2014 Annual Report
Technology.
Service.
Commitment.
Meeting Your Financial Needs
Your Way
Statement MISSION
JM Associates Federal Credit Union is a financial institution whose primary purpose is to provide the highest quality services to our members. In support of this mission, we are committed to: • Building customer-friendly relationships… • Managing the membership’s collective resources for the benefit of all… • Providing a wide range of competitively priced products, and… • Leveraging technology to maximize efficiency, while always protecting and maintaining member confidentiality.
JM Associates Federal Credit Union
Annual Meeting April 23, 2015 JM Family Enterprises 111 Building Auditorium Deerfield Beach, FL
Table of Contents Chairman’s Report .........................................................................................................................4 President’s Letter ............................................................................................................................5 Meeting Your Financial Needs, Your Way ........................................................................6 Financial Statements ...................................................................................................................8 Independent Auditor’s Report ........................................................................................... 34 Supervisory Committee’s Report ...................................................................................... 36 Board of Directors....................................................................................................................... 37
Chairman’s Report April 2015
Dear Member: I am pleased to once again provide the opening comments to this year’s Annual Report. I hope you find the report interesting, educational and maybe even entertaining. Your credit union is financially strong and well prepared to serve you in the future. It can be easy and sometimes repetitive to talk about financial success and what it means to you as the member. Financial strength to a credit union is like gasoline to a car. It is the foundation of what makes us “go” and what allows us to “move forward.” Art Mirandi
I want to stress the importance of financial strength, but emphasize that our greatest strength is our people. Without great people and dedication to service, our credit union would just blend in with many other financial institutions down the street. I am very proud of our people. The credit union management, staff and many volunteers bring everything together to deliver to you the products and services that you can also be proud of. Again, this is your credit union! Thank you to our members for your continued confidence and your business. Let us know what we can do for you! Sincerely, Art Mirandi Chairman of the Board JM Associates Federal Credit Union
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President’s Letter April 2015
Dear Member, The primary purpose of a credit union is to provide service to its members, as opposed to generating a profit. That purpose sets the tone for everything we do at JMAFCU. While it is necessary to generate some income to continue to operate, our focus is, and always will be, service. In the pages that follow, you will find financial reports for JMAFCU. A brief summary is that JMAFCU is financially healthy and doing well. After reading the reports, you should be assured that JMAFCU is headed in the right direction.
Jim Ryan
These financial reports are only part of the story. As a credit union, JMAFCU is different from other financial institutions. A credit union takes the deposits of one member and loans them to another member to generate interest income that can be used to pay dividends to the depositing member. JMAFCU needs borrowers as much as it needs depositors; members helping members. In addition, you are an owner of JMAFCU. The credit union exists to serve its members (owners). Ultimately, the overall progress of members like you dictates our success and the solid financial results enclosed. What you may not readily see in these financial reports, but is no less important, is JMAFCU’s commitment to serving its members through personal and electronic contact. You may speak with a real credit union associate face-to-face or by phone. It may be an associate you have spoken to for years. Have you ever spoken to the same person at another financial institution? JMAFCU also offers multiple electronic access methods, including phone, Internet and mobile, so you can have 24-hour access to your money. The more our members use electronic access, the more time we have to provide personal service to you. We are there when you need fast (electronic) or personal service. Another way JMAFCU is different is that we are supported by volunteers who, without the benefit of financial gain, contribute their time and talents. Volunteers serve on the Board of Directors, Supervisory Committee and as local representatives. If you have the opportunity, please thank them for a credit union committed to serving you. Strong financials, excellent member service, and committed volunteers and associates – your credit union. Thank you for being a member of JMAFCU, and please let us know how we can better serve you. Sincerely, Jim Ryan, CCUE President
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Meeting Your Financial Needs
Your Way
The theme for 2014, “Meeting Your Financial Needs, Your Way,” allowed JMAFCU the opportunity to show our level of dedication to meeting the needs of our members. By not only providing high quality products and services, but also by investing our resources in researching and discovering the best in technological advancements and security features, JMAFCU continues to ensure that we are doing all that we can to protect our members’ financial resources.
Get Verified. In 2014, JMAFCU introduced V.Me by Visa® to simplify the online
Technology.
payment process and to help protect members from fraudulent credit or debit card activity. V.Me, another line of defense against fraudulent account activity, allowed members to make online purchases without entering payment information on merchant websites. Considering the upward trend in mobile banking over the past year, JMAFCU’s SAFE Mobile has been a welcome addition to JMAFCU’s suite of electronic services, and we continued to see marked increase in usage in 2014. SAFE Mobile was upgraded to be compatible with IOS 8 and one lucky member was the winner of the new iPhone® 6 in our Abundant Benefits giveaway.
The JMAFCU website was upgraded to provide even greater mobile functionality and was also given a facelift for a fresh new look.
To provide greater CheckCard and Visa Credit Card support, JMAFCU upgraded our card services. This upgrade allows cardholders to speak with a live representative to report lost or stolen cards 24 hours a day, every day of the year. This service includes English and Spanish support. All calls are recorded to ensure quality and security.
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In a recent survey (Sept. 2014), 92.9% of members surveyed gave JMAFCU an
excellent/very good rating on products and services.
Knowledge is power. Free credit score review – For a time, JMAFCU offered
free credit score reviews to the entire membership. Loan officers scheduled appointments for members to review their credit files. Recommendations were made for score improvements.
Deerfield Beach branch office celebrated 25 years of service. South Florida members and associates know and love Mona Aliseo, who has served as Branch Manager for the entire 25 years.
Service.
JMAFCU continued our Financial Wellness Fairs, bringing together our members and business partners for informative and engaging expos. We took our financial information, products and services on the road to St. Louis, Mobile, Deerfield Beach, Commerce and Alpharetta. We had over 300 participants at these events, which lead to an increase in membership and increased understanding and usage of products and services.
Accel Members Financial Counseling has proven to be a valuable service and resource for our members. Member usage: Total call volume experienced a 12% increase from the previous year; first-time callers showed a 77% increase from the previous year. Debt Management Plans: Three members completed their plans and paid their debts in full during the last year!
Staff recognition – JMAFCU staff received eight Award of Excellence nominations.
Ally Rice, JMAFCU Branch Supervisor, was the 2014 Winner/Honoree.
JMAFCU’s long-standing commitment to providing the best in products and services continued our partnerships with Capital Mortgage, Accel Services,
Going green. 2014 saw a continued commitment to doing our part to help the
environment by encouraging members to receive their JMAFCU statements electronically. We currently have 2,419 members who receive their statements electronically. JMAFCU’s print newsletter, News You Can Use, was phased out by first going to a quarterly print edition. The last edition was printed in the fourth quarter of 2014.
