Financial overview
for August 2009


The National Credit Union Administration (NCUA) regulates all federally insured credit unions throughout the United States. The agency recently mandated that natural person credit unions (like KaiPerm) contribute to the bailout of so-called wholesale or "corporate" credit unions. The corporate credit unions provide services such as taking natural person credit union deposits, wire transfers and check clearing. The corporate credit unions are also regulated and insured by the NCUA.

Unfortunately, the corporate credit unions invested in mortgage backed securities (also known as sub prime loans). As a result, the corporate credit unions suffered large investment losses. Natural person credit unions are being mandated by NCUA to contribute to the financial bailout of the corporate credit unions.

Beginning in July 2009, NCUA is requiring us to set aside $6,243 each month for the corporate credit union bailout. The expense is deemed a "special assessment" by the NCUA. It is similar to what banks are paying to the Federal Deposit Insurance Corporation (FDIC) for the recent bank mergers and loan losses they are experiencing.

The bailout of the corporate credit unions is very frustrating. Your Board of Directors and management are upset by the NCUA's actions. First and foremost, your credit union is prudent in managing your funds. We make sensible loans and investments and we watch our expenses. At the same time, KaiPerm is doing all it can to maintain the highest level of service and competitive products for our members.

From a financial perspective, your credit union is well capitalized with net worth above 8.00%. KaiPerm has more than adequate loan loss reserves to protect our members. Delinquency is a low .50% and our charge off ratio year-to-date is less than .50%. Both these ratios exceed regulatory guidelines and are well below national averages. Dividend rates remain competitive. The credit union is operating with a positive bottom line and we are continuing to build net worth.

Now for the good news . . . . .

Your credit union has plenty of money to lend! We're anxious to make real estate, auto and VISA loans. Our service level is top notch, too. Our purpose is to help you improve your financial well being. Please feel free to contact our staff or myself with any questions.


Ed Waite
CEO
503-813-3258