Navy Federal Credit Union 2005 Annual Report Download

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PO Box 3000, Merrifield, VA 22119-3000 navyfcu.org
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navy federal eport to members 2005
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Table of contents

  • Page 1
    solutions day-to-day PO Box 3000, Merrifield, VA 22119-3000 navyfcu.org navy federal report to members 2005

  • Page 2
    ...choose Navy Federal as the preferred source for their primary, lifetime financial services. 2005 financial summary Dollars in millions As of 31 December Assets Loans Outstanding Shares, Sharechek®, MMSAs, IRAs Share Certificates Reserves Gross Income Non-interest Expenses Dividends Mortgage Loans...

  • Page 3
    ...the unique financial needs of Department of the Navy personnel and their families. We provide them with services and products they can depend on throughout their lives. It starts with that first savings and checking account, advances to car loans and mortgages, and continues on to trust services and...

  • Page 4
    ... members' overall account access and convenience by adding new member service centers and ATMs in 2005. We also made major enhancements to Navy Federal Online® Account Access, giving members even greater control of their own account management. New products, services and special offers continue...

  • Page 5
    ...7-year, $1,000- and $20,000-minimum Share and IRA certificate, which provided our highest return. As part of our commitment to provide members with products for every phase of their lives, our subsidiary Navy Federal Financial Group added homeowners insurance to an already extensive line of products...

  • Page 6
    ...'04 $17.6 $14.8 $15.8 $13.2 $14.1 $12.2 $17.59 '02 Net Income (dollars in millions) Savings Loans Savings Loans Savings Loans Savings Loans '04 '05 '02 '03 '04 '05 Total Assets (dollars in billions) Total Loans/Savings (dollars in billions) 4 navy federal report to members 2005

  • Page 7
    ... checking options, money market savings accounts, certificates, loans, including vehicle and investment property mortgage loans, credit cards, merchant card processing, business insurance and personal retirement/insurance services SPECIAL RECOGNITION • Members Navy Federal Online & Account Access...

  • Page 8
    ...Navy Federal for savings, checking, car loans and mortgages. Needless to say, we are "lifers." All of our kids are members, also. Department of the Navy Offering customtailored financial products and services for those who serve in the Navy and Marine Corps-active duty, reserve and retired Family...

  • Page 9
    bership Exclusive financial services to last a lifetime 7

  • Page 10
    ... direct deposit, Navy Federal Online Account Access, and the Visa Sharechek Card, all supported by a network of member service centers and ATMs on or near most Naval and Marine Corps bases. S O L U T I O N S every Money essentials for any lifestyle Katherine E. Wisniewski Alexandria, VA Checking...

  • Page 11
    day basics 9

  • Page 12
    ... on our credit card solutions as their needs change over the years. Navy Federal travel and rewards programs stand alone for the value they provide- members' dollars go further and the rewards come quickly. All of our cards carry a low fixed rate, a 25-day grace period on purchases, no annual fee on...

  • Page 13
    cards Convenience and rewards go hand-in-hand 11

  • Page 14
    ... loans at Navy Federal offers competitive rates and terms, coupled with easy online application at navyfcu.org, 24 hours a day. Members also can call in to speak with experienced counselors for help in selecting the right loan, such as whether a fixed equity loan or an equity line of credit is best...

  • Page 15
    products Loans for every purpose and budget 13

  • Page 16
    ...Navy Federal advisors help members choose the best mortgage, by phone or in person, and online applications are taken 24/7. Our flexible programs include options with no points, no down payment, no PMI, no junk fees, loan amounts up to $2 million and low-cost settlement services. Plus, our servicing...

  • Page 17
    ... Navy Federal members and, as a mortgage software consultant, was familiar with their products, recommended we contact the credit union. We looked at the HomeBuyers Choice Mortgage, and the other lenders we shopped didn't compare. Once we found a home, the seller wanted to close in two weeks. Navy...

