APPLE FEDERAL CREDIT UNION Annual Report 60 Years of Service 2016
Apple Federal Credit Union Our Mission Member trust is our number one priority. We earn trust by: Providing caring, personal service Delivering competitive financial solutions Supporting education and the communities we serve. Our Vision We will improve lives and fulfill dreams. Board of Directors Dr. Calanthia Tucker Board Chair Linda Burke Vice Chair Dr. Eric Brent Treasurer Linda Whitfield Secretary Larry Kelly President/CEO Dr. Angela Atwater Board Member Dr. Larry Byers Board Member Mike Engley Board Member Thomas D. Garber Board Member Steve Sengstack Board Member Steve Straight Board Member Supervisory Committee Advisory Board Thomas D. Garber Chairperson Dr. Scott Bauer Suyi Chuang Joyce Bell Rodney Clemmons Leland Smith 2 Michael Sidebotham Jamie Baisden
Dr. Calanthia Tucker Board Chair At Apple Federal Credit Union, this past year marked our 60th anniversary a proud moment and one I personally would like to thank you all for helping us achieve. Fiscally, 2016 was a great year, with significant growth and positive momentum, strong financial performance and ongoing community involvement. Today, Apple FCU remains in sound financial position, thanks to its dedicated staff and leaders who have worked hard to keep Apple strong, secure and viable for our members. Overall, the results reflect how prudently the Credit Union acts to protect our members financial assets, and how we strategically expand our products and services. Apple s growth has been demonstrated in many areas. We completed a successful Online Banking and Mobile App upgrade. We welcomed more than 20,000 new members to the Apple family, saw steady increases in deposits and experienced tremendous loan activity. A continued source of pride for me is Apple s support for organizations and charities. Whether it is aid to struggling families, support for our school system partners or helping students achieve higher education through scholarships, the Credit Union continued to demonstrate its commitment to the communities in which we live and work. Apple employees donated more than 1,000 volunteer hours with various Northern Virginia organizations. Under the new leadership of Executive Director, Steve Sengstack, the Apple Federal Credit Union Education Foundation awarded more than $800,000 in scholarships and grants to area youth, educators and organizations throughout our region. The Credit Union proudly sponsored Collect for Kids in partnership with community non-profits and school organizations donating backpacks and school supplies to local students in need. Apple also partnered with NBC Washington s Backpacks 4 Kids drive, as well as Changing Minds, a series of public service announcements addressing bullying prevention. At the 2016 annual strategic planning session, Apple s Board of Directors and the Credit Union s executive team developed new mission and vision statements. These changes summarize and solidify our keen awareness of what matters most our members. Excitement started to build as we began construction on our new headquarters office in Fairfax in this past July. Message from the Board Chair The new, high performance office building at Fairfax Corner is designed to provide an innovative, engaging experience for our members and staff. It s one we know will help us continually attract, retain and motivate top performing employees who will work hard for our membership. The building is set to open in late 2017. We understand that the success we ve enjoyed in the past is not guaranteed in the future. We must continue to evolve: adapting to new technologies, appealing to new consumers and keeping pace with their rapidly changing priorities and expectations. We will work hard to earn your trust and to demonstrate that our approach to service and financial integrity is different from other choices in the marketplace. I would like to take a moment to thank Mr. Larry Kelly as he approaches retirement, not only for his leadership as President and CEO, but also for the more than two decades of dedication and commitment he has given to Apple. The institution grew in every way under his guidance, and the Board intends to maintain this foundation of excellence as it completes a thorough, national search for his replacement. I am grateful for the commitment of all our staff, our dedicated volunteer Board of Directors and our loyal membership. Your support is what allows us to make a real difference in the lives of those we serve in our community; yesterday, today and well into the future. 3