Committed to service. Based on September 30, 2014, financial data, Bauer
Commitment.
Liberty/TruStage and Members Trust Company. These partners lent their support to our Financial Wellness Fairs and held several informative Lunch-n-Learns throughout the year.
Financial, Inc. of Coral Gables, Florida, the nation’s credit union and bank rating firm, commended JM Associates Federal Credit Union with a Five-Star rating for proving once again that it is a steadfast and invaluable partner to the members it serves.
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JM Associates Federal Credit Union Statement of Financial Condition ASSETS September 30, 2014 Cash and cash equivalents
2013
$
1,108,752 $
950,708
Investments Available-for-sale
54,466,670
52,389,268
Held-to-maturity
570,348
591,750
7,014,056
9,483,290
34,650,744
30,624,494
402,387
350,770
15,496
33,532
785,648
752,604
Assets acquired in liquidation
54,000
54,000
Other assets
537,347
57,075
Other Loans receivable, net of allowance for loan losses Accrued interest receivable Premises and equipment, net National Credit Union Share Insurance Fund deposit
Total Assets
$
99,605,448 $
95,287,491
LIABILITIES AND MEMBERS’ EQUITY September 30, 2014
2013
Liabilities Members’ share and savings accounts
$
Accrued expenses and other liabilities Total liabilities
85,382,568 $
81,613,887
1,447,178
2,929,674
86,829,746
84,543,561
716,460
716,460
12,578,906
11,142,593
(519,664)
(1,115,123)
12,775,702
10,743,930
Commitments and Contingent Liabilities Members’ Equity Regular reserve Undivided earnings Accumulated other comprehensive loss Total members’ equity Total Liabilities and Members’ Equity
8
$
99,605,448 $
95,287,491
JM Associates Federal Credit Union Statement of Income September 30, 2014
2013
Interest Income Interest on loans receivable
$
Interest on investments Interest income Interest Expense Dividends on members’ share and savings accounts
2,063,314 $
1,958,413
1,227,105
1,179,022
3,290,419
3,137,435
JM Associates Federal Credit Union
Interest expense Net Interest Income
401,719
423,702
April 24, 2014 401,719 JM Family Enterprises 111 Building Auditorium 2,888,700 Deerfield Beach, FL
423,702
Provision for Loan Losses
2,713,733
-
(134,327)
2,888,700
2,848,060
1,388,743
1,245,844
340,419
330,762
60,140
37,140
-
3,768
1,789,302
1,617,514
4,678,002
4,465,574
1,442,613
1,389,844
Professional and outside services
571,771
553,827
Operations
515,752
545,514
Loan servicing
486,756
429,289
Travel and conference
110,746
102,650
Education and promotion
84,103
89,823
Loss on sale of investment, net
29,948
-
-
60,208
3,241,689
3,171,155
Net Interest Income After Provision for Loan Losses Non-interest Income Other non-interest income Fees and service charges Other gains and losses, net Gain on sale of investments, net Non-interest income
Non-interest Expense Compensation and employee benefits
NCUA assessment Non-interest expense Net Income
$
1,436,313 $
1,294,419
9
JM Associates Federal Credit Union Statement of Members’ Equity and Comprehensive Income COMPREHENSIVE INCOME September 30, 2014 Net Income
$
2013
1,436,313 $
1,294,419
Other Comprehensive Income (Loss) New unrealized holding (losses)/gains on securities arising during the year Less reclassification adjustment for net losses/(gains) included in net income
Comprehensive (Loss) Income
$
565,511
(1,925,797)
29,948
(3,768)
595,459
(1,929,565)
2,031,772 $
(635,146)
MEMBERS’ EQUITY Regular Reserve Balance, September 30, 2012
$
Net income Change in unrealized gain/(loss) on securities Balance, September 30, 2013 Net income Change in unrealized gain/(loss) on securities Balance, September 30, 2014
$
Accumulated Other Comprehensive Income (Loss)
Undivided Earnings
716,460 $
9,848,174 $
814,442 $
Total 11,379,076
-
1,294,419
-
1,294,419
-
-
(1,929,565)
(1,929,565)
716,460
11,142,593
(1,115,123)
10,743,930
-
1,436,313
-
1,436,313
-
-
595,459
595,459
716,460 $
12,578,906 $
(519,664) $
12,775,702
Mobile Banking
JMAFCU wants you to be able to take us wherever you go! We make mobile banking easy with our SAFE Mobile banking app. That way you can check your account balance, transfer funds and more – right from your smartphone!
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JMAFCU’s mobile banking will help you manage your finances on the go! Mobile banking is a part of our E-suite of services. You must have an eChecking account and SAFE IB to access your accounts via mobile banking. SAFE Mobile allows you to have access to your JMAFCU accounts wherever you are!
