Annual report 2015 new final

CREATING C NNECTIONS 2015 ANNUAL REPORT

Mission Statement First Community Credit Union is dedicated to providing the members of the community sound financial services in a personal, professional manner. The credit union is committed to the philosophy of “people-helping-people.�

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Table of Contents Message from Chairman

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Message from President/CEO

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Statement of Financial Condition

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Comparative Operating Statement

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Financial Graphs

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Audit Committee Report & Credit Committee Report

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Lending Services

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Branch Operations

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FCCU in Your Community

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Houston Texans Partnership

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Board of Directors and Senior Management

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Credit Union and Branch Management

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A Message from the Chairman of the Board As a longtime member of the Board of Directors at First Community Credit Union, it is always a pleasure to report on our strong financials, the security of our institution and our powerful connection to the communities we serve.

In 2015, the Greater Houston Area had its share of economic challenges with the downturn seen in the oil industry as oil prices finished the year well below where they started. However, there were lots of bright spots, too, in the Houston economy such as brisk home sales for the first three quarters of the year, a record number of vehicle sales and modest job growth.

First Community Credit Union saw our membership grow to 115,415. A net increase of 5.60% in new memberships.

In addition, many members took advantage of the benefits of being a credit union member: higher dividends on deposits and very competitive interest rates on loans. During the year, we received 34,643 applications for credit.

Our Gross Loans were up 13.93% to end the year at $910.04 million. A complete breakdown by loan type is available in the Credit Committee Report on page 9.

We continued to connect with the communities and school districts we serve as well as partner with local Chambers of Commerce to make a positive difference in people’s lives. Our participation in the Children’s Miracle Network, Breast Cancer Awareness and the Houston Fire Department Toy Drive were all significantly supported by our membership and for that we thank you!

With the forecasted economic condition in the Houston Market for 2016, we will have some challenging opportunities.

On behalf of the Board of Directors, rest assured that we are focused on making sound business decisions that will translate to a first-rate difference in our members’ lives.

Jerald Till Chairman of the Board FCC

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A Message from the President and CEO Our 2015 results demonstrate that First Community Credit Union is a strong, sustainable and efficient financial institution. We are well-capitalized with a strong net worth ratio of 8.29%.

To put this in perspective, a net worth position above 7% is considered well capitalized by our regulators.

As our membership grows, so do our assets, which is a measure of how well our members are utilizing the products and services FCCU has to offer. The credit union had great growth in our membership and significant loan growth during 2015. As loan demand increased, our delinquencies remain exceptionally low at .50% while charge offs were .39%. This tells me our membership values FCCU and has a strong commitment to honoring their financial obligations with us.

In 2015, we asked members to participate in our member survey and heard loud and clear that security is the most important aspect of choosing a financial institution. We are in full agreement and, as we have for decades, addressed security as a top priority. Cyber security became an even higher-profile matter in 2015 with the many security data breaches amongst retailers. With this in mind, we regularly update software to safeguard member information and protect the assets you have committed to us.

More and more is going on in the communities that we serve, and we are excited to participate where we can and increase the amount of time and financial resources we contribute. For our fifth consecutive year, we continued to partner with the Houston Texans as the Official Credit Union and raise funds for Breast Cancer Awareness. We joined forces with the Houston Fire Department again in 2015 on their toy drive and worked with our members to help provide toys to families truly in need. The membership of FCCU demonstrates such generosity for these and other charitable events.

Our commitment to our membership in 2016 is to grow responsibly, while listening and responding to your needs.

We appreciate each and every member for putting their trust in our financial institution and we look forward to serving them confidently and wisely in the months ahead.

Ron Downing President/CEO

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Statement of Financial Condition ASSETS

2015

2014

$23,286,598

$29,108,423

161,291,099

182,328,090

0

0

4,488,397

9,388,342

912,577,569

802,725,601

385,113

493,456

2,393,420

2,229,975

Other Receivables

4,830,107

4,609,116

Prepaid and Other Assets

6,365,806

5,923,760

26,283,545

25,814,180

9,480,170

8,848,292

$1,151,381,824

$1,071,469,235

2015

2014

$1,035,639,218

$970,502,014

Accounts Payable

7,447,398

5,601,689

Accrued Liabilities

13,789,019

7,721,427

$1,056,875,635

$983,825,130

Regular Reserves

13,213,020

13,213,020

Undivided Earnings

82,253,721

70,604,696

0

4,552,291

(960,552)

(725,902)

$94,506,189

$87,644,105

$1,151,381,824

$1,071,469,235

Cash Investments: Available for Sale Held to Maturity Other Investments Loans to Members, net Accrued Interest Receivable Investments Loans

