80 Years of Bringing Members Dreams to Reality Federally insured by NCUA Bringing Your Dreams To Reality 2016 ANNUAL REPORT
Purpose Bringing Your Dreams to Reality! Mission Statement Southland Credit Union is dedicated to exceptional Member service resulting in superior financial strength, offering convenience, courtesy, and valued solutions. Vision Southland Credit Union will be a dynamic, innovative and exemplary financial institution dedicated to meeting the needs of its Members. Core Values Provide exceptional service with integrity, honesty and creativity. Provide staff with an atmosphere of respect, education, and career growth. 2 2016 Annual Report
Table of Contents Board of Directors & Supervisory Committee...4 Executive Team...5 Board Chair s Message...6 President s Message...7 Consolidated Statements of Financial Condition...8 Consolidated Statements of Income...9 Our Community... 10 Treasurer s Report... 12 Supervisory Committee Report... 14 www.southlandcu.org 3
L E A D E Board of Directors Walter Finnigan Board Chair Annie Perez Vice Chair Angie Avery Secretary/Treasurer Dolores M. Arriola Director Robert L. Hale Director Jose L. Manzano Director Bradley P. Silcox Director G. David Mills Director-Emeritus Supervisory Committee Morris J. Litwack Committee Chair Thomas H. Willingham Committee Member Dr. Ayla Donlin Committee Member 4 2016 Annual Report
R S H I P Executive Team Thomas G. Lent, CPA President & CEO Rene M. LeJay Executive Vice President & COO Christopher Burns Senior Vice President & CFO Matthew P. Herrick Senior Vice President of Marketing & Financial Services Curt A. Bannock Vice President & CIO Patty Jimenez Vice President of Lending Bertrand Villavert Vice President & Controller Cynthia E. Smolinski Vice President of Human Resources www.southlandcu.org 5
Celebrating 80 years of serving our Members has made Southland Credit Union one of the preeminent financial institutions in Southern California. I am honored to be Chairman of the Southland Credit Union Board and proud to have served you as a volunteer for over twenty years. During those years, our Board has strived to keep up with innovation and continues to look forward to new technology focused on better serving our Members through enhanced delivery channels. We understand and we are aware that there is competition out there from big banks, so we strive to give our Members exceptional service and we will continue to provide products and services that meet your financial needs. One way we have done this is by bringing our credit card servicing in-house, which means we can offer better service to our Members and reduce costs. Southland is now able to provide enhanced credit card products to better meet the needs of our Members. Last year was the first time Southland Credit Union crossed over $600 million in assets a tremendous milestone! Our credit union finished the year with over 48,000 Members, while maintaining a strong capital position. Further, we funded over 10,000 loans for a total of $250 million in gross loan originations. Board Chair s The Southland Board was very fortunate to have promoted Thomas Lent as the new President and Chief Executive Officer of Southland Credit Union. Tom has a great vision for Southland and the Board of Directors looks forward to working with him to take our Credit Union to new heights. Tom was instrumental in bringing Harbor Federal Credit Union in as a new partner to the Southland family beginning in January of 2017. The Directors of Southland Credit Union strive each year to make our Members dreams come true by providing each of you products, services and technology to meet your financial needs. We hope you have a prosperous year and thank you for being a Southland Credit Union Member. Walter Finnigan Board Chair, Board of Directors 6 2016 Annual Report
Southland s Next Chapter I am excited to be the new President and Chief Executive Officer of Southland Credit Union after serving as the Executive Vice President, Chief Financial Officer since 2008. For the past 80 years, the steadfast leadership of our credit union has navigated us through economic hardships, a digital revolution and increased competition from banks and lenders. Our success is born from fulfilling our mission to provide our Members exceptional service, resulting in superior financial strength, convenience and valued solutions. Measuring our service quality remains a critical metric in our credit union s strategic operation. Last year we launched a new tracking system to provide better insight of our service and measure it against our peers with the Net Promoter Score. Initial results received through email and paper surveys have shown that our service far exceeds other industries and ranks high amongst peer credit unions throughout the nation. We have also received invaluable feedback on how to improve our operations and products. Southland continues to be a