In 2008, over 53% of SESLOC's earnings were returned to members in dividends. This is almost 14% higher than the nationwide average among credit unions.

Chairman's Report

Financial upheavals of historic proportions made 2008 a year we
will not soon forget. Real estate markets continued crumbling under the weight of subprime mortgage loans and a collapsing market for mortgage backed securities. The meltdown in financial markets created economic turbulence locally, nationally, and globally. Government bailout funds rescued several large banks, insurance companies, investment companies, and the government-sponsored mortgage giants Fannie Mae and Freddie Mac. General Motors and Chrysler received huge government loans. Stock market indexes experienced their worst decreases since 1931, which eroded households' retirement savings. Retail business failures increased dramatically, and consumer confidence reached an all-time low in December. The Federal Reserve took unprecedented actions in attempts to stabilize financial markets, and the federal deficit ballooned. The economy was officially declared to be in a recession.

SESLOC was not immune to the poor economic conditions. Loan losses increased, which required increased loan loss reserves. In response, lending standards were tightened to prevent greater increases in loan losses. Yet SESLOC maintained a positive bottom line in 2008, in contrast to many credit unions in the western states. Assets increased and SESLOC remained well-capitalized, ending the year with a capital/asset ratio of 10.7%. Management and staff worked hard to achieve these results. In 2008, over 53% of SESLOC's earnings were returned to members in dividends. This is almost 14% higher than the nationwide average among credit unions.

Other notable achievements in 2008 were the opening of a new branch in Atascadero and the start of construction on a new, expanded branch in the Arroyo Grande/Five Cities area. The new branches will enable SESLOC to better serve members in the north and south county.

I anticipate economic conditions will remain difficult, and 2009 will be another challenging year. SESLOC is well-positioned and prepared to meet the challenges. The Board is committed to implementing policies that will maintain safety and also meet the credit and other service needs of members.

Alden F. Shiers
Chair