2014 AnnuAl RepoRt foR MeMbeRs

2014 Annual Report for Members
Letter from the Chairman and President
Taking Action
for Our Members
Building a Better Future, Today and Tomorrow
Greg Marchant, Chairman of the Board and
Bill Cheney, President/CEO
(left to right)
In 2014 your Credit Union celebrated several milestones—
our 600,000th Member joined, we welcomed more than
57,000 new Members to the SchoolsFirst FCU family,
we surpassed $10 billion in assets, and we celebrated the
retirement of our President and CEO, Rudy Hanley, who
helped shape the vision and success of SchoolsFirst FCU
for more than 31 years.
Enhancing the Member Experience
We owe these remarkable and record-breaking milestones
to our Members, and their dedication and willingness
every day to help school employees and their families
discover the value of Membership.
We are committed to listening to the feedback you provide
on how we can improve and enhance the way Members
interact with SchoolsFirst FCU through the channels
you choose.
As the SchoolsFirst FCU family continues
to grow, we will never forget each one
of our Members has their own individual
dreams, shaped by their story. We are here
to help make those dreams come true.
This led to a solid year financially. Our Credit Union ended
the year with $10.7 billion in assets and a capital ratio of 11.7%.
As a financial cooperative, the strength of our numbers allows
us to provide more direct benefits to Members. The Credit
Union National Association’s most recent report estimates
that SchoolsFirst FCU provided over $65.3 million in direct
financial benefits to its Members when compared to other
California financial institutions. These benefits are the result
of our lower interest rates on loan products and higher
savings rates, as well as from low-fee or fee-free products
and services. That translates into an average annual savings
of $522 for loyal, high-use Member households.
To make transacting with us even easier, we opened new
branches and remodeled several others to help make our
team more accessible and better serve your in-branch needs
and experience. We added new ATMs, including launching a
partnership that brought more than 100 ATMs to Southern
California Rite Aid stores.
We hired more teammembers in our Contact Center
to better serve you, as Members used communication
channels, such as Chat and Secure Message, to contact us
more than ever before. Through Online Banking, an average
of almost 11,000 Members each month used Chat, Secure
Message or email to communicate with us—almost double
what it was in 2013. Plus, we served Members over the
phone with more than 2.3 million phone calls.
We’re leveraging new technologies and upgraded our
Mobile Banking platform, adding new functionality. Last year,
nearly 180,000 Members used our Mobile Banking apps,
a 31% increase over 2013. And, we improved our security
measures and expertise to help keep Member account
information safe.
Letter from the Chairman and President (continued)
Making Members’ Lives Better
To help Members see a higher return
on savings, we introduced new Share
Certificates and increased rates on
Share Certificates. We developed
a Home Savings Plan to help more
Members save for a home, enhanced
our Credit Card rewards program,
and added a way for Members to
instantly receive a new Debit Card in
our branches when needed.
Helping educate you is a priority, so
we added new financial workshops,
and introduced a YouTube Channel
with educational videos on various
topics for both adults and youth. And,
to help our leaders of tomorrow, we
are partnering with local schools to
offer “Bite of Reality,” an interactive
activity that helps teach teens how to
make financial decisions and gain a
better understanding of how to live
on a budget.
With Gratitude, We Celebrate
Rudy Hanley’s Retirement
Last year, we bid farewell to Rudy
Hanley, our President and CEO for
the last 31 years. We are grateful to
Rudy for his leadership, his many
accomplishments throughout
his tenure, and for helping us
understand what Member Service
truly means. When he started at the
Credit Union, we had one branch
and $145 million in assets; Rudy
successfully led us through many
years of growth and left the Credit
Union in an excellent position to
face the future. We wish him a very
happy and healthy retirement, and
thank him for his tireless dedication
throughout the years.
Capital
(Dollars in Millions)
Memberships
(in Thousands)
Operating
Expense Ratio
Capital
*Without impact of
NCUA insurance
Allowance for Loan Losses
Our Financial Strength Comes From Our Members
We had a record year for Members’ participation in the products and services we
offer, which allowed us to maintain our financial strength while building reserves,
keeping expenses in line and gaining efficiency.
