2018 FCCU Annual Report

MORE THAN JUST A CREDIT UNION 2018 ANNUAL REPORT

BUILDING COMMUNITY BUILDING RELATIONSHIPS BUILDING FUTURES

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 More Than Just a Credit Union

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Message from the CEO and the Chairman of the Board

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Credit Committee Report and Audit Committee Report

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Statement of Financial Condition

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Comparative Operating Statement

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Financial Growth and Distribution of Loans

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Lending and Commercial Services

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Technology 12

Branch Operations

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Community and Texans

14 –15

Board of Directors and Executive Management

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Credit Union Management

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First Investment and Retirement Planning Center

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BUILDING COMMUNITY | BUILDING RELATIONSHIPS | BUILDING FUTURES

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MORE THAN JUST A CREDIT UNION

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A MESSAGE FROM THE CEO

At First Community Credit Union, we are much more than just a credit union – we constantly strive to build strong communities, strong relationships and a stronger future for our members. In order to achieve the success we had in 2018, our central focus was you, the members. To improve the member experience, it was important to create more efficiency in our internal processes for faster, more convenient service. With this being a major goal for the year, hard work yielded positive results for both our staff and members.

In a world where everything is at people’s fingertips through the use of a mobile device, we strived to provide the latest technology to make banking and day-to-day operations as easy and seamless as possible. Our eBranch was remodeled to add additional staff in order to facilitate this First-Rate experience. Many members are now signing documents electronically through their mobile device, opening a new or additional account or applying for and closing a loan, which has saved our members time in their busy days. In addition, donation requests and our scholarship application moved from a manual paper process to an electronic process providing quicker decisions for our members. Plus, we have enhanced the technology at our branches with several upgrades to provide a more modern look and feel along with the new technology.

As part of the FCCU family, protecting members’ finances is the most important thing we are responsible for. Enhanced fraud protection measures were implemented this year, in addition to, our SecurLOCK Equip app and Fraud text alerts which have aided in members identifying fraud faster through real-time alerts.

Consistent growth of our financials shows how First Community continues to build our future. We closed out the year with our assets at $1.424 Billion. Our success is a team effort, which includes our board of directors, management team, staff and our members that trust us with their financial needs. First Community is here for you. We look forward to 2019 and have already begun the work to make our relationship stronger.

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Ron Downing President/CEO

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A REPORT FROM THE CHAIRMAN

On behalf of the Board of Directors of First Community Credit Union, we thank our members for placing their trust and confidence in us. 2018 showed great leadership at the credit union by keeping the member’s top of mind to ensure we provide the First-Rate service and banking experience that we promise.

First Community Credit Union’s membership increased to 129,190 members. Our loans grew 4.22% due to extremely aggressive rates that provided affordable loans to assist our members. The breakdown of our loan portfolio can be found on page 10 of this report.

People-helping-people is a passion for not only the board but our employees as well. 2018 illustrated this principle through increased community service, whether packing lunches for children or having teams that participated in the Northwest Heart Walk in partnership with the American Heart Association, having a team ride in the BP MS 150 in partnership with the National Multiple Sclerosis Society or providing 33 local high schools with financial literacy materials to teach our future generations how to develop successful financial habits in life.

In addition, we donated over $100,000 to schools, charities and community organizations and continued our tradition of awarding scholarships to deserving students entering college.

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The Board is committed to supporting our community. We are honored to serve our fellow credit union members and we look forward to continuing to make a First-Rate difference in our members’ lives in 2019.

Robert Schumacher Chairman of the Board

Reviewing the lending policies is the core responsibility of the Credit Committee. During 2018, the credit union experienced a net growth of 4.22% in our lending portfolio as rates remained very competitive across all loan types.

Our loan officers reviewed 56,706 applications, which included auto loans, credit cards, personal loans and real estate loans. FCCU funded $397.85 million and closed 2018 with a loan portfolio of $1.099 Billion.

Our focus is to ensure members continue to receive the most competitive rates possible and ensure they find the perfect loan to accomplish their

goals. Expanding the loan programs we offer, especially in the Real Estate world, allowed more members to find the right home loan so they could start building their future, and memories, in their new home.

We encourage our members to visit FCCU for the loans they need to help build their financial success. Members reap the rewards of competitive rates, our improved online application and closing process as well as peace of mind that First Community is a trusted source and partner in building their future.

