the value in as their best option to help them achieve their fi nancial goals and dreams. s are learning that Educational Systems FCU is looking out for them, and that by doing more business with their credit union they are also helping their fellow members of the education community. $700 $600 $500 $400 $300 $200 $100 $0 $8.7 1973 $40.8 1983 $96.3 1993 $148.4 2003 $637.7 2013 s of the education community who want to save, or those who want to borrow, get a better deal when they join together with. Loan Growth Our employees and volunteers are committed to our core $800 purpose of serving the education community. Thanks to $700 their commitment, continues $600 to grow and help more members of the education community. It is, and always will be, a pleasure helping you! $500 $400 $300 $392.5 Respectfully Submitted, $200 $100 $8.3 $31.2 $48.7 $110.3 $0 MAURICE C. ERLY Treasurer 1973 1983 1993 2003 2013 Page 4
SUPERVISORY COMMITTEE S REPORT Ensuring safetyand W. CECIL SHORT Chairman of the Supervisory Committee The primary mission of the Supervisory Committee is to conduct internal and external audits designed to determine that: (1) accounting records and reports are prepared promptly and accurately refl ect operations and their results; (2) established internal controls are effectively maintained and adequately protect the Credit Union, its members, its management and its employees; and (3) each unit of the Credit Union is carrying out the plans, policies, and procedures for which it is responsible - all in accordance with the Federal Credit Union Act. The Supervisory Committee ensures our fi nancial statements accurately and fairly represent the fi nancial condition of the Credit Union. For this purpose, a complete annual opinion audit is conducted. Our CPA fi rm, Orth, Chakler, Murnane & Company (OCM), recently completed our annual audit in accordance with generally accepted auditing standards to verify conformity with generally accepted accounting principles. OCM s audit manager, Bill Astrab, provided a detailed presentation of the audit report to the Supervisory Committee and the Board of s. Mr. Astrab reviewed our fi nancial statements and our member account verifi cation. It was noted that our member account verifi cation is conducted each year to verify the integrity of our account database. Once again, our annual audit confi rmed that Educational Systems FCU is in a strong fi nancial position. The National Credit Union Administration (NCUA) completed an examination of our Credit Union this past year. At the conclusion of the exam, NCUA s examiners provided a detailed review of their fi ndings to the Supervisory Committee. In addition, Chairman Short and the Committee provided a summary of the Committee s agenda and our internal audit plans. The examiners noted high commendation for the Committee - with specific mention of the Committee s high level of involvement, detailed minutes and focus on strong internal controls. The examiners also recognized the Committee for their commitment to being independent and objective as required by NCUA. soundness mission. Our internal auditor performed comprehensive, in-depth audits and reviews of our department and branch policies and procedures, as well as our internal controls, processes, functions and security systems. In 2013, the Committee retained an independent fi rm to complete a comprehensive audit of our information technology areas and information security systems. Overseeing the review of management practices and procedures is an important role and is critical to the safeguarding of all members assets. The Committee submits monthly reports to the Board of s for their analysis and actions regarding the safety and soundness of these practices and procedures. Your Supervisory Committee is always available to review and research your concerns. During 2013, the Committee addressed member concerns submitted through our website, and a written response was issued to each member. If any concern or matter can not be resolved with management, the Committee requests that you contact us through the Credit Union s website or at the following address: Supervisory (Audit) Committee, P.O. Box 179, Greenbelt, MD 20768-0179. The Committee recognizes our Board of s, management and employees for their hard work during 2013. As we move forward into 2014, please rest assured that your Supervisory Committee will continue to focus on maintaining our position as a safe, sound and strong credit union. Respectfully Submitted, W. CECIL SHORT Chairman of the Supervisory Committee KAREN E. WASSMAN Secretary MICHELE WINSTON GÉRALDINE DUVAL ALONIA SHARPS The Committee monitors internal controls and external safety and soundness operations with periodic site visits to the Credit Union s branches and departments. In addition, the Committee has a full-time of Internal Audit to assist us as we carry out our Page 6
