2011 Annual Report - Fitzsimons Credit Union

2011 Annual Report
Dear Members,
Over the last four years Fitzsimons Credit Union has been through its fair share of “Re’s.” We have been
through re-locations, re-building, re-branding, regulation, and a recession. We’ve become accustomed
to this world of rapid and for the most part undesirable change, and it’s compelled the board and
management to prepare the credit union for “new.” While no one can accurately predict what the
new normal will be as we head into what we hope is an economic recovery, being able to adapt to the
changing economic and regulatory environment was essential to remaining a safe and sound financial
institution. I am proud to report that Fitzsimons Credit Union, through all of the challenges, has been
able to acclimate, remain safe and sound, and position itself for future economic recovery and upcoming
changes that could test us in the future.
Maintaining a sound capital position was our number one goal throughout the economic challenges
over the past several years and we have been able to achieve that goal, ending 2011 with an 11.59%
net worth ratio. Going forward, our capital cushion remains our priority as we position ourselves for a
slow recovering economy that will allow us to grow in assets and increase our return on those assets.
Over the past few years, several young and highly educated individuals have chosen Fitzsimons Credit
Union for their employment. In 2011, we embarked on a succession program for staff that could create
opportunities for long-term careers. Succession plans are also in place for our board and supervisory
committee that will ensure viable long-term direction and oversight.
Financial Literacy was a “hot topic” this year for boards of directors who govern financial institutions.
Your board has had a long-standing policy that requires ongoing financial literacy for directors. I am
happy to report that your Fitzsimons Credit Union board of directors and supervisory committee remain
fully competent and continue to participate in not only financial literacy courses, but also remain up-todate about economic, legislative and regulatory matters.
While it continues to be a rough ride, your board and management continue their efforts to maintain
a safe and sound institution, provide you with top-quality products and services, and plan for the
opportunities ahead as the economy improves.
Thank you on behalf of all elected volunteers, for your trust and confidence as we willingly continue to
serve you.
THOMAS H. SMITH | Board Chair
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To Our Members,
Throughout the past few years the credit union, like all financial institutions, experienced its fair share
of regulatory and economic burdens. However, this past year, the board and management felt many of
the issues related to relocations, rebuilding, recession, and regulations were finally getting behind us
(somewhat). In 2011, we were able to dedicate more time and resources to planning ahead.
We have begun working internally on an organizational-wide succession plan to ensure continued
operation of the credit union should key staff positions become vacant or we encounter a need to
increase key positions. Our philosophy has always been to build up from within, and through this
recession have been fortunate to hire individuals who have opportunity to rise through the ranks
as many have done over the years. Our plan is to ensure that the future employees who serve our
member-partners have the credit union knowledge, background and philosophy that make us what and
who we are today.
Along with strengthening our employees to move the credit union forward, we have also made an
ongoing commitment to keep our online services up to date with the latest features and functions. In
2011, we upgraded our online banking system to where it meets or exceeds the functionality offered
by other financial institutions. We added an online feature to assist and educate members with the
introduction of the Personal Financial Management (PFM) software. The PFM aligns with our financial
literacy initiatives by providing members the tools to create custom budgets and monitor spending
habits. This software is the future of online banking and we are excited to have it available for our
members. Finally, we upgraded our mobile banking to include text banking and expand mobile text
alerts, added the ability for online banking members to see funds they may hold outside Fitzsimons at
other financial institutions, and added convenience by providing Member-to-Member transfers.
Even with a commitment to improving our service delivery channels, the credit union’s bread and butter
remains offering competitive rates for both borrowers and savers. As you are aware, prolonged forces
of the economy have pushed rates for both loans and deposits to all time lows, theoretically creating
an environment attractive for borrowers, but painful for savers. In either case, the goal of the Federal
Reserve’s economic policy is the same; to stimulate consumer spending, and in turn, hasten economic
recovery. For Fitzsimons, the reality is that lending has steadily declined through the year despite the
low rate environment, while deposit growth has remained relatively flat. With the obstacle of declining
loan growth, Fitzsimons will be disciplined in working to overcome slow growth by not taking on undue
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risk through lax loan underwriting. For savers, Fitzsimons has continually offered its best rates possible
given the constraints of the economy and rate environment. I know that low deposit rates have been
especially hard on our member-savers who depend on monthly dividends. Looking into 2012, the
credit union is poised to increase loans and has budgeted for modest loan growth as we leverage our
presence and personalized service on the Fitzsimons campus.
As we work to grow membership, loans, and improve product and service delivery to the membership,
we are continually reminded of the ever-increasing burden of regulatory requirements. Staying in
compliance with regulations takes a substantial amount of employee resources, yet lessens exposures
to risks posed by economic conditions and keeps management vigilant in monitoring and mitigating
most sources of risk. I can confidently say that Fitzsimons Credit Union remains a safe and sound
financial institution.
