We are all too aware of the current economic challenges. Everybody, including the credit union industry, has been impacted. But the point we want to make very clear: your money in the Kaiperm Northwest Credit Union is solid and secure. We are a sound, stable institution with deposits that are fully insured up to $250,000 per account, and we have never invested in mortgage-backed securities or similar ‘toxic' investments.

Not all credit unions have been so cautious. Several "corporate" credit unions did invest in mortgage-backed securities and derivatives just like a lot of other financial institutions and Wall Street investors. But these are not ordinary credit unions. They are specially designated operations that exist to provide critical back-office functions such as check processing and lending between credit unions throughout the country.

We are now being asked to bailout the corporate central credit union system! The National Credit Union Administration (NCUA*) has mandated that every U.S. credit union contribute to this corporate central credit union network bailout. In our particular case, we are required to contribute approximately $457,000 to comply with this mandate.

Are we pleased with this? Absolutely not. Your management and board have written letters to Congress and our regulator expressing our disappointment and offering alternatives to using credit union funds for the bailout.

We are, in fact, very conservative in managing your credit union. We always take a prudent approach with members' money; whatever we don't loan out to members is invested (usually short-term) in insured certificate of deposits. And we are big supporters of the credit union cooperative philosophy of people helping people.

Please look on our website www.kaipermnw.org to keep abreast of breaking information. Also, please attend our Annual meeting on Thursday, May 14 where this topic will be the subject matter of the evening.

Contact Ed Waite, our CEO, or Mark Moisan, Board Chair, with your questions and comments. We look forward to hearing from you.

Ed Waite         503-813-3258              edw@kaipermnw.org
Mark Moisan    503-318-3738              mark_moisan@hotmail.com

Notes:

* The National Credit Union Administration, the regulatory agency for all credit unions (much like the FDIC for banks), insures all credit union deposits in the United States. There are 7,900 credit unions across the U.S. representing 90 million members. KaiPerm has a 7.8% capital ratio, which indicates we are a stable credit union

Some Questions You May Have

Why This Note?
Your credit union board and management believe in full disclosure and transparency. We want our member-owners to know that the regulator's actions, which are substantial, will have a minimal affect on how we do business with you.

How does this situation affect me?
KaiPerm is still strong and competitive. We try to keep loan rates low, savings rates very competitive and fees at a minimum. Contrary to many of the banks, we are making loans to members; in fact, we would like very much to make more. Our operations and our people are unchanged. You can enjoy the same level of quality products and excellent service you have come to expect from us.

Are my deposits safe?
Your deposits are backed by the full faith and credit of the US government. Members having deposits greater than $250,000 can have multiple accounts. For example, a family of two can keep $750,000 at KaiPerm, all of which is insured. IRA accounts are insured with an additional $250,000 per account coverage.

Is there anything we can do to prevent or mitigate this?
The NCUA is requiring all credit unions to contribute to the corporate bailout. The regulator provides the deposit insurance and has issued rules and regulations that all credit unions must follow. To date, the credit union industry has not pursued any further action against the corporate central management or board.

What is the bottom line impact? What will be different?
The credit union's earnings will be reduced in 2009. Your management and board is consulting with our external auditors and other industry experts to determine the best methods to account for the bailout money that will be paid out. KaiPerm has nearly $4.2 million dollars in equity after the payments required by our regulator. The regulator is also considering a plan to allow credit unions to make "monthly payments" to reduce the immediate affect of the payout. Your board and management decided to immediately take the write-downs in order to move forward and focus on our members.