INDEPENDENT AUDITOR S REPORT Orth, Chakler, Murnane and Company, CPAs A Professional Association 12060 S. W. 129 th Court, Suite 201, Miami, Florida 33186-4582! Telephone 305-232-8272! Fax 305-232-8388 Web site: www.ocmcpa.com Douglas J. Orth, CPA, CFE, Managing Partner James A. Griner, CPA Hugh S. Chakler, CPA, CISA, CITP, CFE Lori J. Carmichael, CPA John J. Murnane, CPA Daniel C. Moulton, CPA Jack D. Kenney, CPA February 5, 2014 To the Supervisory Committee of Educational Systems Federal Credit Union We have audited, in accordance with auditing standards generally accepted in the United States of America, the statements of financial condition of Educational Systems Federal Credit Union as of December 31, 2013 and 2012, and the related statements of income, comprehensive income, members equity, and cash flows for the years then ended (not presented herein); and in our report dated February 5, 2014, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed financial statements is fairly stated, in all material respects, in relation to the financial statements from which it has been derived. Orth, Chakler, Murnane & Co. Orth, Chakler, Murnane & Company Certified Public Accountants Miami, Florida OCM&Co A PROFESSIONAL ASSOCIATION CPAS Page 8
Statements of financial condition Statements of income and expense December 31 2013 2012 December 31 2013 2012 ASSETS Cash $ 41,592,718 $ 76,218,353 Investments: Available for sale securities 218,979,457 155,555,313 Held to maturity securities - 50,339,639 Other investments 34,434,212 44,053,335 Loans to members, net of allowance for loan losses 389,572,955 369,516,560 Accrued interest receivable: Investments 359,539 389,415 Loans 1,232,322 1,340,460 Other receivables 1,434,612 1,804,593 Prepaid and other assets 7,234,665 13,655,165 Goodwill 8,507,465 8,507,465 Property and equipment 22,323,563 22,338,768 NCUSIF deposit 6,623,686 6,771,911 TOTAL ASSETS $ 732,295,194 $ 750,490,977 LIABILITIES AND MEMBERS EQUITY Liabilities: s share and savings accounts $ 637,694,565 $ 652,261,439 Borrowed funds 27,158,571 33,172,857 Accounts payable 5,877,459 2,942,787 Accrued liabilities 5,788,187 6,354,545 TOTAL LIABILITIES 676,518,782 694,731,628 s equity: Regular reserve 1,848,296 1,848,296 Undivided earnings 41,248,460 36,551,302 Accumulated other comprehensive (loss)/income (2,720,344) 1,959,751 Equity acquired from business combination 15,400,000 15,400,000 TOTAL MEMBERS EQUITY 55,776,412 55,759,349 TOTAL LIABILITIES AND MEMBERS EQUITY $ 732,295,194 $ 750,490,977 INTEREST INCOME Loans to members $ 19,601,854 $ 15,161,195 Investments 4,065,276 2,688,629 Total interest income 23,667,130 17,849,824 INTEREST EXPENSE s share and savings accounts 2,196,076 3,064,127 Borrowed funds 964,268 1,063,538 Total interest expense 3,160,344 4,127,665 Net interest income 20,506,786 13,722,159 PROVISION FOR LOAN LOSSES 3,006,269 2,088,311 Net interest income after provision for loan losses 17,500,517 11,633,848 NON-INTEREST INCOME Fees and service charges 11,089,754 9,588,089 Other non-interest income 5,208,497 3,545,168 Recovery on CU National loans 866,643 Gain on sale of investments 4,561 12,475 Gain on sale of OREO 59,880 Total non-interest income 17,229,335 13,145,732 34,729,852 24,779,580 NON-INTEREST EXPENSE Compensation and employee benefits 13,587,363 9,914,660 Office operations expenses 5,291,721 4,047,023 Professional and outside services 4,168,209 2,583,211 Office occupancy expenses 3,190,514 2,092,005 Loan servicing expenses 910,034 561,789 Education and promotion expenses 1,436,319 1,129,501 Other 1,448,534 1,012,189 Loss on disposition of OREO 9,282 Other-than-temporary impairment losses on investments 26,857 Total non-interest expense 30,032,694 21,376,517 NET INCOME $ 4,697,158 $ 3,403,063 Audit provided by Orth, Chakler, Murnane & Company, independent auditors. Page 10
