2011 Annual Report. & Annual Meeting Program

Transcription

1 2011 Annual Report & Annual Meeting Program

2 Agenda Refreshments... 5:30p SMCU s 79th Annual Meeting...6:00p Welcome & Introduction Of New CEO... Jim Yearby CEO Remarks...Richard Romero Introduction of the Board of Directors... Jim Yearby Management Staff & Recognition of Membership...Richard Romero Call to Order... Jim Yearby Ascertain Quorum...Rodney Eng Approval of 78th Annual Meeting Minutes Rodney Eng Supervisory Committee Report...Ben Wakefield Volunteer Election Results... James A. Fossos Unfinished Business... Jim Yearby New Business, Questions from the Membership... Jim Yearby Adjournment...8:00p 2 seattle metropolitan credit union smcu.com

3 Contents New CEO Announcement...4 SMCU Board of Directors and Senior Management...6 Scholarship Winners...7 A Message From the Chairman of the Board Annual Meeting Minutes...10 Executive Committee Report...13 Supervisory Committee Report...14 Finance & Budget Committee Report annual report 3

4 Richard Romero is SMCU s new CEO After a nationwide search, Seattle Metropolitan Credit Union s Board of Directors is pleased to announce the selection of Richard Romero as the Credit Union s Chief Executive Officer. With his tenure beginning in mid- February, Mr. Romero has become just the fourth CEO in SMCU s 79-year history. Mr. Romero has over 24 years of financial services experience, having started in the financial services industry in 1988 as a part-time teller at Great Western Bank. Most recently he was the Chief Operations Officer at $820M Los Angeles Firemen s Credit Union (LAFCU) from 2004 to As LAFCU s COO he led teams responsible for consumer lending, member services, operations, call center, facilities, real estate and business services, commercial lending and information technology. Shortly after his arrival, he addressed his reasons for choosing SMCU and what he sees on the credit union s horizon. I knew this was the right place for me. My first impression of SMCU was that of a progressive credit union with deep roots in the community, a fervent sense of responsibility towards their membership, as well as the core credit union philosophies, and a strong vision for the future. I saw a close relationship between the 7 Principles and my management style and beliefs. I m a strong believer in the cooperative model and I wanted to make sure I would land somewhere that shared the same philosophies. In thinking about SMCU s future, Mr. Romero believes that having a wide range of experience will help him lead the credit union. I spent the first part of my career in the branch network, working the front lines with customers, and building a strong foundation for customer service. As I transitioned into the credit union world and moved up in my career, I began to build a strong administrative background as well as very strong leadership skills. My recent experience with the Los Angeles real estate and economic markets has prepared me to deal with the unexpected and extreme. This, along with a strong background in retail banking, lending and technology, make me feel well prepared to lead the team at SMCU. He understands that the job won t be easy. The new realities of the financial world have changed the landscape for everyone. Economic pressures, both seen and unseen, will challenge all financial institutions. On top of economic pressures, regulatory changes that are sometimes well intentioned but not always thoroughly thought through will also present challenges. Add 4 seattle metropolitan credit union smcu.com

5 those to increased competition for wallet share by all financial institutions and everyone will be forced to perform at a higher level while keeping expenses under control. Even with these challenges, he feels that SMCU is in a prime position for growth and is ready to make a difference. I believe that now is the time for cooperatives, such as credit unions, to really stand out and become part of the solution. Serving the underserved and looking for opportunities to provide services that are affordable, fair and competitive is what the public needs and SMCU is primed to deliver. SMCU is excited to bring Mr. Romero onboard, and we wish him a long and successful career with Seattle Metropolitan Credit Union. Seattle Metropolitan Credit Union President / CEO / Treasurer 2011 annual report 5

6 Board Of Directors Jim Yearby...Chairman Roger Howeiler...Vice Chairman Rodney Eng...Secretary Camilla Bishop...Director James A. Fossos...Director Ken Harer...Director Ray Hill...Director Robert Leighton...Director Frank Mathews...Director Supervisory Committee Ben Wakefield... Chair Robert Leighton Jack McGoldrick Stephanie Weaver Gary Skinner...Secretary Senior Managers Stephanie Weaver -- No Picture Provided Richard Romero...President / CEO / Treasurer Ruth Korotzer...Executive VP / Chief Operating Officer Larry Breitbarth... Interim Chief Financial Officer Judy Elrod... Senior VP of Lending / Chief Lending Officer Jill Vicente...Senior VP / Chief Marketing Officer Tonita Webb...VP / Chief Human Resources Officer Don Rudolph...VP / Chief Information Officer Erik Welch... Senior VP / Chief Branch Retail Operations Officer 6 seattle metropolitan credit union smcu.com

