A Special Message from the Board and Management

2009 was a difficult year for many people, businesses and nonprofits, including your credit union. We were not able to escape the effects of the recession and global economic meltdown. While the credit union remains strong and well capitalized, we have had to make some very difficult changes. In this article, we will discuss the challenges we have faced this year, and our plans to move ahead.

"The Perfect Storm"
We had planned for 2009 to be a "lean" year: we had recently added a new office on North Salina Street, and we were upgrading our data processng system from our old DOS-based system to a new, top-of-the-line system. We planned to end 2009 with a small surplus, but instead we will close 2009 with the our first loss in our 27-year history. Several events came together to cause this.

Financial System Meltdown
Though Cooperative Federal does not make predatory sub-prime mortgages and had no funds in mortgage-backed securities or in the stock market, we have been required to pay for "our share" of the bailout. Others in the credit union cooperative system - particularly "corporate" credit unions that provide financial services and loans to other credit unions - did have money invested in mortgage-backed securities. The losses they have incurred (some of which are accounting adjustments to the estimated value of securities and may or may not be realized) have been passed on to us as a member of the credit union system. We had to "write-down" (take losses on) our National Credit UnionShare Insurance Fund capital and our membership share capital at Members United, our corporate credit union. To bolster confidence in the financial system, federal account insurance was increased from $100,000 to $250,000 per account, so we had to pay for the additional coverage. The financial system meltdown has also resulted in a precipitous decline in interest rates, leading to a decline in our earnings.

We had still hoped to break-even in 2009, with the help of a large grant from the Community Development Financial Institutions (CDFI) Fund. The CDFI Fund has supported our service to underserved neighborhoods since 2001. This year, the Fund gave awards to very few credit unions and more to loan funds. We believe the government's funding priorities were to provide very large awards (almost all were $2 million) to large institutions, to act as quick economic stimulus through infrastructure improvements and job growth. Smaller organizations - and those who emphasize affordable financial services in addition to loans, like us - were not given priority. In October, we were informed that we did not receive an award. At that point, it was necessary to take significant steps to reduce our expenses.

The most difficult decision was to reduce our staffing. We laid off five staff members in October; the lay-offs were distributed across all areas of the credit union's operations. These are our co-workers and our friends. This was very painful, and done soberly and mindfully of how lay-offs can affect individual employees, their families and the community as a whole. We have made other budget adjustments, and continue to seek ways to be more efficient and cost-effective. For example, after this issue we are suspending the mailing of our newsletter to save on paper, printing and postage costs. Instead, we will produce an e-newsletter that will be e-mailed. We will make some printed copies available in our branches and have a PDF on our website. Through all the changes, our focus is on providing the best serve we can to you, our members.

Our Future
Looking forward, we plan to grow our membership, grow our service and grow our income. We will create some new efficiency and service improvements as we put in place some pieces of our new data processing system. One of those pieces is a "relationship management" program that will allow us to track any member questions, outstanding issues, and suggestions to ensure that you get prompt follow-up. In the second half of 2010, we will have a great new eStatements service, and secure loan applications online. We are excited by the possibilities offered by our new data processing system. While the path to implementing the new system has come with a few "bumps" in the road, we are resolving these issues and appreciate our members' patience.

Our growth plan also centers on becoming the premiere homeownership-lending program in Syracuse. We will become Syracuse's choice for first time homebuyers as our First Home Club and other matched savings programs enable more people to buy homes. We are also improving our Home Equity line of credit product. Your ideas are valuable to help us to continuously improve and respond to our members' needs.

On a final note, we would like to emphasize that the credit union built a cushion of capital reserves over the years so that we could weather difficulties. While we did not expect to weather so many storms at once, we remain "well-capitalized" by the National Credit Union Administration's stringent standards. We have adjusted our business plan, obtained additional capital, changed some services, and we shall continue to evaluate our programs.

We invite you to attend our Annual Meeting, March 14th 2010 at the Assumption Parish Center, behind our office at 800 N Salina St to talk with us about 2009's challenges, our plans for a strong future- and ways we can serve you better.