2nd Quarter 2019 Message

Dear Members: July 1, 2019
One year ago I reported in my Chairman’s letter that the U.S. economy was booming; unemployment was at the lowest level in a century, job creation flourished, small business optimism was at a record level and wages rose perceptibly. Not much has changed in a year. In addition to those metrics holding pace the Dow Jones industrial average just hit an all time historic high. However, one year ago the Federal Reserve Board’s strategy was to reign in potential inflation by gradually increasing the Prime Rate, the interest rate they charge banks that borrow from them. And in fact, in 2018 the Feds raised that rate four times. Any of us that borrowed with a Kwik Cash loan or on a Home Equity Line of Credit (HELOC) were directly impacted, as those products are indexed to the Prime Rate. Now the Federal Reserve Board is under scrutiny as financial experts, including President Trump, feel the economy and stock market would have been even stronger had they kept interest rates lower. So, while there’s no firm timeframe for an interest rate reduction, we borrowers may see some interest savings in the very near future.
While Kwik Cash loans and HELOC advances may carry a higher interest rate than collateral loans, they pale in comparison to payday loans some people take. A recent state Department of Financial Institutions report found the average annual interest rate on payday loans in Wisconsin is 565 percent. A consumer borrowing $400 at that rate would pay $556 in interest alone over about three months, and there could also be additional fees. We are one of just eight states that have no cap on annual interest for payday loans. Payday loan reforms proposed last week by the federal Consumer Financial Protection Bureau would not even affect those maximum interest rates because they are set by states and not by the federal agency that is supposed to ensure fairness in borrowing for consumers. All experts agree consumers sometimes need fast access to small amounts of credit but by far the better alternative credit solutions are from nonprofits or credit unions over payday loans.
Your Board of Directors reviews monthly the rates of local financial institutions that members have access to and takes steps to keep our loan rates below theirs. These low, stable interest rates which start at 2.50% combined with the convenience of payroll deduction has caused our loan portfolio to continue to grow monthly. Each quarter it appears we may again have one of the highest years on record for new loans to members.
The increase in loan volume generates more income to the credit union. That income is passed on to you the members in the form of higher quarterly dividends. The level of dividends has increased each of the past three quarters from those which were prospected in the previous quarter. The latest increase just voted on in June increased both the actual dividend you’ll receive for the 2nd quarter of 2019 but also the prospective rate we feel we will be able to distribute to members in the 3rd quarter. We do this because unlike banks that serve shareholders, the credit union is member owned. It’s our money.
Our decision to discontinue sponsorship of the UCU credit card program and transfer direct control to our current provider institution seems to be a good decision. By disassociating ourselves from the financial liability of the many forms of credit card fraud being committed we members are better protected. Also, our new card sponsor is beginning to roll out programs just for UCU members. The most recent promotion is 1.99% APR for 9 months when you transfer an existing balance to that credit card between June 1, 2019 and August 31, 2019. I encourage you to check them out at https://mycucard.com.
I hope all were able to enjoy the 4th of July holiday with family and friends and will continue to have a safe and enjoyable summer.
Sincerely,

John R. Ness,
Chairman, Board of Directors

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