We strengthened the Credit Union’s already strong capital position, enabling us to
make investments to help the Membership, while ensuring that we are in a position to
face whatever lies ahead.
In 2014, Net Interest Income was $229.5 million, $10.9 million (5%) higher than in
2013. This improvement was mainly driven by the growth in the number of Members
who used the Credit Union to fund a new loan, bringing the year-to-date Net
Income to $108.4 million. Assets grew to approximately $10.7 billion, resulting in a
capital ratio of 11.7% versus 11.6% in 2013, with an operating ratio of 2.07% versus
2.12% a year ago, and return on assets (ROA) of 1.05% versus 1.15% in 2013.
None of these results would have been possible without your support.
Looking To The Future
As the SchoolsFirst FCU family continues to grow, we will never forget that each one
of our Members has their own dreams, shaped by their own story. No matter what
your dreams are for the future—saving for higher education, purchasing a home,
planning your retirement, or making sound investments—we are here to help make
those dreams come true. Our team truly has your best interests in mind, and we want
more than anything to help you have a happy, successful future.
Thank you for your continued participation, your loyalty, and your support.
We are honored to serve you.
Bill Cheney President/CEO Greg Marchant
Chairman of the Board
Products and Services
Created with you and your family in mind
Products and Services
Debbi P. and Family
Middle School Teacher
Members since 2004
Serving Your Needs Today
and Into The Future
SchoolsFirst FCU is your Credit Union, and we are here to
help you through each stage of your life, by offering you and
your family the expertise you are looking for from a financial
partner. Whether you need assistance in saving, getting a loan,
or working with a licensed investment, retirement or insurance
professional, we are here to help you achieve the financial
life you dream of, and guide you through life’s unexpected
challenges.1 Our experts will make recommendations that work
for you and your family, based on your unique needs.
In fact, your needs are what shape the products and services
we offer; each new service we introduce, or change we make
to an existing product or service, is designed to help make your
financial life easier.
The Value and Convenience Members Deserve
In 2014, we enhanced the competitiveness of our rates on
both savings and loans products to help a record number of
Members save and borrow with the Credit Union. In addition,
we improved our Credit Card rewards program, introduced
a new Home Savings Plan to offer higher dividends for
those saving for a down payment, and introduced new share
certificates to help our Members save more.
To help improve access to your accounts, we upgraded our
ATMs at all branches with new envelope-free machines,
enhanced our Mobile Banking apps and website with new
features and functionality, and built new branches now serving
the needs of our Members with 44 locations in Orange,
Los Angeles, Riverside and San Bernardino Counties.
We also added new ATMs, and launched a partnership that
brought more than 100 ATMs to Southern California Rite Aid
stores, adding to the 28,000 fee-free ATMs we offer through
the CO-OP Network.
Advocating For Members Starts with the Expertise
of our Team
We believe in order to meet our Members’ changing
needs and expectations, we must have an exceptional
team, and developing their skills was a focus for the Credit
Union in 2014.
To build our exceptional team, we foster employee
engagement, high performance, and a positive work
environment while providing the opportunity to continue
our team’s professional development. Every manager
throughout the Credit Union focuses on strengthening
teammembers’ product knowledge and their ability to
provide world class personal service through listening to
each Member’s individual needs. This in turn enables us to
meet the complex and evolving needs of our Membership.
Expertise in the Organization:
Average tenure
6.45
Licensed
professionals
70
Avg. Years in the Financial
Services Industry
6.83
years
years
Products and Services (Continued)
Financial Education to Help Members be Savvy Consumers
Helping you make more informed decisions starts with improving your
knowledge of financial service products. In 2014, we introduced new
financial workshops and videos, and enhanced existing workshops, to help
educate Members on financial concepts. As a trusted financial partner,
our social media communities connect Members and offer interesting
articles on a number of financial topics from buying the right car to tips
for budgeting around the holidays.
Gina H.
Teacher Assistant
Member since 2014
Last year we also launched our YouTube Channel to provide a place
Members can find videos for both adults and young Members on topics
from being a smart borrower, to good versus bad debt, to tips on saving
more. Many of these videos feature Jean Chatzky, a renowned personal
finance expert.