Message from the President/CEO President/CEO Larry Kelly I d like to start by thanking everyone for a fantastic 60 th anniversary. This past year was cause for much celebration. We saw outstanding loan growth, invested in technology and security infrastructure, and hired more talented people to help assist your every day and future financial needs. One major initiative we tackled was to ensure we re meeting the demands of our electronic delivery channels and elevating convenience. We successfully upgraded our Online Banking system and Mobile App; changes which delivered new features and enhanced functionality. Member information security continued to be a primary focus at Apple FCU. We invested in technology that enables instant-issue EMV chip-enabled card replacements and activation at all of our branches. We deployed ID Scan technology at many branches, to improve security, confidentiality and convenience. Members also gained peace of mind with CardValet, a mobile app solution that helps manage debit card security and protection. Moving forward in 2017, we will continue to build our new headquarters facility at Fairfax Corner, utilizing a branch of the future planning mindset. At the same time, we re working hard to design a modern workplace that supports collaboration and productivity, ultimately attracting and retaining toptalent employees. Our goal is to remain competitive, relevant and forwardthinking when it comes to banking in the years ahead. Leadership changes lie ahead as I plan to retire in 2017. For nearly 22 years, I ve had the pleasure and honor to lead this great organization alongside our dedicated employees. It is time to pass the torch to someone who will continue to move Apple Federal Credit Union forward in innovative and strategic ways, while maintaining the organization s core values and operating philosophy. With a capable senior management team and staff, Apple is well positioned for its next phase of growth and development. I am proud to have been a part of the Apple family. What will not waver is our commitment to improve and simplify your financial life, to make it easier for you to do business with us and to work in your best interest. I feel privileged to have served so many of you as you ve sought to achieve your financial dreams. I truly appreciate your loyalty and membership. 4
Apple Federal Credit Union Education Foundation Apple Federal Credit Union Education Foundation, a conduit for the Credit Union s charitable activities, moved forward in 2016 by building upon past strengths and success, providing more than $800,000 in scholarships and grants to area youth, educators and organizations in Northern Virginia. Charitable Giving The Education Foundation assisted in raising more than $90,000 for charitable causes outside of the education realm, including Collect for Kids and the American Cancer Society. Student Scholarships Thirty-eight graduating, high school seniors were able to supplement their college expenses thanks to $5,000 scholarships. Every school system in the Apple FCU service area, and three education-based organizations, received individualized endowments for enriching educational initiatives. Teacher Induction Program Funding As school budget cuts threatened the integrity of local new teacher induction programs, Apple agreed to provide sizeable sponsorship grants to support such efforts in developing and retaining effective teachers within the following school divisions: Alexandria City Clarke County Fairfax County Falls Church City Fauquier County Frederick County (VA) Loudoun County Manassas City Manassas Park City Prince William County Shenandoah County Stafford County Providing new teachers with vital information about effective classroom management, lesson planning, and communication with students and parents, these freshman teachers are also given the opportunity to learn from seasoned educators. The grants ensured the 3,500 new teachers and 550 mentors and coaches entering the system would receive a top-notch orientation. Virginia Teacher of the Year The Foundation continued its support of the Virginia Teacher of the Year award, which honored individual excellence and achievement in classroom education. Regional winners were additionally recognized by the Foundation for their contributions. One hundred percent of all donations were directed toward charitable giving and were 100% tax deductible for contributors. 5
