O U R M I S S I O N S TAT E M E N T The mission of Erie Federal Credit Union is to responsibly deliver financial solutions that meet the needs of our community.
O U R V I S I O N S TAT E M E N T The vision of Erie Federal Credit Union is to be the #1 most trusted financial resource in the region.
S U P E RV I S O RY COMMITTEE
EXECUTIVE LEADERSHIP TEAM
Norb Kaczmarek
Brian Waugaman, Chief Executive Officer
Ruth Waidley
Brian Warzynak, Chief Information Officer
Rick Macer
Chris Cortes, Chief Operations Officer
Phyllis Ferguson
Denise Kaczmarek, Chief Lending Officer Fred Tonty, Chief Financial Officer Thomas Brennan, Chief Marketing Officer
“A lasting architecture has to have roots.”
~ American Architect, I.M. Pei
OUR BOARD OF DIRECTORS
Daniel Nawrocki
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James Lazan
Norb Kaczmarek
Laurie Becker
Dennis Howard
REPORT OF THE CEO
ROOTED IN PURPOSE Erie Federal Credit Union’s roots can be traced back to June 1936 when ten local educators recognized the need for a member-owned, cooperative financial institution. These same educators combined their financial resources to establish the Erie School Employees Federal Credit Union by embracing the credit union philosophy of “people helping people”. It has been stated that the fastest way to achieve success is to first help others succeed. Erie FCU is committed to helping build strong communities and making a positive impact where we live and work. Our community outreach initiatives, led by the efforts of staff volunteers as part of Erie FCU’s #TeamAOK, delivered on this promise by supporting various events throughout the year. Erie FCU’s outreach efforts were recognized numerous times for their community service locally, regionally and nationally. We are very proud to have been named “Erie’s Choice in Credit Unions” for the sixth consecutive year according to the Erie TimesNews “Erie’s Choice” awards. Everything we do is in support of meeting our members’ financial needs. As a valued member of Erie FCU, you are the purpose behind all we do, and the reason for our continued growth and success in 2018. We cannot make the difference we do without you.
Bonus Program is just another way to thank our members for over 82 years of loyalty and trust. I am extremely proud of our entire team’s advancement. It was exciting to witness numerous meetings where teams from across the credit union, front-line to back office, were deep in thought and discussion working to develop more efficient ways to conduct our operations and enhance our members overall service experience. There is still much work ahead of us, but we are making extensive strides in cleaning up old and outdated ways of doing things, which will position us well for future growth and development.
OUR PROMISE Moving into 2019, we will continue to operate with your best interests at heart and stay true to our common purpose and core mission of helping members to better their lives and businesses. Erie FCU looks forward to another busy year in 2019. Plans are already underway to further enhance overall operational efficiencies and implement structural changes necessary to support future member service initiatives. We thank you for the privilege to serve you and our community, and for your continued patronage and support of Erie Federal Credit Union. It is our sincere hope that you will share your experience and the benefits of membership with your family, friends and co-workers.
YOUR SUCCESS IS OUR SUCCESS Because of our members’ ongoing support and referrals, Erie FCU marked one of our most successful years in our 82 year history. I am proud to report that in 2018 assets grew by 5.72%, a total of $26.7 million, and consumer and business loan growth of 13.78%, or $34.8 million, exceeded expectations. Most importantly, even with substantial growth over the last several years, the credit union’s capital level of 11.48% remains well above the ‘well-capitalized’ threshold of 7.00% set by our federal regulators, the National Credit Union Administration (NCUA). In 2019, Erie FCU will once again distribute a Patronage Bonus back to members in the amount of $600,000, meaning we have been successful in returning over $1.15 million directly to members over the past two years. The Patronage Bonus Program was developed to distribute an equitable bonus from credit union earnings back to members based on their individual account relationship and usage of Erie FCU products and services over the 2018 calendar year. The Patronage
Brian J. Waugaman, CEO
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SUPERVISORY COMMITTEE REPORT Erie Federal Credit Union’s Supervisory Committee consists of volunteers who apply to serve and are appointed by the Board of Directors in accordance with the Federal Credit Union Act. The Committee is responsible for ensuring that credit union policies, procedures and internal controls are adequately designed to protect the Credit Union and members’ assets against fraud and conflict of interest. In carrying out its duties, the Committee oversees and reviews the work of the internal audit department, who is responsible for completing independent audits of the policies, procedures and internal controls of the Credit Union. The Committee is also responsible for ensuring the financial condition of Erie FCU is accurately and fairly represented in the Credit Union’s financial statements by engaging an independent audit firm. The Committee retained the services of CliftonLarsonAllen LLP to complete an annual audit of Erie FCU’s financial statements for year ended March 31, 2018 and to verify accuracy of members’ account statements. This year, as is customary, CLA confirmed that the financial statements fairly present, in all material respects, the Credit Union’s financial position and conformity with generally accepted accounting principles. The National Credit Union Administration (NCUA) is an independent federal agency that insures deposits at federally insured credit unions, protects the members who own credit unions and charters and regulates federal credit unions. The NCUA conducts periodic examinations of federal credit union’s records and operations. Erie FCU’s last exam performed by NCUA was as of June 30, 2017. The Supervisory Committee is pleased to report these positive results and to be of service to Erie Federal Credit Union. The Committee will continue to work diligently in 2019 to ensure the Credit Union remains a safe and sound institution. If you have a question relating to the financial health or management of Erie FCU, please do not hesitate to contact us. We are grateful for the opportunity to serve you!
