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ALEXANDRIA, Va.- Credit union assets jumped by 11.1% to $557.1 billion last year fueled by another year of strong savings, according to NCUA’s year-end 2002 statistics. It’s been two years of heavy asset growth in the industry with assets jumping by 14% in 2001, followed by 2002′s 11.1% clip. “We’ve just come off of two of the strongest savings and assets growth years we’ve ever had,” said CUNA Chief Economist Bill Hampel. Assets were bolstered by a 10.8% jump in savings to the tune of $484.2 billion. This of course is due to the sagging economy and weak stock market. Wary investors can pick their woes these days, whether it be terrorism, war with Iraq, or corporate scandals. Many members have turned to their credit union accounts as safe havens. On the other side of the balance sheet, lending continued its mediocre run, increasing by only 6.3% to $342.6 billion. Fortunately for credit unions, low interest rates helped drive a mortgage boom. First mortgages kept lending respectable, growing by 13% to $100.7 billion. All other real estate loans grew by 8.9%; used autos were strong at 8.7%; while new autos were stagnant at 0.4% growth, statistically zero growth. Members sought out yield on the savings side as money market shares gained the most at 24.3%, followed by regular shares at 15.1% and IRA/KEOGH at 8.2%. The strong savings, mediocre lending combination caused the loan-to-share ratio to drop significantly, from 73.77 to 70.77. This is a far cry from just a few years ago when the loan-to-share ratio hit 80%. “The job of a credit union is to manage whatever loan-to-share ratio members want. It would be more convenient if members generate a loan-to-share ratio of 80 to 85%. During a weak economy, people save more and borrow less,” said Hampel. NCUA’s stats also show membership grew, but at a slower rate than recent years. It jumped just 2% to 81 million. Membership numbers have long been criticized because the same person belonging to three credit unions, for example, is counted three times. However, Hampel says that is balanced out by the fact that many households have one person belonging as a member, yet multiple people having access to single accounts, such as a husband and wife, yet only one is officially a member. The number of credit unions continues to fall, an issue NCUA Board Member Deborah Matz has been discussing publicly. As of year-end, there were 9,688 federally-insured CUs; that’s down from 9,984 at the end of 2001. The sluggish economy didn’t impact the delinquency ratio which dropped from .82 to .80. However the economy’s problems did show up in charge-offs. The net charge-off ratio increased from 0.46 to 0.51%. Hampel said credit unions are much quicker to charge-off loans and get them off their books than they were 20 years ago. That doesn’t mean the credit union stops trying to recover the loan once they charge it off, they just want to move it off their books faster, and if they can recover money later, great. Hampel said despite the mediocre lending, which is where credit unions make their most money, ROA stayed above 1%. This is a clear sign that credit unions have been quick to adjust their deposit rates downward more in line with Fed rate cuts. Historically, credit unions have been reluctant to cut rates, said Hampel, but the numerous Fed cuts have caused CUs to move more in line with the Fed, though not as in step as the banks. NAFCU Director of Research and Chief Economist Dr. Tun Wai said credit union managers did their jobs very well in 2002. “It really struck me how well they managed their balance sheet. If you look at the ROA at over 1% in this environment, then they made the necessary adjustments,” said Wai, referring to CUs cutting deposit rates and tightening their belts a bit. “Operating expenses are also down,” said Wai. Don’t look for the trend of savings outpacing lending at credit unions to end any time soon, said Hampel. He believes 2003 will be much of the same. Hampel said credit unions will see increases in home equity loans and solid used car lending next year that should keep lending at about the same level. “As refinancings slow, home equity loans should pick up a bit. They’re tied to prime which is so low,” said Hampel. The influx of savings into credit unions will also continue, and Hampel believes even if the stock market does rebound, funds will not flow out of CUs as fast as some may think. He had his own saying about that, “people were once really burned, and they’re going to be five times as cautious,” Hampel said regarding consumers’ willingness to move back into the stock market. “I think for the next decade or so credit unions are going to have strong savings growth.” NCUA stats also show credit unions continuing their journey online. The number of federally-insured credit unions offering a Web site increased 18.7% to 3,434 credit unions. The number of CUs offering home banking, audio response, ATMs and kiosks also increased across the board. [email protected]

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