For those times when you need extra help, our partnership with the
BALANCE program has helped Members get out of debt, repair or build
credit, and achieve financial stability.
Participation Builds a Stronger Membership
As a financial cooperative, the more you participate in the products and services we offer, and share the benefits of Membership
with your immediate family and eligible colleagues, the more valuable your Membership becomes—for you and other Members.
Consumer Loans
Bank Avg. APR
SchoolsFirst FCU APR2
Credit Card/Gold
11.84%
10.50%
60 Mo. New Car
4.18%
1.74%3
48 Mo. Used Car
4.29%
1.74% 3
Home Loans
Bank Avg. APR
SchoolsFirst FCU APR2
30 Yr. Fixed (Conforming)
3.72%
3.88% 4
Home Equity Line of Credit (HELOC)
4.71%
3.25%
Rates as of 12/31/2014.
Source: Informa Research Services.
1. Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and
investment advisor. CBSI is under contract with SchoolsFirst FCU to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May
lose value, No Financial Institution Guarantee. Not a deposit of any financial institution. CUNA Brokerage Services, Inc., is a registered broker/
dealer in all fifty states of the United States of America. 2. Lowest rate offered. 3. Includes a 0.75% discount for automatic transfer payment from
SchoolsFirst FCU account. 4. Based on a loan amount of $350,000.
Member Story
“SchoolsFirst FCU has really enriched my life.”
Member Story
“I’ve always felt like family
working with SchoolsFirst FCU,
it was never just business.”
Beatrice J.
Preschool Teacher
Member since 2003
Helping To Build The Future: One Member’s Story
A preschool teacher in Moreno Valley and a single mother,
Beatrice has been a Member since 2003.
Back in 2008, Beatrice was going through a challenging time in
her life when she visited her local branch and sat down with the
branch manager to discuss her situation. David, the manager of
our Riverside-University branch, offered Beatrice his support
and told her if she ever needed anything, he was only a phone
call away. It was the start of a new partnership, and Beatrice
continued to come into her local branch for assistance for her
financial life as time went on.
“He really listened to me,” Beatrice says. “All of my trials, and
there have been many—he was there every step of the way.
He always let me know I could do it.”
At one point, she needed to find a new housing solution, so
David encouraged her to apply for a home through Habitat for
Humanity, and provided a character reference to include with
her application, as well as a small personal loan to help with the
application fee. He was proud to attend the groundbreaking
ceremony when her dream home was built soon after.
Over the years, her relationship with the Credit Union grew even
stronger. She began to think more about her financial future,
and the SchoolsFirst FCU team encouraged her to open a credit
card to start rebuilding her credit. Beatrice also began building
her savings with a holiday savings account, allowing her to buy
gifts for her family for the first time.
Next, Beatrice achieved another milestone—purchasing a car
with Enterprise and SchoolsFirst FCU. “I never thought any of
these things would be possible considering the financial strains
I’ve been through,” says Beatrice. “That car was really helpful for
me and my family.”
Now Beatrice is truly focused on the future; she recently opened
a Membership for her young son, and is now saving for his
college education.
“I’ve always felt like family working with SchoolsFirst FCU, it was
never just business. They have always been helpful and if they
can’t help, they will find someone who can. To know they care
that much about the Member is just amazing—I’ve never had
that before. SchoolsFirst FCU has really enriched my life.”
Community
Making a Difference in Our Communities
Community
SchoolsFirst FCU
teammembers at the
2014 CHOC Walk
Committed to Supporting Those in Need
Our strong sense of community and helping to make a difference in the communities we serve is something SchoolsFirst FCU is
particularly attuned to. Since their beginning, credit unions have focused on “people helping people,” and at SchoolsFirst FCU, we
make it a priority to support the needs of the communities we serve through a variety of programs and events throughout the year.
Our team works not only to fulfill commitments to our Members, but also to the communities where we live and work and to the
causes in which we believe. We are proud that our efforts have made a significant impact in making our Members’ lives better.
In 2014, we gave approximately $2.16 million to those in need through charitable
donations to schools, local organizations and the credit union movement.