Election of Officers: James Lazan and Dennis Howard were nominated for re-election to the Board of Directors. They were elected to a 3-year term commencing May 13, 2019.
REPORT OF THE BOARD OF DIRECTORS — James Lazan, Board Chair On behalf of the Board of Directors, management and staff, I am delighted to present your credit union’s 2018 Annual Report. As Board Chair, it is my distinct pleasure to work with the Board and Senior Management in our collective goal of providing world-class financial solutions and 5-star service to you, our member-owners. Many thanks to my fellow Board members for their time and dedication on helping guide our credit union to its current financial strength and reputation. We also thank members, their families and businesses who choose us as we realize you have many choices when it comes to banking. Your Credit Union continued to grow in 2018. This is evidenced by the charts and financial reports contained within. You will clearly see that we have achieved impressive membership, loan, and asset growth. In fact, your Credit Union will reach $500 million in assets and will surpass 60,000 members sometime during the first quarter of 2019. We are grateful to CEO, Brian Waugaman, the Management team and all our employees for their vision and commitment to the financial well-being of our members. The leadership team was asked to meet challenging goals last year and they excelled. It will not get any easier in 2019, but your Board has complete faith in the team and their ability to make sound decisions for our future success. For the 2nd year in a row, a Patronage Bonus was declared as a way to say “thank you” for your commitment, support and usage of Erie FCU in 2018. Erie FCU continued its tireless efforts in providing financial education/literacy by hosting numerous free seminars and financial fairs for middle school, high school students and adults, and sponsoring education programs in the communities we serve. More details on this outreach provided later in this report. We refinanced over 400 vehicle loans from other banks, credit unions and financing companies saving our members serious money. Our members will potentially put over $85k back (plus a cash incentive for keeping it here) into their own pockets in the first year by moving their vehicle loans to us. We will strive to make your banking more convenient. Technology is constantly evolving and Erie FCU is working diligently to stay on top of these changes. In 2019, we will look to improve our facilities, make mortgage loan decisions easier, continue technology improvements and remain best in class in member safety and security. We will also continue to voice our concerns to our Representatives and government leaders to protect and keep the credit union charter strong, while the big banks continue to challenge our not-for-profit, member-owned structure. Our profits are returned to you, our members, in the form of higher interest rates on savings, lower rates on loans, and lower fees. This enables us to serve your financial needs with your best interests at heart. 2018 was a stellar year for Erie FCU! ...And it’s all thanks to you, our valued members! 4
CREDIT UNION GOVERNANCE The Erie FCU Board of Directors is responsible for the general direction and control of the credit union. Effective governance by our board of directors is instrumental to the success of our credit union. Directors are volunteers who must be committed to the credit union mission and understand the laws and regulations that govern it. Additionally, our Board of Directors appoint volunteers to serve on the Supervisory Committee. The primary responsibility of this volunteer committee is to serve as a means of checks and balances for the Credit Union. The Board of Directors also oversees the Associate Board Committee, whose purpose is to attract, train and educate members who are interested in filling future openings on the Board or Supervisory Committee. The program will afford potential candidates the opportunity to experience the duties and responsibilities associated with these positions. Members in good standing, at least 18 years of age, may apply to the program. Any Erie FCU member interested in learning more about the program and the application process can contact the Associate Board Committee at 814-825-2436, Opt 1, Ext 1037.