7 2012 Tony Marino Scholarship Recipients This year, Seattle Metropolitan Credit Union awarded ten $2000 scholarships to member-applicants seeking higher education. Each scholarship was awarded based on academic standing, financial need, extracurricular activities and/or employment. Congratulations to each of our recipients! Laura Beaty Jordan Bolden No Picture Provided Rayna Ceaser Jessica Gonzalez No Picture Provided Elsa Hagos Anjelina Hill No Picture Provided Jason Kam Patrick Spencer Alexander Springer Joycelyn Thomas 2011 annual report 7

8 A message from the Chairman of the Board Last year I reported to you that in spite of the effects of tough economic times, locally and nationally, Seattle Metropolitan Credit Union (SMCU) was financially healthy. I want to assure you that today SMCU s financial affairs remain in a healthy state. Though we face some tough challenges now and in the future, SMCU is confident that we have the human and fiscal resources to achieve the financial success that you, our members, deserve and expect. We have made an important leadership change at SMCU since our last annual meeting. After more than eighteen years of service, Bob Harvey retired in July The Board completed an exhaustive search process for a new CEO, and we are confident that we found the person with the right talent to lead us forward. Richard Romero began his duties as the new CEO, February 13 of this year. Mr. Romero brings to SMCU many years of financial experience and success in both banks and credit unions. Most recently he served as the Chief Operations Officer for the Los Angeles Firemen s Credit Union, an institution serving 31,000 members and over $820M in assets. The Board is confident that Mr. Romero brings not only the financial expertise to lead our credit union but the interpersonal relationships skills needed to move us forward. Working with a competent, dedicated Board and staff we anticipate that Richard will help move us forward to unprecedented areas of growth and service for our members. Thus, the new CEO and Board will soon begin an aggressive process of reviewing our current business model to determine if any adjustments are needed, including reviewing our five-year strategic plan to determine if the growth goals established a couple years back are still on target to meet our vision for SMCU. Working with Richard, the Board has already begun to set high performance standards and measures to ensure our success. As I stated last year, the Board is not setting aggressive goals to simply become a bigger institution, but we want to improve our capacity to serve you and to make SMCU your primary financial institution serving all of your needs. The Board and credit-union staff are working jointly to achieve this vision. As we move forward, we will continue to focus on credit union risk. Maintaining safety and soundness is one of the most important functions of the Board; we will continue to make decisions that do everything we can to protect the assets with which you have entrusted us. 8 seattle metropolitan credit union smcu.com

9 As always, meeting the needs of SMCU members is the primary objective of both the Board and the SMCU management team. We want to meet or exceed your service expectations on every interaction you have with SMCU. Member feedback tells us we are delivering on this goal, and the majority of you are satisfied with the service you receive. That doesn t mean we are satisfied, however, as we strive to improve in this area with every member contact. Our goal is to improve service through more efficient operations and delivery of service through multiple channels, including electronic services. Online banking and improvement in member experience through use of newer, more efficient ATMs are all part of our plan. And you will soon experience a new lending model that will emphasize simple, easy-to-assess and highquality loan products and services. The Board is excited and optimistic about the future of Seattle Metropolitan Credit Union. With your continued support, we are confident that SMCU will stand above all other financial institutions in meeting your needs. We are honored to have the opportunity to serve you for many years to come. Thank you for your continued, loyal support. Sincerely, Jim Yearby Board Chair Seattle Metropolitan Credit Union 2011 annual report 9