JM Associates Federal Credit Union Statement of Cash Flows September 30, 2014
2013
Cash Flows From Operating Activities Net income
$
1,436,313 $
1,294 ,419
Adjustments to reconcile net income to net cash Provisions for loan losses
-
(134,327)
Depreciation and amortization of premises and equipment
18,036
17,314
Loss (gain) on sale of investments, net
29,948
(3,768)
1,283,969
1,133,785
(51,617)
(19,424)
(480,272)
5,087
(1,482,496)
923,400
Amortization of investment premiums/discounts Changes in operating assets and liabilities Accrued interest receivable Other assets Accrued expenses and other liabilities Net Cash Provided by Operating Activities
$
753,881 $
3,216,486
Cash Flows From Investment Activities Purchases of: Available-for-sale securities Premises and equipment
(22,191,594)
(28,496,806)
-
(33,916)
18,899,734
27,881,326
21,402
64,165
2,965,234
(1,587,189)
(4,105,500)
(4,008,740)
(33,044)
(37,338)
79,250
84,604
Proceeds from: Maturities, paydowns and sales of available-for-sale securities Maturities and paydowns of held-to-maturity securities New change in: Other investments Loans receivable, net of charge-offs NCUSIF deposit Recoveries on loans charged off Net Cash Used in Investing Activities
$
(4,364,518) $
(6,133,894)
Cash Flows From Financing Activities Net change in members’ share and savings accounts Net Cash Provided by Financing Activities
$
3,768,681
2,961,045
3,768,681 $
2,961,045
Net Change in Cash and Cash Equivalents
158,044
43,637
Cash and Cash Equivalents at Beginning of Year
950,708
907,071
Cash and Cash Equivalents at End of Year
$
1,108,752 $
950,708
Dividends and interest paid
$
401,719 $
423,702
Loans receivable transferred to assets acquired in liquidation
$
- $
54,000
Non-cash change in investments, net
$
- $
250,000
Supplemental Cash Flow Disclosures
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JM Associates Federal Credit Union Notes to the Financial Statements NOTE 1: SIGNIFICANT ACCOUNT POLICIES Organization JM Associates Federal Credit Union (the “Credit Union”) is a cooperative association organized in accordance with the provisions of the Federal Credit Union Act for the purposes of promoting thrift among, and creating a source of credit for, its members. Participation in the Credit Union is limited to those individuals who qualify for membership. The field of membership is defined in the Credit Union’s Charter and Bylaws. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States (U.S. GAAP) requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Specifically, Management has made estimates based on assumptions for fair value of assets and liabilities and the assessment of other than temporary impairment on investments. Actual results could differ from these estimates. Material estimates that are particularly subject to change in the near term include the determination of the allowance for loan losses (ALL), valuation of securities, and the fair value of financial instruments. Basis of Presentation The Credit Union follows the accounting standards set by the Financial Accounting Standards Board (FASB). The FASB establishes U.S. GAAP that are followed to ensure consistent reporting of the financial condition, results of operations and cash flows of the Credit Union. Cash and Cash Equivalents For purposes of the statement of financial condition and the statement of cash flows, cash and cash equivalents includes cash on hand, amounts due from financial institutions, and highly liquid debt instruments classified as cash which were purchased with maturities of three months or less. Amounts due from financial institutions may, at times, exceed federally insured limits. Investments The Credit Union’s investments are classified and accounted for as follows: Held-to-Maturity: Investments which the Credit Union has the positive intent and ability to hold to maturity are reported at cost, adjusted for amortization of premiums and accretion of discounts which are recognized in interest income. Available-for-Sale: Investments are classified available-for-sale when Management anticipates that the securities could be sold in response to rate changes, prepayment risk, liquidity, availability of and the yield on alternative investments and other market and economic factors. These securities are reported at fair value. Unrealized gains and losses on securities available for sale are recognized as direct increases or decreases in members’ equity and comprehensive income. Cost of investments sold are recognized using the specific identification method. The amortization of premiums and the accretion of discounts are recognized over the term of the related investment by a method that approximates the interest method. Other Investments: Investments in this category do not meet the definition of a debt or equity security under U.S. GAAP. Other investments may include certain cash equivalents that Management has elected to classify as investments. Other investments are stated at the lower of cost or market. Management periodically performs analyses to test for impairment of various assets. A significant impairment analysis relates to the other than temporary declines in the value of securities. Management conducts periodic reviews and evaluations of the securities portfolio to determine if the value of any security has declined below its carrying value and whether such a decline is other than temporary. If such decline is deemed other than temporary, Management would adjust the amount of the security by writing it down to fair market value through a charge to current period operations.
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JM Associates Federal Credit Union Notes to the Financial Statements Visa®, Inc. Stock As part of the restructuring of Visa, Inc., the Credit Union was issued shares of Class B Common Stock in Visa, Inc. The shares represented by this issuance are fully paid and non-assessable. The Credit Union received a partial redemption of their Class B Common Stock in Visa, Inc. leaving a balance of 5,245 shares. Currently, there is no readily available fair market value of the stock and therefore, the stock is not reflected in the Credit Union’s financial statements. Once a readily available fair market value of the stock is available, the value of the stock will be reflected in the Credit Union’s financial statements. Loans Receivable The Credit Union grants mortgage and consumer loans to members. The ability of the members to honor their contracts is dependent upon the real estate market and general economic conditions. Loans that the Credit Union has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at principal balance outstanding, net, of an allowance for loan losses. Interest income on loans is recognized over the term of the loan and is calculated using the simple-interest method on principal amounts outstanding. Interest income is not reported when full loan repayment is in doubt, typically when the loan is impaired or payments are past due 90 days or more. All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest received on such loans is accounted for on the cash basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Consumer loans are typically charged off no later than 180 days past due. Residential real estate loans are evaluated for chargeoff on a case-by-case basis and are typically charged-off at the time of foreclosure. Past-due status is based on the contractual terms of the loans. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if the collection of principal and interest is considered doubtful. Allowance for Loan Losses The allowance for loan losses is a valuation allowance for probable incurred credit losses, increased by the provision for loan losses and decreased by charge-offs less recoveries. Management estimates the required allowance for loan losses balance using past loan loss experience, known and inherent risks in the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and other factors. Allocations of the allowance for loan losses may be made for specific loans, but the entire allowance is available for any loan that, in Management’s judgment, should be charged-off. Loan losses are charged against the allowance for loan losses when Management believes the uncollectibility of a loan balance is confirmed. The allowance for loan losses consists of specific and general components. The specific component relates to loans that are individually classified as impaired or loans otherwise classified as substandard or doubtful. The general component covers non-classified loans and is based on historical loss experience adjusted for current factors. Due to the nature of uncertainties related to any estimation process, Management’s estimate of loan losses inherent in the loan portfolio may change in the near term. However, the amount of the change that is reasonably possible cannot be estimated. In addition, the Credit Union’s regulator, as an integral part of its examination process, periodically reviews the Credit Union’s allowance for loan losses. The regulator may require the Credit Union to adjust the allowance for loan losses based on their judgments of information available to them at the time of their examination. A loan is considered impaired when, based on current information and events, full payment under the loan terms is not expected. Impairment is generally evaluated in total for smaller-balance loans of similar nature, such as residential mortgage, consumer, and credit card loans, but may be evaluated on an individual loan basis if deemed necessary. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral.