champion of supporting our local communities. Over the course of the previous year, the credit union supported dozens of local charities, educational organizations and philanthropic causes. This support extended to our Southland Associates who volunteered their own time to reinvest in the communities we serve. Our commitment to supporting our communities remains unwavering as we plan for the year ahead. Providing for the family has always been at the heart of Southland s financial vision. Throughout the coming year, we will continue to focus on providing valued financial solutions for you and your family. This goes beyond our goal of reshaping our branch lobbies to be more family-friendly and extends to financial products that provide a tangible financial benefit for your family. The Path Forward We have already started the year with a new member to the Southland family. As of January 1, Harbor Federal Credit Union has agreed to partner with Southland. The merger grows our credit union to over $730 million in assets with approximately 58,000 Members, while adding an additional branch in Carson, California. This strategic partnership prepares our credit union for a bold path forward. Southland will reinvest in our technology through hiring additional staff and enhancing our core banking products. This includes upgrading over 30,000 debit and credit cards with the industryleading EMV chip, updating our online and mobile banking platforms to provide greater convenience, and evaluating our core banking system to position ourselves for future growth. A Commitment We owe our success to the many Members who trust their financial future to the credit union. This places a responsibility on us that we do not take lightly. While we are pleased to report we are a strong and healthy credit union, we are committed to building on our past success by providing our Members an exceptional service experience. Southland has thrived because our commitment to putting the needs of our Members first has never changed. As Southland s CEO, I pledge to keep this commitment and chart a course that keeps the credit union at the core of your family s financial success. President s Thank you for your membership with Southland Credit Union. Thomas G. Lent, CPA President and Chief Executive Officer www.southlandcu.org 7
Consolidated Statements of Financial Condition As of December 31, 2016 and 2015 (in thousands) (unaudited) Assets 2016 2015 Cash and Cash Equivalents $ 60,759 $ 69,270 Investment Securities: Available-For-Sale 78,416 74,068 Other Investments 8,064 14,665 Federal Home Loan Bank Stock 2,191 2,191 Loans to Members, Net of the Allowance 428,430 379,874 for Loan Losses Accrued Interest Receivable 1,420 1,374 NCUSIF Deposit 4,864 4,899 Property and Equipment, Net 7,887 11,386 Other Assets 25,934 21,500 TOTAL ASSETS $ 617,965 $ 579,227 Liabilities Members Shares and Savings Accounts $ 542,572 $ 508,726 Accounts Payable and Other Liabilities 10,556 7,055 Members Equity TOTAL LIABILITIES 553,128 515,781 Regular Reserve 12,887 12,887 Undivided Earnings 45,713 43,946 Equity Acquired in Merger 7,221 7,221 Accumulated Other Comprehensive Income (984) (608) TOTAL MEMBERS EQUITY 64,837 63,446 TOTAL LIABILITIES AND MEMBERS EQUITY $ 617,965 $ 579,227 8 2016 Annual Report
Consolidated Statements of Income For the years ended December 31, 2016 and 2015 (in thousands) (unaudited) Interest Income 2016 2015 Loans to Members 18$ 18,566 $ 18,638 Investment Securities and Cash Equivalents 1,529 1,326 Total Interest Income 20,095 19,964 Interest Expense Members Shares and Savings Accounts 1,611 1,301 Net Interest Income 18,484 18,663 Provision for Loan Losses 2,160 952 Net Interest Income After Provision for Loan Losses 16,324 17,711 Non-Interest Income Fees and Charges 4,986 5,128 Other Non-Interest Income 2,818 2,185 Total Non-Interest Income 7,804 7,313 Income Before Non-Interest Expense 24,128 25,024 Non-Interest Expense Compensation and Benefits 11,807 12,048 Operations 7,823 8,202 Occupancy 2,731 2,986 Total Non-Interest Expense 22,361 23,236 NET INCOME $ 1,767 $ 1,788 www.southlandcu.org 9
Our Community A strong community is made through the active participation of local businesses. That is why Southland Credit Union is committed to supporting our local communities. Our Associates volunteer and support our community throughout the year with various charities, toy drives, food drives, women and children s causes, local school programs, community events, and many other important community needs. Through helping support local non-profits, community projects and our schools, Southland is a partner in improving the areas our Members live, work, worship and attend school. 2016 Southland Sponsored & Team Southland Events Cypress 5k and Festival Cypress Police Officers Association Downey Kids Day Downey Street Faire Long Beach State Athletics Long Beach State Women s Basketball Los Alamitos Police Officers Association Los Alamitos School Ghoul Los Alamitos Wings Wheels & Rotors Los Alamitos Winter Wonderland Los Alamitos Youth Center Los Alamitos Educational Foundation (LAEF) Los Alamitos Race on the Base Orange County Liver Walk Orange County Walk to End Alzheimer s Run Seal Beach Santa Monica Christmas Run Southland Credit Union Annual Membership Meeting Toys for Tots Toy Drive Orange County Alzheimer s Walk Los Alamitos Winter Wonderland Long Beach State Women s Basketball 10 2016 Annual Report Executive Team gift donations to Toys for Tots