10 Minutes from SMCU s 78th Annual Meeting of the Membership - April 2, Mr. Yearby welcomed the members to the Nesholm Family Lecture Hall and introduced the Board of Directors to the membership. 2. Mr. Harvey introduced the staff in attendance to the membership. He then staged a countdown to determine who in attendance had been a member of SMCU the longest. Three members had been with the credit union for over 50 years. A round of applause. 3. The 78th Annual Meeting of the Membership of Seattle Metropolitan Credit Union was called to order at 9:41 a.m. by Mr. Jim Yearby, Chair of the Board of Directors. The Annual Meeting was held at the Nesholm Family Lecture Hall at Seattle Center. Mr. Yearby announced that this was Mr. Bob Harvey s last annual meeting as President/CEO of the credit union and thanked him for his dedicated service of 19 years. Mr. Harvey received a standing ovation from the assembly. 4. Mr. Rodney Eng, Secretary of the Board, confirmed and announced that a quorum was present. Present: Chair, Mr. Jim Yearby; Secretary, Mr. Rodney Eng; Ms. Camilla Bishop; Mr. James A. Fossos; Mr. Ken Harer; Mr. Ray Hill; Mr. Robert Leighton; Mr. Frank Mathews. Absent: Vice-Chair, Mr. Roger Howeiler. 5. It was moved and seconded to accept the minutes of the 77th Annual Meeting held on April 3, The motion carried. 6. Mr. Ben Wakefield gave the report of the Supervisory Committee. It was moved and seconded to approve the Supervisory Committee s report. The motion carried. 7. Mr. Harvey gave his SMCU Year in Review report. He stated 2010 was a very good year and that we are beginning to move out of the recession. He reported that despite our significant investment in real estate loans we experienced only one foreclosure during the year. He also said we began to sell off loans that were at lower interest rates. We also built up a provision for loan loss accounts to cover any potential losses. In addition, we evaluated all of our vendor contracts and leases and renegotiated as necessary. 10 seattle metropolitan credit union smcu.com

11 As part of our emergency preparation, we purchased flood insurance for the Southcenter branch and installed a new emergency back-up generator at the downtown location so that we could maintain normal operations in the event of any natural emergency. We also implemented an inclement weather team to be lodged at a local hotel in the event of a snowstorm so that they could get to and open the main branch for business. Other new services we introduced included mobile banking, a web site upgrade, social media access such as Facebook, Twitter, and electronic signatures. We also created a sales and business development team to seek out new Select Employee Groups. 8. Report of the Nominating Committee: Mr. Fossos gave the election results. The official results for the 2011 SMCU Board Elections are presented below. Voting method Valid ballots % of eligible voters Paper 1, % Online 1, % Total 2, % Board of Directors Votes per candidate Todd Boze 1,129 Ken Harer 1,881 Gary Karns 451 Frank V. Mathews 1,771 Jim Yearby 1,813 Total Votes 7,045 Mr. Harer, Mr. Mathews and Mr. Yearby were re-elected to the Board. Mr. Fossos reported that there was one position on the Supervisory Committee up for election but the incumbent had chosen not to run for re-election. That position remained vacant at the time of the annual meeting. It was moved and seconded to approve the Nominating Committee s report. The motion carried. 9. Unfinished Business: There was no unfinished business annual report 11

12 10. New CEO update Mr. Yearby reported that the Board had engaged a search for the new CEO and planned to make an announcement at this meeting but that a successor had not yet been named. He said the Board remained focused on the task of finding a good match and would report to the membership as soon as a new CEO was named. A member asked how the Board was identifying candidates. Mr. Yearby stated the Board hired a consultant firm as a search partner and we are receiving several inquiries from outside sources. 11. Farewell Address Mr. Harvey gave his farewell address. 12. New Business Mr. Yearby acknowledged Ellanor Smith, who was stepping down from the Supervisory Committee, and thanked her for her dedicated service. He then invited questions from the membership. A member stated many members of our community, such as the homeless and other very poor members of our society, are unbanked and suffering the insecurity of financial losses. He asked what our co-op was doing to reach out to these people to help them become members and help them gain financial security. Mr. Harvey said we have gone into those communities, including the shelters, to offer membership. He said staff had no authority to decline membership and we will even pay the $5.00 required to join the credit union. He said we also offer a special membership account. Ms. Nina Cavelli also reported that the business development team visited a shelter for homeless teens to offer education on the credit union difference. She said this visit sparked a lot of interest in those youth who had not had any previous financial education. Mr. Fossos spoke as a member and thanked Mrs. Harvey for her patience and sacrifices over the years in allowing Mr. Harvey to do what he had done. Another member asked what effect the Federal Reserve rules to cut interchange fees on debit cards would have on our fee income revenue. Ms. Purnell-Hepburn said though it would benefit larger institutions, it would have a drastic, negative effect on us. She said we charge what 12 seattle metropolitan credit union smcu.com