13
JM Associates Federal Credit Union Notes to the Financial Statements Troubled Debt Restructurings (TDRs) In situations where, for economic or legal reasons related to a member’s financial difficulties, the Credit Union grants a concession for other than an insignificant period of time to the member that the Credit Union would not otherwise consider, the related loan is classified as a TDR. The Credit Union strives to identify members in financial difficulty early and work with them to modify to more affordable terms before their loan reaches nonaccrual status. These modified terms may include interest rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases where the Credit Union grants the member new terms deemed to be a concession, the Credit Union measures any impairment on the restructuring using the methodology for individually impaired loans. Loans classified as TDRs are reported as impaired loans. Premises and Equipment Furniture and equipment, and leasehold improvements are carried at cost, less accumulated depreciation and leasehold amortization. Furniture and equipment are depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the shorter of their estimated useful lives or the term of the respective leases. Maintenance and repairs are expensed, and major improvements and renovations are capitalized. Management reviews premises and equipment for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Gains and losses on disposals are included in current operations. Assets Acquired in Liquidation Assets acquired in liquidation in lieu of loan foreclosure are initially recorded at the lower of the Credit Union’s carrying amount or fair value less estimated selling cost at the date of foreclosure. Any write-downs based on the asset’s fair value at the date of acquisition are charged to the allowance for loan losses. After foreclosure, property held for sale is carried at the lower of the new cost basis or fair value less cost to sell. Impairment losses on property to be held and used are measured as the amount by which the carrying amount of a property exceeds its fair value. Costs of significant property improvements are capitalized, whereas costs relating to holding property are expensed. The portion of interest costs relating to development of real estate is capitalized. Valuations are periodically performed by Management, and any subsequent write-downs are recorded as a charge to operations, if necessary, to reduce the carrying value of a property to the lower of its cost or fair value less cost to sell. NCUSIF Deposit and NCUSIF Insurance Premium The deposit in the National Credit Union Share Insurance Fund (NCUSIF) is in accordance with National Credit Union Administration (NCUA) regulations, which require the maintenance of a deposit by each insured credit union in an amount equal to one percent of its insurable shares, less any reportable impairment. The deposit would be refunded to the Credit Union if its insurance coverage is terminated, it converts to insurance coverage from another source, or the operations of the fund are transferred from the NCUA Board. Being insured by the NCUSIF, the Credit Union is required to pay an annual insurance premium equal to one-twelfth of one percent of its total insured shares, unless the payment is waived or reduced by the NCUA Board. Members’ Share and Savings Accounts Members’ shares are the savings deposit accounts of the owners of the Credit Union. Share ownership entitles the members to vote in annual elections of the Board of Directors and on other corporate matters. Irrespective of the amount of shares owned, no member has more than one vote. Members’ shares are subordinated to all other liabilities of the Credit Union upon liquidation. Dividends on members’ share and savings accounts, except for interest on certificates of deposit, which is set in advance, are based on available earnings at the end of a dividend period and are not guaranteed by the Credit Union. Dividend rates on members’ share accounts are set by the Board of Directors, based on an evaluation of current and future market conditions.
14
JM Associates Federal Credit Union Notes to the Financial Statements Regular Reserve The Credit Union is required by regulation to maintain a statutory reserve, “regular reserve.” The regular reserve, which represents a regulatory restriction of retained earnings, is not available for the payment of dividends to members. Federal and State Tax Exemption The Credit Union is exempt from federal and most state and local taxes under the provisions of the Federal Credit Union Act, the Internal Revenue Code and state tax laws. The FASB ASC clarifies accounting for uncertainty in income taxes reported in the financial statements. The interpretation provides criteria for assessment of individual tax positions and a process for recognition and measurement of uncertain tax positions. Tax positions are evaluated on whether they meet the “more likely than not” standard for sustainability on examination by tax authorities. Federal credit unions are tax exempt under Internal Revenue Code Sections. As such, the Credit Union has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. Additionally, no interest or penalties have been recorded in the accompanying audited financial statements related to uncertain tax positions. Comprehensive Income Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the members’ equity section of the statements of financial condition. Advertising Costs Advertising costs are expensed as incurred. Fair Value Measurements The Credit Union categorizes its assets and liabilities measured at fair value into a three-level hierarchy based on the priority of the inputs to the valuation technique used to determine fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used in the determination of the fair value measurement fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement. Assets and liabilities valued at fair value are categorized based on the inputs to the valuation techniques as follows: Level 1 – Inputs that utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Credit Union has the ability to access at the measurement date. Level 2 – Inputs that include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Fair values for these instruments are estimated using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Level 3 – Inputs that are unobservable for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. Subsequent to initial recognition, the Credit Union may remeasure the carrying value of assets and liabilities measured on a nonrecurring basis to fair value. Adjustments to fair value usually result when certain assets are impaired. Such assets are written down from their carrying amounts to their fair value. Subsequent Events In preparing these financial statements, the Credit Union evaluated events and transactions for potential recognition or disclosure through December 10, 2014, the date on which the financial statements were available to be issued. Reclassifications Certain 2013 financial statement amounts have been reclassified to conform with classifications adopted in the current year. This reclassification did not have any change on net income or members’ equity.
15
JM Associates Federal Credit Union Notes to the Financial Statements
NOTE 2: INVESTMENTS AVAILABLE-FOR-SALE
Investments classified as available-for-sale securities consist of the following:
September 30, 2014
Amortized Cost Federal agency mortgage-backed securities
$
Bank notes and certificates Federal agency securities Total
$
Gross Unrealized Gains
Gross Unrealized Losses (594,304) $
Fair Value
31,166,764 $
193,456 $
14,633,834
201,829
(45,436)
14,790,227
9,185,736
60,414
(335,623)
8,910,527
54,986,334 $
455,699 $
(975,363) $
30,765,916
54,466,670
September 30, 2013
Amortized Cost Federal agency mortgage-backed securities
28,713,080 $
187,398 $
Bank notes and certificates
14,602,108
Federal agency securities
10,189,203
Total
16
$
Gross Unrealized Gains
$
53,504,391 $
Gross Unrealized Losses
Fair Value
(1,020,416) $
27,880,062
194,947
(35,626)
14,761,429
50,660
(492,086)
9,747,777
(1,548,128) $
52,389,26
433,055 $
JM Associates Federal Credit Union Notes to the Financial Statements Gross unrealized losses and fair value by length of time that the individual securities have been in a continuous unrealized loss position at September 30, 2014 and 2013, are as follows: September 30, 2014 Less Than 12 Months Unrealized Losses
Fair Value Federal agency mortgage-backed securities
$
11,676,685
12 Months or Greater
$
(266,266)
Unrealized Losses
Fair Value $
9,645,080
$
(328,038)
Federal agency securities
3,939,306
(28,405)
1,115,780
(17,031)
Bank notes and certificates
1,219,298
(7,295)
466,910
(328,328)
(301,966) $
11,227,770 $
(673,397)
Total
$
16,835,289 $
September 30, 2013 Less Than 12 Months Fair Value Federal agency mortgage-backed securities
$
18,053,387 $
12 Months or Greater
Unrealized Losses
Unrealized Losses
Fair Value
(1,005,997) $
500,584 $
(14,419)
Federal agency securities
6,006,514
(204,571)
2,712,030
(287,515)
Bank notes and certificates
2,753,510
(35,626)
-
-
Total
$
26,813,411 $
(1,246,194) $
3,212,614 $
(301,934)
There are a total of 37 and 34 securities with unrealized losses as of September 30, 2014 and 2013, respectively. The unrealized losses associated with these securities are considered temporary as the Credit Union has the ability to hold these securities for a period of time sufficient to allow for any anticipated recovery in fair value. Proceeds from sales of investment securities classified as available-for-sale and gross realized gains and losses from those are as follows: September 30, 2014
2013
Sales proceeds
$
12,087,019 $
4,411,654
Gross realized gains
$
122,732 $
112,958
Gross realized losses
$
(152,680) $
(109,190)
The amortized cost and estimated fair value of securities by contractual maturity are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay certain obligations without call or prepayment penalties.