Message from the Loan Committee Loan Committee Chair Jeff Long Apple Federal Credit Union is committed to providing quality loan products and services to its members, helping to improve their lives and fulfill their dreams. 2016 proved to be a year in which Apple was able to help many members, originating more than 20,000 loans for $569,695,344. Apple s loanto-share ratio (funds on deposit versus funds loaned to members) increased from 94.33% at year-end 2015, to 95.21% as of December 31, 2016. Apple FCU s lending practices have always been conservative, a fact which has protected the assets of members and the Credit Union for the past 60 years. As a result, the Credit Union grew stronger and remained safe and secure. Loans for the year grew 10.51%, for a year-end total of $1,747,019,524. Apple continues to remain dedicated to its education roots by providing tuition loans for post-secondary education; outstanding balances totaled $23.8 million at year-end. Additionally, the education community takes advantage of our New Teacher Transition Loan and the Educator Visa Credit Card which uniquely offers no payments during the summertime months. Members continued to utilize Apple s HomeAdvantage program. This unique service assists members in the purchase or sale of a home, connects them with a trusted Real Estate Agent, vast property search options, and ultimately gains a partial rebate of their agent s commission at closing. In 2016, we served 101 buyers and sellers, resulting in total rebates of $199,000. To respond, as in the past, to business owners whose growth and success could benefit from assistance, Apple focused on helping our community thrive, increasing our Commercial Loan portfolio by more than 21%. We completed multiple technological advances to improve efficiencies during the year, affording us the ability to get more loans disbursed to more members in less time. Additionally, our Credit Cards enjoyed the added capabilities of Samsung and Android Pay and Visa Checkout, and we added the ability to make payments within the upgraded Mobile App. Given that the world s largest financial institutions saturate our local market, Apple must prove its value as a lending provider to meet member demand. Since the inception of online member reviews in the spring of 2015, more than 1,160 reviews have been submitted for our Loan and Credit Card products, garnering a 4.80 rating out of 5 stars. Proven in this score and Apple s successes during 2016, the Credit Union has certainly drawn the distinction of a trusted lending source. In the year ahead, we ll continue to emphasize the overall welfare of our members through sound lending practices, and further empower a dedicated, dynamic staff that is passionate in its approach to helping members achieve their dreams. 6
Spotlight on Education Apple Federal Credit Union s tradition of service is deeply rooted in the belief that the support of community and education is vital at both the individual and local levels. BALANCE Financial Fitness Program Providing financial literacy and money management tools to students and adults is key to Apple s focus on serving the community. Free and confidential for all members to use, BALANCE is also provided via select Early Head Start and Head Start programs as part of their parent-education series in Fairfax, Loudoun, Prince William and Stafford Counties, and Northern Virginia Family Service. Financial Education Video Game & Curriculum by Visa Helping to tackle the importance of financial education, Apple continues to provide the Financial Football program to area middle and high schools. Financial Football is a free, NFL-themed educational video game and curriculum, developed by Visa Inc., where players put their fiscal knowledge to the test, combining the structure and rules of the NFL, with financial questions of varying difficulty. Mentoring & Math Readiness Providence Elementary School Since 2007, Apple has partnered with Providence Elementary School in Fairfax to provide mentoring and one-on-one math tutoring for kindergarten students. Student-Run Credit Unions (SRCU) Helping Local High School Students For more than 20 years, the SRCU program provides students with increased opportunities to develop work skills and financial fitness with branches in local schools. Due to the success of the program, Apple FCU assists other credit unions starting their own programs. 7
