Building Value Through PARTNERSHIP ANNUAL REPORT 2014
CONT ENT S Our Mission 3 President s Report 4 Chair s Report 6 Treasurer s Report 8 Supervisory Committee Report 9 Statements of Financial Condition 10 Statements of Income 11 Officials 12
Our Mission As a financial partner, we have an unwavering commitment to maximize value for our membership. Our Vision Building Value Through Partnership. Our Core Values of our High Performing Team: } We strive for continuous improvement and growth } We provide exceptional service by identifying needs and delivering the right solutions } We seek opportunities for collaboration to improve outcomes } We are accountable for our actions } We stay engaged through open and effective communication } We remain open to change for the right reasons President and CEO Theresa Mann speaking at last year s Annual Meeting
A Letter from the President and CEO In last year s annual report I closed with a word about a new service that was coming soon that would define Value in a new way. This program, which arrived on January 1, 2015, is appropriately titled Value In Partnership, or VIP. It s not a gimmick, or service for us to sell. We did not mark prices up only to falsely offer them at a discount. This is real, live cash back to you, the cooperative owners of your credit union based upon a simple calculation - usage. If this was the annual report of a for-profit company, we would provide statistics that would illustrate our company value by showing you a stock price or return on investment, known as a PE ratio, and your value would be determined by how much you owned. However, as a not-forprofit financial cooperative, we define value to the stockholder differently. While all of our member/owners are receiving a solid benefit of financial services at a fair price, as of June 30, 2015, approximately 25% of our members weighed in at either Elite or Premier Elite and are enjoying more cash back in their pocket. They did not sign up they don t have to. They are automatically getting benefits just by using the credit union. How do you know if you are a VIP Member? You will read it in your monthly statement, you will see a banner when you sign in to online banking and you will receive a monthly email direct message to you (as long as we have your correct email address). Can your status change from month to month? Yes that s why you should pay attention to the monthly message! Benefits In the six months since we began VIP in January, the credit union has provided more than $21,000 to those members who use us the most: } $10,422 in fee refunds } $4,950 in discounts for loan protection products } $6,355 in mortgage closing costs rebates } An extra dividend bonus of.25% or.50% paid on certificates for more than 13% of our members who hold these certificates 04 The Partnership FCU Annual Report 2014
To be fair, these benefits typically would have been income to the credit union. However, they are now being redirected back into the pockets of our members who use us the most. If you are not one of those members, then you should ask yourself if your financial institution would forego income to give it back to their active customers? Do they walk the talk of value? Why do we do it? Because we should. The more you use us, the more profitable we become. The more profitable we become, the more value we can add back in many ways that include paying better rates, offering more innovative and convenient services and giving you cash back in your pocket. It s win/win here at The Partnership, where we serve members like you who advance and promote the interests of the public. At The Partnership FCU, we believe that no one should have to muddle through the consumer finance world alone. We are here for you. We have been working with two of our elite sponsor agencies, the FDIC and NSF, to provide financial education and consumer interest seminars, webinars and articles on topics such as mortgages, retirement and getting and maintaining good credit. We are ready to work with all of our sponsor agencies just ask us! We have an assortment of topics available and have received rave reviews by those in attendance. Another measure of value is how financial institutions price their products. At The Partnership, we price as low as possible. Examples include maintaining auto loan rates as low as 1.24% for up to 60 months, or 1.90% for new autos up to 72 months. How about Home Equity Loans as low as 4.00% with no closing costs? Or Platinum VISA Credit Card with no fees and rates as low as 8.25%? For some, it s easier to obtain low-priced credit than others. Some of our member-owners are rebuilding their credit. To support them, we are providing the ZipLINE Credit Builder line of credit. This loan offers varying amounts in a line of credit, which may increase as your credit rebuilds. Say goodbye to expensive payday lending and say hello to a stronger credit score and lower-priced credit! And the future is brighter than ever. Soon, members with auto loans and consistent credit history may be receiving an offer to lower their payment on their terms by using a product we call AutoRefi. You are in control just chose your term and presto your payment will be lowered at your request. Innovation is happening at The Partnership. Look for more products that support helping you put money back into your pocket. As I said last year, for financial institutions, the game has changed. Today banks and Credit Unions today must provide more of everything to their customers than ever before. Why? Because so many options now exist for the consumer to choose how and when they bank. We hope you will choose ownership, where you will get value, convenience and cash back in your pocket. We hope you will choose The Partnership. Theresa B. Mann President/CEO
