2002 Annual Report. Focus on the Future

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1 Annual Report Focus on the Future

2 Message from the President Despite the uncertain times in which we live today, your credit union has maintained its Focus on the Future - providing a brand of member service with financial products and services to you, our member/owner, which offers a clear financial advantage. For over forty years, we have helped many families to achieve their dream of owning a home, buying that dream car, or adding to their nest egg for retirement. In the future, we will continue to address the financial service needs of our membership through products and services that take advantage of today s technology. Automated services via the Internet, such as home banking, bill payment, and other electronic transactions are on the horizon. As we move forward, we want to be a part of your future. The Board of Directors, management, and staff are committed to providing you with the best we have to offer while maintaining competitive savings rates, low loan rates, and quality member service with a Focus on the Future. Marvin L. Thomas President/CEO Report of the Chairman Your Credit Union Board of Directors is pleased to report that was another very successful year for AFCU. Operating costs were held to our traditionally low level. The general environment was one in which interest rates fell substantially. Due, we think, to our favorable dividend rate for most of the year, we saw a $40 million, or nearly 25%, increase in Total Assets. Due to competitive external loan interest rates, we saw a $7 million, or approximately 20%, decrease in member loan demand. Our forecasts for 2003 are for a more stable interest rate environment with less of an increase in assets and less of a decline in loans. As has been our policy for some time, we maintained a very competitive dividend rate, as compared with credit union norms. The Credit Union Board and management have continued to evaluate new approaches to services this year, including the introduction of home loan programs, further development of our Web site ( the completion of another successful year of the AFCU Visa card program, and continuation of the use of ATMs that were installed during We continue our commitment to our members, to provide high dividends and low loan interest rates, consistent with maintaining the safety and liquidity of the Credit Union. The annual audit conducted by the National Credit Union Administration again resulted in the highest possible overall rating. This comprehensive audit examines key financial and management

3 factors and compares the operation of AFCU with NCUA goals and with the performance of other federal credit unions. We appreciate the efforts of both management and staff of AFCU to improve operational efficiency and to continue to seek better ways to meet member needs for both loans and deposits. We value the advice and service provided by management and staff for our fellow volunteers on the Board and the Supervisory Committee. Most importantly, we would like to extend our thanks to our members for viewing Aerospace Federal Credit Union as a key financial institution in their lives for both loans and deposits. Joe M. Straus Chair, Board of Directors Your Credit Union experienced favorable financial performance in. Some of the highlights are: An average dividend rate of 3.00% was paid on shares for the year. Total dividends paid of $5.4 million represents 60.5% of the Credit Union s total income of $9.0 million for. The operating expense ratio continues to be one of the lowest in the credit union industry at 23.2%. The percentage of delinquent loans at 0.37% reflects a slight increase from the 0.25% at year-end. Losses on member loans were $12,400 more than in. Reserves and retained earnings increased $1.8 million from $15.1 million to $16.9 million. The net worth ratio continues to be very strong at 8.38% and is reflective of our goals to provide members with the highest possible dividends and lowest possible loan rates Report of the Treasurer Other trends of significance were: Total assets increased by $40.0 million from $171.2 million to $211.2 million, a 23.4% increase. Total share account deposits increased by $38.2 million from $155.9 million to $194.1 million, a 24.5% increase. Loans decreased $6.7 million to $27.4 million. The average return on loans for the year was 7.2% and was down from the 7.6% yield earned in. Investments increased $45.1 million from $133.7 million to $178.8 million, an increase of 33.7%. The average return on investments for the year was 4.1% compared to 4.9% for. The Credit Union looks forward to a relatively stable year in We anticipate member share and loan account volumes to remain constant. Given the general interest rate environment that we are currently experiencing, we anticipate that our return on investments will decrease slightly. James W. Ford Treasurer

4 Total Assets $150.1 $153.7 $148.4 $171.2 $211.2 Loans $33.9 $33.9 $37.4 $34.1 $27.4 Shares $136.1 $139.3 $133.8 $155.9 $194.1 Total Reserves $13.9 $14.2 $14.5 $15.1 $16.9 $=millions Year End Report of the Supervisory Committee The Federal Credit Union Act requires the Supervisory Committee to make or cause to be made a comprehensive annual audit of the books and affairs of the Credit Union. The Supervisory Committee has retained a professional accounting firm, which specializes in auditing credit unions, to conduct an independent audit of the Credit Union s financial statements. The audited financial statements are available for review at the main office of the Credit Union. Ray F. Johnson Chair, Supervisory Committee

5 SUMMARY STATEMENT OF FINANCIAL CONDITION Years ended December 31 ASSETS Loans to s $27,365,939 $34,115,753 Less: Allowance for Loan Loss ($180,000) ($608,467) Cash 2,193,562 1,646,436 Investments 178,828, ,743,817 Accrued Interest Receivable 1,176, ,796 Property and Equipment 93,737 61,053 NCUSIF Deposit 1,557,080 1,240,991 Other Assets 154, ,963 TOTAL ASSETS $211,190,276 $171,175,342 LIABILITIES & EQUITY Shares $194,095,177 $155,881,443 Accounts Payable & Accrued Liabilities 179, ,242 Regular Reserve 1,580,557 1,580,557 Retained Earnings 14,834,957 13,029,100 Appropriated Retained Earnings 500, ,000 TOTAL LIABILITIES & EQUITY $211,190,276 $171,175,342 Aerospace Federal Credit Union SUMMARY STATEMENT OF INCOME & EXPENSE Years ended December 31 INTEREST INCOME Loans to s $2,212,259 $2,780,600 Investments 6,631,908 5,776,280 Total Interest Income $8,844,167 $8,556,880 Less: Dividend on Shares $5,419,115 $6,197,113 Net Interest Income $3,425,052 $2,359,767 Other Operating Income $109,371 $135,033 Operating Income Sub-Total $3,534,423 $2,494,800 OPERATING EXPENSE Salaries & Fringe Benefits $1,287,731 $1,157,904 Data Processing 144, ,964 Communications 69,690 62,912 Auditing Fees 30,437 27,000 Stationery & Supplies 34,184 25,756 Education and Promotion 31,338 32,423 Depreciation & Amortization 11,926 10,410 General Expenses 118, ,111 Total Operating Expense $1,728,566 $1,883,480 NET INCOME $1,805,857 $611,320

6 Board of Directors Joe M. Straus Wanda M. Austin James W. Ford Robert D. Matthews James R. Coge Patrick J. Devine Lynn M. Friesen Charlotte M. Lazar-Morrison Col. Andrew E. Notestine Chair Vice Chair Treasurer Secretary Supervisory Committee Ray F. Johnson Gary F. Hawkins William H. Hiatt Susan A. Enk Anthony B. Oates Recording Secretary Elaine S. Lydon Chair Credit Union Office 2350 E. El Segundo Boulevard El Segundo, CA Telephone: (310) Toll Free: (800) Fax: (310) Web Site: ATM Locations The Aerospace Corporation Building A-3 Cafeteria Building D-8 Cafeteria Conference Center Drive Chantilly, VA Los Angeles Air Force Base Area A, Building 120, Cafeteria Lobby