Friday, May 8, 2009

The "Real" Cost of the "Deal"

Last week I was invited to attend a meeting of a group of concerned citizens in one of the communities that we serve. I met with the group in the home of one of their members. As we discussed Rogue Federal and how our members' deposits are reinvested in loans in Jackson, Josephine, and Klamath counties the discussion led to how we must all reinvest in our community.

The conversation quickly turned to the "true" cost of the best deal. I am concerned how Internet banks, captive finance companies, and distant credit card companies slowly eat away at our community's livelihood. Yes, you can get a rate at an Internet bank that is 1 to 2% higher than you can locally, and it is oh so simple. Yes, you can get an auto loan through a captive finance company for a marginally better rate. And yes, you can get a credit card with travel miles, rebates, etc. However, what is the real cost of using these distant service providers?

These companies are all great companies with strong charitable foundations that employ large numbers of Americans. There will always be a need for products and services from organizations that are not of, or for, our community. Yet, they are a threat to the livelihood of great local companies that provide similar and often "more honest" value.

Now take a look at the local providers of these services and look at how they reinvest in the community. It varies from organization to organization, but local providers reinvest in our community through donations to children's activities, support of arts programs, or aid to our schools. The amounts are substantial and critical to the survival of many programs. In addition, local providers employ hundreds, if not thousands of your friends, neighbors, and family members.

If we want our community to thrive we must understand the "true" cost of the deal. Before you make a purchasing decision, please consider the overall cost verses the benefit of the decision. Each time you support a local company you keep jobs in your community, you support youth charities, you support arts initiatives, and you make your community a better place to live.
Posted by at 10:41 AM

2 comments:

  1. through march, 2009 ROGUE reported a loss of over $225,000. How safe are member deposits at ROGUE? ROGUE also reports a NOTE PAYABLE of $5 Million. Looks like you borrowed a lot of money and now you are losing money. Did you borrow money and make losing bet?
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  2. Our country and our community have faced some difficult economic times and it is true that the credit union lost money in two of the first three months of 2009. The net result was a first quarter loss of $226,548. Our local unemployment rate, which now tops 14% in some of our local counties, is making it very difficult for many of our members to meet their monthly payment obligations with us. Fortunately, over time Rogue Federal has built a substantial capital reserve of more than $35 million. This capital reserve far exceeds our regulatory requirements and stands as a cushion for us to be able to weather the current economic storm and help our community through this difficult time. Because of this large reserve, deposits at Rogue Federal are very safe and we are able to continue to serve our local community with all of our usual financial services, including auto loans, mortgages, credit cards, deposits and much more. In addition, our deposits remain insured up to $250,000 by the federal government through the National Credit Union Administration.

    In short, Rogue Federal is a safe and sound place to do business and we have chosen to be part of the solution instead of part of the problem. Thus, we have not limited services and we are looking for ways to use this difficult time to our advantage so that we can serve our members better both now and in the future. A great example of this is that we are realizing considerable cost savings on the construction of our new North Medford branch due to the economic downturn. Nearly 200 local contractors and construction workers have benefitted from this project. Those folks spend the money that they earned by working on our project in our community!

    The referenced $5 million note is a perfect example of the credit union taking advantage of a very low risk opportunity to earn additional revenue. In December, the nation’s unusual economic climate presented us with the very rare opportunity of being able to borrow money at a fixed interest rate lower than fixed rate investments available at the time. In this case, part of this money was borrowed for 6 months at a rate of 0.79% and was reinvested for an equal length of time in a federally insured institution at 1.44%. In financial circles, this is known as “arbitrage”. We just like to call it a “no brainer”. By taking advantage of the rate environment at that time, the credit union will make approximately $17,875 of profit off of this investment with practically no risk. The only real down side is that we show debt on our balance sheet.

    While the economic climate has been challenging for our credit union, we feel fortunate to be in a position that is enviable by many financial institutions. We are well capitalized, we have great member loyalty, and we have a talented group of staff and volunteers. We have taken a measured and methodical response to the challenges that we have faced. This has resulted in considerable cost savings with limited impact to our product and service delivery. There are still difficult days ahead, but we feel that we are well positioned to thrive as our country and community emerges from the economic challenges we have faced.

    As a federally insured financial institution our financial records are available to any interested party online. Simply go to www.ncua.gov and select credit union data. Our charter number is 11393. A variety of data is available on our credit union and other credit unions at this website. Or you can just click on this link to get access to our most recent quarterly financial report http://webapps.ncua.gov/ncuafpr/OnlineFPR.aspx?cu_number=11393.

    Thank you for your interest in OUR credit union!
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