13 it costs us to offer that service and the proposed fee would not cover that cost. The member asked if there was anything the members could do to raise their voice in protest of that ruling. Mr. Harvey said members could send an to their senator or representative. He said members could visit the NWCUA web site at www. nwcua.org for information on how to contact those representatives. There were no further questions. 13. The meeting adjourned at 10:32 a.m. Executive Committee Report The Executive Committee is comprised of the officers of the credit union: Roger Howeiler, Vice Chair; Rodney Eng, Secretary; Ken Harer, past Chair of the Board; Richard Romero, Treasurer; and me, Jim Yearby, Chair of the Board. The Executive Committee s role is to provide policy oversight and act on behalf of the full board in matters delegated to the committee. The Committee s specific focus is on oversight and strategy to help the credit union more effectively create and execute its business plans. Principal duties include: Helping the credit union plan and decide on strategic issues related to setting the overall direction of the credit union, Evaluating the annual performance of the President and CEO, Reviewing long-term growth strategies, including merger opportunities and other proposals, to leverage the resources of the credit union, Recommending key actions the board should take to ensure the credit union actions meet the board s high standard of a safe and sound financial institution, Leading board discussions focused on strategic issues, Leading the process for setting credit union short- and long-term goals, Setting the Board s monthly meeting agenda, Reviewing and approving all credit union lease agreements and real property purchases, Hearing and deciding appeals from decisions of appointed loan officers regarding denial of member loans, Assessing economic market conditions and reviewing strategies to keep 2011 annual report 13

14 the credit union s assets safe and its services competitive, Reviewing and recommending proposals for credit union service expansion and recommending action the board should take on such issues, Recommending the sale, acquisition or restructure of credit union assets, The Executive Committee s role is critical to the oversight and strategic responsibilities of the Board. Committee members do an outstanding job of performing their functions while holding themselves to a high standard of accountability. With high standards of accountability and performance, the Committee will continue to work hard to help direct the credit union on a safe and prosperous course. We appreciate the opportunity to serve you. Thank you, Jim Yearby Executive Committee Chair Seattle Metropolitan Credit Union Supervisory Committee Report The Washington State Credit Union Act defines the corporate governance requirements for credit unions, including the requirements and duties of the Supervisory Committee. The Bylaws of SMCU further define the membership, terms, duties and responsibilities of the Supervisory Committee. As of 12/31/11, the SMCU Supervisory Committee was comprised of four elected volunteers: Ben Wakefield, Chair; Gary Skinner, Secretary; Jack McGoldrick and Bob Leighton, members; and one appointed volunteer member, Stephanie Weaver. Jane Brunton, AVP of Internal Audit, works on behalf of the Committee. The duties and responsibilities of the Supervisory Committee include the following: Have a certified audit and member account verification performed annually, as required by the regulatory and insuring agencies. 14 seattle metropolitan credit union smcu.com

15 Ensure that deficiencies identified through audits are brought to the attention of the Board and management; track and document progress made in addressing deficiencies. Ensure that effective internal controls are established and maintained, and that policies and procedures are established and maintained and in compliance with current regulations Regularly review the financial records and the Minutes of the Board. Periodically meet with management to discuss issues of internal control and compliance. Recommend courses of corrective action to the Board and management when applicable. Review member complaints concerning safety and soundness issues. Carry out all duties as required by law, regulation and SMCU s Bylaws. Approve the firm that serves as Tellers of the Elections for the Board and Supervisory Committee. Report annually to the members at the Annual Meeting about the Committee s activities. The Committee held regular meetings throughout Turner, Warren, Hwang & Conrad, AC (TWHC) was engaged by the Committee to perform the annual certified CPA Audit for the calendar and fiscal year ending 12/31/11, and the Member Account Verification as of 9/30/11. In addition to the CPA Audit, and the examinations by the Division of Financial Institutions/Department of Credit Unions (DFI/DCU), our state regulator, and the National Credit Union Administration (NCUA), our federal regulator, we reviewed all internal and external audit reports. In 2011, we also engaged outside experts to perform an Accounts Recovery Operational Review, an IT Security Assessment, a Non-Deposit Investment Compliance Review, a Change of Controls Review, a GL Reconciliation Review, and a Member Information Risk Assessment. At each regular meeting, the Committee discussed the responses from Management and tracked their progress. The Committee received the Board and Board Committee minutes on a monthly basis and reviewed those for issues related to safety and soundness. At this time, the Committee is focused on the progress made to resolve audit and exam findings and recommendations, in addition to the following critical issues: the safeguarding of member information, IT security, fraud, and issues related to regulatory compliance, financial responsibility and accountability, and credit risk management annual report 15

