Report of the CEO, Brian J. Waugaman This past year was a very special year for Erie Federal Credit Union. 2016 marked our 80th year of dedicated service to both our members and our local community. Erie FCU was chartered on June 16, 1936 and began with 46 members, $241 in deposits and a single loan for fifty dollars. Our first office was located on the second floor of the public library at 6th and French streets. From these humble beginnings, we have grown to become the largest credit union in northwestern Pennsylvania, with over $465 million in assets and serving more than 54,000 members and businesses in
Various products and services were introduced in 2016 to bring further convenience and security to our members including the introduction of EMV “chip cards, Apple Pay and the addition of Mobile Deposit to our mobile banking platform.
both Erie and Crawford counties. To show our gratitude and honor this milestone, we really wanted to make this past year, an extra special year. We developed plans to not only pay tribute to our past but also to further strengthen our foundations for future growth and expansion. The first step was to develop our signature 80th anniversary logo featuring an iconic Erie landmark that was used in all marketing efforts throughout 2016. In celebrating 80 years of “people helping people”, it was important to us to give back to our community, our members and the dedicated employees contributing to our success. A year-long celebration was planned and filled with fun activities, member giveaways and monthly charitable donations. Members celebrating their 80th birthday during the year were spotlighted at our Annual Dinner as well as in our quarterly newsletter. At the branch level, members signed up for the opportunity to win various giveaways. Monthly donations in the amount of $1,080 were made to fulfill a specific need or capital project for a local charitable organization in order to provide a greater impact at the local level. Organizations receiving donations included: the Erie City Mission, the St. Martin Center, Second Harvest Food Bank of NWPA, Greater Erie Habitat for Humanity, the Bethany Outreach Center, Sarah Reed Children’s Center, TREC (Therapeutic Riding Equestrian Center), Gliding Stars Adaptive Ice Skating, Support our Troops and Embracing our Veterans, the Millcreek Kiwanis and the ANNA Shelter. The modernization of the former Glenwood Elementary School into a full-service member branch location and centralized operations center continued throughout 2016 and is scheduled to open in June 2017. Please come and visit us at this new location. 2
Brian J. Waugaman, CEO
Erie Federal Credit Union’s consumer and business loan growth remained strong throughout 2016 and far outpaced our peers. Most importantly, our 11.25% capital level remains well above the ‘well-capitalized’ threshold set by the National Credit Union Administration (NCUA). In addition to celebrating our anniversary, Erie FCU received various local and national recognition including: the Erie Times News “Erie’s Choice in Credit Unions” for the fifth year in a row, Erie Readers Best of Erie Awards for “Erie’s Best Bank/Credit Union” for the third year running, “Best Credit Union” in the Edinboro Journals 2016 Best of the Best reader’s poll and finally we brought home the prestigious Commitment to Erie - “Community Service Award” given to businesses that show exemplary and ongoing community service while enhancing the quality of life in Erie and surrounding communities. Not to mention, Erie FCU was ranked by Advisory HQ, an independent online news source that provides extensive research, independent reviews and top rankings of financial institutions across the U.S., U.K., and Canada, as one of the Top 15 Credit Unions in Pennsylvania. We thank you for the continued privilege to serve you and our community, and your continued trust in Erie Federal Credit Union.
Our Mission Statement The mission of Erie Federal Credit Union
is to responsibly deliver financial solutions that meet the needs of our community.
Why we are Different (from a bank)
While services from our credit union may appear nearly the same as a bank, the structure and philosophy is quite different. •We are not-for-profit financial cooperatives owned by the very people we serve. adquarters ranch & He B d o o w n le G une 2017
• We exist solely to serve our members, not enrich outside stockholders. • Our credit union is overseen by a board of directors, who are volunteers elected, by you, the members.
