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<p>WASHINGTON – As members turned to the safety of insured deposits and other savings vehicles, credit unions saw record borrowing growth at the end of 2001 while real estate lending numbers set the tone for a much anticipated economy rebound. This, according to Chip Filson, president of Callahan & Associates, Inc., speaking with more than 80 credit union representatives at the firm’s Trend Watch audio conference call held on March 14. Credit unions saw the second highest rate of savings growth at $4.2 billion in the industry’s history. The previous high was December 1999 in anticipation of the Y2K cash needs with the total then being $4.3 billion of drawn down lines, Filson said. “During the Y2K buildup two years ago, 25% of credit unions were borrowing from the corporate network, but in 2001 that percentage had decreased to 6%,” Filson said. “We interpret that to mean that the Federal Home Loan Bank has stepped up its participation and there’s more active borrowing.” Indeed, existing members were the driving force behind the bulk of growth in shares, which increased 14.7% over year-end 2000 to $441 billion. The average share balance rose from $4,900 to $5,500. The loan-to-share ratio declined 5.6 percentage points to 73.9% with the “tight liquidity” that characterized the industry at the end of 2000, Filson said. Still, that liquidity crunch had been nearly eliminated by the middle of 2001 as members turned to the safety of insured deposits at their credit union after the downturn in the stock market, he added. Filson also pointed out that the way revenue proportions are evolving with non-interest income which includes credit and debit cards, ATM surcharges and overdrafts, exceeded the entire net income in the history of the credit union movement. Real estate originations were up 125% over 2000 with loans rising 6.7% to $327.6 billion primarily on increases in first mortgage and used auto loans. Callahan polled credit unions last February and of the 175 respondents, 90% had loans approved through closure. Of note, were the 55% of credit unions that accepted mortgage applications from outside their home state. “This is interesting because there is a conversion on community charters, but we’re seeing in real estate lending, mostly with larger credit unions, members are being served in various states,” Filson said. Although the number of credit unions declined by 340 last year, assets crossed the $500 billion mark for the first time as the fastest growth rate in 15 years, Filson said. John Olivo, portfolio manager for Trust for Credit Unions’ money market portfolio at Goldman Sachs also participated in the Trend Watch conference call and shed light on what’s to come over the next few months, particularly on whether there will be any future “tightening of interest rates” by the Federal Reserve Board. “The U.S. recovery is well underway with the labor market improving substantially, productivity continues to be strong and retailers reporting further acceleration. Much of the improvement comes from companies catching up to their inventory levels,” Olivo said. “The Fed doesn’t want to do anything to derail the long-term economic recovery.” -</p> <p>[email protected]</p>

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