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WASHINGTON-During NAFCU’s annual meeting with the Federal Reserve Board Governors Dec. 2, NAFCU’s board and senior staff brought the governors up to speed on a number of credit union issues. “This is our 13th year and like every year, we like to give the Fed our overview of what’s happening at credit unions,” NAFCU Chief Economist Tun Wai explained. Federal Reserve Board Governor Ben Bernanke hosted the 90-minute meeting and Governor Ed Gramlich joined them. NAFCU shared its 2004 Credit Union Report for the Board of Governors of the Federal Reserve System, as it does each year for the Federal Reserve. According to the report, credit unions have survived the economic downturn of recent years and have come out swinging. Federally insured credit union loan growth is expected to be the fastest since 2000 and share growth the slowest in three years, NAFCU stated. Asset quality “remains solid” with delinquency and charge-off rates down from December 2003. Loan growth is expected to hit around 10% by year-end with savings up just 6%. Because loans are outpacing shares, the loan-to-share ratio should increase to about 73.4% this year, up from 71.1% in 2003. Wai emphasized that there really is no `right’ loan-to-share ratio and it depends upon the institution and its field of membership Credit unions are healthy with a 10.7% net worth ratio, however return on assets is projected to dip to 0.94% in 2004 from 0.99% at year-end 2003. “It’s really not a big dip,” NAFCU Senior Economist Jeff Taylor said, “In an interest rate environment that’s at a 45-year-low, that’s a positive.” Credit union investments grew 9.8% in the first half of 2004 but strong loan demand removed incentives for further increases in portfolios and credit unions kept most of their investments in short-term instruments. Regarding Fed regulations that impact federal credit unions, NAFCU members supported allowing advance notice of risk-based pricing, a regulation expected to come out under the Fair and Accurate Credit Transactions Act. They also backed decreasing regulatory burden for Regulation E (implementing the Electronic Funds Transfer Act) disclosures and preventing further unnecessary burdens by eliminating or combining disclosures under the rule. NAFCU supported increasing the Regulation D six-transaction limit per month to another account at the same institution or to a third party in today’s increasingly electronic world. Additionally, consumers cannot make more than three of these six for payments to third parties. Two-thirds of NAFCU members said they are increasing their usage of Federal Reserve services. Sixty-three percent said they viewed the Fed’s services as either `very competitive’ or `competitive’ in pricing. NAFCU’s economists explained that remittances and service to those of modest means seemed to be of particular interest to Bernanke and Gramlich. Taylor said the governors did not indicate whether they were supportive of legislation currently in Congress to broaden credit unions’ ability to offer remittances to anyone in their potential field of membership, but both were very supportive of expanding lower-cost services. At the meeting, NAFCU pointed to the increasing percentage of low-income designated credit unions and the expanding number of potential credit union members through adoption of underserved areas, as well as the above average loan growth for credit unions adopting underserved areas. Credit unions also offer many services and products tailored to meet the needs of low- to moderate-income persons, including 84- and 96-month new auto loans, first-time buyer and low down payment mortgage programs, and long-term savings account with low minimum deposit requirements. NAFCU has met with each of the sitting members of the Federal Reserve Board at some point. -

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