  • Page 18
    ...bonds, mutual funds and other securities. Navy Federal offers products to fit every stage of life, all readily available online or by phone. S O L U T I O N S invest Money Market Savings Accounts Higher earnings than share savings, yet access when needed, by check, online, ATM or phone Certificates...

  • Page 19
    savings & ments Get to where you want to be 17

  • Page 20
    ... Card for purchases, cash is available from several hundred thousand ATMs, and members can speak with someone in person using our toll-free numbers. 24-hour, free online Account Access and Web Bill Pay (free with a minimum of three monthly payments) offer the ultimate access. navyfcu.org, Account...

  • Page 21
    account access Control your money no matter where you are 19

  • Page 22
    ... accounts in one place. small Customized services to help you start or grow your business Basic Small Business Banking The money management tools members need, from checking to savings to loans Merchant Card Processing Lower processing costs and easy-toread monthly statements Employee Retirement...

  • Page 23
    ..., a Navy Federal member, suggested we go to the local member service center for help. I joined, but all I had was our business's Tax I.D. number-no corporation papers. You put me back in business, transferring money from my old bank, arranging for us to pay our bills, set up accounts receivable and...

  • Page 24
    ... Life A variety of term and whole life plans. Some policies combine life insurance and tax-deferred investments Long Term Care Pays fixed amounts for at-home and nursing home care Some services provided by Navy Federal Financial Group and its subsidiaries. 22 navy federal report to members 2005

  • Page 25
    insurance The right coverage can make a big difference 23

  • Page 26
    board of 24 navy federal report to members 2005

  • Page 27
    directors from left to right John A. Lockard, Chairman Mary Jane Miller, First Vice Chairman Bruce B. Engelhardt, Second Vice Chairman Brian L. McDonnell, Treasurer Kenneth R. Burns, Secretary second row Sharon R. Chapman Vernon Hutton III Henry J. Sanford W. Scott Slocum Alan S. Thompson Frances C....

  • Page 28
    ... members need to manage their credit well and become savvy borrowers while reaching their lifelong financial goals. Denise S. Holmes Chairperson Your Credit Committee is dedicated to providing the best possible loan solutions for all members, offering low rates, convenient products and services...

  • Page 29
    ...Navy Federal benefit from this open communication because your individual concerns are addressed on a personal basis, and your comments help to ensure that Navy Federal maintains the highest level of service to its members. Based on the results of the quarterly audit procedures and the Annual Report...

  • Page 30
    ... Credit ...Marketing Committee 4 Executive Committee 5 Financial Plan Review Committee 6 Investment Committee 7 Personnel Policies Committee 8 Planning Committee 9 Retirement Program Committee 10 Supervisory Committee 11 Volunteers' Education Committee 3 28 navy federal report to members 2005

  • Page 31
    ...Report of Independent Auditors To the Board of Directors, Supervisory Committee and Other Members of Navy Federal Credit Union: We have audited the accompanying consolidated statements of financial condition of Navy Federal Credit Union as of December 31, 2005 and 2004, and the related consolidated...

  • Page 32
    Consolidated Statements of Financial Condition (dollars in thousands) December 31 ASSETS Cash Short term investments Securities available-for-sale Securities held-to-maturity Mortgage loans awaiting sale Loans to members, net of allowance for loan losses of $201,102 at December 31, 2005 and $161,889...

  • Page 33
    Consolidated Statements of Operations (dollars in thousands) Years Ended December 31 Interest income Interest on loans to members Interest on securities available-for-sale Interest on securities held-to-maturity Total interest income Dividend and interest expense Dividends to members Interest on ...

  • Page 34
    ... (dollars in thousands) Years Ended December 31, 2005 and 2004 Regular Reserve Capital Reserve Undivided Accumulated Other Total Reserves Earnings Comprehensive Income and Undivided Earnings Balance at December 31, 2003 Net income Net unrealized loss on available-for-sale securities Transfers...

  • Page 35
    ... in Federal funds and other short-term investments Purchase of HTM investment securities Proceeds from maturity of HTM investment securities Net increase in loans to members Purchase of fixed assets Sale/retirement of fixed assets Increase in deposit to NCUSIF Net cash used in investing activities...