Property and Equipment NCUSIF Deposit

TOTAL ASSETS LIABILITIES AND MEMBERS’ EQUITY Liabilities Members' Share Accounts

TOTAL LIABILITIES Members' Equity

Appropriated Undivided Earnings Accumulated Other Comprehensive Gain/Loss

TOTAL MEMBERS' EQUITY TOTAL LIABILITIES AND MEMBERS' EQUITY 6

Comparative Operating Statement 2015

2014

$34,472,622

$31,891,651

2,621,447

2,873,898

$37,094,069

$34,765,549

3,779,370

3,788,994

33,314,699

30,976,555

4,306,436

3,290,128

$29,008,263

$27,686,427

Fees and Service Charges

17,081,663

15,358,176

Other Non-Interest Income

3,201,521

3,141,581

$20,283,184

$18,499,757

Compensation and Benefits

22,588,961

20,325,535

Office Operating Costs

17,462,746

15,476,166

2,143,005

2,608,796

NCUA Premium Assessment

0

0

Other

0

0

Other-than-Temporary Impairment on Investments

0

0

$42,194,712

$38,410,497

$7,096,735

$7,775,687

Interest Income Interest on Loans to Members Interest on Investments and Cash Equivalents

TOTAL INTEREST INCOME Interest Expense Members’ Share and Savings Accounts

NET INTEREST INCOME Provision for Loan Losses

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES Non-Interest Income

TOTAL NON-INTEREST INCOME Non-Interest Expense

Education and Promotion

TOTAL NON-INTEREST EXPENSE NET INCOME

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Financial Graphs $910.0 $1,151.4

115,415

$1,071.5

$798.7

109,294 $680.0

103,122 93,907

Assets

(millions)

Membership

2015

2014

2015

2014

2013

2012

$496.6

2011

2015

2014

2013

2012

2011

86,227

2013

$824.7

$553.4

2012

$914.4

2011

$985.8

Gross Loans (millions)

Distribution of Loans

New Auto 32.78%

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Used Auto 30.36%

Commercial 11.74%

Real Estate 13.78%

Unsecured 9.85%

Other Loans 1.49%

Audit Committee Report Based on an in-depth independent audit of the operations of First Community Credit Union, the CPA firm of OCM & Co., CPAs and Advisors: A Doeren Mayhew Firm, concluded that, in their opinion, the financial position of FCCU, the operations and the cash flow for the year ending December 31, 2015, conforms with generally accepted accounting principles and practices.

As a state chartered credit union, FCCU has additional reviews of our accounting practices by the Credit Union Department for the State of Texas. Texas State Examiners, in their annual audit, found First Community Credit Union sound in both policy and practice. As such, FCCU continues to be federally insured by the National Credit Union Administration (NCUA).

Arlie Beckendorf Chairman, Audit Committee

Credit Committee Report Reviewing the lending policies and practices is the core responsibility of the Credit Committee. During 2015, the credit union experienced good growth in our lending portfolio as rates remained very competitive across the board.

Our loan officers reviewed 34,643 applications for consumer loans. These requests were for credit cards, auto loans, lifestyle and several types of real estate loans. FCCU funded $146.43 million and closed 2015 with a loan portfolio of $910.04 million. This represents a net increase, year over year, of 13.93%. Below is the breakdown by loan type: • Credit Card Loans • Direct Auto Loans • Indirect Auto Loans • Real Estate Loans • Other Loans • Commercial Loans

$ 49,588,896 $ 208,333,281 $ 319,872,760 $ 159,742,288 $ 66,329,229 $ 106,177,546

We are pleased that our members reached out to us for help in improving their financial lives. We encourage all members to take advantage of these benefits and reap the rewards: very competitive rates, online applications, easy closing process and the security and peace of mind that you are working with a credit union you know and trust.

Think First in 2016!

Doug Wilcher Chairman, Credit Committee

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Lending Solutions Making a major purchase means lots of decisions and choices. And if it requires a loan to fit into your budget, Think First and get peace of mind! In 2015, we were here to help thousands of members meet their lending needs and continue to be a preferred lender in the Greater Houston Area.

CONSUMER LENDING In 2015, we reviewed over 35,000 loan applications that were submitted for approval. These loans funded a variety of needs such as real estate, credit card, auto, debt consolidation and lifestyle. We even offer motorcycle, boat and RV loans to support our diverse membership needs. Applications are accepted at all 18 branches or save time and go online to apply at FCCU.org. Most loans can be decisioned quickly and funded electronically.

REAL ESTATE SERVICES The December 2015 headline from the Houston Area Realtors Association stated that slumping oil prices and limited inventory slowed home buying for the third straight month. While this was the market analysis, First Community Credit Union had an increase in home loan applications, closed home loans and total dollars funded in our real estate portfolio.