Supporting the Educational Community
Since our beginning almost 81 years ago, our focus on supporting
the educational community has been part of who we are
and 2014 was no different. We continue to support schools
throughout the counties we serve, and partner with districts to
honor school employees for excellence in teaching and service.
We offer grants for teachers to create innovative classroom
programs, and scholarship programs to encourage high school
and college students to continue to pursue their educational
goals. Our teammembers volunteer to participate in many of
the Academic Decathlon and Pentathlons in our communities, as
well as other financial literacy events in local schools.
This year we partnered with California State University, Fullerton,
to launch the SchoolsFirst Federal Credit Union Center for
Creativity and Critical Thinking. This unique spot on the university
campus fosters partnerships with local schools and focuses
on providing educators with the tools to develop creativity,
collaboration, critical thinking, and decision-making in students.
The Discovery Cube in Santa Ana and Los Angeles now offer
the SchoolsFirst Federal Credit Union Teacher Resource
Center, which provides hands-on exhibits where the Science
Center’s expert educators are available to assist teachers in
guiding their students through the exhibits and lessons aligned
with the California Science Content Standards.
In 2014, we supported many districts, schools and foundations
in the counties we serve, including Riverside, Orange,
Los Angeles and San Bernardino.
To help promote financial literacy for youth nationally and
locally, we continue to support “BizKid$,” an educational
PBS television program that teaches financial education
and entrepreneurship to a preteen audience. The show uses
sketch comedy and young actors to explain basic economic
concepts, with a motto of “Where kids teach kids about
money and business.”
Community (Continued)
Supporting our Members and the Communities We Serve
Our teammembers and Members regularly give back to the
community with their own time and funds to important causes
such as our annual school supplies drive, Lee National Denim
Day in support of breast cancer awareness, MS Bike Ride,
blood drives and disaster relief.
People Helping People—We help our
Members with “People Helping People”
loans, providing Members with interest-free
funds to help them in emergency situations.
Many of our teammembers also contribute time to local
community, education foundation and credit union boards to
provide additional support to our communities and the credit
union movement.
Our support of Children’s Miracle Network (CMN) has
been a focus at the Credit Union for more than seven years.
We participate in many local efforts to help raise awareness
and funds in support of CMN. Right now, there’s a Children’s
Miracle Network Hospital working to save the lives of kids in
many communities, including those in our own backyard. In fact,
62 children enter a Children’s Miracle Network Hospital for
treatment every minute—that’s one child every second. Some
are battling cancer. Some are suffering from a traumatic injury.
Others require constant care because they were born too
early, or with a genetic disease. Regardless of why the kids are
there, Children’s Miracle Network Hospitals always have their
doors open.
Giving Back to the Credit Union Movement
The credit union movement is not just a part of what we do; it’s
who we are. This past year, SchoolsFirst FCU and our Members
were a big part of the “Don’t Tax My Credit Union” campaign—
bringing in more letters to congress than from any other credit
union in the nation. This movement helped ensure that credit
unions keep our tax-exempt status.
We contributed to the Richard Myles Johnson Foundation, a
local organization that focuses on youth financial education.
Our partnership with them in 2014 focused on an increased
commitment to deliver the “Bite of Reality” program in local
schools. This interactive activity teaches teens how to make
financial decisions and gives teens a better understanding of
the challenges of living on a budget, while introducing the next
generation to the benefits of credit unions.
We also gave our support to the National Credit Union
Foundation and Credit Union House, who support and
strengthen credit unions in America, plus an annual gift to
the World Council of Credit Unions, which promotes the
development of credit unions throughout the world. We
also make contributions to the national credit union disaster
relief service, which directly benefits credit unions and their
Members who are located in a disaster zone.
SchoolsFirst FCU teammember
volunteer at “Bite of Reality”
Financial Statements
Ensuring a secure financial future for every Member
Condensed Consolidated Financial Statements
Winifred N.
