Business as usual.

Amid the gloomy headlines about unemployment, the economy, home sales, and mortgages, credit unions continue to be a source of good news—and good loans.

Why? It’s the credit union difference. Bank lenders accountable to stockholders must generate earnings to pay those investors. Not-for-profit, cooperative credit unions are owned by members only—you and other consumers—and thus have no motivation to maximize profits at the expense of borrowers. Credit unions make responsible loans at fair rates.

Still, in this economy, no individual, family, or lender is immune from effects of the recession. For example, even a prudently made home loan can become troubled when it’s for a house whose value later declines 40% or more, or the mortgage holder loses a job.

Just one example of the credit union difference is the credit union way of doing business. Credit unions support each other. For example, consider the National Credit Union Share Insurance Fund, which insures your credit union accounts to at least $250,000.

Our credit union—and all other federally insured credit unions—pay insurance premiums annually. In our system, the insurance is entirely funded by credit unions. We also maintain a capital deposit with the National Credit Union Administration (NCUA), the federal insurer—equal to 1% of the total insured savings at our credit union—to further strengthen federal insurance.

Credit unions are different in another way: For some liquidity and investment services, we turn to unique credit unions—called corporate credit unions—that serve only other credit unions, not consumers.

Because of the nature of what they do, these wholesale credit unions operate in the capital markets. Although they invested in securities that were highly rated at the time they bought them, they, like so many others in those markets, have seen the value of their investments decline in the economic downturn.

As in our credit union, deposits in these wholesale corporate institutions are federally insured by NCUA, the federal insurer and regulator for credit unions. The reserves in its federal deposit insurance fund come from funds contributed entirely by credit unions, through the insurance premiums we pay annually. These funds, in turn, are backed by the full faith and credit of the U.S. government in the same way that the FDIC protects deposits in the nation’s banks.

To address losses expected by some of these 27 corporates, NCUA has to charge all federally insured credit unions a higher premium. We have the ‘rainy day funds’ put aside to replenish the fund. Still, we will be paying a higher insurance premium this year and for a few more, both to make up for the corporate losses and to pay for the increase in your coverage to $250,000. These expenses will shore up the insurance protection we all count on.

Our daily operations are not affected; we will continue to provide the same high level of quality services you have come to expect. And we continue to maintain plenty of capital reserves to act as a cushion for difficult economic times.

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