17
JM Associates Federal Credit Union Notes to the Financial Statements
September 30, 2014 Amortized Cost Within 1 year
$
Fair Value
4,068,827 $
4,134,191
1 to 5 years
13,558,207
13,641,779
5 to 10 years
3,194,689
3,172,474
After 10 years
2,997,847
2,752,310
23,819,570
23,700,754
31,166,764
30,765,916
Subtotal Mortgage-backed securities Total
$
54,986,334 $
54,466,670
Mortgage-backed securities classified as available-for-sale represent participation interest in pools of residential mortgage loans which are guaranteed by the U.S. Government, its agencies or instrumentalities. However, the guarantee of these types of securities relates to the principal and interest payments, and not to the market value of such securities. In addition, the guarantee only relates to the mortgage-backed securities held by the fund and not to the purchase of shares of the fund. Mortgage-backed securities are issued by lenders, such as mortgage bankers, commercial banks, and savings and loan associations. Such securities differ from conventional debt securities, which provide for the periodic payment of interest in fixed amounts (usually semiannually) with principal payments at maturity or on specific dates. Mortgage-backed securities provide periodic payments which are, in effect, a “pass-through” of the interest and principal payments (including any prepayments) made by the individual borrowers on the pooled mortgage loans. A mortgage-backed security will mature when all the mortgages in the pool mature or are prepaid. Mortgage-backed securities do not have a fixed maturity and their expected maturities may vary when interest rates rise or fall.
Mobile Deposit
A feature of SAFE Mobile, Mobile Deposit gives sending a check for deposit a whole new meaning. It is as simple as point–click–deposit! JMAFCU’s newest mobile app feature, Mobile Deposit, is available for members who have downloaded our mobile banking app. Mobile Deposit is secure, easy to use and convenient. • Deposit checks directly into your account using your Apple® or Android™ device. • Receive confirmation on your device that JMAFCU received your deposit. • Save time with fewer trips to the ATM or your JMAFCU branch office.
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JM Associates Federal Credit Union Notes to the Financial Statements HELD-TO-MATURITY
Investments classified as held-to-maturity securities consist of the following: September 30, 2014 Gross Unrealized Gains
Amortized Cost Federal agency mortgage-backed securities
$
Certificates of Deposit Total
74,348
$
3,775 $
496,000 $
570,348
Gross Unrealized Losses - $
$
Fair Value
3,775 $
78,123
-
496,000
- $
574,123
September 30, 2013
Amortized Cost Federal agency mortgage-backed securities
$
Certificates of Deposit Total
95,750 $ 496,000
$
591,750 $
Gross Unrealized Gains
Gross Unrealized Losses
6,628 $ 6,628 $
Fair Value - $
102,378
-
496,000
- $
598,378
There were no debt securities with unrealized losses as of September 30, 2014 and 2013. The amortized cost and estimated fair value of securities by contractual maturity are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay certain obligations without call or prepayment penalties. September 30, 2014 Amortized Cost 1 to 5 years
$
Mortgage-backed securities Total
496,000
Fair Value $
74,348 $
570,348 $
496,000 78,123 574,123
Mortgage-backed securities classified as held-to-maturity represent participation interest in pools of residential mortgage loans which are guaranteed by the U.S. Government, its agencies or instrumentalities. However, the guarantee of these types of securities relates to the principal and interest payments, and not to the market value of such securities. In addition, the guarantee only relates to the mortgage-backed securities held by the fund and not to the purchase of shares of the fund. Mortgage-backed securities are issued by lenders, such as mortgage bankers, commercial banks, and savings and loan associations. Such securities differ from conventional debt securities, which provide for the periodic payment of interest in fixed amounts (usually semiannually) with principal payments at maturity or on specific dates. Mortgage-backed securities provide periodic payments which are, in effect, a “pass-through” of the interest and principal payments (including any prepayments) made by the individual borrowers on the pooled mortgage loans. A mortgage-backed security will mature when all the mortgages in the pool mature or are prepaid. Mortgage-backed securities do not have a fixed maturity and their expected maturities may vary when interest rates rise or fall.
JM Associates Federal Credit Union Notes to the Financial Statements OTHER INVESTMENTS
Other investments consist of the following:
September 30, 2014 Federal funds sold
$
Other deposits at corporate credit unions
4,321,254 $
2013 9,272,083
2,553,022
71,427
Perpetual capital at corporate credit unions
83,570
83,570
CUSO
56,210
56,210
Total
$
7,014,056 $
9,483,290
As a requirement of membership, the Credit Union is required to maintain perpetual contributed capital share account at Corporate One Federal Credit Union. Perpetual contributed capital is not subject to share insurance covered by the National Credit Union Share Insurance Fund or any other deposit insurer. The perpetual contributed capital is redeemable only at the option of Corporate One Federal Credit Union provided regulatory approval is obtained. Perpetual contributed capital cannot be pledged against borrowings, has no scheduled maturity, and offers noncumulative dividends.
SAFE Txt
Is text messaging your communication method of choice? Now you can let your fingers do the talking to your credit union! JMAFCU’s SAFE TXT allows SAFE IB users to view account balances, access transaction history and transfer funds via text message (SMS). To participate in this program, you must first log in to SAFE IB at www.jmafcu.org. Through SAFE IB, select Online Services-SAFE TXT and follow the instructions for registering your cell phone.
