Navy Federal Credit Union 2012 Annual Report Download

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ACHIEVING
RESULTS.
2012202012
NAVY FEDERAL CREDIT UNION • 2012 ANNUAL REPORT
LEADING
WITH VISION.

Table of contents

  • Page 1
    20 2012 LEADING WITH VISION. ACHIEVING RESULTS. NAVY FEDERAL CREDIT UNION • 2012 ANNUAL REPORT

  • Page 2
    Vision Statement Financial Summary As of December 31 2011 2012 Dollars in millions Assets Loans Outstanding Shares, Checking, MMSAs, IRAs Share Certificates Reserves Gross Income $ 46,925.5 $ 31,486.6 $ 24,146.2 $ $ $ $ $ 9,493.8 5,078.8 3,301.5 1,446.0 420.9 $ 52,436.1 $ 35,257.1 $ 27,131.0 ...

  • Page 3
    .... Navy Federal is the best financial institution I have ever done business with. My deposits post quickly and I can get a human on the phone 24/7. As far as fees go, I don't have any fees!" -Online Review Attracted by dividends, no fees, and free debit cards, growth in checking accounts set new...

  • Page 4
    ... the Chairman and President 2012 Annual Report "I've been with this credit union 35 years and have never found another bank even come close to the service and treatment I get here. I have received mortgage loans over the phone and at great rates. I always end up back at NFCU." -Facebook Post The...

  • Page 5
    ...natural disasters, and, at year end, the looming threat of the fiscal cliff. ASSetS 2011 2012 MeMBeRS $46.9 $52.4 John A. Lockard Chairman Cutler Dawson President 2011 2012 LOANS/SAVINGS 3,867,127 4,235,315 2011 2012 $31.5/$33.6 $35.3/$37.4 6 Navy Federal Credit Union Leading with Vision...

  • Page 6
    ... A. Lockard Chairman of the Board Kenneth R. Burns First Vice Chairman Bruce B. Engelhardt Second Vice Chairman Cutler Dawson Treasurer Grisell F. Collazo Secretary Edward R. Cochrane Jr. William P. Mizerak Henry J. Sanford 8 Navy Federal Credit Union Leading with Vision. Achieving Results...

  • Page 7
    ... it receives from Navy Federal members. By maintaining an open line of communication with the membership, the committee helps to ensure that you are provided the quality of service that you deserve as member-owners of your credit union. The Supervisory Committee employs the independent accounting...

  • Page 8
    ... member depogitg and gelling nondepogit invegtment productg. Representatives registered with NFBS and NFAM (Members FINRA/SIPC). Trust Services available through MEMBERS Trust Company, 14025 Riveredge Dr., Suite 280, Tampa, FL 33637. 1-877-221-8108. Fax 703-206-1510. 12 Navy Federal Credit Union

  • Page 9
    2012 LEADING WITH VISION. ACHIEVING RESULTS. The Report of Independent Auditors

  • Page 10
    ... consolidated financial statements referred to above present fairly, in all material respects, the financial position of Navy Federal Credit Union at December 31, 2012 and December 31, 2011, and the results of its operations and its cash flows for the years then ended in accordance with accounting...

  • Page 11
    ... sales Mortgage servicing Credit card interchange 1,434,017 290,683 40,706 61,882 169,440 98,379 100,199 35,159 60,169 247,515 1,339,965 88,216 22,399 57,466 143,529 159,519 84,063 34,286 52,832 189,865 Total assets LIABILITIES AND MEMBERS' EQUITY Members' accounts Savings accounts Money market...

  • Page 12
    ... of property, plant, and equipment Recovery of loss on membership capital in other credit unions Gain on sale of investments Amortization of loan origination fees and costs Loss on change of value in mortgage servicing assets Mortgage loans originated for sale Gain on sale of mortgage loans Mortgage...

  • Page 13
    ...the fair value option for MLAS. MLAS are sold with the mortgage servicing rights retained by Navy Federal. Loans are removed from the Consolidated Statements of Financial Condition as assets and sales treatment is applied when, pursuant to ASC 860-10, Transfers and Servicing, the conditions for sale...

  • Page 14
    ... rent amount is deferred. Navy Federal reviews its operating leases annually for the existence of asset retirement obligations that should be accrued pursuant to ASC 410-20, Asset Retirement Obligations. National Credit Union Share Insurance Fund (NCUSIF) Deposit The deposit in the NCUSIF is in...

  • Page 15
    ... shares. These shares were not insured by the NCUSIF and required three years' notice prior to withdrawal. Navy Federal made a request to withdraw these shares in 2009 and subsequently closed out its membership with the corporate credit unions during 2012, leaving a zero balance of membership shares...

  • Page 16
    ... Home Loan Banks (FHLB) of San Francisco and Atlanta stock as of December 31, 2012 and 2011. FHLB stock is a restricted investment and is carried at cost, which is par value. As a member of the FHLB, Navy Federal has access to a $9.5 billion line of credit facility. All debt securities were reviewed...