Core Purpose Serving the education community Values Integrity Competence Commitment Respect Vision To be the premier financial services provider for the education community OUR VOLUNTEERS The people BOARD OF DIRECTORS ROSEMARY BRINKLEY Chairman Retired Educator and Administrator JOHN NEVILLE Retired Educator and Administrator SUPERVISORY COMMITTEE EVA CHESLEY Vice Chairman Retired Educator GEORGE D. DENNY, JR. Retired Educator, Counselor, and Administrator serve who the education community MAURICE ERLY Treasurer Retired Educator and Administrator ALONIA SHARPS Community College Administrator DR. JEROME CLARK Secretary Retired Educator, Administrator, and Superintendent PHILIP McGAUGHEY, JR. School System Accountant SUSANNE G. DEGRABA School System Chief Financial Offi cer Mission To grow by helping the members of the education community achieve their financial goals and dreams W. CECIL SHORT Chairman Retired Educator and Administrator KAREN E. WASSMAN Secretary Educator MICHELE WINSTON School System of Internal Audit GÉRALDINE DUVAL Education Association Administrator and Former Educator ALONIA SHARPS Community College Administrator Page 12
honor support education For us it s an SUPPORT EDUCATION to Supporting education My Favorite Teacher and Principal for a Day Prince George s Area Science Fair Read and Hit a Home Run with the Bowie Baysox Academy of Finance - Business Education Pinch Onto Books with the Southern Maryland Blue Crabs S.T.E.M. (Kids for Science, Technology, Engineering and Mathematics) Fair Prince George s County Spelling Bee Automotive Trade Foundation (ATF) - Vocational Education and Automotive Sales Summer Adventures In Learning - Supporting year-long learning ommunity College Foundations support of C students and scholars Rewarding scholars We are honored to support education by rewarding scholars. We awarded three $3,000 Community College We awarded six $3,000 Dorothy Marvil Scholarships with one awarded at each of the Memorial Scholarships to college-bound community colleges we serve, which include high school seniors throughout the College of Southern Maryland, Montgomery education community. College and Prince George s Community College. Imparting financial knowledge Educators and parents understand the importance of sharing wisdom. We embrace that philosophy too, with seminars for school employees, parents and students on topics ranging from college financing to retirement planning. In addition, we are honored to provide programs such as FoolProof that can be used in the classroom, at home or by any member to share and learn the basics of a good financial life. Page 14
LOCATIONS ASPEN HILL BRANCH 13711 Georgia Avenue Silver Spring, MD BOWIE BRANCH DuVall Village Shopping Center 4801 Glenn Dale Road Bowie, MD CALIFORNIA BRANCH San Souci Plaza 22599-122 MacArthur Boulevard California, MD CHERRY HILL BRANCH 12500 Prosperity Drive Silver Spring, MD CLARKSBURG BRANCH Highlands Shopping Center 23225 Stringtown Road Clarksburg, MD GREENBELT BRANCH Maryland Trade Center 1 7500 Greenway Center Drive Suite 140 Greenbelt, MD MIDDLEBROOK BRANCH 12850 Middlebrook Road Suite 1 Germantown, MD ROCKVILLE BRANCH 15901 Frederick Road Suite 100 Rockville, MD PRINCE FREDERICK BRANCH 705 Prince Frederick Boulevard Prince Frederick, MD UPPER MARLBORO BRANCH Washington Plaza 1 8903 Presidential Parkway Suite 100 Upper Marlboro, MD WALDORF BRANCH 169A Smallwood Village Center Waldorf, MD Page 16
PRODUCTS AND SERVICES Designed to help members finance what they need Auto Loans with an option to skip a payment in the summer Auto Buying Service Home Equity Loans Personal Loans Mortgages Fixed and adjustable rates Visa Credit Cards Rewards, fixed rate and no annual fee options Student Loans Services to help members stay connected online and on the go Online Banking with Bill Pay Mobile Banking with Mobile Deposit Capture Audio Response Teller (ART) Phone Banking Credit Union 24 CU Here Surcharge-Free ATMs Medallion Signature Guarantees Notary Services LifeLock - Identity theft protection Accounts to help educators save Checking accounts with debit cards Share certificates 3 to 60-month terms Money Market Accounts Summer Pay To help save for the summer months We come to you New accounts Loans disbursed Financial education seminars Your savings are insured up to at least $500,000. The first $250,000 is federally insured by the National Credit Union Administration (NCUA), and backed by the full faith and credit of the United States Government. An additional $250,000 of coverage is provided by Excess Share Insurance (ESI), a private corporation. Traditional and Roth IRAs are insured up to $250,000 by NCUA, and up to an additional $250,000 through ESI, all at no cost to you. CORPORATE OFFICE P.O. Box 179 Greenbelt, MD 20768-0179 800.356.6660 esfcu.org