The History of Credit Unions The first credit union model was started in Germany. The first US credit union, St. Mary’s Cooperative Association was established in Manchester, NH. President Roosevelt signed into law the FCU Act which established federally chartered credit unions in all states. The NCUA, National Credit Union Administration is formed to supervise credit unions. The NCUSIF, National Credit Union Share Insurance Fund is backed by the “full faith and credit of the United States Government.” 3
Report of the Board of Directors In 2016, Erie FCU celebrated its 80th Anniversary. It is humbling to know that for more than three-quarters of a century we have served our member-owners, providing highly personalized service, competitive loan rates and deposit rates that are among the best in the markets we serve. Clearly, there have been many changes in the financial services world since we first started in 1936. Back then, our service delivery was markedly different than it is today. Very few could have imagined using an iPad or smartphone to do one’s banking. It is this new technology that is not only changing the way we do business, but allowing us to provide our members better service and increased value. For example, recent enhancements to our Online Banking system, including adding convenience services such as mobile check deposit have been very well received. The Board of Directors is also pleased to report that in 2016, we enjoyed increased membership, an improved capital position (capital increased to 11.25% which is well above the requirements of what our regulator considers a healthy credit union) and robust loan growth of 10%. Loan rates remained historically low in 2016 causing ongoing pressure to interest margins. Fortunately, successful operational efficiencies and growth in non-interest income helped offset some of this pressure. Member business loans continued to grow last year as well with our commercial loan portfolio now approaching $28 million. The strategic planning process that was rolled out in 2015 and further implemented in 2016 continued to position Erie FCU to
exceed performance goals in many areas. But as successful as we were, we will have to work even harderfor 2017 to continue our growth trajectory. Meaning, we will have to help more members with their borrowing needs; we will have to make managing your money more convenient and secure and we will have to provide more financial consulting and education to members who need it. The only best way to do this is making members even more aware of everything we have to offer, in other words, take full advantage of their membership. When it comes to community involvement and financial literacy, we remain engaged and supportive of many charitable organizations that strengthen the communities we serve. Always striving to offer more than just monetary support, we reach out in unique ways that make a difference to those who need it. You will see evidence of that commitment later in this Annual Report. Norb Kaczmarek was nominated by committee for re-election to the Board of Directors. There were no additional nominations; therefore, a mail ballot was not required In closing, we would like to thank you for your membership and trust. We would also like to thank our dedicated and talented staff. From branches to back office, our team is filled with hardworking, caring employees. Earning our members’ trust in the safety and security of their finances as well as providing 5-star service are goals we take very seriously. We are proud of what we have accomplished over the past 80 years and look forward to guiding you and your family for years to come.
Report of the Supervisory Committee The Supervisory Committee is responsible for ensuring the financial condition of Erie Federal Credit Union is accurately and fairly represented in the Credit Union’s financial statements. The committee members, Norbert Kaczmarek, Ruth Waidley, Rick Macer, Phyllis Ferguson, and William Liebel, also ensures established internal controls are effectively maintained and adequately protect the credit union and its members. Additionally, they oversee the internal audit department, who work independently, to conduct ongoing internal audits, to review policies and procedures to mitigate financial, operational, and compliance risks facing the Credit Union, and to assist the NCUA (federal regulator) with their annual examination. 4
Norb Kaczmarek, Chairman, Supervisory Committee
In order to meet the financial responsibilities, the committee retained the services of CliftonLarsonAllen LLP., an independent CPA firm, to complete an annual audit of EFCU’s financial statements for year ended March 31, 2016 and to verify accuracy of members’ account statements. This year, as is customary, an unqualified opinion was issued on the financial statements of the Credit Union. This means the financial statements fairly represent Erie FCU’s financial results and that practices and procedures followed are in accordance with generally accepted accounting principles. If you have a question relating to the financial health or management of the Credit Union, please do not hesitate to contact us. We are grateful for the opportunity to serve you.
Getting STRONGER every year! FINANCIAL HIGHLIGHTS Deposits: $404,061,908.54 Assets: $455,271,078.46 Loans: $225,565,632.76 Membership: 54,479 at 12/31/16
Saving our members money is what we do Whether you’re in the market to buy or sell a home, Erie FCU can save you hundreds or even thousands of dollars through our Realtor Rebate Program. We have partnered with a group of experienced real estate agents from the local area to provide highly personalized service, professional advice and a rebate of 25% of their commission to our members*. In 2016, Erie FCU members received more than $30,000 in rebates as part of the credit union’s Realtor Rebate Program.
*To participate in Erie FCU’s Realtor Rebate Program, you must register prior to signing a Real Estate Sales Contract. Rebate information provided to member in listing/purchase agreement. All Erie FCU loans subject to credit approval. Contact the credit union for complete details. Membership eligibility required.
Survey Says! During the third quarter of 2016, we conducted a Member Satisfaction Survey. Such feedback gives the Board of Directors and our management team valuable insight into member opinion, preferences, satisfaction and loyalty. Needless to say, we were very pleased with the response rate as over 1,100 Members completed it! We felt the survey was an excellent way of gauging our successes, as well as areas to improve on. It was truly an honor to receive many wonderful
(and actionable) comments about our service, rates and convenience as well. One of the more important questions asked was simply this: “ Would you recommend Erie Federal Credit Union to your family, friends and neighbors?” Over 95% of you said you would. Thank you very much for your support and trust!
