Loan Growth Sees Highest Upswing since 2000 as Loan-to-Share,Capital-to Assets See Strong Improvements. MADISON, Wis. – It'sbeen four years since credit unions have seen a 10% increase in thegrowth of their loan portfolios. This, according to CUNA MutualGroup's December 2004 Credit Union Trends Report. Credit unionsachieved 10.4% total loan growth in 2004, an increase not seensince 2000. At $429 billion, CUs had a net increase of $40.6billion in total loans outstanding. These results were attaineddespite an estimated $18-$20 billion in first mortgage loan salesand numerous CUs selling their credit card portfolios. On an annualbasis, all major loan portfolio segments showed positive results,according to the report. The big growth contributors in 2004 wereadjustable rate first mortgages at 26.4% of the total loanincrease; new vehicle loans contributed 18.4%; and home equityloans with an 18.3% share of the gain. The report also revealedmore proof that member business lending continues to grow. Earlyestimates show member business loans grew by 37% and accounted foralmost 9% of all loan growth. CUNA Mutual has forecast “lessaggressive” member borrowing and CU loan holdings constrained byasset increase, which could lead to slower loan growth in 2005,said Dave Colby, CUNA Mutual chief economist. “Credit unionsfinished 2004 on a strong financial footing, but will be challengedin 2005 to balance the need for gross spread with the need forliquidity,” Colby said. Meanwhile, the industry finished the yearwith an estimated 9,368 credit unions, which represents a netdecline of 341 CUs during 2004. Colby said CUNA Mutual's forecastunderstated market contraction by 17 credit unions. “Competitivepressures, high costs to meet member demand for multiple productand delivery channel choices, plus a declining spirit ofvolunteerism, are key factors driving consolidation,” Colby said.“The impacts of these factors are felt most on CUs with assetsunder $20 million.” Colby said looking forward, CUNA Mutual isanticipating market contraction in the 3.5% to 3.6% range, meaningthe industry may see a net decline of more than 650 credit unionsthrough 2006. By the start of 2007, more than 8,700 credit unionsare predicted to be around, he added. Membership, on the otherhand, made a slight comeback for the year, according to the report.In 2004, 1.3 million members joined credit unions but the numberswere the smallest increase since 906,000 joined in 1991. There arecurrently 82.6 million members. “Even our conservative forecastoverstated actual results,” Colby noted. “We had factored innatural growth, growth from field-of-membership expansions and newmembers from indirect lending programs. We continue to believethere is a good supply of new members, but the combined effects ofmore accurate data processing systems (counting members notaccounts) and cleansing the rolls of inactive low-balance members,are reducing existing membership estimates.” Right now, the “data`noise' is masking true trends,” Colby explained. NCUA 5400 datathrough the end of the third quarter of 2004 showed that 1,378credit unions reported membership declines of 100 or more. Thesecredit unions held 18% of all assets. “Our outlook indicates bettertimes ahead for net membership growth,” Colby said. “We shouldexpect gains in excess of 1.4 million members per year. Thisforecast generates a membership base above 89 million at the startof 2007.” In other areas, assets reached $665 billion, but growthwas decelerating, up just 5.7% for the year, according to thereport. Savings were up 5.0%, although second half growth was lessthan 1%. Both the loan-to-share ratio (75.0%) and thecapital-to-asset ratio (10.9%) improved over the course of 2004.-

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