Message from the President

Printer Friendly Version

Your Credit Union - Safe, Strong, & Secure

Update On The Credit Union Industry

A Message from the President:

Your Credit Union – Safe, Strong, & Secure

During these financially uncertain times, the U of I Employees Credit Union wants to reassure our members that their credit union is safe, strong, and secure. The U of I Employees Credit union is ready and able to help our members during these difficult economic times.

Your credit union has worked hard to build and maintain a strong financial foundation. It is this principle that has allowed us to remain in the position to offer competitive rates for deposits and loans, while protecting the financial integrity of our members. When you have questions, when you are in need – your credit union will be there to provide sound financial solutions.

In order to provide comprehensive financial education and counseling to our members, the U of I Employees Credit Union has partnered with the BALANCE Financial Fitness Program. Services include money management and housing counseling, a debt repayment plan, credit report review, and a toll-free information line – all free to members of the U of I Employees Credit Union. The BALANCE program compliments the U of I Employees Credit Union’s continued mission to offer sound financial solutions to all of our members.

It is our goal to provide members with professional guidance to match them with the right products and services. The execution of this goal, along with the adherence to sound financial practices has made the U of I Employees Credit Union stand out among its peers.

The credit union has received the highest regulatory ratings from State of Illinois Examiners for the past 4 years along with 67 consecutive quarters of Excellent and Superior ratings from Bauer Financial. We are well-positioned to continue successful operating results and growth.

Thank you for choosing the U of I Employees Credit Union and for the trust you continue to place in us. It is our hope that during these troubling times, we will continue to secure that trust through the provision of consistent and meaningful services.

Share the trust you have in us with your family, friends, and co-workers. They too can benefit from the U of I Employees Credit Union’s financial solutions.

Should you have any questions, please contact us at 217-278-7700 or info@uiecu.org.

Sincerely,

E.J. Donaghey

President/CEO

The credit union is chartered and supervised by the State of Illinois through the IDFPR (www.idfpr.com). The credit union is also supervised and insured by the Federal Government through the NCUA (www.ncua.gov). The NCUA currently insures member share accounts up to $250,000 per member, as well as an additional $250,000 per member for Individual Retirement Account monies. The NCUA is the most secure and strongest of the federal savings insuring agencies.

UIECU Executive Vice President/Chief Operating Officer, Greg Anderson, Offers Update on Credit Union Industry

The National Credit Union Administration (NCUA) has taken steps to support the corporate credit union network which is facing extraordinary market disruptions in the current economic environment. Corporate credit unions provide liquidity, investment, and payment processing services to consumer-owned natural person credit unions, like the U of I Employees Credit Union (UIECU). While corporate credit unions face these economic challenges, UIECU is building on a strong financial position and continues to increase deposit and loan balances, as well as overall membership in the credit union.

By regulation, corporate credit unions are only allowed to invest in highly rated securities, with limited exposure to interest rate risk. Historically, the securities held by the corporate credit unions could be readily sold in the market with security values having experienced little or no loss. However, in recent months, national credit markets have been disrupted, resulting in depressed prices and inactive trading worldwide.

These market disruptions paired with the current economic climate left the corporate credit union system facing unprecedented strains on its liquidity and capital. On January 28, 2009, NCUA began offering National Credit Union Share Insurance Fund (NCUSIF) guarantee of member shares in corporate credit unions as part of the corporate stabilization program. In addition, NCUA injected $1 billion in cash from NCUSIF into US Central Federal Credit Union (US Central) in the form of capital.

On March 19, 2009, the NCUA Board placed US Central and WesCorp Federal Credit Union (WesCorp) into conservatorship and began managing daily operations. The investment security valuations at US Central and WesCorp had declined to the point that NCUA felt regulatory action was necessary. Services provided by both organizations are uninterrupted and credit union members have not been impacted. NCUA is committed to protecting member funds in federally insured credit unions, and will continue to take all steps necessary to preserve a safe and sound credit union industry.

UIECU is committed to supporting the credit union industry through the actions of the NCUA Board. Credit unions nationwide are participating in these efforts to stabilize these corporate credit unions.

Credit Union’s Support of Insurance Fund

The guarantee of corporate credit union deposits requires the establishment of a $5.9 billion liability that will impact the NCUSIF. In 2008, UIECU recognized a $1.5 million charge as its share of the impairment to the insurance fund based on our level of insured shares. Subsequent legislation has established a Temporary Corporate Credit Union Stabilization Fund to mitigate the financial impact to credit unions like UIECU. NCUA is able to borrow from this fund, with interest due back to the US Treasury. In June, 2009, UIECU and other credit unions recognized a recovery of the $1.5 million charge mentioned above as directed by the NCUA. Rather than this being a one time charge it will be due over the next seven years to re-pay the US Treasury. In addition, NCUA has reported that natural person credit unions will be assessed an insurance premium to bring the NCUSIF back to its maximum level of 1.3 percent of insured shares. In 2009 this assessment to UIECU will be approximately $278,000. This will be the first insurance assessment for the credit union industry since 1992 and may be assessed over 8 years in order to manageably re-build the NCUSIF. It is important to note that the corporate stabilization measures being taken involve no Troubled Asset Relief Program (TARP) funds or other taxpayer “bailouts”.

Credit Union Impact from Investment Markets

On September 11, 2009, US Central released their financial statements for 2008, reporting a $4.9 billion loss on its investments related to mortgage-backed securities. This impacted the financial condition of Members United Corporate Federal Credit Union because of Members United’s investments in US Central. Members United realized a loss of $152.7 million as a result. Subsequently, because of UIECU’s membership and investment in Members United, UIECU had to recognize a negative impact to assets and capital of almost $1.25 million on September 17, 2009. UIECU’s projected earnings for 2009 through September 30 remains positive at .57% Return on Assets, well above peer levels thus far this year. Projected capital at the end of the third quarter is 8.33%, still comfortably above industry standards.

The industry standard for a “well capitalized” credit union is a capital ratio of 7 percent or more. Nationally, credit unions are very well-capitalized. UIECU had a capital ratio of 9.06 percent as of June 30, 2009 and is well positioned in this time of unprecedented economic uncertainty. UIECU continues to serve members and grow in accordance with our strategic and operational plans.

Again, let us reassure you that UIECU remains financially secure and your deposits and investments with the credit union remain safe and sound. The NCUA’s actions will not affect your deposits or loans at the credit union, and each account remains insured up to at least $250,000 by the full faith and credit of the U.S. Government. This level of share insurance was recently extended through 2013, at which time insurance is scheduled to revert to $100,000. The credit union has received the highest regulatory ratings from State of Illinois Examiners for the past 4 years along with 67 consecutive quarters of Excellent and Superior ratings from Bauer Financial. We are well-positioned to continue successful operating results and growth.

Thank you for choosing UIECU and for the trust you continue to place in us. It is through this trust and support that we will continue to be financially sound and well positioned to serve you now and in the future. Should you have any questions please contact me at 217-278-7700, or ganderson@uiecu.org.

Greg S. Anderson

Executive Vice President