shared success - Chevronfcu.org

SHARED
SUCCESS
2014 Annual Report
TO OUR MEMBERS
W
e are pleased to report that Chevron Federal Credit Union achieved in
2014 another year of solid growth and exceptional financial strength.
Despite ongoing uncertainty about if, and when, interest rates might begin
moving upward, the Credit Union enjoyed another strong year of loan
growth. Overall loan growth exceeded 12%, surpassing our budget target.
Mortgage lending once again led the way. As anticipated, the refinancing
boom subsided in 2014, but the Credit Union’s low loan rates and modest
closing costs helped generate an increased volume of home purchase
mortgages. Loan growth also benefited from a strong volume of relocation
loans for Chevron employees. The Credit Union remains the primary source
of mortgages for members buying homes under Chevron Corporation’s
employee relocation program.
The Credit Union also witnessed a steady rise in deposits in 2014. The 6%
annual growth matched our budget target. After several years of doubledigit increases, however, deposit growth has become more challenging as
depositors are increasingly attracted to more volatile equity markets.
As a financial institution grows, it must also grow capital to provide depositors
with protection against adverse or unforeseen events. At year end, the Credit
Union’s ratio of net capital to assets stood at nearly 11%, well above our
regulators’ 7% standard for a well-capitalized financial institution.
The Credit Union’s enviably strong financial position was made possible by our
loyal members. True to the cooperative tradition of credit unions, we will be
sharing that success in 2015 and beyond in the form of even more competitive
deposit and loan rates. In particular, the Credit Union expects its money
market and certificate yields to consistently outpace the market. And in the
same cooperative tradition, our members never need to worry about being hit
by an avalanche of fees.
Looking back at 2014, we are pleased to note the achievement of a significant
milestone: total Credit Union membership surpassed 100,000 members. We
now serve members in all 50 states as well as 94 countries.
2 | 2014 ANNUAL REPORT
Wherever our members may be, the Credit Union will do all it can to bring
unique value to each and every one.
As always, we welcome your comments and suggestions as to how Chevron
Federal Credit Union can better serve you, the members and owners of the
Credit Union.
Sincerely,
Scott Swasey
Chairman of the Board
[email protected]
James Mooney
President & CEO
[email protected]
2014 ANNUAL REPORT | 3
2014 YEAR IN REVIEW
I
n a year of unexpected
developments – sharply falling oil
prices, moderately lower interest
rates – the Credit Union remained on
a steady course of performance and
growth.
Though the refinancing boom of 2012
and 2013 came to an end, new home
loans largely made up for the drop in
refinances, and our real estate loan
portfolio grew by double digits for the
seventh consecutive year.
Net interest income was higher than
anticipated, while operating expenses
were maintained at a level below
expectations. Together, these factors
helped the Credit Union generate a
return on assets (ROA) well above the
0.91% target.
With assets reaching $2.5 billion and
a net capital ratio comfortably above
what is considered “well-capitalized,”
Chevron Federal Credit Union
remains one of the largest, strongest,
and best capitalized credit unions in
the country.
4 | 2014 ANNUAL REPORT
2014 ANNUAL REPORT | 5
2014 YEAR IN REVIEW
GROWTH TRENDS
Membership Growth
The Credit Union reached a 100,000-members milestone in May, just
two years after reaching the 75,000-members mark. The Houston area
continued to be the largest source of new members for the Credit Union,
while our two fastest growing locations were Bakersfield, California, and
Covington, Louisiana.
Since 2010, membership has grown 45%, bolstered by mergers with
ChevronWest Credit Union (2013) and Spectrum Federal Credit Union
(2012) and through regular referrals from our loyal existing members.
2014
102
2013
99
2012
2010
89
74
70
Assets
The Credit Union’s assets grew by $146.4 million to a total of $2.5 billion in
2014, again placing us among the top 1% of credit unions nationwide by
asset size.
Since 2010, assets have increased 62%, reflecting several years of doubledigit loan and deposit growth along with the assumption of assets from four
merger partners.
