Message from the President

Even though our nation’s financial system is facing one of its greatest challenges, your Permaculture Credit Union is performing at its best since it opened its doors. I would add that many other credit unions and community oriented banks are also performing well. Why is this? I believe the answer is because these institutions have not strayed from the basic fundamentals of lending and investing.

On the issue of the sub prime market, there are four basic underwriting guidelines, commonly referred to as the four C’s - Credit, Collateral, Capacity and Character. Disregard of these basic fundamentals, I believe, is one of the causes of our current market collapse. The other causes, in my perception, are growth for the sake of growth and greed.

This brings us back to the reason your Permaculture Credit Union is able to prosper in these tough economic times. First, it is because of you, our members. Your beliefs and values make you stand for something different. Your beliefs and values have you preparing for disruptions in advance of the crisis happening. This preparedness helps the Permaculture community weather whatever storm is upon it. For this I commend you. I believe this is the underlying reason why our organization has continued to strengthen over the past eight years of our existence. In addition, my observations and interactions with members have helped me formulate innovative plans and solutions for the scenarios we are faced with as a financial institution.

Before we entered 2008, we were already feeling the effects of what the Federal Reserve was trying to stop. Our income was decreasing on our mortgage portfolio because a portion of it is tied to the prime rate. This is a decrease in income for the credit union, but a benefit for our members who have these mortgages. We started the year with an approved budget of $244,000 to operate, pay dividends and accrue for our allowance of loan loss account. By April it was apparent this was not going to work. In order to accommodate the decrease in income, we began monitoring our income monthly and have made cuts in order to offset the reduced income. We are now operating with a budget of approximately $212,000. This cutback was enabled by the attrition of an employee. We made a choice to hold our growth and provide the best service we could without hiring anyone for that position. We were able to do this mainly because of the investment a year ago of some time and money to automate our share certificate and loan programs.

We have already surpassed our gross dollars lent last year in the first nine months completed this year. Our Assets are also at the highest level of our credit unions eight-year history. We ended the third quarter at just under 3.5 million dollars in assets. Our Capital Reserves continue to strengthen. In December of 2002, our capital account was around $40,000. Our capital reserves are now over $210,000. This is mainly a result of donations received from our generous members, who believe in sharing their surplus and, most recently, from a donor advised fund of RSF Social Finance.

It is evident that we are challenging the current financial system and that people believe in what we stand for. When we look at setting growth targets, it’s a forecast of what we estimate our members may need and what we can afford to provide. When we originally set our dividends, we made it a goal to pay back 20% of our income on loans and investments. Following these types of fundamentals should make us a strong leader, not a follower of the status quo of the financial world. Over the next year we will focus on the following: evaluating our dividend payment model to our members, ensuring that we continue to get closer and closer to the 20 percent payback model; looking at ways to automate our consumer loans, which may help streamline the borrowing process for members; and finally, a revamp of our website. What we are looking for in this enhancement is a way for our members to become more self-sufficient in the way you interact with your credit union.

We are committed to the continued strengthening of all aspects of your credit union over the next year. We also look forward to having our members continue to redirect their surplus savings and loan requests to their credit union. Your courage and loyalty to the Permaculture Credit Union is our inspiration to continue to make change happen.

Sincerely,

Donald J. Sarich
President / CEO