My staff and I want to extend a big thank you for your continued partnership with Fitzsimons Credit
union.
SANDY NEVES | President & Chief Executive Officer
“With the obstacle of declining
loan growth, Fitzsimons will
be disciplined in working to
overcome slow growth by not
taking on undue risk through
lax loan underwriting.”
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Thomas H. Smith, Board Chair
Has been a member since 1967 and has over 30 years of volunteer service
with the credit union. Mr. Smith received education from Regis College and
the Denver Paralegal Institute. He retired from the U.S. Military.
George H. Touchard, Board Vice Chair
Has been a member since 1980 with over 25 years of volunteer support to
the credit union. Mr. Touchard retired from the U.S. Military.
Ruth E. Bigham, Board Secretary
Has been a member since 1968 and has over 20 years of volunteer service
on the Board of Directors. Ms. Bigham is retired from the Civil Service.
Lyle R. Artz, Board Treasurer
New to the board in 2010, Lyle was previously a volunteer for 8 years on the
Supervisory Committee. Mr. Artz is retired from the U.S. Military and currently
works for the Fitzsimons Redevelopment Authority.
James L. Dye, Board Member
Has been a volunteer and member supporting the credit union for over 25
years and was also the Supervisory Committee Chair. Mr. Dye retired from
the U.S. Military and Civil Service.
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Supervisory
Committee
Robert Fritsch
Committee Chair
Executive &
Management Team
Sandy Neves
President & Chief Executive Officer
Anthony Briseno
Robert Fryberger
Committee Secretary
Executive Vice President
Judy Thomas
Dave Erickson
Committee Member
Vice President Finance
Donald Wagner
Andrey Parshenkov
Committee Member
Vice President Information Technology
Ruth Bigham
Committee Member
Kim Awaznezhad
Vice President Branch Operations
Cheri Prochazka
Vice President Human Resources
Randall Skitt
Accounting Manager
Yvonne Loney
Lending Manager
Rob Brenneman
Marketing Manager
MaryAnne Biaesch
Branch Manager
Renee Grimm
Branch Manager
Brett Slayden
Branch Manager
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Treasurer’s Report
Fitzsimons Credit Union remained a healthy, well capitalized institution and returned to profitability in
2011 following two consecutive years of negative earnings. Responses related to the economy, such
as padding of the allowance for loan loss account and write-downs of the credit union’s investment
in the corporate credit union system, abated in 2011; however, Fitzsimons continues to be assessed
annually for expenses to stabilize the credit union corporate system and the share insurance fund.
For 2011, the cost for Fitzsimons was $333K for corporate stabilization. There was no premium
charged by the National Credit Union Share Insurance Fund (NCUSIF) during the year which reflects
the strength of the insurance fund backing member deposits. The 2011 assessment was slightly less
than the combined corporate credit union stabilization and NCUSIF assessments in 2010.
Each month, credit union management conducts estimations for potential losses within the loan portfolio
based on historical losses, loan portfolio performance (delinquency), and economic conditions. For
2009 and 2010, loan loss estimates were raised in response to declining economic conditions such as
rising unemployment and depressed home values. In reaction to the economic climate, the credit union
expensed and set aside substantial funds for potential loan losses, thus driving down earnings. As the
economy has slowly improved and the credit union has fine-tuned its loss estimates, fewer funds are
required to be set aside for losses, in part because of the over-funding conducted in the prior two years.
In short, the credit union reaped the benefits in 2011 of lower loan loss expenses due to significant
funds in the loss reserves (allowance for loan loss account).
While mechanisms are now firmly in place to monitor loan performance, net loans continued to
decline during the year despite historically low interest rates. Loans are vital to Fitzsimons’ financial
performance as they provide higher yields than investments, and more importantly, meet the financial
needs of our members. In 2011, total net loan balances decreased by 14.5% while interest income
from loans fell 15.6%, providing less revenue to cover operating expenses, loan losses and dividends
to the membership. Management recognizes that loan growth goes hand in hand with the economic
climate, as consumers are less likely to borrow when there is uncertainty surrounding employment,
creditworthiness, and home values. While Fitzsimons cannot allay all economic concerns, it will continue
to offer competitively priced lending options and work with members in need of financial assistance.
The prospect of lower interest revenue in the coming year due to slow loan growth has pushed
management to place tighter control on operating expenses without disrupting service to members.
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Management will look to reevaluate the current fee structure, by rewarding members who transact
using more efficient products and delivery channels such as online banking, bill pay, eChecking, etc.
As most business interactions and transactions have electronic delivery options and alternatives, the
business model for financial institutions, including Fitzsimons, is changing. We must be prepared to
capitalize on how future members will prefer to interact with the credit union without jeopardizing the
personal touch that existing members have come to expect.