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JM Associates Federal Credit Union Notes to the Financial Statements NOTE 3: LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES LOANS RECEIVABLE
Loans receivable consist of the following: September 30, 2014 Residential first mortgage real estate
$
2013
4,628,654 $
4,372,868
Residential second mortgage real estate
2,019,399
2,049,808
Consumer secured
15,567,179
12,930,344
Consumer unsecured
12,998,169
12,068,407
35,213,401 $
31,421,427
$ Allowance for loan losses
(562,657)
Loans Receivable, Net
$
34,650,744 $
(796,933) 30,624,494
ALLOWANCE FOR LOAN LOSSES ACCOUNT
The following summarizes the activity in the allowance for loan losses account: For the year ending September 30, 2014 Residential Real Estate
Consumer
Total
Allowance for Loan Losses: Beginning balance
$
Provision for loan losses Recoveries on previous loan losses Loans receivable charged off Ending Balance Individually evaluated for impairment
293,676 $
796,933
-
-
-
8,000
71,250
79,250
(26,626)
(286,900)
(313,526)
$
484,631 $
78,026 $
562,657
$
90,216 $
58,767 $
148,983
394,415
19,259
413,674
$
484,631 $
78,026 $
562,657
$
182,618 $
114,536 $
297,154
Collectively evaluated for impairment Total Allowance for Loan Losses
503,257 $
Loans receivables: Individually evaluated for impairment Collectively evaluated for impairment Total Loans Receivables
6,465,435 $
6,648,053 $
28,450,812 28,565,348 $
34,916,247 35,213,401
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JM Associates Federal Credit Union Notes to the Financial Statements For the year ending September 30, 2013 Residential Real Estate
Consumer
Total
Allowance for Loan Losses: Beginning balance
$
532,323 $
1,182,438
(109,324)
(25,003)
(134,327)
7,505
77,099
84,604
(15,039)
(320,743)
(335,782)
$
503,257 $
293,676 $
796,933
$
159,522 $
103,186 $
262,708
343,735
190,490
534,225
$
503,257 $
293,676 $
796,933
$
194,219 $
315,685 $
509,904
Provision for loan losses Recoveries Loans receivable charged off Ending Balance Individually evaluated for impairment Collectively evaluated for impairment Total Allowance for Loan Losses
620,115 $
Loans receivables: Individually evaluated for impairment Collectively evaluated for impairment Total Loans Receivables
22
$
6,228,457
24,683,066
30,911,523
6,422,676 $
24,998,751 $
31,421,427
JM Associates Federal Credit Union Notes to the Financial Statements IMPAIRED LOANS The Credit Union considers a loan to be impaired when, based on current information and events, it is determined the collection of all amounts due according to the loan contract, including scheduled interest payments, is unlikely. Determination of impairment is treated the same across all classes of loans. When a loan is identified as impaired, impairment is measured based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the collateral. In these cases, impairment is based on the current fair value of the collateral, less estimated selling costs when foreclosure is probable, instead of discounted cash flows. If the value of the impaired loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), an impairment is recognized through an allowance estimate or a charge-off to the allowance for loan losses account. The following table includes the unpaid principal balances for impaired financing receivables with the associated allowance amount, if applicable. Allowance reserves have been determined based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the remaining source of repayment for the loan is the operation or liquidation of the collateral. In those cases, the current fair value of the collateral less selling costs was used to determine the specific allowance recorded. Also presented is the average ending principal balance of the impaired loans and the related allowance recognized during the time the loans were impaired. As of September 30, 2014 Unpaid Principal Balance
Average Ending Principal Balance
Related Allowance
With a Related Allowance Recorded: Residential first mortgage real estate
$
Residential second mortgage real estate
- $
- $
-
182,618
90,216
182,618
Consumer secured
63,124
30,547
5,739
Consumer unsecured
51,412
28,220
3,213
With No Related Allowance Recorded: Residential first mortgage real estate
$
Residential second mortgage real estate Consumer secured Consumer unsecured
- $
- $
-
-
-
-
23,558
-
7,853
-
-
-
Total: Residential real estate
$
182,618 $
90,216 $
182,618
Consumer
$
138,094 $
58,767 $
16,805
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JM Associates Federal Credit Union Notes to the Financial Statements
As of September 30, 2013 Unpaid Principal Balance
Average Ending Principal Balance
Related Allowance
With a Related Allowance Recorded: Residential first mortgage real estate
$
- $
- $
-
Residential second mortgage real estate
194,219
159,522
244,612
Consumer secured
188,386
14,320
247,174
Consumer unsecured
127,299
88,866
119,440
With No Related Allowance Recorded: Residential first mortgage real estate
$
- $
- $
-
-
-
-
147,097
-
73,543
-
-
-
Residential second mortgage real estate Consumer secured Consumer unsecured Total: Residential real estate
$
194,219 $
159,522 $
244,612
Consumer
$
462,782 $
103,186 $
440,163
PAST DUE LOANS BY CLASS The following tables present the aging of the recorded investment in past due loans by class of loans. Also included are loans that are 90 days or more past due by loan class. For the year ending September 30, 2014
Current Residential first mortgage real estate
$
Residential second mortgage real estate
4,628,654 $
60-89 Days Past Due
Loans Past Due 90 Days or > - $
Total
- $
4,628,654
2,008,719
10,680
-
2,019,399
Consumer secured
15,470,579
68,529
28,071
15,567,179
Consumer unsecured
12,963,881
25,139
9,149
12,998,169
Total
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$
35,071,833 $
104,348 $
37,220 $
35,213,401
JM Associates Federal Credit Union Notes to the Financial Statements For the year ending September 30, 2013 60-89 Days Past Due
Current Residential first mortgage real estate
$
Loans Past Due 90 Days or >
4,372,868 $
Residential second mortgage real estate
- $
- $
Total 4,372,868
1,827,527
195,655
26,626
2,049,808
Consumer secured
12,839,844
39,774
50,726
12,930,344
Consumer unsecured
11,948,460
81,449
38,498
12,068,407
Total
$
30,988,699 $
316,878 $
115,850 $
31,421,427
The accrual of interest income on loans is discontinued at the time the loan is ninety days past due or when the collection of interest or principal becomes uncertain, unless the credit is well secured and in the process of collection. Loans on which the accrual of interest has been discontinued or reduced approximated $37,000 and $116,000 as of September 30, 2014 and 2013, respectively. There were no loans 90 days or more past due and still accruing interest as of September 30, 2014 or 2013. Loans are assessed for credit quality based on the contractual aging status of the loan and payment activity. Such assessment is completed at the end of each reporting period. The following is a summary of loans based on credit quality: As of September 30, 2014 Performing Residential first mortgage real estate
$
4,628,654
2,019,399
-
2,019,399
Consumer secured
15,539,108
28,071
15,567,179
Consumer unsecured
12,989,020
9,149
12,998,169
Total
$
$
Total
- $
Residential second mortgage real estate
4,628,654
Nonperforming
35,176,181 $
37,220 $
35,213,401
As of September 30, 2013 Performing Residential first mortgage real estate
$
Residential second mortgage real estate
Nonperforming
4,372,868 $
- $
Total 4,372,868
2,023,182
26,626
2,049,808
Consumer secured
12,879,618
50,726
12,930,344
Consumer unsecured
12,029,909
38,498
12,068,407
Total
$
31,305,577 $
115,850 $
31,421,427
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JM Associates Federal Credit Union Notes to the Financial Statements Internally Assigned Loan Grades Are Defined as Follows: Performing – A performing loan’s primary source of loan repayment is satisfactory, with secondary sources very likely to be realized if necessary. Nonperforming – A loan classified as nonperforming is considered potentially uncollectible with a likelihood of chargeoff. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it means that charge-off is likely in the near future.