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CREDIT COMMITTEE REPORT

Doug Wilcher Chairman, Credit Committee

AUDIT COMMITTEE REPORT As a state chartered credit union, FCCU has additional reviews of our lending and accounting practices by the Credit Union Department of the State of Texas and by Federal Examiners with the National Credit Union Administation (NCUA). Texas State Examiners, in their annual audit, found First Community Credit Union sound in both policy and practice.

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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, 2018, conforms with generally accepted accounting principles and practices.

Sally Moseley Chairman, Audit Committee

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STATEMENT OF FINANCIAL CONDITION

ASSETS

2018

Cash

$105,088,204

LIABILITIES AND 2017 MEMBERS’ EQUITY $104,899,782

Investment Held to Maturity Other Investments Loans to Members, net

161,975,612

138,604,614

0

0

1,698,400

4,511,600

1,097,449,391

1,053,853,064

Accrued Interest Receivable Loans

2017

$ 1,257,156,666

$1,203,761,386

Accounts Payable

7,372,929

8,505,185

Accrued Liabilities

25,473,019

27,080,824

$1,290,002,614

$1,239,347,395

13,213,020

13,213,020

122,990,357

106,119,203

0

0

(2,734,597)

(1,338,598)

$133,468,780

$117,993,625

Liabilities Members’ Share Accounts

Available for Sale

Investments

2018

TOTAL LIABILITIES Members’ Equity

483,699

284,222

Regular Reserves

3,076,092

3,468,284

Undivided Earnings

Other Receivables

5,470,572

5,044,563

Appropriated Undivided Earnings

Prepaid and Other Assets

8,424,400

8,251,750

Accumulated Other Comprehensive

28,208,880

27,725,303

11,596,144

10,697,838

Property and Equipment NCUSIF Deposit

TOTAL ASSETS

$1,423,471,394 $1,357,341,020

Gain/Loss

TOTAL MEMBERS’ EQUITY TOTAL LIABILITY AND MEMBERS’ EQUITY

$1,423,471,394 $1,357,341,020

COMPARATIVE OPERATING STATEMENT 2018

2017

$44,977,340 5,559,805

$41,174,856 3,332,123

TOTAL INTEREST INCOME

50,537,145

44,506,979

Interest Expense Members’ Share and Savings Accounts

8,131,088

5,796,822

42,406,057

38,710,157

4,235,000

5,187,000

$38,171,057

$33,523,157

20,959,075 5,375,415

18,852,204 3,647,622

26,334,490

22,499,826

24,230,101 20,374,852

21,816,766 18,214,379

3,029,440 0 0 0

2,642,142 0 0 0

47,634,393

42,673,287

$16,871,154

$13,349,696

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

NET INTEREST INCOME Provisions for Loan Losses

NET-INTEREST INCOME AFTER PROVISIONS FOR LOAN LOSSES Non-Interest Income Fees and Service Charges Other Non-interest Income

TOTAL NON-INTEREST INCOME Non-Interest Expense Compensation and Benefits Office Operating Costs Education and Promotion NCUA Premium Assessment Other Other-than-Temporary Impairment on Investments

TOTAL NON-INTEREST EXPENSE NET INCOME

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FINANCIAL GROWTH

DISTRIBUTION OF LOANS

ASSETS 2014 2015 2016 2017 2018

$1.072 B $1.151 B $1.249 B $1.357 B $1.424 B

REAL ESTATE 23.64%

COMMERCIAL 14.52%

GROSS LOANS 2014 2015 2016 2017 2018

LOANS

$680 M $799 M $910 M $1.054 B $1.099 B

UNSECURED 10.46%

MEMBERSHIP 2014 2015 2016 2017 2018

103,122 109,294 115,415 125,229 129,190

AUTO

NEW 20.77%

USED 26.95%

OTHER 3.67%

Helping members and businesses build their future by providing a loan that fits the member’s budget is the goal of First Community’s Lending team. FCCU is proud to be a trusted resource when our members need loans. We are always here to assist our members with any of their financial needs.

CarFax was added as a tool to assist members searching for a new or used vehicle. The use of CarFax has assisted many of our members from purchasing a “lemon.” With our competitive rates, the ease of online applications and quick closing, we provide our members a seamless and stress free experience. In 2018, 73% of all loans approved were funded, our highest booked to approve loan percentage in our credit union history. Whether purchasing a new car, home or a business, FCCU is proud to be a partner in making our members dreams become a reality.

BELOW IS THE END OF YEAR BREAKDOWN OF OUR PORTFOLIO BY LOAN TYPE: CREDIT CARD LOANS

$ 62,169,944

AUTO LOANS

$ 501,809,927

AUTO LEASES

$ 22,427,940

REAL ESTATE LOANS

$ 259,703,504

OTHER LOANS

$ 93,063,060

COMMERCIAL LOANS

$ 159,483,429

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FCCU is proud to have played a part in helping local businesses grow and prosper.