Assets 2010-2014 (dollars in billions)
2.5
2013
2.4
2012
2.1
2011
6 | 2014 ANNUAL REPORT
Deposits 2010-2014 (dollars in billions)
2014
2.2
2.1
2012
1.9
2011
2010
1.6
1.4
Loans
The Credit Union had another strong showing in loan growth in 2014,
ending the year at $2.0 billion. It was widely predicted that real estate loan
volumes – the source of most of our loan growth – would fall sharply in 2014
due to fewer mortgage refinancings.
While we did see a reduction in the number of refinanced loans, the Credit
Union enjoyed a large jump in new mortgages as rates stayed low while
home prices began to rise. Real estate loans increased 14% in 2014, with
loans as a whole growing 12%.
Since 2010, the Credit Union’s overall loan portfolio has increased 82%.
Loans 2010-2014 (dollars in billions)
2014
2010
Since 2010, deposits have increased 63% as members took advantage
of our above-average rates, especially for MarketEdge accounts and
Share Certificates.
2013
Members 2010-2014 (members in thousands)
2011
Deposits
Deposits at the Credit Union grew by 6% during the year, matching the
budget target for 2014. Of our four core deposit products – regular savings,
checking, share certificates, and MarketEdge money market accounts –
checking experienced the highest increase, rising 17%.
1.7
1.5
2014
2.0
2013
1.8
2012
1.5
2011
2010
1.3
1.1
2014 ANNUAL REPORT | 7
2014 YEAR IN REVIEW
FINANCIAL PERFORMANCE
Return on Assets (ROA)
Higher than predicted net interest income and lower than expected
operating expenses contributed to strong profitability for the Credit Union
in 2014. Excluding non-operating income, a return on assets (ROA) of 1.09%
was generated during the year, exceeding the original 0.91% target.
Total earnings were adversely affected by an accounting adjustment
reflecting reduced “fair value” of interest rate derivative contracts used to
hedge the Credit Union’s balance sheet against rising interest rates. Longterm interest rates fell in 2014, resulting in the fair value decline; in 2013,
rising long-term interest rates resulted in a net gain.
Core Return on Assets 2010-2014 (percentage)
1.09%
2013
2011
2010
8 | 2014 ANNUAL REPORT
By keeping operating expenses low, the Credit Union maintains a
competitive advantage which translates into more attractive rates and fewer
fees for members.
Operating Expense Ratio 2010-2014 (percentage)
2014
2012
Operating Expenses
In 2014, the Credit Union’s ratio of operating expenses to assets fell once
again, ending at 1.68%. By comparison, similarly sized credit unions had an
average operating expense ratio of 2.75% in 2014.
1.10%
2014
2013
2012
0.97%
2011
0.86%
1.06%
2010
1.68%
1.78%
1.82%
2.00%
2.13%
2014 ANNUAL REPORT | 9
2014 YEAR IN REVIEW
Asset Quality
The Credit Union’s relatively low loan losses are another reason we are able
to offer competitive rates and low fees. In 2014, loan delinquencies and
charge-offs both continued to fall compared to previous years.
Our overall delinquency rate of 0.38% compared favorably to the 0.78%
average among credit unions our size. Likewise, our charge-off rate of 0.07%
was superior to the peer average of 0.52%.
Loan Delinquencies 2010-2014 (percentage of total loans)
2014
0.38%
2013
0.46%
2012
0.51%
2011
2010
0.55%
Capital
Capital – the residual difference between assets and liabilities – is an
important measure of a credit union’s financial strength. In 2014, the Credit
Union’s net capital grew 10% to $267 million.
0.26%
NCUA regulations require that credit unions have a net capital ratio (capital
divided by total assets) of 7.0% to be considered “well capitalized.” The
Credit Union’s net capital ratio for 2014 was far better: 10.7%.
Loan Charge-Offs 2010-2014 (percentage of total loans)
2014
2013
2012
2011
2010
0.07%
The Credit Union earned the highest possible rating – Five Stars – for
financial strength from BauerFinancial, an independent rating service.