The Chair s Report Over the past few years the Board of your Credit Union has been expanding the build-out of our governance infrastructure, and we continue to attract talented and dedicated volunteers to join our team as well. While in 2013-14 we were able to, among other things, finalize our recruitment and succession planning efforts and formalize Position Descriptions for the Board and Supervisory Committee, in 2014-15 we established a CEO/Human Relations Committee as well a Governance Committee, chaired by Bert Vint and Karen Hughes respectively, both of whom have been diligently advancing their mandates. For example, under our new Volunteer Education Policy developed by Karen s Governance Committee, clear guidelines have been established for our Directors to engage in learning through conferences, webinars and the like so as to sharpen our skills in risk, compliance and financial literacy above and beyond baseline requirements imposed by our regulator, the National Credit Union Administration. And, as we prepare to say goodbye to one of our longest serving members, our Board Secretary of over ten years, Sandra Pierce, we welcome our newest Director, Martin Henning. Sandra had served on the Board since 1999 (when we were still the FDIC FCU), prior to which time Sandra also served our members on the Credit Union s Supervisory Committee since 1984. Even though Sandra retired from the FDIC in 2012, she continued to serve the Credit Union s membership through the middle of this year, and we are grateful for her thirty plus years of service to our members. 06 The Partnership FCU Annual Report 2014
Like Sandra, Martin is a longtime professional with the FDIC. We welcome Martin to the Board and particularly look forward to the vast insights he will bring to our deliberations on leading cybersecurity measures -- an area of growing concern for credit unions and society at large. Thanks to our member-owners for your continued support of your Credit Union. As volunteers, it means a lot to your Board to be working with such a strong management to promote and advance your interests while staying true to the ideals of the credit union movement. Thanks again to Sandra for her many years of invaluable service to our membership. We wish her the very best as she enters the next phase of her well-deserved retirement. I also extend my thanks to my colleagues on the Board -- for another productive year of partnering in engaged and active service to our members, and to the talented management of The Partnership -- for making our jobs as volunteers relatively easier as a result of their able stewardship of this fine organization. We look forward to another great year! Best regards. John Richards Chair The Partnership FCU staff raised over $2,000 in art supplies for Children s National Medical Center
The Treasurer s Report Financially, the Partnership Federal Credit Union had an outstanding year in 2014. We achieved 6.22% loan growth bringing our net loan portfolio to $71,556,805. During 2014, we continued to follow our strategy of carefully acquiring first mortgage loans which helped us grow total real estate loans by $2.3 million over 2013 figures. Loan quality remained sound. As of December 31, 2014, the loan portfolio was comprised of 38% Real Estate, 32% Vehicle, 0.2% Share Secured, and 30% Unsecured. The Partnership closed 2014 with strong positive net income of $270,874. This was 15.2% higher than our 2013 income primarily due to ample loan growth and slight improvements in investment yields. While the Partnership continued to be prudent with its spending we saw a modest increase of 6% in operating expenses in 2014. Our Asset & Liability Committee (ALCO) met monthly to discuss investment strategies, potential loan and dividend rate adjustments, and other relevant financial events that could impact credit union business, including the monitoring of liquidity. In 2013, liquidity was roughly 10% of total assets. We were able to decreased liquidity to 5.3% by the end of 2014 by investing in sound higher-yielding assets. An optimal liquidity rate is between 5% and 10%, so we were pleased with this multi-year effort to best put our money to work. Overall, and in light of the slow recovery of the economy, the Credit Union continued to make steady steps upward. The Credit Union s net worth closed the year at 9.05%, higher than the 2013 figure of 8.78%. In summary, the Credit Union s solid capital position, strong loan portfolio and prudent long and short term financial planning enabled us to have another successful financial year, which means we may give more value back to our member-owners. This success speaks to the hard work and dedication of all credit union staff and management. In addition, the tireless commitment of my fellow Board members has been critical to The Partnership s continued success. Alex Wynnyk Treasurer 08 The Partnership FCU Annual Report 2014