Our loan officers take the time to recommend the loan and services that will help you build the future of your company.

Commercial Lending includes financing for land, office buildings, shopping centers or small retail or owner occupied space. In 2018, our commercial lending portfolio increased by 9% to $159.44 million dollars.

With our complete suite of business services including checking and savings accounts, business credit cards, Treasury Services including Sweep Transfers, to maximize your savings, Merchant Services, ACH payroll and payments and a dedicated commercial online banking platform – FCCU has the tools to support the daily operations side of the business.

FCCU is proud to be a resource for business owners in the surrounding Houston area.

Real Estate

FUTURE

LENDING SOLUTIONS

COMMERCIAL LENDING AND TREASURY SERVICES

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TECHNOLOGY

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Deployed ITM enhancements which allows the machines to double as an ATM

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Improved security standards with enhancements of biometric authentication

FUTURE

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Implemented efficiencies internally and simplified processes to provide members with the answers they are looking for

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Scholarship application moved from a paper application to being electronic

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Donation requests moved to an online platform

Members visit branches for a number of reasons, or they may call our call center to speak with a representative regarding a loan or simply to ask a question. Building relationships with our members is at the heart of our member experience. It is vital to First Community to provide service, financial advice and education to guide our members on the right financial path.

While many members visit our branches for that human touch, the trend is leaning towards more technology and self-sufficiency. In order to provide a balanced mix of in-branch service and selfsufficiency, several branches underwent a remodel to install Interactive Teller Machines (ITMs) and

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BRANCH OPERATIONS FCCU’s eBranch provides the complete electronic experience. eBranch offers self-sufficiency to open a new account or add an additional account or apply and close on a loan through the online channel.

All documents are signed electronically on a computer or a mobile device, speeding up the process and saving our members time and a trip to a branch.

RELATIONSHIPS

provide an updated modern experience. ITMs allow members to make quicker visits to our branches for deposits and withdrawals.

ITMs in the drive through or at in-store branches provide extended hours so members don’t have to rush to get to the credit union after work. By adding this new technology in the branches, ITMs provide added security for our members and employees. Improved speed of transactions plus added security is an all around win-win. In 2018, our remote tellers processed 349,362 transactions for our members.

Plus, ITMs in the drive through areas double as an ATM which means members have more ATMs available to them.

If you unlock your smartphone with a fingerprint, you know just how easy it is to access your phone quickly. FCCU brought this biometric technology to the credit union to provide members with more freedom and self-sufficiency when accessing their safe deposit box.

Over the next several months, all of our branches that have Safe Deposit Boxes will offer this new service. No more signing in to have an employee let you into your box; members will simply use their palm to gain access to their Safe Deposit Box now.

Another initiative to support our members is enrolling our personal bankers to become Certified Credit Union Financial Counselors.

Currently, 60% of our personal bankers are certified to provide the guidance that members seek when it comes to their finances.

No matter what your preference, in-branch or online, FCCU has the right option for you to conduct your banking your way. First Community is here for you.

We look forward to bringing more convenience to our members in 2019 with new features to continue to make banking more convenient.

Red Nose Day

Texans Tailgate Winner

Coloring Book Winner

AHA Heart Walk

BIG Game Winners

Scholarship Winners

HFD Toy Drive

MS 150

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COMMUNITY

Giving back to the communities we serve is in First Community Credit Union’s DNA – it’s what we do. Building stronger communities means celebrating our successes and helping others in times of need. Since 1954, community has been a focus for First Community Credit Union and over the years we continue to expand our footprint through community outreach, financial literacy and donations to numerous organizations. With our eye on education, we work with the Houston Texans and other community groups to benefit our teachers and schools. For the eighth year, FCCU partnered with the Houston Texans, as the Official Credit Union of the Houston Texans, to honor and celebrate ten teachers that made a difference in their classroom. Students nominated their teacher explaining why they felt the teacher made a difference in their lives and should be recognized as going above and beyond. Houston Texans Linebacker, Brian Peters (#52), surprised each of these teachers in their classroom and FCCU donated $500 back to the winning teacher’s school district, for a total of $5,000, going back to schools in our communities. We will continue this program in 2019 and will begin accepting nominations in the fall. Also, our friend TORO visited 50 schools with the TORO Shoots for the STAAR program that is sponsored by FCCU. This program provides test-taking tips and the best ways to prepare for the challenge of the STAAR test so students can ace it!