Message from the Supervisory Committee Supervisory Committee Chair Thomas D. Garber The Apple Federal Credit Union Supervisory Committee was established to safeguard member assets by ensuring that Board of Directors policies and operating procedures are executed in a timely, efficient and effective manner. The Committee is dedicated to certify that member programs and services adhere to government regulations and the strict guidelines established in our Bylaws. For the 2016 financial statements, Apple had an unqualified opinion audit rendered by the Doeren Mayhew Firm. They additionally conducted a verification of accounts during the year. Similarly, the National Credit Union Administration conducted a 2016 exam. Both organizations verified that Apple s business practices remain sound and comply with, or exceed, the standards set forth by the credit union regulatory agencies. These annual reviews are vital to assess and maintain the health of the Credit Union. In addition, Apple FCU s Bank Secrecy Act policies and procedures were independently tested in 2016 by Doeren Mayhew. This review was undertaken to establish that Apple FCU has the appropriate anti-money laundering detection systems in place to satisfy regulatory requirements. Apple s internal controls and suspicious activity report protocols were also surveyed to ensure proper compliance with government regulations. Doeren Mayhew confirmed during this assessment that Apple s management and staff adhere to all requirements set forth by the Bank Secrecy Act. To further strengthen operating effectiveness and financial soundness, Apple s Internal Audit Department performs a variety of operational and financial audits that verify proper adherence to regulatory and Credit Union policy. They also monitor organizational controls designed to protect Credit Union assets. During 2016, RSM LLP was contracted to help complete our internal audit plan and provide additional audit expertise. A sampling of the audits conducted included reviews of the Consumer Lending, Indirect Lending, Accounting, Debit Cards and Deposits operations. These reviews help to ensure that the credit union is operating in a safe and sound manner. Lastly, the vulnerability of Apple s computer network to outside entities was tested with two comprehensive security review audits performed by Slait Consulting and Polito, Inc. These in-depth assessments ensured that a dynamic security program was in place to protect the digital assets of the organization, and meet regulatory requirements for an independent thirdparty evaluation. Should members have a concern or comment that cannot be addressed by Apple Management, contact the Committee by writing to: Apple Federal Credit Union ATTN: Supervisory Committee P.O. Box 1370 Fairfax, VA 22038 All communications will remain confidential. 8
Social Responsibility Supporting our community is part of our identity. It s not new to us it s who we are. Northern Virginia Family Service: Thrift Shops Each month Apple employees volunteer their time to help stock merchandise, take inventory, tag items and more at the Centreville and Falls Church Clock Tower Thrift Shop, as well as the Manassas Save N Serve. Northern Virginia Family Service: Hunger Resource Center Throughout the year, Apple volunteers descended on the Hunger Resource Center at the SERVE Campus in Manassas to lend a helping hand. Volunteers assisted by stocking shelves, sorting produce and repackaging food items. 15th Annual Charity Golf Tournament Apple hosted its Annual Charity Golf Tournament with all proceeds - $70,000 raised - benefiting the American Cancer Society. Apple Shred Day Events Hundreds of members took advantage of the opportunity to have documents shredded on-site at Shred Day Events held at the Kingstowne, Manassas, Sterling, Springfield, Sudley Manor and Winchester branches. Collect for Kids School Supply Drive Apple s annual back-to-school supply drive had another successful year. Nearly all Apple branches served as supply donation sites. NBC4 Backpack Drive Apple partnered with NBC Washington to collect school supplies and backpacks for children in need throughout the Northern Virginia area. Bullying Prevention Awareness Apple partnered with NBC Washington during October in observance of National Bullying Prevention Month. Public service announcements, part of NBC4 