Frontwave Annual Report 2021

Frontwave Annual Report 2021

Annual Report 2021

Banking | Lending | Saving | Planning

Chairman’s Report

2021 was another transformational year for Frontwave Credit Union. Following on the heels of 2020, when our attention was on adapting to the unique challenges of serving the Membership through a pandemic, 2021 provided us an opportunity to recalibrate and look toward the future. We focused on how to better serve our Members, not just in the moment, but for years to come. At the same time, the rise of inflation in 2021 reminded us of our core goal: to provide a full suite of financial products and services with exceptional value to the Membership. With this in mind, Frontwave has committed to a digital-first strategy to better serve our diverse Membership regardless of where they live, work, or are stationed. This digital-first strategy aims to make digital transactions seamless and easy, and fully complements our improved lending infrastructure, which can deliver Members everything from a VA mortgage loan to a rewards credit card. To support this strategy, Frontwave created a new Process Excellence Team in 2021 solely focused on improving the quality of all Member services.

Frontwave Credit Union is now the Official Credit Union of the San Diego Sockers, helping us better share our message of service and value with the community. At the end of 2021, Frontwave Credit Union’s Membership now stands at more than 117,000 strong. Throughout the year, we continued to grow and outpace our competitors. For example, we grew our Membership 5.3%, outperforming the industry average of 3.5%. We also grew our assets 8.79% (compared to peer

We became the Official Credit Union of the San Diego Sockers in 2021, and a primary sponsor of their 2021-2022 season.

average of -0.12%), exceeding our goals and strengthening our credit union’s financial condition.

We were honored to be presented the Distinguished Credit Union of the Year award by the Department of the Navy, and to be named San Diego’s Best Credit Union by the San Diego Reader as well as Best Bank in the Morongo Basin by the Hi-Desert Readers’ Choice Poll. We are excited for the future and to continue to help fulfill the financial dreams of our Members. Our team is known as “Dream Makers.” So, for 2022, keep dreaming big. We got you! Michael Brigagliano Chairman of the Board

In addition to expanding our focus on digital, we also expanded our support for the community and the military in 2021. We held 58 financial workshops and provided over 44,000 hours of financial education to our Members. Working side by side with Marines from Camp Pendleton and 29 Palms, we supported over 42,000 Service Members and their families in 2021, distributing food and Christmas gifts to those in need. And as part of our community development,

Through our partnership with the ASYMCA, we helped provide Christmas gifts for 4,657 individuals.

We received the Department of Navy’s Distinguished Credit Union of the Year award, adding to our honors 2014, 2015, 2015, 2016 and 2017.

Treasurer’s Report

Although a second year of the pandemic created challenges, Frontwave Credit Union finished the year financially strong. Assets continued to grow year over year; total assets increased $95 million or 8.79% over 2020. Supply chain issues and the uncertainty of the pandemic had people hold on to their funds, driving down the demand for auto loans. We saw a 10.15% or $18.7 million decrease in the direct and indirect auto loan portfolios. The real estate loan portfolio experienced respectable growth of 6.43% or $22.2 million for the year. Overall we saw a 1.85% or $12 million decline in total loans. Deposit growth in 2021 was much more sedate than the stimulus enhanced deposit growth in 2020, yet remained very healthy at $98.6 million or 10.47%. The vast majority of that growth, 87.16%, was in checking and savings accounts.

Net Income grew at a slower pace than asset growth, resulting in a decrease in our Net Worth Ratio from 10.82% at year-end 2020 to 10.64% at year-end 2021. We remain very well capitalized and significantly above the NCUA benchmark of 7%. Total operating expenses increased by 9.9% compared to the previous year, primarily due to increases in salary, benefits, marketing, and card processing expenses. Many of the key ratios that wemonitor for financial performance exceeded the budget forecasts. Specifically, our Efficiency Ratio came in at 81.23% compared to the budgeted 82.43%, Return on Average Assets was 0.75% compared to a goal of 0.31% and Net Charge-Off was 0.29% compared to a budget of 0.72% Kelley L. Mayer, CPA Treasurer

100% Commitment. Zero excuses. In 2021, we rose to the challenge of the ongoing pandemic to provide more support than ever to our Members and the community. We’ve been making financial dreams come true since 1952, and we’ll never back down!

87,040 MARINE CONNECTIONS FOR GROUP & INDIVIDUAL TRAINING & EDUCATION

EARNED PETER BARRON STARK AWARD FOR WORKPLACE EXCELLENCE 180 MILITARY & LOCAL ORGANIZATIONS SUPPORTED THROUGH SPONSORSHIPS, EVENTS & VOLUNTEERISM

Honored by the Department of

Voted Best Credit Union in San Diego & Best Bank in the Morongo Basin!

