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MADISON, Wis. -Smaller credit unions seeking merger partners may find it a bit easier due to the growing number of community charters and overlapping charters. This, according to the latest CUNA Mutual Group’s Credit Union Trends Report. At the end of May, CUNA Economics & Statistics estimates there were 9,217 credit unions reflecting a year-to-date decline of 129 institutions and a net loss of 350 over the past year. “The factors which led to the decline of credit unions in 2004 have not gone away,” said Dave Colby, CUNA Mutual chief economist. “Competitive pressures continue to escalate, as do member expectations and the costs to meet member needs. Thus, we believe current results may slightly underestimate actual trends. We are holding our current forecast at a net decline of 371 CUs in 2005.” Meanwhile, Colby said more aggressive marketing has helped membership numbers as purging inactive or low balance accounts “may have run its course.” May saw nearly 150,000 new members adding to the 87.2 million total industry number. “Additionally, field-of-membership expansions (community charters and SEG additions) are now paying dividends,” Colby said, adding “these conclusions are based on anecdotal information, not hard facts.” The annual membership growth rate is now a solid 2.0%, according to the report. Colby said CUNA Mutual’s early forecast of a net increase of 1.2 million members in 2005 will understate actual results and will hold at this forecast level until semi-annual revisions are complete based on mid-year NCUA mid-year call report data. With five months left in the year, it remains to be seen what the final outcome will be for membership and credit union numbers, but the savings outlook took a downturn in May, dropping nearly $3 billion. “The sharp plunge in share drafts indicates May’s results were due to payroll timing,” Colby said. “The larger trend of slowing growth is concerning. Year-over-year savings growth has now fallen to 3.8%, the slowest rate of increase since August of 2000.” While deposits are up 2.3% and a little over 37% are regular shares, growth here over the past year is under 1%, the report noted. Since the beginning of June 2004 to the end of May 2005, the Federal Reserve’s Open Market Committee raised the Fed Funds Target Rate by 200 basis points, Colby said. Credit unions have responded by raising share draft and regular share yields by less than 10 basis points. Money market accounts are up just 39 basis points and CD rates were boosted 126 basis points. CDs supplied 49% of the YTD gain in total savings and over 71% since May 2004. “With one-year CD yields at 3.00%, we assume most of the recent gains have come from “odd maturity” CDs with yields more in line with competitive market conditions,” Colby pointed out. Total assets fell in May and now stand at $690 billion, up just 4.8% over the past year. Loan growth is also a mixed bag with total portfolio growth only up 3.5% through the first five months of 2005. At $444 billion, credit unions have added $43 billion in member loans to their books over the past 12 months. This gain is net of loans sold, payoffs and the usual amortization, Colby said, adding annual loan growth improved to a “very respectable” 10.7% in May. As interest rates rise throughout the year, annual gains are expected to slow down, CUNA Mutual forecasted. [email protected]

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