s Changing Minds Initiative, aired on bullying prevention featuring Robert Sowell, vice president of community relations. Food Bank Collections Thousands of pounds of donated food was collected for the Blue Ridge Food Bank, Our Daily Bread/Food for Others and SERVE s Hunger Resource Center, making this the most successful food drive to date. Warm Coats Project: Operation Warm In partnership with Fairfax County Fire & Rescue, Apple helped distribute new winter coats to local children. Build a Village: Ending Homelessness in Fairfax County Apple joined with the Fairfax County Government Office to Prevent and End Homelessness, the Fairfax-Falls Church Community Partnership to Prevent and End Homelessness and the Northern Virginia Chamber of Commerce, to raise awareness and funds to benefit the homeless community. 16th Annual Holiday Fundraiser for Local Children The Credit Union staff donated, bolstered by a corporate match, more than $3,500 to purchase gifts for school-aged children living in Fairfax, Prince William, Stafford and Winchester communities. Community Events Apple supported several festivals and events, such as: Burke Centre Festival Centreville Day City of Falls Church Run for the Schools FCPS Leadership Conference Friday Night Live in Winchester GMU-Arlington Welcome Day Hampton Oaks Elementary School Career Day Haymarket Day Herndon Festival Kingstowne Anniversary Celebration Kingstowne Home Expo Manassas Fall Jubilee Mason Day Merrifield Festival Mt. Vernon/Lee Celebration Potomac Nationals Play Ball Kid of the Game Prince William Chamber of Commerce Community Nights with the Potomac Nationals Prince William Chamber of Commerce Connections 2016 Prince William Community Expo Red Cross Blood Drive Shenandoah Apple Blossom Festival South Riding Business Expo Stafford County National Night Out SterlingFest ViVa! Vienna! Winchester Home & Garden Show 9
Financial Condition Statement of Financial Condition Assets 2016 2015 2014 2013 Net Loans $ 1,727,660,355 $ 1,558,801,105 $ 1,302,467,057 $ 1,173,031,172 Cash and Cash Equivalents $ 154,246,949 $ 109,130,671 $ 158,670,045 $ 126,600,888 Other Investments $ 271,013,805 $ 321,883,666 $ 456,012,559 $ 462,779,255 Fixed Assets $ 59,762,570 $ 43,339,197 $ 42,286,778 $ 42,003,587 Other Assets $ 55,570,582 $ 60,045,616 $ 55,618,677 $ 41,584,212 Total Assets $ 2,268,254,260 $ 2,093,200,255 $ 2,015,055,116 $ 1,845,999,114 Liabilities 2016 2015 2014 2013 Notes Payable $ 185,531,489 $ 197,626,788 $ 237,771,356 $ 135,348,950 Other Liabilities $ 29,724,004 $ 22,307,672 $ 20,342,566 $ 18,752,222 Shares $ 1,834,842,030 $ 1,675,463,711 $ 1,575,017,392 $ 1,526,147,169 Reserves $ 18,598,953 $ 18,789,088 $ 20,512,956 $ 20,294,492 Undivided Earnings $ 199,557,784 $ 179,012,996 $ 161,410,846 $ 145,456,281 Total Liabilities $ 2,268,254,260 $ 2,093,200,255 $ 2,015,055,116 $ 1,845,999,114 Statement of Changes in Undivided Earnings Balance at Beginning of Year ADDITIONS 2016 2015 2014 2013 $ 179,012,996 $ 161,410,846 $ 145,456,281 $ 125,984,440 Net Income $ 20,544,788 $ 17,602,150 $ 15,954,565 $ 12,557,596 Adjustments $ 0 $ 0 $ 0 $ 6,894,244 Provisions for Losses $ 0 $ 0 $ 0 $ 0 Subtotal $ 199,557,784 $ 179,012,996 $ 161,410,846 $ 145,456,281 DEDUCTIONS Transfers to Reserves $ 0 $ 0 $ 0 $ 0 Balance at End of Year $ 199,557,784 $ 179,012,996 $ 161,410,846 $ 145,456,281 10
Financial Condition Distribution of Earnings Income $ 111,303,704 EXPENSES Personnel $ 38,179,427 Member Protection and Benefits Office Occupancy Expense $ 11,121,170 $ 5,163,745 Office Operating Expense $ 20,806,247 Other Expenses $ 6,620,495 Total Expense $ 81,891,084 Income Before Dividend $ 29,412,620 Net Income $ 20,544,788 Dividend $ 8,867,832 Expenses 6 % 18 % 8 % 19 % 34 % 5 % 10 % Dividend Office Operating Member Protection & Benefits Office Occupancy Personnel Other Reserves 200 MEMBERS (in thousands) 150 100 50 $ (in milliions) 0 2000 1500 1000 2010 2011 2012 2013 2014 2015 2016 Loans Shares 00 500 0 0 2010 2011 2012 2013 2014 2015 2016 11
81 50 37 Winchester 7 11 17 50 66 Gainesville 29 Ashburn 267 Sterling 7 Herndon 495 123 50 28 Falls Church Chantilly Vienna Arlington 50 Fair Oaks Fairfax Merrifield 395 29 City Centreville 236 Alexandria GMU Fairfax Station/ Sudley Burke Manor Springfield Kingstowne 123 Mt. Vernon Manassas 28 1 234 3000 Branch Woodbridge ATM Only 95 627 610 Stafford 1 CONTACT US P.O. Box 1200, Fairfax, VA 22038-1200 703-788-4800 800-666-7996 AppleFCU.org