We had 3,150 applications for home loans during 2015. This was up slightly from 2014 as we reminded our members that their credit union is the best place to start when buying a home. We have a complete staff of real estate experts headed up by Vice President George Cheairs, who has 30+ years in the industry. This team of professionals will make the home buying process easy and convenient.

Using your home’s equity is also a popular and affordable source for a loan. Working with members for renovations, college funds or to consolidate debt in 2015, First Community provided solutions to fit their budgets.

The direct phone number to reach Real Estate Services is 281.856.9057. Connect with us first before you shop for your new home.

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COMMERCIAL SERVICES Many small businesses are searching for a better alternative to big banks and the fees they charge. At First Community Credit Union, we have the answer. A mix of deposit accounts, a business rewards credit card and commercial loans at competitive rates connect small businesses to the services and features they want and need. And while some accounts have a fee associated with them, we continue to offer free commercial checking and fees lower than most banks.

Our business membership increased in 2015 to 3,580 serving all types of businesses: Sole Proprietors, Partnerships, S Corps, LLCs and Corporations. Membership comes with a robust online banking program with features specifically for business owners to support direct deposit of payroll.

During 2015, we funded $34.97 million in new commercial loans. This was a net increase of 13.21% as it brought the commercial loan portfolio to $106.18 million. Our commercial business lenders group understands our community and their business needs. We look forward to working with additional businesses in 2016 and encourage members to move their business accounts to FCCU, your trusted partner.

LENDING SOLUTIONS are available for consumers and businesses alike. We are ready to evaluate your request when you need it and lend money where appropriate while protecting the assets of the membership of FCCU.

Don Mozingo Executive Vice President, Chief Lending Officer

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Branch Operations Branches are the primary connection point for many of the 115,415 members we serve and, while you may expect a decline in branch usage, we actually experienced an increase in 2015. Transactions increased by 1.64% to 1.86 million. We maintained 18 branches in the Greater Houston Area and remodeled two of those branches to incorporate new technology. The Sam Houston and Fry Road branches introduced Interactive Teller Machines (ITMs) to their members. This equipment allows us to handle teller transactions without a teller on site, thus increasing security for staff and members alike. These ITMs, in coordination with a remote teller, added 24,908 transactions to the transaction total. Another 77,369 items were deposited using our UDeposit mobile technology. The UDeposit adoption rate has increased by 54.16% making it easier and more convenient for our members to make a simple deposit without visiting a branch.

Financial Service Representatives are available at all branches to assist with opening new memberships, add an account or answer a variety of questions. They are also the face of our in-person lending process meeting our members’ loan needs such as auto, credit card and home loans. Instant issue credit and debit cards have been available in our traditional branches for more than a decade offering convenience to our members.

We respect your time and with life seemingly getting busier, we now offer an online appointment feature to assist you in setting up appointments to meet with a Financial Service Representative (FSR). Simply go to FCCU.org and on the homepage just below the Locator Guide is a link to “Make an Appointment”. We appreciate being your financial partner and want to stay connected to you as your financial needs change.

TJ Tijerina Executive Vice President, Chief Operations Officer

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Alief Education Foundation Award

Blood Drive

Operation Stocking Stuffer Toy Drive Kick-off

Scholarship Social 2014

Operation Stocking Stuffer Toy Drive Pick-up Red Ranger Party

Scholarship Social 2013

CMN - Miracle Blizzard Day

Scholarship Social 2015

Chamber After Hours Operation Stocking Stuffer Toy Drive Shopping

Summer Survival Food Drive

FCCU in Your Community In 2015, First Community Credit Union was busy once again in the communities we serve. In addition to our service, we supported many local schools and charities through in-kind and financial donations. Over $78,000 donations were made to 66 school events or charitable causes throughout the year. Plus $28,000 was contributed towards the education of 7 college students who each won a scholarship through our annual program. This brings our college scholarship program since 2007 to an exciting $100,000.

Beyond the walls of FCCU, we supported Children’s Miracle Network on several occasions including buying Blizzards on Miracle Treat Day for random customers of Dairy Queen Restaurants. There was an element of surprise in the goodwill that we shared; plus the restaurants were giving back proceeds to Children’s Miracle Network. This was a win-win for everyone!

Other annual events that supported so many in need included: · Summer Survival Food Drive feeding hungry families during the summer school break. · Candy Sale supporting the efforts of the Cornerstone Credit Union League for Credit Union Advocacy. · Pink on Parade raising funds for Breast Cancer Awareness. We took this one to Texans fans at a game in October and raised over $500 for a total contribution of $8,400. · Operation Stocking Stuffer was accomplished in partnership with the Houston Fire Department

to provide toys for children in need at Christmas. This year was a record year for the drive which collectively raised more than $50,000 and provided 4,413 families (3-5 children each) with toys!

