As shown on the charts, UCCU continued its steady growth in membership and financial strength during 2013 despite the lingering difficult economic environment. During the year, assets increased by 3.81% to over $879 million at the close of the year. It is important to note that this growth has not come through increased risk-taking. A commonly used measure for Federal regulators to assess the riskiness of a bank or credit union is the capitalization ratio. This ratio compares the net worth or capital for an institution to its total assets. UCCU is considered by the credit union regulator, the National Credit Union Administration (NCUA), to be in its highest capitalization category, Well Capitalized. UCCU’s capitalization ratio at the end of 2013 of 10.27% is well in excess of the standard that has been established for multinational banks.
Members benefit from this ongoing growth in assets because it allows UCCU to provide an increasing range of services. An important element of our mission is to provide financial education to our members and the community. We continued with the Be Money Smart program and last year had over 22,000 youth participating in the program. UCCU also sponsored the Family Festival held in October with over 16,000 community members attending.
With our members increasingly accessing financial services using the internet and mobile devices, UCCU continues to improve our ability to provide those services. During 2013, active users of Personal Branch increased from 58,898 to 63,557 which is over half of the total UCCU members. Among other transactions, these members undertook 1.5 million funds transfers with a total value of $905 million. Members also used UCCU’s Bill Pay service to pay 570,000 bills totaling $210 million. Mobile apps usage continued to grow as well. Using the mobile deposit service, members deposited over 89,000 checks with a value exceeding $33 million.
Even with the growing usage of digital transactions, members continue to use our physical branches. To ensure that the members receive the highest quality service, during 2013 UCCU employees spent over 8200 hours in training to improve their skills. Over 94% of front-line staff have completed training and testing and have certified in their current positions. The other 6% are newer employees and are in the certification process. Although no new branches have been opened in the past few years, UCCU management continues to evaluate membership population trends with the perspective of providing physical branches as needed.
Going forward, most forecasters predict slow improvement in the economy. Nevertheless, UCCU will face several challenges. I will note two that are particularly critical.
Interest Rate Risk. We are currently in an unusually low interest rate environment. Interest rates will increase in the future, but there is great uncertainty as to when this will occur. UCCU, as do all financial institutions, accepts short-term deposits and makes long-term loans. When interest rates increase, the rate that UCCU pays to depositors will go up as well. However, since many of the long-term loans are made with fixed interest rates, UCCU will not be able to increase the rates charged on those loans. Hence there is a risk that the interest income from the loans will be less than the interest paid out to depositors. Management is well aware of this risk and has been managing the portfolio of deposits and loans to lessen it.
Consumer Financial Protection Bureau (CFPB) Regulations. The CFPB was created by Congress in response to perceived financial abuse of individual consumers that came to light during and may have caused the recent financial crisis. These perceived abuses were promoted by large financial institutions not credit unions. Nevertheless, UCCU and all financial institutions will have to deal with the new regulations, such as more strict requirements for mortgages. UCCU has consciously maintained a conservative lending philosophy, and we don’t expect to have any difficulties in complying with the forthcoming regulations. However, these regulations will increase compliance costs for UCCU and perhaps cause inconvenience for our members.
I am confident the quality of our members will allow UCCU to deal with these and other challenges. I have appreciated the opportunity during the past year to have served as Chair. Our Board of Directors, Supervisory Committee, Management team, and Employees exemplify high standards of integrity, service, dedication, and sacrifice.
Board of Directors