Letter to Our Members

The 2010 year was certainly a challenging one. This whirlwind effect was aided in part by all of the outside forces that saddled our credit union. Much of our agenda for 2010 was playing "catch up" from the Corporate Stabilization Act – which is not behind us yet. The losses in natural person credit unions in 2010, some in our back yard, added a great deal of pressure to heightened regulation, a call for deeper and more meaningful due diligence, enhanced Asset Liability Management initiatives, stronger policy and guidelines, and a call for a more conservative approach to operating the credit union.

For 2010, we reined in asset growth to end the year with $137 million in total assets. This growth was driven by share deposits, which needed to be slowed down to balance slower loan growth. By balancing these two, managing expenses, and working with members to minimize loan delinquencies and charge-offs, we show a pre-NCUA stabilization assessment profit of $172,000. With the NCUA stabilization expense of $327,000 we show a loss of $155,000. Regardless of the new reality of similar annual assessments from the NCUA, we firmly believe we laid the foundation in 2010 positioning ourselves for success in 2011 and beyond.

Our growth in deposits occurred in shares, certificates, and money market accounts largely due to the flight to safety by many people in our community and our market high rates in certificates and money market accounts. In order to manage this growth we lowered the rates on certificates and money markets in August, ultimately yielding a lower cost of funds and stronger earnings growth. Through that tough economic time we were proud to be able to support our community and our members with some of the highest share certificate and money market rates.

At that same time, we continued to offer competitively low rates on consumer loans and remained a strong force in the commercial lending market. As a result our commercial lending portfolio grew by an astonishing 64%. However, we are nearing the limit of how much we can lend out to commercial members and need to balance our portfolio with more consumer loan growth. In 2010, even with our low rates, our consumer loan portfolio declined by 9%. Therefore, we reentered the indirect loan arena by developing strategic partnerships with several local area dealerships and hired a sales trainer to give our team the tools needed to continue to strengthen the sales culture.

The opportunities for 2011 and beyond are great. We continue to drive value for our members while providing a path to financial freedom. We will continue to offer great products and services at low cost, like the roll out of mobile banking that is free to all members of the credit union. On the horizon in 2011, you will also enjoy managing your finances through a personal financial management tool online called MoneyDesktop.

We have a tremendous duty and responsibility to not only serve our community, but to EDUCATE, SUPPORT and EMPOWER our members and others in the community to be better savers and gain more knowledge financially. We have the responsibility to all people in our community to illuminate the path of financial independence, arm teens with the knowledge of the risks of credit card debt, and teach young children the value of money and why it is important to save. It is our duty to inspire both young and old to make a difference not only in their jobs and school, but in their community.

Kevin J. Ralofsky

Chief Executive Officer