LHCU News - Interoffice Circulation and Bulletin Boards

January 5, 2010

Dear Friends,

The year 2009 will certainly go down in the books as a year to remember for financial markets! After a rollercoaster ride for almost every asset class, the year not only brought us a bailout for major banks, but also for central credit unions. Our credit union never utilized the services of central credit unions but yet we still have to share in the bailout of them. This charge will be levied for years to come and is our involuntary contribution for the lax oversight of federal regulators. Quite frankly, we never trusted central credit unions “creative” investments in derivatives, CMOs, and other swap instruments. Our motto of safety and risk aversion will remain unaltered regardless of attractive yields. Our ultimate share in this “mess” will be over half a million dollars in the next 5 years. We have protested to NCUA along with other credit unions to assess the bail-out to only those credit unions that have used central credit unions services, but to no avail. Fortunately, or should I say unfortunately, our credit union has fully reserved this amount.

Aside from the above, your credit union did well and as such we will pay the following extra dividend on the December deposits bances:

Money Market 2.18% + 0.25% = 2.43% APR / 2.45% APY
IRAs 2.97% + 0.50% = 3.47% APR / 3.52% APY
Regular Share (Quarterly Rate) 1.74% + 0.25% = 1.99% APR / 2.00% APY

In addition we will credit every 1st mortgage holder with an unpaid balance as of 12/31/09, $100.00 in form of shares and every 2nd mortgage holder, $75.00 in January of 2010.

We do believe that in 2010 the fed will gradually increase the federal funds rate. To cover this interest risk, the credit union will transfer $400,000 to the account for contingencies, thus enabling us to continue to pay above market rates for comparable deposits.

We also wish to advise that NCUA just completed their annual audit and we are pleased to report that all is in order. One item the audit did bring about was the notion of identity theft and dormant accounts. Identity theft is a growing issue for financial institutions. While our credit union is somewhat immune to it as we have a restricted membership to employees and relatives of the Lufthansa umbrella, we have implemented stricter membership verification. With regards to dormant accounts, we will be sending written notification to the affected accounts. While small in number, your response is requested to verify your account status. For 2010 we expect a more stable year for markets and with that, we wish you all a happy, healthy, and prosperous new year.

Sincerely,

Franz Herzig
Treasurer