None of these events would be successful if it wasn’t for the caring and generosity of the members and staff of First Community Credit Union.

Cheryl McCullough Executive Vice President, Chief Development Officer

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Houston Texans Partnership When it comes to defining what makes FCCU different, we have to point to our Texans Checking program.

As the Official Credit Union of the Houston Texans, we hold the exclusive rights to this checking account.

But our partnership goes well beyond offering a specialty checking account with the Texans Debit Card.

Together, we make a difference in education and honor teachers that go above and beyond for their students. This is what stands at the core of this partnership.

After five years of the Stars in the Classroom Program, we have now honored 51 teachers. We have experienced an increase in the number of nominations we get year over year and in 2015, we selected 10 teachers from approximately 200 nominations. Our First Community Credit Union Spokesman, Houston Texans Linebacker, Brian Cushing (#56), and his teammates, Wide Receiver, Cecil Shorts III (#18) and Running Back, Chris Polk (#22) visited the classrooms of our winning teachers. Most were surprised by the visit and the player brought an added measure of fun to their classroom. Nominations for 2016 will be accepted in the fall to continue this rewarding program.

We also sponsored the TORO Shoots for the STAAR program sending TORO out to 50 elementary schools to meet with third, fourth and fifth grade students and shine a positive light on the importance of the STAAR test. We are thrilled these programs will continue in 2016.

Autographed merchandise, tickets to games, trips to the Big Game and passes to the VIP tent at the Texans Training Camp are extra opportunities that are only available with our Texans Checking Account. Join a winning team with Texans Checking and join the other fans who have found the best checking account available in Harris, Fort Bend and Montgomery Counties.

GO TEXANS!

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Stars in the Classroom

Texans Winners Texans Winners

Stars in the Classroom

Training Camp

TORO Shoots for the STAAR

Stars in the Classroom

BIG Game Winner

Stars in the Classroom

Stars in the Classroom

Stars in the Classroom Banquet

Board of Directors

Jerald Till

Sally Moseley

Julie Eisenhauer

Chairman

Vice Chairman

Secretary

Treasurer

Term Expires: March 2016

Term Expires: March 2018

Term Expires: March 2018

Term Expires: March 2017

Rob Hauck

Arlie Beckendorf

Robert Schumacher

Director

Director

Director

Term Expires: March 2017

Term Expires: March 2016

Term Expires: March 2017

Douglas Wilcher

Senior Management

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Ron Downing

Cheryl McCullough

Keith Domingue

Rito Garza

TJ Tijerina

Don Mozingo

President/Chief Executive Officer

EVP/Chief Development Officer

EVP/Chief Financial Officer

EVP/Chief Information Officer

EVP/Chief Operations Officer

EVP/Chief Lending Officer

Credit Union Management Sr. Vice President – Accounting Sr. Vice President – Lending Sr. Vice President – Marketing & Business Development Sr. Vice President – Operations

Tricia Smith Randal Ward Nancy Trennel Velsie Borja

Vice President – Asset Recovery Vice President – Audit & Compliance Vice President – Business Development Vice President – Call Center Vice President – Commercial Lending Vice President – Consumer Lending Vice President – Fraud Management Vice President – Human Resources & Staff Development Vice President – Indirect Lending Vice President – Information Technology Vice President – Product Management Vice President – Point of Sale Lending Vice President – Real Estate Vice President – Special Services

Mark Palomo Matt Smith Melinda Storrs Stefanie Addis Patrick Thomas Jill Vinson Robbie Henegar Katie Rigby Michael Hosen Jon Hartman Jody Kohlmaier Derik Wilcox George Cheairs Karon McMahan

Branch Management Vice President – Alief Vice President – Barker Cypress Vice President – Champions Vice President – Cinco Ranch Vice President – Copperfield Vice President – Fairfield Vice President – Fry Road Vice President – Grand Parkway Vice President – Jones North Vice President – Katy Market Vice President – Sam Houston Vice President – Sienna Plantation Vice President – Spring Branch Vice President – Spring Market Vice President – Sugar Land Vice President – Technip Vice President – The Woodlands Vice President – Tomball

Joy Gonzalez Kim Lemex Andrew Meese DeAndre Massey Arthur Gordon Kim Lemex John Littler Melissa Walls Yesi Gonzales Alex Samoilov Ed Dobranich Alex Barrero Larry Pugh Kelly Fay Lana Huff Jamie Drohan Chris Gagne Mark Vinson 19

Think First! ® 2 8 1 . 8 5 6 . 5 3 0 0 | F C C U. o r g