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WASHINGTON – Members erring on the side of caution with short-term investments and “vigorous” efforts by credit unions to woo new savers to buffer recent liquidity pressure have resulted in a surge in savings and mortgages. This, according to Callahan & Associates Inc.’s second quarter research and data report discussed during the firm’s quarterly audio conference call on Sept. 19. With many credit unions trying to get back to business following the recent terrorist attacks, those that participated dialogued about the impact of the destruction on credit union operations. One credit union in Texas saw older members withdrawing “very large amounts of cash” on the day of the attacks, said one participant. Another credit union touted an account that allows members leery of the stock market to park their money for the short term at a 5% interest rate. Some knew of others still missing since the aftermath of the World Trade Centers’ collapse. In the midst of the tragedy and faltering economy, credit union growth is stronger than at any time in the past two decades, said Chip Filson, president of Callahan. Second quarter data through June 30 show share growth of 10.1 % – the highest in the industry since the mid-1980s, and the annual rate of growth of credit unions also registers at 12.2% since June 2000. “It is a surge largely unexpected, but it can be explained by two events – members’ choice of less risky credit union investments in the face of concern about the short-term direction of the stock market,” Filson said, “and vigorous credit union efforts to find new savers to meet the liquidity pressure caused by three years of double digit loan growth.” Money market accounts saw an increase of 11.7% with share certificate growth at 26.54% in the first half of the year, indicating members’ preference for more stable returns than stocks currently are providing, the report revealed. It also shows that credit unions’ average dividends increased from 3.86% to 3.95%. The pay out ratio of dividends as a percent of total income rose from 42.08% to 43.93%. “This means need has met demand and the liquidity pressures are over,” Filson said. The Federal Reserve Board’s recent interest rate cut of 50 basis points continues to help home shoppers. First mortgage originations were double over the prior year at 19.32 billion versus 10.01 billion, according to Callahan’s report. Loan growth continues to propel with its sales by credit unions to the secondary markets increasing more than 261% from $1.951 billion in 2000 to over $7 billion in the first six months of 2001. New and used auto loans were up 8.59%. Not surprisingly, larger credit unions have seen more growth with those over $50 million in assets seeing real estate lending and auto loans as their dominant sectors of business. On the down side, bankruptcy filings were up by 152.8% with total loan chargeoffs increasing by 13.76% over the previous year. [email protected]

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