LOOKING AHEAD TO 2019 AND BEYOND Early in 2019, Erie FCU expects to pass the $500 million asset threshold, which is a significant milestone. The credit union will also recognize its 60,000th member! As we grow and serve even more members, we will continue to provide superior financial value, in the form of marketleading savings returns, lower loan rates and few, low fees. We’re proud to provide our members with 5-Star Service and a simple, personalized banking experience. In addition to these exemplary accomplishments, Erie FCU will continue to invest in our current and future members through state of the art technology and enhancements to our branches/systems. Your involvement in the credit union that you own, made 2018 a high point in Erie FCU’s history. Erie FCU remains committed to find new ways to invest in YOU!
At Erie FCU, we understand the importance of owning your own home and establishing your roots Erie FCU offers a first-time home-buyer grant program funded by FHLBank Pittsburgh. Through First Front Door (FFD), if ones qualifies, Erie FCU will match their contribution 3-to-1. For every $1 one contributes, they can receive $3 in grant assistance, up to a maximum of $5,000. Pictured with Lindsey Shatto, Glenwood Office Assistant Branch Manager is first-time home buyer/member, Amy Miller.
Amy Miller
Amy Miller, who qualified for the program, had been waiting a long time and was excited about the opportunity to purchase her own home. Ms. Miller stated, “I heard about the program through the St. Martin Center and they referred me to Erie FCU to learn more.” She was thankful for the financial assistance the grant provided which Lindsey Shatto motivated her to pursue her dream in earnest. Ms. Miller said that the team at Erie FCU was excellent and made the home-buying process easy to understand. She went on to say that she learned so much about it (the process) that she was able to thoroughly explain it to others... She has since encouraged a friend to look into the First Front Door program.
“We are very proud to work with local realtors, nonprofits and the Federal Home Loan Bank of Pittsburgh to help make homeownership dreams a reality for our members”, said Erie FCU Chief Lending Officer, Denise Kaczmarek. For more information, visit www.eriefcu.org/special-offers/first-front-door-homebuyer-grant-program 5
A LITTLE KINDNESS GOES A LONG WAY In 2017, Erie FCU started a Random Acts of Kindness program called #TeamAOK as part of our Glenwood facility grand opening festivities. Through #TeamAOK, we encourage our employees, members and community to do something kind for others, whether it’s delivering lunch to first responders, gathering supplies for our veterans or donating clothing to a shelter. Erie FCU will continue to encourage Random Acts of Kindness in 2019... Won’t you join us?
“Thank you Team AOK! Your food drive and fundraiser will help us to provide over 1,000 meals to those in need.” Tori Pursell, Second Harvest Food Bank
We gave members the tools to reach their financial goals Financial Literacy/Outreach: • Financial Literacy workshops conducted at 19 schools and business (reaching approximately 1,500 individuals)
• Hosted 10 Educational Seminars for members and the Erie Community (reaching nearly 600 attendees)
As our way of saying thank you, we decided to perform some random acts of kindness al around the community throughout the year 23 programs and events were held in 2018 with approximately 100 employees volunteering their time and talents.
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Carry out a Random Act of Kindness, with no expectation of reward, safe in the knowledge that one day, someone might do the same for you. ~ Princess Diana
PERRY SQUARE COMES ALIVE FOR THE HOLIDAYS! Erie FCU had the unique honor of lighting the star topper on the new Erie Community Holiday tree at the annual Downtown D’Lights event in December! “We are committed to our community. It’s a part of our who we are and this was a wonderful way to kick off the holiday season.” — Tom Brennan, CMO of Erie FCU
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WHAT’S THE DIFFERENCE? The difference between credit union and a bank can be distinct, but in some ways, grey. Many say that we look and function like a bank, so they will call us their bank. That’s OK, but we want you to know that it’s not all the things we do and services provided, but why we
do it and the manner in which we do it.
• Erie FCU and other credit unions are financial cooperatives. Meaning that we are owned by our members. Our member-owners expect a high level of service while banks are owned by shareholders/stockholders and they expect a profit. Earnings are returned to our members in the form of lower loan rates, higher interest on deposits, and lower fees.
• Credit unions pay the same taxes a bank pays (payroll taxes, sales taxes, and property taxes), except one, federal income taxes. Why do we not pay federal income taxes? Simply stated, we are notfor-profit and here to help people, not turn a profit. Credit unions are member-owned, democratically operated organizations managed by volunteer boards of directors and because credit unions have the specified mission of meeting the credit and savings needs of consumers, especially persons of modest means.
Buying or selling a home? You can save too. At Erie FCU, we save our members MONEY! Like with our Realtor Rebate program, earn money back on the sale or purchase of your home!
