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According to CUNA Mutual Group’s December 2005 Credit Union Trends Report, the member count stood at 87.5 million at year-end boosted by new members added through the expansion of indirect lending, said Dave Colby, CUNA Mutual chief economist. “One would also expect field-of-membership expansions to provide a healthy lift, but based on our readings, this has not materialized,” Colby said. “We are hoping this is a function of timing where tapping these opportunities takes longer than originally anticipated.” Given tightening margins and ROA pressures, “we believe CUs are more aggressively managing inactive low balance members who are primarily an expense burden,” the report read. Over the next three years, CUNA Mutual forecasts that CUs can expect to generate a net increase of 3.7 million members. “While increasing counts is nice, developing deeper-mutually profitable relationships is the key success factor,” Colby said. Early estimates show a net decline of 332 CUs in 2005. At year-end, CUNA Economics and Statistics reported 9,014 CUs including a net loss of 39 CUs in December. Colby cautioned that when final results are in, “the decline will likely be greater.” As noted last month, CUNA Mutual has yet to see significant reductions from the 2005 hurricane impact. Looking forward over the next three years CUNA Mutual is forecasting an average decline of 355 CUs per year, reducing the natural person CU count to about 7,900 by the end of 2008. “This forecast does not include any major external shocks or negative rulings adversely impacting the value of the credit union charter,” Colby said. In other areas, CUs finished the year with just under $200 billion in surplus funds, which includes cash and investments. The December deposit surge pushed this measure up 1.4% for the month, but overall, CUs drew down surplus funds by $16 billion (7.4%) from the year-end 2004 level, the report read. Surplus funds now equal 28.4% of all assets which indicates “adequate liquidity,” but this measure has declined by 3.9% over the past year. CUNA’s sample estimates show 54.4% of surplus funds have maturities of one year or less. “Expect surplus funds to post seasonal gains from February to April and then stabilize as a share of assets through year-end,” Colby said. Meanwhile, an extra pay period in December pushed annual savings growth to 3.8%. Overall, 2005′s growth results were less than half the average annual rate of savings increase over the past 10 years, according to the report. The 1% deposit surge in December was attributable to payroll timing as the 6.9% month-only gain in share drafts accounted for 87% of the total December savings gain. In 2005, CDs’ 21.7% annual gain supplied 130% of the $22 billion total savings gain. Regular shares (35% of all savings) fell by $9.0 billion (4.2%) during the year and money market deposit accounts (17% of all savings) fell by 5.4% in 2005. “With December’s share draft surge a temporary phenomenon, we remain very concerned about future deposit growth and further tightening of liquidity,” Colby said, CUNA Mutual’s outlook through 2008 calls for “modestly stronger savings gains as deposit yields move higher and members work to rebuild “nest-eggs.” “We caution – with the growing gap between home equity loan rates and deposit yields, members may start using low cost core deposits to pay off home equity loans,” Colby said. “This will depress both asset and loan growth results.” -

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