0.08%
0.14%
0.23%
0.26%
Net Capital Ratio 2010-2014 (percentage of total assets)
2014
10.7%
2013
2012
2011
2010
10 | 2014 ANNUAL REPORT
10.3%
9.3%
10.0%
11.3%
2014 ANNUAL REPORT | 11
2014 FINANCIAL STATEMENTS (Audited )
*
(In Thousands of Dollars)
STATEMENT OF FINANCIAL CONDITION
STATEMENT OF OPERATIONS
(AT DECEMBER 31)
Assets
Real Estate Loans
Other Secured Loans
Unsecured Loans
Total Loans
Less: Allowance for Loan Losses
Net Loans
Cash and Investments
Other Assets
Total Assets
(FOR YEAR ENDING DECEMBER 31)
2014
2013
$1,791,877
$1,570,354
157,975
160,578
40,039
38,467
1,989,891
1,769,399
(5,597)
(5,401)
1,984,294
1,763,998
460,001
531,063
54,641
57,499
$2,498,936
$2,352,560
Income
Interest on Loans
Income from Investments
6,094
Cost of Funds
2014
2013
Dividends Paid to MembersIncome
(9,961)
(9,812)
Interest Rate Risk Hedging Expense
(5,169)
(4,295)
(15,130)
(14,107)
(1,542)
1,823
8,807
7,531
(41,006)
(39,684)
(4,503)
9,944
$24,961
$36,753
2014
2013
101,749
98,920
Total Interest Income
421,649
379,371
Non-Interest Expense
Change in Fair Value of Derivatives
279,303
Share Certificates
440,679
405,783
MarketEdge
Total Members’ Balances
Borrowed Funds
Other Liabilities
Total Liabilities
Reserves and Undivided Earnings
Unrealized Gain (Loss) on Securities
Total Members’ Equity
Total Liabilities and Members’ Equity
Provision for Loan Losses
2013
326,290
1,025,875
1,029,977
2,214,493
2,094,434
0
0
10,271
11,375
$2,224,764
$2,105,809
266,766
241,805
7,406
4,946
274,172
246,751
$2,498,936
$2,352,560
$65,152
$71,246
2014
Checking
$72,266
6,069
Total Cost of Funds
Savings
2013
$78,335
Net Interest Income
Liabilities and Member’s Equity
2014
Non-Interest Income
Net Income
$63,205
$57,139
MEMBERSHIP (AT DECEMBER 31)
Income
Total Members at December 31
*A complete copy of our audited financials is available online at chevronfcu.org and spectrumcu.org.
12 | 2014 ANNUAL REPORT
2014 ANNUAL REPORT | 13
SUPERVISORY COMMITTEE REPORT
CREDIT UNION BRANCHES & ATMS*
I
In addition to the following Credit Union locations, members can conduct
transactions in 6,800+ CO-OP Shared Branch locations and at 76,000+
surcharge-free network ATMs around the country.
n accordance with the Federal Credit Union Act, the Supervisory
Committee is responsible for ensuring that the Credit Union safeguards its
assets, maintains adequate systems of internal control, and reports accurate
financial information.
®
We meet regularly with Internal Audit and our external auditors to
monitor and evaluate internal controls and to ensure that your assets are
safeguarded. The Committee also monitors the performance of Credit
Union employees and elected officials and the policies established by the
Board of Directors to ensure their compliance. The Committee engages
independent firms to perform the annual financial, IT, 401k, and other
necessary audits.
Members can confidentially report perceived Credit Union violations of rules
and policies, unethical behaviors, and other complaints directly to a special
post office box established for the Supervisory Committee:
Chevron Federal Credit Union
Supervisory Committee
P.O. Box 70157
Oakland, CA 94612-0157
Based on the results of internal audits and external reviews for the year
2014, we conclude that Chevron Federal Credit Union has adequate internal
controls and is financially sound.
James Killoran
Chairman, Supervisory Committee
ARIZONA
Glendale
5323 North 99 Ave.
HAWAII
Kapolei
91-480 Malakole
(Restricted access. ATM only.)