16 The Committee effectively carried out its responsibilities during For the Audit as of 12/31/11, we have received an unqualified opinion from TWHC, our independent auditors. Thank you, Ben Wakefield Supervisory Committee Chair Seattle Metropolitan Credit Union Finance & Budget Committee Report The Finance & Budget Committee of Seattle Metropolitan Credit Union is tasked with the following duties and responsibilities: Reviewing SMCU s financial statements and supporting documents; Reviewing delinquency statistics and monthly charge-off reports; Reviewing the monthly Asset/Liability Committee (ALCO) meeting minutes for clarity and understanding; Reviewing our credit union investments, liquidity and balance sheet riskmanagement strategies; Recommending to the Board of Directors key financial ratio benchmarks for the Credit Union for their approval and adoption; Approving correspondent financial institutions and investment brokers; Recommending new investment strategies to the Board of Directors for their approval and adoption; Reviewing monthly variance reports and responses from Management; and Recommending the annual budget to the Board of Directors for approval and adoption. The members of the 2011 Finance & Budget Committee were: Roger Howeiler, Chair, Board Director Jim Fossos, Board Director Ken Harer, Board Director Ray Hill, Board Director Frank Mathews, Board Director 16 seattle metropolitan credit union smcu.com

17 Robert Leighton (non-voting Committee Member) Ruth Korotzer, ex-officio Michelle Purnell-Hepburn, non-voting staff Providing support to the committee were Robert H. Harvey, Jr., our President/ CEO until retirement, July 2011; Treasurer; Michelle Purnell-Hepburn, Senior Vice President/Chief Financial Officer until her resignation, November 2011; Ruth Korotzer, Interim CEO and Treasurer; and Michael Oaks, Administrative Coordinator. Here are the highlights of 2011: SMCU ended the year with 40,786 members SMCU paid just under $3.4 million in dividends to our members SMCU helped 359 of our members purchase or refinance homes, granting over $73.7 million in mortgage loans. When consumer loans of over $41 million are added, SMCU granted over $114 million in loans to our members. Member loan balances ended the year at $379 million, and member share deposits increased to $514 million by December In 2009, the National Credit Union Administration (NCUA) announced the Corporate [CU] Stabilization Program, a program designed to add financial strength to the credit union industry over a number of years, and to replenish the federal share insurance fund (NCUSIF). SMCU s required assessment by NCUA was over $1.2 million for Loan losses increased in 2011 as the local economy stagnated, unemployment remained over 8%, and housing values declined. Yet, with prudent management, we were able to increase our net worth, adding $0.9 million from our operations. Your Finance and Budget Committee members are proud that Seattle Metropolitan Credit Union is weathering the economic situation and continues to be a strong and vibrant credit union. These endeavors are a joint effort among you, our loyal members, our knowledgeable staff and dedicated volunteers, all working together. Thank you, Roger Howeiler Finance and Budget Committee Chair Seattle Metropolitan Credit Union 2011 annual report 17

18 Notes 18 seattle metropolitan credit union smcu.com

19 Notes 2011 annual report 19

20 Seattle Metropolitan Credit Union smcu.com 7principles.coop

21 Seattle Metropolitan Credit Union Condensed Statements of Financial Condition - unaudited Assets Cash and cash equivalents Investments - Securities available for sale - Other Loans to members, net of the allowance for loan losses Accrued interest receivable Property and equipment NCUA Share Insurance Fund deposit Other Assets Total Assets 48,177, ,385,225 8,345, ,102,625 1,658,661 9,678,368 4,817,607 4,858, ,023,666 Liabilities & Members Equity Liabilities - Members share accounts - Accrued expenses & other liabilities Total Liabilities 514,661,400 6,550, ,212,361 Members Equity - Regular reserve - Undivided earnings - Accumulated other comprehensive gain Total Members Equity * Total Liabilities & Members Equity 5,201,500 40,202, ,719 45,811, ,023,666 * Unaudited

22 Condensed Statements of Income - unaudited Interest Income Loans to members Investments and interest bearing accounts Total Interest Income Interest Expense Members share accounts Total Interest Expense 21,579,179 1,682,713 23,261,892 3,390,409 3,390,409 Net Interest Income 19,871,483 Provision for Loan Losses 5,171,408 Net Interest Income after Provision for Loan Losses 14,700,075 Non-Interest Income Fees and charges Interchange income Net realized gain on sale of real estate loans Other Income Total Non-Interest Income 2,134,223 2,454, , ,638 5,672,502 Non-Interest Expense Compensation and benefits Office operations Occupancy NCUSIF premium assessment Other Expenses Total Non-Interest Expense 9,717,091 6,353,039 1,498,986 1,204, ,388 19,448,906 * Net Income 923,671 * Unaudited