Proudly Serving the Employees of over 300 Companies PROVIDENCE ST. JOHN S HOSPITAL MILITARY PERSONNEL OF THE FORMER MARINE CORPS AIR STATION EL TORO SANTA MONICA CITY EMPLOYEES RETIRED EMPLOYEES OF LOS ANGELES COUNTY (RELAC) INTERNAL REVENUE SERVICE HANSEN & ADKINS AUTO TRANSPORT INC. LOS ANGELES COUNTY BAR ASSOCIATION LOS ANGELES PARALEGAL ASSOCIATION GREATER LOS ANGELES ASSOCIATION OF LEGAL ADMINISTRATORS (GLA ALA) LOS ANGELES TIMES LOS ANGELES COUNTY SANITATION DISTRICT LA COUNTY DEPARTMENT OF PARKS & RECREATION LA COUNTY DEPARTMENT OF MENTAL HEALTH LA COUNTY HOUSING AUTHORITY/ COMMUNITY DEVELOPMENT COMMISSION HYDRAFLOW USA ROYAL PAPER BOX CO. HATHAWAY-SYCAMORES CHILD & FAMILY SERVICES BIENVENIDOS COMMUNITY HEALTH CENTER LA FREIGHTLINER TARZANA TREATMENT CENTER, INC REGAL MEDICAL GROUP LAKESIDE COMMUNITY HEALTHCARE MEDICAL GROUP U.S. MARSHAL SERVICES U.S. BANKRUPTCY COURT AND DISTRICT COURTS U.S. DEPARTMENT OF HOMELAND SECURITY www.southlandcu.org 11
The Board of Directors and Supervisory Committee Members volunteer and work diligently to ensure the continued safety and soundness of Southland Credit Union. In 2016, Southland continued to identify and act upon opportunities to improve Member services while maintaining its financial strength. Southland remained well-capitalized with a net worth at approximately 10.7% far exceeding the regulatory requirement for any credit union of 7%. Total assets on December 31, 2016 were $618 million, an increase of $39 million from 2015. Net income was nearly $1.8 million while we also returned dividends to our Members totaling $1.6 million. Southland s net loan balances increased $49 million (13%) for a total of $428 million. In addition to our strong loan growth, Member deposits increased $34 million (7%). The historically low interest rate environment and rising real estate market contributed to a record year of mortgage loans for Southland. To mitigate our exposure to interest rate risk, the credit union continued to sell many fixed-rate real estate loans on the secondary market while retaining servicing of these sold loans for our Members. We finished the year with total mortgage loans sold and serviced increasing 14% for a total of $194 million. Southland is in excellent financial condition, and is poised for continued success and future growth in 2017. This success is well underway with the merger of Harbor Federal Credit Union into Southland effective January 1, 2017. The merger takes Southland to more than $730 million in assets, increases our total Membership to approximately 58,000, and improves our net worth to 11.4%. We thank you for allowing us to serve you and look forward to an exciting and innovative year to come. You can be proud of the many accomplishments attained in the past years while being assured the future of Southland Credit Union continues to look bright. Treasurer s Sincerely, Angie Avery Secretary/Treasurer Board of Directors 12 2016 Annual Report
$174,037 $125,571 $117,252 $116,225 $2,653 $6,835 www.southlandcu.org 13
Supervisory Committee members are elected by the Membership, with the committee consisting of three volunteers. The committee s primary responsibility is to assist the Board of Directors in fulfilling its oversight responsibility by providing an independent appraisal of the safety and soundness of the operations and activities of the credit union. The Supervisory Committee engages and oversees the internal and external audits and verification of Member accounts, as performed by two nationally recognized CPA firms. The committee also meets with the federal and state regulatory agencies during their routine examinations. Supervisory Committee The external auditor s report as of and for the years ended December 31, 2016 and 2015 indicated the Credit Union s financial statements are fairly stated in accordance with generally accepted accounting principles. It is the opinion of the Supervisory Committee that your credit union is financially strong, complies with sound business practices, and has effective internal controls to adequately protect and safeguard the Members assets. Sincerely, Morris J. Litwack Committee Chair Supervisory Committee 14 2016 Annual Report
$171,811 $137,891 $46,416 $44,951 $9,906 $8,910 $7,287 $1,258 www.southlandcu.org 15
P.O. Box 3003 Los Alamitos, CA 90720-1303 800.426.1917 www.southlandcu.org