(Restricted access. ATM only.)
Tucson
4800 W. Gates Pass Rd.
LOUISIANA
Belle Chasse
10285 Highway 23
Administrative Building
(ATM only.)
CALIFORNIA
Bakersfield
9525 Camino Media
(Restricted access.)
Bakersfield
1546 China Grade Loop,
Suite J3
(Restricted access. ATM only.)
Bakersfield
5060 California Ave., Ste. 190
(Branch only.)
Brea
145 South State College,
Ste. 5042
Concord
2003 Diamond Blvd., Bldg. 3
El Segundo
324 W. El Segundo Blvd.
(Restricted access. ATM only.)
Covington
100 North Park Blvd.
Suite B1302
Lafayette
5750 Johnston St.
(ATM only.)
MARYLAND
Frederick
5265 Westview Dr.
(Restricted access.)
MISSISSIPPI
Pascagoula
250 Industrial Road
Pascagoula
3200 Industrial Blvd.
Houston
3000 Post Oak Blvd.,
Suite 150
Houston
1400 Smith, Sky Ring
(Restricted access. Virtual branch.)
Houston
1600 Smith, Suite 200
Concourse Level
Houston
1400 Smith
(Restricted access. ATM only.)
Houston
1980 Post Oak Blvd.,
Ste. R2D
Houston
1500 Louisiana St.
(ATM only.)
Houston
3901 Briarpark, Library
(Restricted access. Non-cash
facility.)
Houston
9009 West Loop South,
Rm. 1157
(Restricted access. ATM only.)
(Restricted access.)
El Segundo
Pacific Towers
200 N. Sepulveda Blvd.
PENNSYLVANIA
Moon Township
600 Corporate Center Dr.
(Restricted access. ATM only.)
(Restricted access. ATM only.)
(Restricted access. ATM only.)
Richmond
200 Chevron Way, Bldg. 10
Smithfield
800 Mountain View Dr.
(Restricted access.)
San Francisco
50 Beale St., Lobby
San Ramon
6001 Bollinger Canyon Rd.,
Bldg. V
COLORADO
Denver
116 Inverness Dr. E., Ste. 206
(Restricted access. ATM only.)
TEXAS
Bellaire
4800 Fournace, E131
(Restricted access.)
El Paso
6501 C-Trowbridge
Midland
15 Smith Rd.
The Woodlands
10001 Six Pines Dr.
(Restricted access. ATM only.)
UTAH
Bountiful
100 S. 500 W.
Salt Lake City
2351 N. 1100 W. #100
(Restricted access.)
VIRGINIA
Reston
12011 Sunset Hills Rd.,
Ste. 110
*Unless noted, locations include branch and ATM(s) on site.
14 | 2014 ANNUAL REPORT
2014 ANNUAL REPORT | 15
Board of Directors
Scott Swasey
Chairman of the Board
Jennifer Machado
1st Vice Chair
Joseph Lodge
2nd Vice Chair
Steven Francis
3rd Vice Chair
James Mooney
Secretary/Treasurer
David Andrade
William Clutter
Anne Hollingsworth-Haley
Adrianne Lee
May-Yee Ng
Rose Taylor
Supervisory Committee
chevronfcu.org
800-232-8101
[email protected]
twitter.com/ChevronFCU
facebook.com/ChevronFCU
spectrumcu.org
800-782-8782
[email protected]
twitter.com/SpectrumCU
facebook.com/SpectrumCU
James Killoran, Chairman
Linda Blackwell
David Seals
Ronald Susa
Richard Van De Boom
Credit Review Board
Teresa Speck, Chairman
Elizabeth Battin
Joseph Gershman
David Marceau
William Wojciak
Harriet Wu
Asset Management Committee
Chevron Federal Credit Union
P.O. Box 2069 | Oakland, CA 94604-2069
Fee Stough, Chairman
Dele Adeniji
David Andrade
Eva Jansson
Janet Lee
Lavina Mehta
James Mooney
May-Yee Ng
Steven Winerman
Alan Wong