In 2018, members earned nearly $41,000 in rebates!
Why is this so important? Every day banks continue to attack credit unions on the issue of taxation claiming that credit unions don’t pay taxes. Now you know the TRUTH. Credit unions are not-for-profit financial cooperatives where every member counts… That makes a difference.
Auto Lending In 2018, we helped to make it possible for more than 21,000 members to drive off in a new car, truck or RV.
THANK YOU FOR USING ERIE FCU! Credit unions work hard every day help members keep more of their hard-earned money. In 2018, for the first time ever, members of Erie FCU received a Patronage Bonus of nearly $550,000 for their Credit Union relationship. The bonus was deposited to over 51,000 eligible member accounts in January 2018 as a token of the credit union’s appreciation for their continued loyalty and support. Banks share profits as well, but it is stockholders, not customers, who benefit the most. As an Erie FCU member-owner, you, active borrowers and savers, had the opportunity to benefit from our success. Simply put, the more you USE us, the more we share with you.
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SURVEY SAYS… Each year, we conduct a Member Satisfaction Survey. Feedback from the survey provides the Board of Directors and the management team critical insight into your preferences, satisfaction and loyalty. We received 1,166 responses last year which went a long way in helping to shape our upcoming and existing products/services. Here is some of what we learned:
• Overall, members rated us 4.5 out of 5 stars! Thank you. Many comments were offered that members appreciate the friendliness and professionalism of staff who helped them. Highest average ratings: 4.7 in friendliness of staff, and 4.6 in professionalism of staff. • 90.1% of members rated us 4 or 5 stars overall. • 78.5% of members consider Erie FCU their primary Financial Institution. • Over half of our members joined Erie FCU based on recommendations from family, friends or employers.
• Members also commented that they love the Patronage Bonus Program! (and hoped that we will continue it).
• Convenience of branches and ATMs remain very important to members. We will
“Joining Erie FCU has been one of the best decisions we’ve ever made over 15 years ago. Very happy with their services and outstanding customer service. No company is as perfect as Disney, but they’re pretty close. We thank you all at Erie FCU!”
continue to provide quality, consistent delivery across a myriad of touchpoints including phone, online, and in person.
~ Uneika L., Erie FCU Member
Your opinions matter to us. Thank you, again, for your help and membership!
LOCALLY • Erie FCU was honored by Preservation Erie at the
prestigious “Greater Erie Awards”. The Greater Erie Awards are presented annually by Preservation Erie’s board of directors to individuals, businesses or organizations that are exceptional stewards of Erie’s physical and cultural landscape. The awards are organized to attract and educate residents and community leaders and to celebrate Erie’s preservation and design successes. Erie FCU was recognized for our “adaptive re-use” conceptual design of our Glenwood Branch & Headquarters Facility.
• Erie FCU was named by the readers of the Erie Times News as “Erie’s Choice in Credit Unions” for the 6th year in a row, named Erie’s Best Bank by the Erie Reader for the 5th consecutive year and voted “Edinboro’s Best Credit Union” for the 3rd year in a row!
REGIONALLY Erie FCU received two honors from the Pennsylvania Credit Union Association.