Supervisory Committee Report The Supervisory Committee is responsible for ensuring that the credit union s financial records are in order and that internal controls are in place to safeguard assets of the credit union and its members. The Committee does this by engaging an independent accounting firm to conduct an external audit of the credit union each year. The accounting firm, Rowles & Company, LLP of Baltimore MD, audited the financial statements for the year ended December 31, 2014. The auditors unmodified opinion and a complete set of the credit union s financial statements are available from the credit union upon request. To supplement the annual work done by the credit union s external auditors, the Supervisory Committee also contracts for, or performs, certain internal audit functions to determine that the credit union is soundly managed and members assets are properly safeguarded. These audit functions include, but are not limited to, reviews of regulatory compliance, policies and procedures, internal controls, wire transfers, member accounts, operational cash, and the Allowance for Loan Losses adequacy. In addition, we provided increased attention to the credit union s external environmental risks, such as, information security and market rate sensitivity. The Supervisory Committee also serves the interests of credit union members by responding to members inquiries regarding the credit union s handling of their accounts. We always recommend going direct to appropriate credit union staff to first resolve issues. However, for unresolved member issues, please contact: Supervisory Committee The Partnership Federal Credit Union PO Box 101146, Arlington, VA 22210 I would like to express my appreciation to all my colleagues on the Supervisory Committee. Jeffery B. Smullen Chair The Partnership FCU Annual Report 2014 09
Statements of Financial Condition December 31, 2014 2013 Assets Cash and cash equivalents $ 7,676,167 Loans to members, net 71,556,805 Investment securities available for sale 3,271,447 Investment securities held to maturity 23,070,163 Certificates of deposit in other financial institutions 31,015,000 National Credit Union Share Insurance Fund deposit 1,274,270 Credit Union owned life insurance 2,918,746 Goodwill 1,038,274 Property and equipment 505,598 Prepaid expenses and other assets 1,904,003 $ 14,560,962 67,366,458 4,802,265 23,243,172 28,366,000 1,290,711 2,824,759 1,038,274 664,178 1,447,815 Total assets $ 144,230,473 $ 145,604,594 Liabilities and Members' Equity Members' share accounts $ 130,759,652 Accrued expenses and other liabilities 626,541 $ 132,530,690 526,558 Total liabilities 131,386,193 133,057,248 Members' equity Regular reserve 1,495,295 Undivided earnings 7,039,742 Equity of merged credit unions 4,193,773 Accumulated other comprehensive income 115,470 1,495,295 6,768,867 4,193,773 89,411 Total members' equity 12,844,280 12,547,346 Total liabilities and members' equity $ 144,230,473 $ 145,604,594 DISCLAIMER: The condensed financial statements presented herein do not constitute a complete set. The complete set, including the independent auditors opinion, statements of changes in members equity and cash flows and notes to the financial statements, is available in the Credit Union office. 10 The Partnership FCU Annual Report 2014
Statements of Income Years Ended December 31, 2014 Interest income Interest on loans $ 3,736,315 Interest on investments 906,501 4,642,816 Interest expense Dividends on members' shares 260,460 Net interest income 4,382,356 Provision for loan losses 289,827 Net interest income after provision for loan losses 4,092,529 Noninterest income Card services 429,355 Share draft fees 305,222 Loan account fees 114,733 Other 495,075 1,344,385 Noninterest expense Compensation and benefits 2,658,147 Office occupancy and operations 1,749,692 Other 758,200 5,166,039 Net income $ 270,875 $ $ 2013 3,658,590 841,308 4,499,898 290,886 4,209,012 479,729 3,729,283 428,436 322,255 124,338 583,379 1,458,408 2,424,679 1,661,116 866,882 4,952,677 235,014 DISCLAIMER: The condensed financial statements presented herein do not constitute a complete set. The complete set, including the independent auditors opinion, statements of changes in members equity and cash flows and notes to the financial statements, is available in the Credit Union office. The Partnership FCU Annual Report 2014 11
Board of Directors John Richards, Chair Andrea Woolford Eley, Vice Chair Alex Wynnyk, Treasurer Pamela Hawkins, Secretary Robert Catalanotto, Director John Forlines, Director Karen Hughes, Director Sandra M. Pierce, Director Bert Vint, Director The Supervisory Committee Jeffery B. Smullen, Chair Peter Savarino, Vice Chair Robert Basinger, Secretary Jesse Galindo, Member Christine Bouvier, Member John Colantoni, Associate Member Martha Dodson, Associate Member Alvin James, Associate Member The Partnership FCU staff bowling to raise money for Children s National Medical Center