TROUBLED DEBT RESTRUCTURINGS (TDR) The following is a summary of information pertaining to troubled debt restructurings that occurred during the audit period: As of September 30, 2014
# of Loans
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings: Residential real estate
0 $
- $
-
Consumer
0 $
- $
-
As of September 30, 2014 # of Loans
Balance
Troubled Debt Restructurings that Subsequently Defaulted: Residential real estate
0 $
-
Consumer
0 $
-
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JM Associates Federal Credit Union Notes to the Financial Statements As of September 30, 2013
# of Loans
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings: Residential real estate
0 $
- $
-
Consumer
2 $
12,626 $
11,752
As of September 30, 2013 # of Loans
Balance
Troubled Debt Restructurings that Subsequently Defaulted: Residential real estate
0 $
-
Consumer
0 $
-
Commercial
1 $
34,463
NOTE 4: PREMISES AND EQUIPMENT Premises and equipment consist of the following:
September 30, 2014 Furniture and equipment
$
Leasehold improvements Less accumulated depreciation and amortization Premises and equipment, net
$
378,421 $
2013 378,421
10,449
10,449
388,870
388,870
(373,374)
(355,338)
15,496 $
33,532
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JM Associates Federal Credit Union Notes to the Financial Statements NOTE 5: MEMBERS’ SHARE AND SAVINGS ACCOUNTS Members’ share and savings accounts consist of the following:
September 30, 2014 Share draft accounts
$
2013
13,311,510 $
12,323,632
Money market accounts
44,002,785
41,693,009
Share accounts
17,469,277
16,326,612
Certificate accounts
10,598,966
11,270,634
Total
$
85,382,568 $
81,613,887
The aggregate amount of certificate accounts in denominations of $100,000 or more were approximately $3,590,000 and $3,442,000 as of September 30, 2014 and 2013, respectively. As of September 30, 2014, scheduled maturities of certificate accounts are as follows:
Year ending September 30, 2015
Amount $
5,393,086
2016
1,722,968
2017
1,011,824
2018
935,650
2019
1,535,468
Total
$
10,598,966
The National Credit Union Share Insurance Fund insures members’ shares up to $250,000. This includes all account types, such as savings, checking, money market, and certificates of deposit. Individual Retirement Account coverage is an additional $250,000.
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JM Associates Federal Credit Union Notes to the Financial Statements NOTE 6: EMPLOYEE BENEFITS Employees of the Credit Union are participants in the JM Family Enterprises, Inc. pension plans. The plans include a contributory defined contribution pension plan, a non-contributory defined benefit pension plan, and a noncontributory profit sharing plan. It is not possible to determine the net pension expense for the Credit Union for the years ended September 30, 2014 and 2013 or to present separately the actuarial present value of benefit obligations or the net assets available for benefits of the Credit Union because no determination has been made of the allocation of such amounts between JM Family Enterprises, Inc. and the Credit Union. The Credit Union participates in the JM Family Enterprises, Inc. defined benefit post-retirement medical plan. The plan covers all full-time status employees who elect coverage and satisfy the plan’s eligibility requirements when they retire. It is not possible to determine the net periodic post-retirement benefit cost attributable to the Credit Union for the years ended September 30, 2014 and 2013, nor is it possible to present separately the actuarial accumulated post-retirement benefit obligation for the Credit Union because no determination has been made of the allocation of such amounts between JM Family Enterprises, Inc. and the Credit Union.
NOTE 7: COMMITMENTS AND CONTINGENT LIABILITIES During the prior audit period, the Credit Union closed its unused line of credit with Corporate America Credit Union and Corporate One Federal Credit Union. The Credit Union does not have an unused line of credit as of September 30, 2014. Legal Contingencies The Credit Union is a party to various miscellaneous legal actions normally associated with financial institutions, the aggregate of which, in Management’s opinion, would not be material to the Credit Union’s financial condition. Off-Balance-Sheet Risk The Credit Union is a party to conditional commitments to lend funds in the normal course of business to meet the financing needs of its members. These commitments represent financial instruments to extend credit, which include lines of credit, credit cards and home equity lines that involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements. The Credit Union’s exposure to credit loss is represented by the contractual notional amount of these instruments. The Credit Union uses the same credit policies in making commitments as it does for loans recorded in the financial statements. Unfunded loan commitments under lines of credit are summarized as follows: September 30, 2014 Credit card
$
Unsecured line of credit (PLOC) Home equity Share draft line of credit Total
$
10,013,479 $
2013 8,497,131
1,515,167
1,301,388
813,485
229,290
96,680
98,614
12,438,811 $
10,126,423
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JM Associates Federal Credit Union Notes to the Financial Statements Commitments to extend credit are agreements to lend to a member as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Credit Union evaluates each member’s creditworthiness on a case-by-case basis. The amount of collateral obtained to secure borrowing on the lines of credit is based on Management’s credit evaluation of the member. Unfunded commitments under lines of credit and revolving credit lines are commitments for possible future extensions of credit to existing members. These lines of credit are uncollateralized, with the exception of home equity loans, and usually do not contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Credit Union is committed. Concentrations of Credit Risk A significant amount of the Credit Union’s business activity is with its members who are employees or former employees of JM Family Enterprises. The Credit Union may be exposed to credit risk from a regional economic standpoint, since a significant concentration of its borrowers work or reside in the state of Florida. However, the loan portfolio is well diversified and the Credit Union does not have any significant concentrations of credit risk except unsecured loans, which by their nature increase the risk of loss compared to those loans that are collateralized. The Credit Union’s policy for repossessing collateral is that when all other collection efforts have been exhausted, the Credit Union enforces its first lien holder status and repossesses the collateral. The Credit Union has full and complete access to repossessed collateral. Repossessed collateral normally consists of vehicles and residential real estate.
Online Loan Application Did you know you can apply for any JMAFCU loan using our online loan application? That’s right, apply any time of the day or night, 24 hours a day. Visit us online at www.jmafcu.org and click Apply For a Loan!
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JM Associates Federal Credit Union Notes to the Financial Statements NOTE 8: CAPITAL REQUIREMENTS The Credit Union is subject to various regulatory capital requirements administered by the NCUA. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Credit Union’s financial statements. Under capital adequacy regulations and the regulatory framework for prompt corrective action, the Credit Union must meet specific capital regulations that involve quantitative measures of the Credit Union’s assets, liabilities and certain off-balance-sheet items as calculated under generally accepted accounting practices. The Credit Union’s capital amounts and net worth classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Credit Union to maintain minimum amounts and ratios (set forth in the table below) of net worth to total assets. Furthermore, credit unions over $10,000,000 in assets are also required to determine if they meet the definition of a “complex” credit union as defined by regulation. The minimum risk-based net worth ratio to be considered complex under the regulatory framework is 6.00%. If the Credit Union falls under the “complex” category, an additional Risk-Based Net Worth (RBNW) requirement may be imposed that could result in capital requirements in excess of minimum levels established for non-complex credit unions. Key aspects of the Credit Union’s minimum capital amounts and ratios are summarized as follows: Risk Based Net Worth Ratio September 30, 2014
September 30, 2013
5.95%
7.16%
No
Yes
Risk Based Net Worth Ratio Credit Union Considered Complex?