Navy with the Distinguished Credit Union Award

58 FREE FINANCIAL WORKSHOPS HOSTED IN 2021 386 WORKSHOP ATTENDEES IN 2021 44,694 hours OF FINANCIAL EDUCATION TAUGHT IN 2021

Financial Highlights

Assets (in millions) 2018 $819

Members 2018

106,225

2019

$877

2019

109,197

2020

$1,080

111,371

2020

2021

$1,175

2021

117,291

Shares (in millions)

Loans (in millions)

$556

2018

2018

$697

2019

2019

$614

$750

$648

2020

2020

$941

$1,040

2021

2021

$636

Capital (in millions)

Net Income (in millions)

2018

$3.95

2018

$116

2019

$113

2019

($2.55)

2020

$3.94

$125 $117

2020

$8.36

2021

2021

Condensed Statement of Financial Condition Assets Cash, prepaids, receivables & other assets $ Regular loans to members Visa ® loans to members Purchased loans Less allowances for loan losses Investments NCUA Share Insurance Fund Fixed assets (net) Total Assets $

12/31/21 137,773,226 559,391,057 41,275,168 35,404,884 (4,109,779) 368,057,009 9,855,352 28,084,940 1,175,731,855 1,039,910,616 52,047,755 73,081,027 (3,551,076) 14,243,532 1,175,731,855 26,233,353 5,489,868 26,185,008 57,908,229 (23,118,454) (20,171,174) (3,089,048) 487,172

12/31/20 137,646,063 561,059,396 40,348,328 46,669,885 (6,562,574) 263,856,904 8,344,104 29,373,969 1,080,736,075

Liabilities and Equity Shares of members

$

941,335,807 52,046,328 64,936,469

Reserves Undivided earnings Unrealized gain/(loss) on AFS Investments Other liabilities Total Liabilities & Equity

3,987,459 18,430,011 1,080,736,075

$

Profit and Loss Analysis Interest from loans Interest from investments Other income Total Income

$

28,330,510 4,317,737 21,976,572 54,624,819 (19,910,623) (24,688,320) (2,590,974) 688,054 8,122,956 (4,178,706) 3,944,250

$

Compensation & benefit expenses Office operating costs Education and promotion Other non-operating income (expense) Available for dividends Less dividends paid Net Income

$

12,016,725 (3,655,871) 8,360,854

$

Commercial Real Estate: 6%

Other Consumer Loans: 2%

Business Loans: 0.24%

Share Certificates: 14%

Checking: 32%

Unsecured Visa: 8%

IRA: 4%

Auto Loans: 26%

HELOC/2nd Mortgage: 3%

Regular Shares: 29%

Money Market: 21%

Residential Mortgage: 55%

Loan Portfolio

Share Portfolio

The Supervisory Committee is responsible for ensuring that the assets of Frontwave Credit Union are safeguarded, an independent audit is performed annually, and appropriate controls exist to ensure compliance with management’s objectives and regulatory requirements. The Supervisory Committee is made up of volunteer members who independently evaluate the strength, safety, and soundness of the credit union’s operations and activities. As an independent and objective body, the Supervisory Committee engages in regular monitoring of financial reporting, verification of Membership account balances, compliance with legal and regulatory requirements, and oversight of independent auditors and internal controls. In 2020, the Supervisory Committee contracted with the Certified Public Accountant (CPA) firm of Turner, Warren, Hwang and Conrad to perform an independent opinion audit of the credit union’s financial statements. In their opinion, the financial statements were presented fairly, in all material respects, the financial position of Frontwave as of December 31, 2020, and the results of operations and cash flows for the year ended in accordance with the Generally Accepted Accounting Supervisory Committee Report

Principles (GAAP). The financial statements in this Annual Report are unaudited, since they reflect January through December 2021. The Supervisory Committee is satisfied the records reflect Frontwave Credit Union’s financial condition and that it continues to operate with strong internal controls in accordance with board policies and the credit union procedures. The Supervisory Committee wishes to thank the Board of Directors, Executives, Management, and employees for their diligence, support, and dedication to the well-being of our Membership and of Frontwave Credit Union. The Supervisory Committee wishes to thank our Members for your continued confidence and trust in Frontwave Credit Union. Dream big. We got you! Robert Ross Chairman, Supervisory Committee

2021 LEADERS

Michael Brigagliano Chairman

Kelley Mayer Treasurer

Brian Sutton Vice Chairman

Gary Greving Director

James Cothran Secretary

Sally Arnett Director

Bill Birnie President/CEO

Joseph Mitilieri Director

Richard Rothwell Director

Gerald Polyascko Director

WEBSITE frontwavecu.com MEMBER SOLUTION CENTER 800.736.4500 EXPRESS LINE 800.829.7676

LOCATIONS

Barstow Camp Pendleton - Mainside Camp Pendleton - Pacific Plaza Camp Pendleton - SOI Escondido Oceanside - Fire Mountain Oceanside - Rancho Del Oro

San Diego - MCRD San Marcos Temecula - Temecula Parkway Temecula - Winchester Twentynine Palms Wildomar Yucca Valley