The last three years have taught us that Fitzsimons is not immune to market downturn, but it has
shown us that Fitzsimons is resilient. Many financial institutions that entered the recession did not
survive; they were either merged or liquidated. Fitzsimons has remained strong by not taking undue
risk in loan underwriting or generating unsustainable (and costly) deposit growth. As a result of these
commitments, the ultimate barometer of financial health, the net worth position, remained well above
minimum regulatory requirements at year end.
Last year was profitable for the credit union as some of the initial reactions to loan losses from
earlier years began to subside. We know 2012 will have its own challenges, like increasing lending,
managing expenses, and annual assessments all during a time when the economy is slowly recovering.
Statements made by the Federal Reserve Board indicate that market rates are expected to remain
low through 2014, and the credit union is prepared to operate and serve its members should a low
rate cycle persist. This is made possible by not taking undue risk prior to, nor during the recession,
thereby preserving the credit union’s net worth position. Your board and management will always make
operating a safe and sound institution a priority for Fitzsimons. We thank our member-partners for their
loyalty over the last year.
LYLE R. ARTZ | Board Treasurer
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Independent Auditors’ Report
To the Members, Board of Directors,
and Supervisory Committee of
Fitzsimons Federal Credit Union
Aurora, Colorado
We were engaged by Fitzsimons Federal Credit Union to perform an independent audit of the
credit union’s financial statements for the year ended September 30, 2011. We have issued our
independent auditors’ report dated December 30, 2011.
In the independent auditors’ report, we expressed an unqualified opinion on the credit union’s
financial statements. An unqualified opinion states that the financial statements present fairly, in
all material respects, the financial condition of the credit union as of September 30, 2011, and the
results of operations and cash flows for the year then ended.
A full copy of the independent auditors’ report and audited financial statements are available from the
credit union upon request.
Sincerely,
Holben • Hay • Lake • Balzer
Certified Public Accountants, LLC
Denver, Colorado
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STATEMENT OF FINANCIAL CONDITION
Assets
Total Loans
Allowance for Loan Losses
Net Loans
82,988,444
(2,745,505)
80,242,939
Cash & Investments 65,184,458
Fixed Assets
8,909,857
Share Insurance Capitalization Deposit
1,331,547
All Other Assets
2,000,587
Total Other Assets
12,241,990
____________
Total Assets
$ 157,669,388
Liabilities, Shares & Equity
Accounts Payable & Other Liabilities
Total Liabilities, Shares & Equity
Checking 1
6%
Money Market
13%
CDs 31%
1,568,886
Regular & IRA Shares
45,043,830
Share Drafts 22,538,276
Money Market Shares
17,269,669
Share & IRA Certificates
52,916,675
Total Shares & Certificates
137,768,450
Regular Reserve & Undivided Earnings
Unrealized Gain / (Loss) on Investments
Total Net Worth & Unrealized Inv Loss
ACCOUNT DISTRIBUTION
Savings 32%
IRAs 8%
18,274,342
57,710
18,332,052
____________
$ 157,669,388
STATEMENT OF INCOME
Interest Income
Interest on Loans
Income from Investments
Total Interest Income
Interest Expense
Dividends on Shares
Interest on Borrowed Money
Total Interest Expense
Net Interest Income Before Provision
Provision for Loan Losses
Net Interest Income After Provision
Operating Expense
Employee Compensation & Benefits
Travel & Conference
Office Occupancy
Office Operations
Educational/Promotional
Loan Servicing
Professional/Outside Services
Members Insurance/Corporate CU Stabilization NCUA Operating Fee
Miscellaneous Operating Expense
Total Operating Expense
Fee & Other Income
Fee Income
Other Operating Income
Total Fee & Other Income
5,064,257
534,574
5,598,832
2,573,770
56,189
584,984
1,492,738
154,077
327,431
249,433
332,887
44,505
51,769
5,867,783
1,548,986
694,557
2,243,543
Net Operating Income
646,356
Gain (Loss) on Disposition of Assets
26,077
__________
$ 672,433
Net Income
LOAN DISTRIBUTION
937,621
153
937,774
4,661,058
390,462
4,270,596
1st Mortgage 40%
Auto 35%
Unsecured 2%
2nd Mortgage 18%
Commercial 4%
Other 1%
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Supervisory Report
The National Credit Union Administration (NCUA) requires that the supervisory committee be
responsible to ensure that the board of directors and management of Fitzsimons Federal Credit Union
(FFCU) meet required financial reporting objectives and establish practices and procedures sufficient
to safeguard members’ assets. In satisfying this requirement, the supervisory committee assures that
(1) internal controls are in place and effectively maintained, (2) accounting records and financial reports
are accurate, and (3) plans, policies and controls are properly administered by the board to safeguard
against error, conflict of interest, self-dealing and fraud.