  • Page 36
    ...required by the agreement. During 2005, no new loans were sold to Charlie Mac under this agreement. The total principal balance of these loans Cash For purposes of the consolidated financial statements, cash includes cash and balances due from banks and other credit unions. Short Term Investments...

  • Page 37
    ... 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. The fair value of mortgage servicing assets is based on the current market price for similar products. Significant assumptions include future prepayment rates based on current interest rate levels...

  • Page 38
    ... of the mortgage servicing assets over their fair value. For purposes of measuring impairment, mortgage servicing assets are stratified on the basis of loan type and term. Income Taxes Pursuant to the Federal Credit Union Act, Navy Federal is exempt from the payment of Federal and state income...

  • Page 39
    ... at cost, which is par value. As a member of the FHLBA, Navy Federal has access to a $3.7 billion line of credit facility. The FHLBA stock paid a 4.60% and 3.75% dividend in the 4th Quarter of 2005 and 2004, respectively. U.S. Government and federal agency debt securities were reviewed individually...

  • Page 40
    ...Credit card loans Mortgage loans Mortgage Loan Investments Fixed rate Variable rate Mortgage Loans Awaiting Sale Fixed rate Variable rate Mortgage Loans in Process Mortgage Loan Investments Mortgage Loans Awaiting Sale Unamortized Discount Points Equity loans Fixed equity Home equity lines of credit...

  • Page 41
    ...on its Consolidated Statements of Financial Condition as fair value with changes in fair value included in current earnings. These derivative instruments are economic hedges to which Navy Federal does not receive hedge accounting treatment. The notional value of the mortgage loan commitments totaled...

  • Page 42
    ... in 2004. The carrying value of intangible assets was $15,439,000 and $15,693,000 at December 31, 2005 and 2004, respectively, and is included in the total for "Other assets" in the Consolidated Statements of Financial Condition. At December 31, 2005, Navy Federal was obligated under operating...

  • Page 43
    Note 10: Members' Accounts Member deposit accounts are summarized as follows (dollars in thousands): Weighted Average Rate for 2005 Money market Share savings Member escrow Sharechek Share and IRA certificates IRA shares Investor custodial accounts Total deposits 2.48% 1.26% 0.48% 0.50% 4.06% 1.48%...

  • Page 44
    ...in the years ended December 31, 2005 and 2004, respectively. To provide more options to its members regarding credit life insurance, Navy Federal implemented Payment Protection Plans in November 2004. These plans offer members the opportunity to purchase an insurance plan that will pay their loan in...

  • Page 45
    ... amount is a fixed monthly amount based on the number of years of continuous service. The following table sets forth the funded status of the pension and other postretirement plans (dollars in thousands): Pension Benefits 2005 Benefit obligation Fair value of plan assets Funded status $ $ 388,720...

  • Page 46
    ... loans at December 31, 2005 and 2004 were $22,114,000 and $17,487,000, respectively. Credit union officials are defined as volunteer members of the Board of Directors and board committees, and employees with the title of Vice President and above. Navy Federal employs a total return investment...

  • Page 47
    ...) of net worth to total assets. Credit unions are also required to calculate a risk-based net worth (RBNW) requirement that establishes whether the credit union will be considered "complex" under the regulatory framework. Navy Federal's RBNW requirement as of December 31, 2005, was 4.60%, which is...

  • Page 48
    ... fair value for vault cash and demand balances from other financial institutions. Fair value for short-term securities is based on quoted market prices. Members' Accounts The fair value of Share Savings, Money Market Savings, Sharechek and Individual Retirement Account (IRA) share accounts...

  • Page 49
    ... fair values of the credit union's financial instruments are as follows (dollars in thousands): 2005 Carrying Amount Financial assets: Cash and cash equivalents Securities available-for-sale Securities held-to-maturity Interest-bearing deposits Other investments Investment in FHLB-Atlanta Mortgage...