April 17th, 2008

Credit Crisis Update – Letter from the CEO

Robert H. Harvey Jr., President & CEO

Valued members,

With all of the alarming headlines about large financial institutions failing around the country and in our own community, it is no surprise that many of you have expressed concerns about the security of your deposits and the solvency of your financial institution, Seattle Metropolitan Credit Union.

I want to assure you again that your money is very safe at SMCU. Because we are a financial cooperative, we are different from big banks, both in organizational structure and investment strategy. Our autonomy and independence assure that we will be sound and secure in good times and bad.

Your funds are safer at SMCU than at other institutions because:

SMCU is a credit union, owned by you
That is exactly why we do not engage in the risky behavior of loaning more to our member-owners than they could afford to repay. The not-for-profit mission of SMCU to serve you, the members who own the credit union, is illuminated in contrast to the profit-maximizing schemes that resulted in the sub-prime lending crisis.

We save up for a rainy day
Capital adequacy is a measure of how much money a financial institution must keep on hand to mitigate risk and protect depositors. At SMCU, our capital strength, percentage-wise, is much greater than that of most banks. One reason big banks have gotten into trouble is that they were never required to carry more than 4% capital, while 6% has been the regulation for credit unions. At SMCU, our capital ratio is 9%.

We tell it like it is
At the World Council of Credit Unions annual meeting in Hong Kong last week, former Senator Paul Sarbanes praised credit unions for their transparency, in contrast to the financial institutions at risk of failure.

“Credit unions are the ultimate self-help tool and an important response to America’s challenges,” said Sarbanes. “Other businesses can learn from their transparency and accountability, and how it has helped them weather the sub-prime lending challenges to the financial system in the United States.”

Credit union deposits are insured by NCUA
Your deposits at SMCU are insured by the National Credit Union Share Insurance Fund (NCUSIF), an arm of the NCUA. NCUSIF insurance is similar to the deposit insurance protection offered by the Federal Deposit Insurance Corporation (FDIC), but arguably more solvent and better managed.

The NCUSIF is funded completely by participating credit unions, and no taxpayer dollars have ever been used to bail out a credit union. Not one penny of insured savings has ever been lost by a member of a federally insured credit union. This federally-backed insurance fund has several programs to support credit unions that may be experiencing problems, turning to liquidation or closure only as a last resort. In the rare case of a credit union failure, members receive full payouts usually within 3 days from the time the credit union closes its doors.

If you are curious about the financial health of your bank or credit union, they post quarterly financial statements on the FDIC or NCUA Web sites. You’ll see that our capital rate is higher than that of almost all banks. SMCU is in a strong position to meet the financial needs of our members, and we look forward to offering secure, high quality financial services to our members and for many generations to come.

Bob Harvey
Seattle Metropolitan Credit Union

Still Have Questions?
Call us at (206) 398-5500 or (800) 334-2489.

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