Stars in the Classroom

We are also proud to support organizations throughout the Greater Houston area through charitable donations and community outreach. FCCU donated over $100,000 to local charities. Starting with our Food Drive which benefits local food banks, helping pack meals for kids, our MS 150 team, our American Heart Association Heart Walk team, our Annual Operation: Stocking Stuffer Toy Drive in partnership with the Houston Fire Department, awarding scholarships for college-bound students, Children’s Miracle Network, building financial awareness for both teens and adults and so much more. The work has only just begun. Continuing to build a strong community will always be a mission for FCCU.

Food Drive

12 Days of Christmas Winner

COMMUNITY

FCCU IN YOUR COMMUNITY

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BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT

Sally Moseley

Douglas Wilcher

Chairman

Vice Chairman

Secretary

Treasurer

Term Expires: March 2019

Term Expires: March 2021

Term Expires: March 2020

Term Expires: March 2021

LEADERSHIP

Robert Schumacher

Arlie Beckendorf

Rob Hauck

Julie Eisenhauer

Jerry Till

Director

Director

Director

Term Expires: March 2020

Term Expires: March 2020

Term Expires: March 2019

Ron Downing

Cheryl McCullough

Keith Domingue

Rito Garza

TJ Tijerina

Don Mozingo

Nancy Trennel

President and Chief Executive Officer

Chief Development Officer

Chief Financial Officer

Chief Information Officer

Chief Operations Officer

Chief Lending Officer

Chief Marketing Officer

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SENIOR MANAGEMENT

VICE PRESIDENTS Mark Palomo Matt Smith Stefanie Addis Mark Vinson Mike McGee Larry Hook Jill Vinson Steve Gregg Darrell Storrs Robbie Henegar Jesse Rocha Amber Magee Stephen Martin Jody Kohlmaier George Cheairs Karon McMahan Sabrina Atkinson

Asset Recovery Audit & Compliance Call Center Card Services Commercial Lending I Commercial Lending II Consumer Lending Enterprise Risk Management Facilities & Construction Management Fraud Management Indirect Lending Marketing Network & Infrastructure Product Management Real Estate Special Services Staff Development

Accounting Development & Project Management Human Resources Information Technology Lending Operations Operations

BRANCH VICE PRESIDENTS Denise Farnon DeAndre Massey Juan Alatorre Diego Daza John Littler Kim Lemex Joy Gonzalez Julie Scott Juan Alatorre Jonathan Estes

Aliana Alief Barker Cypress Bunker Hill Champions Cinco Ranch Copperfield eBranch Fairfield ITM Branch

Taylor Borja Eric Vasquez Alex Samoilov Larry Pugh Kelly Fay Lana Huff Jamie Drohan Andrew Meese Chris Gagne

Katy Market Sam Houston Sienna Plantation Spring Branch Spring Market Sugar Land Technip Tomball The Woodlands

LEADERSHIP

Tricia Smith Jennifer Kilgore Katie Rigby Jon Hartman Randal Ward Velsie Borja Arthur Gordon

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FIRST INVESTMENT AND RETIREMENT PLANNING CENTER At First Community, we make available the FIRPC wealth management program as a resource for our members’ investment and insurance needs.

It’s never too early to start planning for retirement, college tuition for your children or to protect your family with life insurance. Let our investment team work with you to help set your goals and structure ways for you to reach them. Sergio is a Certified Retirement Planning Counselor and Brian is a Certified Financial Planner which provides you with the advisors you deserve no matter what your goals are. You can schedule a no cost, no obligation appointment with one of our wealth management advisors by calling 281.856.5644.

The FIRPC program is supported by CUNA Brokerage Systems (CBSI) and these funds are separate from those deposits that are held by First Community Credit Union.

Sergio Garza, CRPC

®

VP of Wealth Management

• Retirement Planning • Asset Allocation • Mutual Funds • College Funding | 529 Plans

Brian Turpen, CFP®

VP of Wealth Management

• Annuities • Stocks, Bonds, Trusts • Life, Disability or Long-Term Care Insurance

*Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. 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. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America. The CFP® certification marks are not affiliated with CUNA Brokerage Services, Inc. CERTIFIED RETIREMENT PLANNING COUNSELOR (SM) and CRPC® are registered service marks of the College for Financial Planning®.

FR-2455196.1-0319-0421

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VISION STATEMENT “Every member will recommend First Community Credit Union to their family and friends.”

MAKING A FIRST-RATE FINANCIAL DIFFERENCE IN OUR MEMBERS’ LIVES