With the close of the year, Aerospace Federal Credit Union says thank you to our members for making another successful and memorable year. During the year, we launched the much anticipated checking account program; a long awaited member service featuring debit card and bill payment transaction capabilities. We believe the addition of this new service to our unique line of products and services will benefit you and your family for many generations to come while saving you time and money. As a member-owner of AFCU, we strive to make your encounters with us a rewarding Credit Union experience CUe. We acknowledge managing your finances is more than just a set of banking transactions. It is about doing business with people that you know and trust, understanding that you are not a customer but a member, and furthermore, we have no profit motive to direct you into one service or another. At AFCU we offer competitively priced loans and better than average dividend rates to accommodate your financial goals. The industry slogan of People Helping People is the foundation of our goal to making your CUe (Credit Union experience) with AFCU more rewarding. Moving forward, we welcome your continued participation. We are dedicated to unrivaled quality, value and personal member service in delivering you the most innovative financial services. We believe that anticipating your needs and exceeding your expectations are key in forging a lifelong relationship with you and your family. This is our commitment to you, our member-owners of Aerospace Federal Credit Union. We understand that there are many choices for banking services and we thank you for choosing AFCU for your CUe. Marvin L. Thomas President/CEO MESSAGE FROM THE PRESIDENT 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
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 short term interest rates held steady during the first half of the year, but rose substantially, due to the actions of the Federal Reserve Board, later in the year. This motivated us to increase our dividend rate, starting in August. Due, we think, to our favorable dividend rate for most of the year, we saw a $12.2 million, or 5.1%, increase in Total Assets. We saw loan demand increase by about $1.3 million during the year. Our forecasts for 2005 are for a somewhat rising interest rate environment with a similar increase in assets and continuing relatively constant loan demand. 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, most notably the introduction of the AFCU Checking Account and Visa Debit Card services, as well as some improvements to the home loan programs started last year, and further development of our Web site (www.aerofcu.org) to incorporate on-line bill payment. We also continued to provide the AFCU Visa credit card and ATM programs for another successful year. The Checking Account program was well received by the members and as of year-end, 451 checking accounts were established. 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 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, the Supervisory Committee and the Advisory 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
REPORT OF THE TREASURER Your Credit Union experienced favorable financial performance in. Some of the highlights are: 1. An average dividend rate of 1.98% was paid on shares for the year. Total dividends paid of $4.4 million represents 53.7% of the Credit Union s total income of $8.2 million for. 2. The operating expense ratio continues to be one of the lowest in the credit union industry at 28.2%. 3. The percentage of delinquent loans at 0.64% remains unchanged from year-end. Loan losses on member loans at $34,356 were $49,012 less than in. 4. Reserves and retained earnings increased $1.5 million from $18.7 million to $20.2 million. 5. The net worth ratio continues to be very strong at 8.26% and is reflective of our goals to provide members with the highest possible dividends and lowest possible loan rates. Other trends of significance were: 1. Total assets increased by $12.2 million from $237.3 million to $249.5 million, a 5.1% increase. 2. Total share account deposits increased by $10.9 million from $218.4 million to $229.3 million, a 5.0% increase. 2. Loans increased $1.3 million to $28.0 million. The average return on loans for the year was 5.9% and was down from the 6.6% yield earned in. 3. Investments increased $13.5 million from $203.8 million to $217.3 million, an increase of 6.6%. The average return on investments for the year was 3.1% compared to 3.3% for. The Credit Union looks forward to a relatively stable year in 2005. 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 increase slightly. James W. Ford Treasurer TOTAL ASSETS MEMBER LOANS $148.4 $171.2 $211.2 $237.3 $249.5 MEMBER SHARES $37.4 $34.1 $27.4 $26.7 $28.0 TOTAL RESERVES $133.8 $155.9 $194.1 $218.4 $229.3 $14.5 $15.1 $16.9 $18.7 $20.2
SUMMARY STATEMENT OF FINANCIAL CONDITION Years ended December 31 ASSETS Loans to s 28,008,653 26,683,173 Less: Allowance for Loan Loss (90,000) (90,000) Cash 446,182 3,179,775 Investments 217,305,016 203,797,806 Accrued Interest Receivable 1,572,931 1,518,100 Property and Equipment 53,056 80,226 NCUSIF Deposit 1,763,728 1,715,383 Other Assets 466,303 419,103 TOTAL ASSETS 249,525,869 237,303,566 LIABILITIES & EQUITY Shares 229,306,958 218,388,770 Accounts Payable & Accrued Liabilities 236,722 194,480 Regular Reserve 1,580,557 1,580,557 Retained Earnings 18,091,017 16,639,759 Appropriated Retained Earnings 500,000 500,000 Accumulated Unrealized Gains/Loss on Investments (189,385) 0 TOTAL LIABILITIES & EQUITY 249,525,869 237,303,566 SUMMARY STATEMENT OF INCOME & EXPENSE Years ended December 31 INTEREST INCOME Loans to s 1,572,072 1,786,693 Investments 6,476,421 6,370,435 Total Interest Income 8,048,493 8,157,128 Less: Dividend on Shares 4,403,240 4,266,842 Net Interest Income 3,645,253 3,890,286 Other Operating Income 145,247 142,314 Total Operating Income 3,790,500 4,032,600 OPERATING EXPENSE Salaries & Benefits 1,298,217 1,321,230 Data Processing 183,996 172,340 Communications 78,143 60,703 Auditing Fees 24,269 41,957 Stationery & Supplies 32,249 34,298 Education & Promotion 45,251 36,219 Depreciation & Amortization 38,111 49,853 General Expenses 639,007 511,198 Total Operating Expense 2,339,242 2,227,799 NET INCOME 1,451,258 1,804,801
ANNUAL REPORT OF OFFICIALS Board of Directors Joe M. Straus Lynn M. Friesen James W. Ford Robert D. Matthews James R. Coge Patrick J. Devine William H. Hiatt Charlotte M. Lazar-Morrison John F. Wagner Supervisory Committee Ray F. Johnson Susan J. Adams Andrea L. Amram Gary Hawkins Advisory Committee Mark H. Goodman Allyson D. Yarbrough Chair Vice Chair Treasurer Secretary Chair Recording Secretary Elaine S. Lydon Credit Union Office 2350 E. El Segundo Boulevard El Segundo, CA 90245 Telephone: (310) 336-5030 Toll Free: (800) 795-2325 Fax: (310) 336-8212 Web Site: http://www.aerofcu.org ATM Locations The Aerospace Corporation Building A-3 Cafeteria Building D-8 Cafeteria 15049 Conference Center Drive Chantilly, VA Los Angeles Air Force Base Area A, Building 120, Cafeteria Lobby