• At the PCUA’s Evoke conference, Erie FCU walked away with a “M.I.C. Award” (which stands for Market. Innovate. Create) with a 1st place in the “It’s Who You Are” category for our Team AOK (Acts of Kindness) company-wide community outreach initiative. • For the 2nd year in a row, the Pennsylvania Credit Union Association recognized Erie FCU with a prestigious Dora Maxwell award/“honorable mention” for our “Team AOK community outreach initiative.” 9
ERIE FCU IS A STRONG FINANCIAL INSTITUTION
Financial Overview
Fred Tonty, CFO
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The more things change — the more things stay the same — at least as far as the financial condition of Erie Federal Credit union goes. 2018 was another outstanding year for Erie FCU and very similar to 2017 — despite FED rate hikes, challenges in the local economy, increased regulatory pressure, government shutdowns, tariff battles and a very volatile stock market. Amid local and global chaos, Erie FCU continues to show financial strength as income exceeded $2.7 million, including a December declaration by the Credit Union to pay a Patronage Bonus of nearly $600,000 to our membership for a second straight year. The Bonus will be paid in January of 2019. Assets increased over $11 million as Erie FCU continues to expand its membership base in Erie and Crawford counties. Loans grew a robust 13.78%, once again far exceeding expectations as Erie FCU remains top of market in loan and deposit rates and product offerings. Capital remained very strong at 11.48%, well above NCUAs adequately capitalized threshold of 7%. (continued on next page)
Year Ending December 31, 2018
Assets
2018
2017
Member Loans $ 287,320,384 $ 252,530,214 Allowance for Loan Losses (2,142,790) (1,791,985) Cash 8,697,142 9,659,825 Investments 145,048,550 173,278,397 Building/Equipment 22,171,464 22,595,001 All Other Assets 31,373,765 9,542,472 Total Assets $ 492,468,515 $ 465,813,924
Liabilities Member Savings $ 422,832,410 $ 411,115,546 Reserves 5,365,745 5,365,745 Unrealized Loss/Gain for AFS CMOs (984,485) (578,893) Undivided Earnings 51,163,123 48,458,571 Other Liabilities 14,091,722 1,452,955 Total Liabilities $ 492,468,515 $ 465,813,924
Earnings Loan Interest $ 13,990,727 $ 12,277,797 Income from Investments 3,578,103 3,382,070 Fee & Other Income 7,655,866 6,908,664 Total Earnings $ 25,224,696 $ 22,568,531
Interest Expense $ (108,294) Dividends Total Interest Expense
$ (3,318,323) $ (3,426,617)
$ (58,977) $ (2,975,361) $ (3,034,338)
Operating Expense Compensation, Taxes, Training $ 8,751,414 $ 7,840,079 Occupancy & Operation 4,291,283 3,829,161 Promotion & Education 590,902 607,297 Loan Processing 2,326,410 2,074,781 Outside Operation Service 1,018,911 904,517 Member Insurance 15,354 14,951 Federal Supervision 118,277 97,984 Other Expenses 1,980,976 1,608,626 Total Operating Expenses $ 19,093,527 $ 16,977,396
Net Income
$ 2,704,552
$ 2,556,797
(continued from previous page) Erie FCU’s mission to responsibly serve its membership has never been more evident as we provided more loans and more deposit products to our membership than ever before, as well as expanding our financial counseling program for the benefit of all our members. Erie FCU will continue to expand out delivery channels through strategic initiatives and technology to serve our members more efficiently. Our growth and financial strength can be attributed to the support of members as well as our Board of Directors, Management team and the rest of our hard working staff. We look forward to continuing this trend in 2019 and beyond.
Financially Strong, Safe and Sound
11.48%
7.00%
Erie FCU Capital Level
Well-Capitalized Credit Union
GROWING OUR BUSINESS LENDING Whether you’re starting a new business or growing your existing business, Erie FCU can help. We have a number of business loan options to help you find the financing you need to get your plans started. Our strong roots within the Erie community provides us with a unique understanding and flexibility to look at each business owner’s individual needs when making important lending decisions. And, we are growing… One-year loan growth is 7.4%, two-year loan growth is 22.5% and three-year loan growth is 34%! In 2018 alone, we added over $5 million in new commercial loans reinforcing that both commercial and small businesses in our market area continue to turn to Erie FCU for their present and future objectives. We welcome your inquiries and seek to fully serve your needs. You’ll find everything you love about your credit union, now for your business.
• Business Line of Credit
• Commercial Real Estate
• Vehicle Loans
• Equipment Loans
• Business Expansion Loans
FINANCIAL WELL-BEING Erie Advisors continued to offer their clients a full breadth of investment management, insurance, retirement solutions, and specialized seminars, to meet the multitude of wealth management needs of our growing membership. Credit Union members can meet with the Erie Advisors, Brandon Armella and Larry Amenta at the Glenwood Branch for assistance with mutual funds, insurance needs, retirement planning, and much more.
(814) 897-2500 Brandon Armella, Stacey Iadeluca and Larry Amenta
Stacey.Iadeluca@cunamutual.com
Representatives are registered, securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC , a registered broker/dealer and investment advisor, which is not an affiliate of the credit union. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. FR-2543645.1-0519-0621
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“The substantial growth of the credit union is shared, not only by the chartering members, but by all members —past and present. It’s the people that make the Credit Union.”
— James H. White Clerk 1961-Board Member 1970-2004
Our Family of Branches to Serve You: 1109 East 38th Street 2436 Buffalo Road
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1005 Greengarden Road
518 State Street
1220 West 32nd Street
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5500 Zuck Road
1825 Downs Drive
101 Washington Towne Blvd. (Edinboro, PA)
(814) 825-2436
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3503 Peach Street
www.eriefcu.org