General Capital Requirements September 30, 2014 Amount Amount needed to be classified as “well capitalized” Regulatory Net Worth
September 30, 2013
Requirement/ Ratio
Amount
Requirement/ Ratio
$
6,972,381
7.00% $
6,670,124
7.00%
$
13,295,366
13.35% $
11,859,053
12.45%
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JM Associates Federal Credit Union Notes to the Financial Statements NOTE 9: RELATED PARTY TRANSACTIONS In the normal course of business, the Credit Union extends credit to Directors, Supervisory Committee members and executive officers. The aggregate loans to related parties as of September 30, 2014 and 2013, were approximately $1,092,000 and $1,119,000, respectively. Shares from related parties as of September 30, 2014 and 2013, amounted to approximately $2,444,000 and $3,064,000, respectively.
NOTE 10: FAIR VALUE MEASUREMENTS Recurring Basis The Credit Union uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. For additional information on how the Credit Union measures fair value, refer to Note 1 – Significant Accounting Policies. Available-for-Sale Securities: Fair values for securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments, or on discounted cash flow models based on the expected payment characteristics of the underlying instruments. The following tables present the balances of the assets and liabilities measured at fair value on a recurring basis: September 30, 2014 Total Available-for-sale investments
$
54,466,670 $
Level 1
Level 2
54,466,670 $
Level 3 - $
-
September 30, 2013 Total Available-for-sale investments
$
52,389,268 $
Level 1 52,389,268 $
Level 2
Level 3 - $
-
Nonrecurring Basis Certain assets and liabilities are measured at fair value on a nonrecurring basis. These assets and liabilities are not measured at fair value on an ongoing basis; however, they are subject to fair value adjustments in certain circumstances, such as if there is evidence of impairment or a change in the amount of previously recognized impairment.
32
JM Associates Federal Credit Union Notes to the Financial Statements Assets Acquired in Liquidation: Fair value is measured based on the appraised value of the collateral. Collateral may be real estate, vehicles and/or business assets including equipment, inventory and/or accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Credit Union. Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the member and member’s business. September 30, 2014 Total Assets acquired in liquidation
$
Level 1
54,000 $
Level 2 - $
Level 3
54,000 $
-
September 30, 2013 Total Assets acquired in liquidation
$
54,000 $
Level 1
Level 2 - $
Level 3
54,000 $
-
Bauer Financial Rating
JMAFCU received a 5-Star rating from Bauer Financial, the nation’s leading independent bank and credit union rating and research firm. JMAFCU’s latest 5-Star rating is based on September 30, 2014, financial data and signifies that we are one of the strongest credit unions in the nation. JMAFCU has earned and maintained this top 5-Star rating for 21 consecutive quarters.
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Supervisory Committee’s Report April 24, 2015 Dear Member, Your Supervisory Committee is pleased to provide the following report to you. Our independent auditing firm, Nearman, Maynard, & Vallez (Nearman), Certified Public Accountants, performed the annual audit of JM Associates Federal Credit Union (JMAFCU). The audit for the 12-month period ending September 30, 2014, is complete and resulted in an unqualified opinion. The auditor’s report is included in the Annual Report booklet and consists of the auditor’s opinion letter and the financial statements with corresponding auditor notes. Vicki McComb
Mandatory internal audits conducted by the CPA firm during 2014 addressed the following areas of federal compliance: the Bank Secrecy Act (BSA), Office of Foreign Assets Control (OFAC), Customer Identification Program (CIP), Secure and Fair Enforcement (SAFE) for Mortgage Licensing Act, FACT Act, Identity Theft Red Flag Procedures, and Automated Clearing House (ACH) transactions. There were no significant findings from these audits. Internal audits addressed areas of credit union operations including loan file maintenance activity and procedures; reviews of Consumer Financial Protection Board (CFPB) compliance, general ledger reconciliation, and vendor management. Additional independent audits/assessments included website compliance, IT external vulnerability assessment and a risk management analysis. There were no significant findings resulting from these audits and/or reviews. JMAFCU management has evaluated auditor recommendations for changes to policies and procedures and implemented the recommendations where feasible. Members of the Supervisory Committee conducted regular closed account surveys, random cash counts, and other reviews of Credit Union procedures and activities with no significant findings. The National Credit Union Administration (NCUA), the regulatory body charged with overseeing federal credit unions, examines the credit union on a regular basis. Our last examination took place in May 2014 and resulted in a favorable report. The Supervisory Committee believes that all audits and examinations, with their related reports, have shown that the financial statements present a fair and reliable report of the financial condition of JMAFCU. Respectfully submitted, Vicki McComb Chairman, Supervisory Committee
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Board of Directors
Art Mirandi
Cindy Grieco
Jerry Cook
Chairman
Vice Chairman
Secretary
Marty Osborne
Larry Jaffe
Andrew Mobayed
Treasurer
Director
Director
Ralph O’Day
Maryann Siler
Carolyn Weeden
Director
Director
Director
37
Important Information Questions? Email us:
[email protected]. *Note: Do not include any sensitive information. Main Office
Deerfield Beach Branch
8019 Bayberry Road Jacksonville, Florida 32256 800-581-2256 or 904-443-6767 Open 8:30 a.m. – 4:30 p.m. EST Monday – Friday Karen Pustay, VP of Operations
111 Jim Moran Boulevard Deerfield Beach, Florida 33442 954-429-2451 Open 9:00 a.m. – 4:30 p.m. EST Monday – Friday Mona Aliseo, Branch Manager
Mobile Branch
Southeast Toyota Port Processing
6150 Omni Park Drive Mobile, Alabama 36609 251-639-7700 Open 7:30 a.m. – 4:00 p.m. CST Monday – Friday Gwen Johnson, Branch Manager
1751 Talleyrand Avenue Jacksonville, FL 32206 904-358-4424 Open 8:00 a.m. – 4:30 p.m. EST Monday / Wednesday / Friday Ally Rice, Branch Supervisor
Southeast Toyota Westlake Facility
St. Louis Branch
9985 Pritchard Road Jacksonville, FL 32219 904-378-4623 Open 8:00 a.m. – 4:30 p.m. EST Tuesday / Thursday Ally Rice, Branch Supervisor
3120 Rider Trail South Earth City, MO 63045 314-702-4305 Open 8:30 a.m. – 4:30 p.m. CST Monday – Friday DeeDee Manson, Branch Supervisor
JM Associates Federal Credit Union Routing Number
263089800
38
8019 Bayberry Road Jacksonville, FL 32256 www.jmafcu.org