Strong Leadership Matters
Erie FCU’s 80 years of success is a combination of the vision, investments, and achievements of a dedicated Board of Directors and Supervisory Committee volunteers, management, and employees all working together to strengthen our credit union and support our membership.
It all started with a charter in 1936
When our founders signed the charter application on June 16, 1936, they probably could not have imagined the growth the credit union would experience over the next 80 years. Erie FCU has now become the largest credit union in Northwest Pennsylvania.
1936: Ten Teachers and a Dream... On June 9, 1936, a group of ten educators met at the Ford Hotel to discuss the possibility of forming Erie School Employees Federal Credit Union. The credit union began with 46 members, $241 in deposits and one loan for $50.00.
The credit union doubled to 94 members with its first Annual Meeting (June 25, 1937) at Erie Technical High School (now Central Tech).
The credit union had $138,000 in assets and 522 members. During this timeframe, the annual meeting grew so large it eventually was moved to the East Erie Turners where both floors were filled.
The Credit Union experienced its first merger with Halle FCU and began bringing in Select Employer Groups (SEG’s).
The Credit Union celebrated a half century of service.
A third addition to the East 38th Street office was completed including our first three drive thru lanes. Assets are now over $110 million and membership was over 13,000.
1990 The Credit Union entered the “computer age” with the purchase of its first PC, the IBM Personal System/1.
The cred assets and timeframe so large i the East
Via a merg Credit Uni offic
By the end of 2006, the Credit Union was serving 30,000 members with assets of $236 million.
The Credit Union was approved to expand its Community Charter to include Crawford County. By year’s end, the Credit Union reached $308 million in assets and 36,000 members.
The Credit Union’s first CEO, Norb Kaczmarek retires after 41 years with the Credit Union. Two new offices were opened, West 32nd Street and Walmart Supercenter
Moving on Up In May 2006, to accommodate its growing staff, the Credit Union purchased the former Attorney General building on East 36th Street to house its current Corporate office.
2016 The Credit Union celebrates 80 years!
Building a Brighter Tomorrow, Today. 6
Ground breaking began on the former Glenwood Elementary School which will be the future home of the Credit Union’s new corporate headquarters and full service branch (Grand Opening will be June of 2017)
dit union had $138,000 in d 522 members. During this e, the annual meeting grew it eventually was moved to t Erie Turners where both floors were filled.
1969: Welcome Norb!
In January 1969, a math teacher from Roosevelt School, Norb Kaczmarek, was hired as office manager. At this point, the credit union had grown to over $237,000 in assets and close to 700 members.
The East 38th Street office was officially opened in 1973. The credit union was growing quickly with assets now over $1,490,000 and 172 members.
In 1980, the Credit Union started offering checking accounts, IRA’s, ATM access and student loans. The credit union had over $9 million in assets and 3,169 members.
2003: The Charter Expands
The Credit Union built its first office from the ground up which became its third branch (Bayfront). By the end of the 90’s, the Credit Union had 45 employees and over 130 SEG’s.
In May 2003, the Credit Union was granted a Community Charter so it could serve all of Erie County.
Construction of the Credit Union’s sixth office, Zuck Road, was completed.
ger with Smith Erie, the ion acquired its second ce (Buffalo Road).
A New Name In September 2003, the Credit Union changes its name to Erie Federal Credit Union. In October 2003, the Credit Union merged with the County of Erie and Hammermill FCU’s – These mergers provided the fourth office, State Street and its fifth office, Hammermill on East Lake Road.
The Credit Union celebrated its 75th anniversary.
In April 2014, the Credit Union Appoints former COO, Brian Waugaman, as its new CEO.
The Credit Union merges with 1st Choice Community FCU adding two new offices at Schaper Avenue and in Edinboro.
Message from the CFO, Fred Tonty 2016 by the Numbers... Erie FCU completed another very successful year in 2016 as
income exceeded $2.7 million. Assets increased over $17 million as Erie FCU continues to expand its membership base in Erie and Crawford counties. Loans grew a robust 10%, far exceeding expectations as Erie FCU remains top of market in loan and deposit rates. Capital also increased to 11.25%, well above NCUAs adequately capitalized threshold of 7%. This is a testament to our continuing financial strength which is guided by the principles of safety and soundness. 2017 looks to be an exciting, yet challenging year, as many operational changes will be made in 2017 as we prepare for the opening of our new Glenwood branch and corporate facility. As Erie FCU has grown over the last 80+ years, it is finally time to expand our infrastructure to keep up with our growth in the Erie and Crawford county communities. While expenses are sure to increase, the Board and Management team of Erie FCU are confident that earnings will continue to be strong. Erie FCU will remain well capitalized and ultimately position itself for the long term to better serve our members.