The supervisory committee has contracted with Lombardi Accounting Services Inc. since October 2007
to provide quarterly audits of the credit union’s internal controls. The committee meets and reviews any
findings from the internal audits and follows up with management on any corrective actions.
For the opinion audit, the committee hired Holben, Hay & Balzer, CPAs, in the summer 2010, to conduct
annual opinion audits. The last annual audit was performed for the period ending September 30, 2011.
The purpose of the opinion audit is to review the credit union’s accounting records and financial reports
in accordance with generally accepted auditing standards. A component of the opinion audit includes
performing a verification of members’ accounts against the credit union’s records. The independent
auditors’ report indicates the audited financial statements as of September 30, 2011, present fairly the
financial condition of the credit union.
The unaudited financial statements as of December 31, 2011, as listed in the annual report can not
be verified by the supervisory committee; however, there have been no material changes in accounting
policies or management of the credit union that would cause concern.
It has been a pleasure serving the FFCU membership. Additionally, we thank the board of directors, the
management and staff for their support.
ROBERT FRITSCH | Supervisory Committee Chair
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MORTGAGE & HOME EQUITY LOANS
Our products and services are
aligned for all stages of life.
SAVINGS ACCOUNTS
Credit Union Shared Branching
continues to grow. Members
have access to over 150 Front
PERSONAL CHECKING
Range locations and over
3,000 nationwide.
BUSINESS CHECKING
The Partnering Rewards Visa
Debit Card earns cash back
AUTO & VEHICLE LOANS
with Rainbow Rewards and
gains access to over 30,000
CO-OP Network surcharge-
VISA CREDIT & DEBIT CARDS
FREE ATM locations.
PERSONAL LOANS
Partner Paramount Checking
offers unique rewards savings,
companion airfare, dividend
earning potential, ID Theft
YOUTH & TEEN SAVINGS
Insurance and more.
LONG TERM CARE INSURANCE
Auto Loan rates remain low
and competetive with others,
yet the speed at which they
ONLINE & MOBILE BANKING
are approved at Fitzsimons
is unmatched. Combined
LPL FINANCIAL INVESTMENT SERVICES
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with the addition of two new
auto brokers, car buying
and borrowing has become
a smooth, fast and easy
SAFE DEPOSIT BOXES
experience.
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Securities and insurance products offered through LPL Financial and its affiliates, member
FINRA/SIPC. Fitzsimons Credit Union is not a registered broker/dealer, nor are they affiliated with
LPL Financial. Investments and securities are not NCUA insured. No guarantee. May lose value.
Your savings are federally insured by NCUA up
to $250,000.
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We’re always searching
for more opportunity.
Part of being a good financial partner is giving back to the community in
ways that do not translate to “the bottom line.” Fitzsimons Credit Union is
always searching for more opportunities and better ways to support our
community and its people, of whom we have been serving since 1955.
Partnerships are not
taken for granted.
At Fitzsimons Credit Union, our fundamental strength comes from the
partnerships we build over time. We understand that these partnerships
are two-way. Members rely on us and we rely on the members, just as
members need to rely on each other. The building blocks for these two-way
relationships are the products and services we offer. The key to long-term
growth is building our team, our products, and our services around meeting
the demands of our membership.
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Aurora Alliance
Fitzsimons Credit Union continues to partner with other Aurora area
credit unions to promote credit union awareness in the community of
Aurora. The end goal is to help educate consumers on the choices
they have in regards to selecting a financial institution and help
explain why choosing a credit union is a wise financial decision.
Hospital Donations
Fitzsimons supports the Children’s Miracle Network and Children’s
Hospital Colorado. Fitzsimons sponsored the Courage Classic bike
tour in July, participated in the Miracle Jeans Day and raised nearly
$1,500 through member donations at Christmas time. In 2011,
Fitzsimons sponsored the University of Colorado Hospital Hearts of
All Ages benefit dinner.
NJH Kunsberg School
Fitzsimons Credit Union is proud to support the National Jewish
Health Kunsberg School located on the NJH campus. The Kunsberg
School educates 70 to 90 students (K through 8th grade) each year.
All of the students have life-threatening illnesses and most have
difficult home lives. Thanks to a skilled and dedicated faculty these
children get their academics and health back on track.
Employer of the Year
The Association for Persons in Supported Employment (APSE),
awarded Fitzsimons Credit Union their “Employer of the Year”
award. Fitzsimons was selected to win the award for their efforts
in promoting employment for people with disabilities and showing a
commitment to education about hiring people with disabilities.
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2201 N. Fitzsimons Parkway • Aurora, Colorado • 80045
6359 S. Southlands Parkway • Aurora, Colorado • 80016
(303) 340-3343 • (800) 933-5839 • FitzsimonsCU.com