Middle School Teacher
Member since 2009
Consolidated Statements of Financial Condition
As of December 31, 2014 and 2013 (in thousands of dollars)
Assets
2014
2013
$572,763
$347,768
35,652
51,652
367,490
513,480
4,259,505
4,145,820
5,010,198
4,377,687
Loans held for sale
15,038
4,697
Accrued interest receivable
32,291
34,208
National Credit Union Share Insurance Fund (NCUSIF) deposit
85,183
80,363
25,000
25,000
67,179
68,695
215,318
223,998
$10,685,617
$9,873,368
Cash and cash equivalents
Certificates of deposit, original maturities greater than three months
Investments, available-for-sale, at fair value
Investments, held-to-maturity, at amortized cost
Loans, net
Federal Home Loan Bank stock, at cost
Property and equipment, net
Other assets
Total Assets
Condensed Consolidated Financial Statements (Continued)
Liabilities and Members’ Equity
2014
2013
$8,860,990
$8,236,226
Accrued expenses and other liabilities
100,720
97,142
Borrowed funds
475,000
400,000
9,436,710
8,733,368
1,248,895
1,140,457
12
(457)
1,248,907
1,140,000
$10,685,617
$9,873,368
Capital ratio
11.69%
11.55%
Supplemental Information
2014
2013
$1,248,907
$1,140,000
61,064
80,443
$1,309,971
$1,220,443
$10,746,681
$9,953,811
12.19%
12.26%
Liabilities
Members’ shares
Members’ Equity
Retained earnings (partially restricted)
Accumulated other comprehensive income (loss)
TOTAL LIABILITIES AND MEMBERS’ EQUITY
Members’ equity
Allowance for loan losses
Members’ equity plus allowance for loan losses
Members’ assets without allowance for loan losses
Adjusted capital ratio
Note: The Supplemental Information above has been derived from the amounts in the consolidated financial statements. This Supplemental
Information includes non-GAAP measures which are provided for additional information and analysis.
Condensed Consolidated Financial Statements
For the Years Ended December 31, 2014 and 2013 (in thousands of dollars)
Interest Income
2014
2013
$231,612
$215,193
56,471
57,902
288,083
273,095
Members’ shares
47,062
42,805
Borrowed funds
11,488
11,607
58,550
54,412
229,533
218,683
1,850
-
227,683
218,683
Card interchange and ATM fees
55,833
50,836
Member fees
16,565
16,521
2,218
13,990
431
25
20,240
17,320
95,287
98,692
Salaries and benefits
117,852
105,056
Operations
85,002
84,116
Occupancy
11,495
10,406
183
6,472
Total non-interest expense
214,532
206,050
Net income
108,438
111,325
469
(3,462)
$108,907
$107,863
Loans
Investments
Total Interest Income
Interest Expense
Total Interest EXPENSE
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Non-Interest Income
Gain on sale of loans
Gain on sale of investments
Other
Total non-interest income
Non-Interest Expense
Members’ shares insurance
Change in other comprehensive income (loss)
Total comprehensive income
Board and Supervisory Committee
HELPING TO MAKE OUR MEMBERS’ LIVES BETTER
Board and Supervisory Committee
Supervisory Committee Report
The Supervisory Committee is responsible for monitoring
the financial safety and soundness of SchoolsFirst Federal
Credit Union and compliance with various financial and
regulatory requirements. In fulfilling these responsibilities,
the Committee appointed the independent audit firm of
Moss Adams LLP, which directly reports to the Committee.
We held quarterly meetings to, among other things,
review internal audit services, internal controls and risk
management processes, and examinations by regulatory
agencies. In the opinion of the Committee, SchoolsFirst
Federal Credit Union has operated in a fiscally sound
manner and, in all material respects, in accordance with
applicable federal and state regulations.
Paul Burkart, Dr. John Nelson (top row, left to right)
Ted Alejandre, Karen Cant, Paul Reed (bottom row, left to right)
Dr. John Nelson
Chairman, Supervisory Committee
Board of Directors
Your volunteer Board of Directors’
commitment, advice and leadership help
make our Members’ lives better.
Dr. Essie Adibi, Andy Plumley, Linda Salata, John Didion, Kristine Wetzel, Dr. Marc Ecker (top row, left to right)
Lynn April Hartline, Greg Marchant, Adam O’Connor, Kary Bemoll, Marcy Gowdy (not present) (bottom row, left to right)
Federally Insured by NCUA