Year Ending December 31, 2016
Member Loans $ 225,566,876 $ Allowance for Loan Losses (1,695,964) Cash 10,408,765 Investments 193,421,441 Building/Equipment 19,138,800 All Other Assets 8,751,145 Total Assets $ 455,591,063 $
204,416,936 (1,464,152) 14,723,029 201,339,010 11,419,045 8,559,528 438,993,396
Liabilities Member Savings $ 404,063,151 $ 390,783,298 Reserves 5,365,745 5,365,745 Unrealized Loss/Gain for AFS CMOs (431,912) (827,101) Undivided Earnings 45,901,774 43,161,956 Other Liabilities 692,305 509,498 Total Liabilities $ 455,591,063 $ 438,993,396
Earnings Loan Interest $ 11,214,873 $ 10,451,137 Income from Investments 3,244,219 3,186,558 Fee & other Income 6,967,512 6,359,799 Total Earnings $ 21,426,604 $ 19,997,494
Dividends Total Interest Expense
$ (2,578,697) $ (2,578,697)
$ (2,522,576) $ (2,532,919)
Operating Expense Compensation, taxes, Training $ 7,603,340 $ 6,987,064 Occupancy & Operation 3,482,349 3,476,194 Promotion & Education 694,120 754,765 Loan Processing 1,895,157 1,757,136 Outside Operation Service 863,367 760,253 Member Insurance 14,724 17,113 Federal Supervision 79,276 77,998 Other Expenses 1,521,534 1,377,210 Total Operating Expenses $ 16,153,867 $ 15,207,733
Is this the year you stop procrastinating about your Financial Plan? Some things to think about as you get started. Provided by Erie Advisors Look at your expenses and your debt. Take a look at your core living expenses (such as a mortgage payment, car payment, etc.). Can any core expenses be reduced? Investing aside, you position yourself to gain ground financially when income rises, debt diminishes and expenses decrease or stay (relatively) the same. Maybe you should pay your debt first, maybe not. Some debt is “good” debt. A debt is “good” if it brings you income. Credit cards are generally considered “bad” debts. If you’ll be carrying a debt for a while, put it to a test. Weigh the interest rate on that specific debt against your potential income growth rate and your potential investment returns over the term of the debt. Of course, paying off debts, paying down balances and restricting new debt all works toward improving your FICO score, another tool you can use in pursuit of financial freedom (we’re talking “good” debts). Implement or refine an investment strategy. You’re not going to retire solely on the elective deferrals from your paycheck; you’re to going retire (hopefully) on the interest that those accumulated assets earn over time, plus the power of compounding.
Brandon Armella, Stacey Iadeluca and Larry Amenta
Manage the money you make. If you simply accumulate unmanaged assets, you have money just sitting there that may be exposed to risk – inflation risk, market risk, even legal risks. Don’t forget taxes. The greater your wealth, the more long-range potential you have to accomplish some profound things – provided your wealth is directed. If you want to build more wealth this year or in the near future, don’t neglect the risk management strategy that could be instrumental in helping you retain it. Your after-tax return matters. Risk management should be part of your overall financial picture. Request professional guidance for the wealth you are (or could be) growing. A good financial professional should help to educate you about the principles of wealth building. You can draw on that professional knowledge and guidance this year – and for years to come.
2016 was a brand new year for Erie Advisors
Erie Advisors may be reached at
In July of 2016, we proudly rebranded our MEMBERS Financial Services Program and launched Erie Advisors. We felt that the new name more closely aligns the program with the credit union and better speaks to our
814-825-2436 opt. 1 Ext. 1624.
commitment of serving the community and our members. This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information should not be construed as investment, tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.
As we begin our 81st year of business, we are energized by the commitment and trust that our members have shown to Erie Federal Credit Union.
Our Family of Branches to Serve You: 1109 East 38th Street 518 State Street
1005 Greengarden Road
5500 Zuck Road
2436 Buffalo Road
1220 West 32nd Street
101 Washington Towne Blvd. (Edinboro, PA)
1825 Downs Drive
3503 Peach Street