31 July 2008
From The President’s Desk
Dear OCCU Member,
“Today 20,000 commercial airplane flights flew safely and without incident.”
“Today 50 million people commuted to and from work in their cars safely.”
“8,000 Credit Unions in America may provide the safest choice for your money because of how they are organized.”
These statements are all true but they are headlines you will never see in the news. They don’t sell papers or TV ratings.
Most banks are capitalized by selling shares of stock to the public and other institutions. Many owners of bank stock aren’t even customers of the bank they own stock in.
When banks sell stock to raise capital, by that very organizational design, they may create tremendous need to maximize profits in order to please shareholders. But this also can lead to risky business strategies. Strategies like making predatory, sub-prime mortgage loans to unsuspecting customers because of the higher potential income available in these type products.
Credit Unions, by law, can not sell stock to their members, or to anybody. Therefore, Credit Unions have no incentive or need to maximize profits to please shareholders. That is a huge fundamental organizational difference between banks and Credit Unions. Also, Credit Unions make it a point to avoid placing their valued members in unaffordable loans.
Bank Presidents (and their entire executive management teams) routinely receive hundreds of thousands of dollars, even millions of dollars, in annual cash bonuses and stock options based on their bank’s profitability. This can and has lead to risky business.
In the 23 years that I have been President of this Credit Union and the 31 years that my predecessor, Ken Fredson, was President of this Credit Union, we have never received even $1 in annual bonuses. For the last 54 years your Credit Union’s Presidents have been paid a fair salary but never have been given incentives to maximize profits.
Key Facts:
- Our Community CU has grown 13.58% in deposits this year. We have become a “safe haven” for members’ money.
- Federal law requires us to have reserves equal to 7% of assets to be classified as “highly capitalized”. We have 12.70% as of June 30, 2008.
- Many banks have over 50% of their assets tied up in direct real estate loans. We have 13.85% as of June 30, 2008.
- Sub-prime Real Estate loans have reached foreclosure rates of over 20% in some markets. We have no subprime real estate loans at all and we have zero real estate loans of any kind in foreclosure.
- Our overall delinquency on all loans is .84% as of June 30, 2008. The lowest it has been in the last 8 years is .66%. Our reserves for loan losses are funded at 146% of regulatory requirements as of June 30, 2008.
In closing I’d like to mention three things more:
- Ask our staff how “Payment on Death” (POD) share accounts can help you insure your deposits which may be over the $100,000 limit ($250,000 additional limit on IRAs). For example, a husband and wife with three children could have $600,000 deposit insurance coverage.
- If you have outside investments that are causing you some concerns, our licensed financial consultant, Mark Mager, would be happy to review with you.
- Please don’t let the media headlines scare you. I’ve got all my funds here and I know what our Board of Directors and staff has done managing this credit union in recent years….. so even though the news all around us about banks seems bad, I have no concerns about us. I sleep very well!
Sincerely, 
Joe Robertson
President/CEO |
