LGFCU Remains Safe and Sound—
An Open Letter from the President

Dear Members:

Considering the current uncertainty in many financial markets, LGFCU members can rest assured their Credit Union is both safe and sound. The bottom line for LGFCU is we remain healthy, vibrant and well-capitalized. Members should understand that LGFCU is not part of the banking sector's troubles and stands apart as a safe harbor for members' savings.

The following is a list of considerations we believe reinforce the comfort members should have in LGFCU.

Deposit Insurance. In response to the passage of the Emergency Economic Stabilization Act of 2008, the National Credit Union Administration (NCUA) immediately increased share insurance protection through the National Credit Union Share Insurance Fund (NCUSIF) to $250,000 on all types of accounts until December 31, 2009. This includes funds in LGFCU's Share, Checking, Money Market Share and Share Term Certificate accounts, as well as Individual Retirement Accounts. The NCUSIF is a federal fund comparable in assurances to the FDIC, Federal Deposit Insurance Corporation, for banks.

The NCUSIF is administered by the NCUA and backed by the full faith and credit of the U.S. Government. The NCUA is an independent United States government agency that insures the deposits of credit union members nationwide. Managed by the National Credit Union Administration Board, NCUA examines, supervises and insures both federally-chartered and qualifying state-chartered credit unions.

Delinquency. Many financial institutions have seen dramatic rises in non-performing loans. Many of the bad debts were brought about because of unwise lending practices. LGFCU has not practiced irresponsible lending. LGFCU has not offered subprime or predatory loans. Our lending practices have always followed sound, conservative fundamentals. As a result, LGFCU delinquency remains one of the lowest in the industry—below 1 percent. Furthermore, not all delinquencies result in a costly loan loss. As for LGFCU, actual losses are just a fraction of the write-offs experienced by most institutions.

Investments. When a financial institution receives deposits, it seeks to invest the funds to make a rate of return. Some financial institutions have come under fire for investing in unsafe instruments. LGFCU only invests in loans to members and government-backed instruments. There are no hybrid, unconventional or risky securities in LGFCU's portfolio.

Capital. Financial institutions are required to maintain a regulatory-enforced level of capital. For LGFCU, the level of capital to be considered well-capitalized is 7 percent. Currently, LGFCU has capital in excess of 8 percent. This equals over $63 million in net worth. The Board of Directors and management, as well as our federal regulator, the NCUA, consider our capital level to be satisfactory to meet the current and prospective business risks facing LGFCU.

Growth. One measure of a financial institution's stability is growth. Growth for a financial institution is a validation of its ability to serve the needs of its members. LGFCU is one of the fastest growing credit unions in the nation with an annualized growth rate near 20 percent for total assets. In fact, total loans are growing at an annualized rate in excess of 20 percent, nearly three times the rate of peer credit unions. There is no “credit crunch” at LGFCU!

Liquidity. It is critical that a financial institution maintains adequate cash—and access to that cash—to meet the needs of its depositors. LGFCU has sufficient amounts of cash, short-term investments and lines of credit to ensure members that requests for withdrawals and credit can be met. While some institutions are curtailing lending and services to conserve liquidity, it is business as usual at LGFCU.

Good Corporate Governance. A financial institution should be managed with prudent, professional leadership. The members of LGFCU's Board of Directors are experienced leaders from North Carolina local government units. As such, our Board understands fiscal responsibility and maintaining the type of integrity needed to hold the confidence of members. The senior management team of LGFCU has a combined 65 years of experience in the management of financial institutions. Moreover, as a not-for-profit cooperative, LGFCU is built to
protect the interests of members.

This cooperative structure means:

• Members, depositors, borrowers and owners are one and the same.
• Any profits we make are returned right back to our members in the form of higher dividends rates, lower interest rates on loans and improved products and services.
• Members have a voice in the way their credit union is run—and one vote.
• We stress the idea of community, partnering with North Carolina's 100 counties and 546 cities, towns and villages with the mission of improving lives.

These are just a few points that illustrate the safety and soundness of LGFCU, and how we are ready to help you during these troubled times. Thank you for your continued support, and for your contribution to the success of your Credit Union.

As always, we welcome hearing the comments and concerns of members. If you are interested in learning more, please visit www.ncua.gov or www.cuna.org, or feel welcome to contact me. After all, we are your Credit Union.

Sincerely,

Maurice R. Smith
President, Local Government Federal Credit Union