  • Page 17
    ...198 Membership capital shares Cash on deposit in money market accounts Cash collateral Total $ 6,798 NOTE 4: LOANS TO MEMBERS AND ALLOWANCE FOR LOAN LOSSES Navy Federal originates mortgage loans both for sale and for its own portfolio. During 2012 and 2011, Navy Federal originated $10.3 billion...

  • Page 18
    ... Federal uses estimated current LTV ratios and FICO score as the credit quality indicators for its mortgage loans, which consisted of the following as of December 31, 2012 and 2011: As of December 31, 2012 (dollars in thousands) Total $ 1,734,032 $ 6,128,684 $ 7,862,716 Excludes fair value...

  • Page 19
    ... for loan losses during the years ended December 31, 2012 and 2011 were as follows: Grand Total (dollars in thousands) Estimated Current LTV Indeterminate*

  • Page 20
    ... escrow deposits, loss mitigation activities, foreclosure activities, and funding servicing advances that have not yet been collected from the borrower. Navy Federal recognizes advances that are reimbursable as "Accounts receivable" on its Consolidated Statements of Financial Condition. Advances...

  • Page 21
    2012 Financial Section Cumulative total loan amounts, related impairment, average loan balances, and interest recognized on Navy Federal's TDRs for the years ended December 31, 2012 and 2011 were as follows: 2012 (dollars in thousands) Accretable yield activity for acquired credit-impaired loans ...

  • Page 22
    ... Mac for losses related to higher loan-to-value (LTV) loans not having private mortgage insurance. Under this agreement, Navy Federal received proceeds of $618.9 million and $745.4 million from the sale of mortgage loans during the years ended December 31, 2012 and 2011, respectively. The balance of...

  • Page 23
    ...month period, and their note rates range between 2.5% and 4.0%. Management has the intent and ability to fill the incremental balance of forward sales contracts over the open mortgage loan commitments with the balance of closed loans classified on the Consolidated Statements of Financial Condition...

  • Page 24
    ...Consolidated Statements of Financial Condition: Carrying Value of Goodwill $ 58,650 254 58,904 1 $ 58,905 NOTE 15: MEMBERS' ACCOUNTS Interest rates on members' share accounts are set by Navy Federal's Board of Directors, based on an evaluation of current and future market conditions. Member deposit...

  • Page 25
    ...330 2013 2013 Fixed Fixed Monthly Quarterly 2,400,000 0.22% (dollars in thousands) 2012 $ 44,565 21,611 11,093 318,470 2,279 $ 2011 Money market Savings Checking Share and IRA certificates IRA shares 613,750 216,600 2.63%-4.91% 1.21%-5.78% 830,350 Total short-term borrowings Long term FHLB...

  • Page 26
    ... and $8.3 billion in mortgage loans held for investment. Navy Federal had the following unused lines of credit as of December 31: 2012 Fixed Monthly $ 252,500 0.14% 0.13-0.14% (dollars in thousands) Other FHLB short-term borrowings 2012 2012 Fixed Floating Monthly Quarterly 1,500,000 40,000...

  • Page 27
    ...plan assets, historical market index and plan returns, and a forecast of future expected asset returns. The amounts recognized in "Accumulated other comprehensive income" for the years ended December 31 consist of: Pension (dollars in thousands) Funded status, end of year: Fair value of plan assets...

  • Page 28
    2012 Financial Section The investment strategy of the Navy Federal Credit Union Employees' Retirement Plan is to employ an investment approach, whereby a mix of equity and fixed income investments are used to maximize the long-term return of plan assets at a prudent level of risk that includes ...

  • Page 29
    ... of the valuation methodologies used by Navy Federal for the assets measured at fair value: NOTE 18: RELATED PARTY TRANSACTIONS In the normal course of business, Navy Federal extends loans to credit union officials. The total principal amount of loans extended to officials during 2012 and 2011 was...

  • Page 30
    ...: Fair Value at December 31, 2012 Quoted Prices in Active Markets for Identical Assets (Level 1) $ - - - - - 10,928 10,928 - - - $ Available-for-sale U.S. government and federal agency securities Residential mortgage-backed securities Commercial mortgage-backed securities Bank notes Total available...

  • Page 31
    ... due from banks and credit unions, all of which mature within 90 days. The carrying amount reported approximates fair value for vault cash and demand balances from other financial institutions. Fair value for short-term securities is based on quoted market prices. Total assets at fair value on...

  • Page 32
    ..., including Federal Home Loan Bank (FHLB) Borrowed Funds FHLB debt comprises both short-term (operational) and long-term (strategic) debt. The fair value of FHLB borrowings is based on the present value of future discounted cash flows using implied forward rates. The estimated fair values of...

  • Page 33
    ... with continuing involvement: (dollars in millions) 2012 $ 5,167 19 62 $ 2011 2,948 9 58 Cash from sale of mortgage loans and mortgage-backed securities Repurchase of previously transferred loans Contractual servicing fees received Total $ 5,248 $ 3,015 46 Navy Federal Credit Union

  • Page 34
    Federally insured by NCUA. © 2013 Navy Federal NFCU 8010-F (4-13)

  • Page 35
    PO Box 3000, Merrifield, VA 22119-3000 • navyfederal.org Federally insured by NCUA. © 2013 Navy Federal NFCU 8010 (3-13)