Data Show CUs Closed 2005 With 3rd Consecutive Yr. Of Loan Growth

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Credit unions closed out 2005 posting a third consecutive year of double-digit loan growth and the fastest loan growth since 1994, according to data compiled by CUNA.

Loans grew by 11.2% during the year with the industry holding $476.7 billion in loans at the end of 2005, up from $428.6 billion at year-end 2004, according to the Monthly Credit Union Estimates from the economics and statistics department at CUNA.

"Due to the low interest-rate environment, savings were not a high priority for consumers. Instead they used the low rates for more loans and spending," said Steven Rick, CUNA senior economist.

Not surprisingly, CUNA noted that lending accounted for the "vast majority of credit union lending" in 2005, with increases in home equity loans (13.5%), adjustable-rate mortgages (13.4%) and fixed-rate mortgages (11.7%), Rick said.

CUNA credited the employee-pricing specials on auto loans (which replaced the subvented loan rate deals from the captive finance companies) for boosting new-auto loans to 18.2% in 2005, compared with 17.1% of credit union lending in 2004.

Used autos loans dropped to 18.8% of the loan portfolio, compared with 20.4% at year-end 2004.

Savings were up 3.8% to $596.4 billion. In 2004, savings grew 5.4% and ended the year at $574.5 billion.

Despite weak savings growth, share certificates grew 22% as members transferred funds from money market accounts and regular share accounts, said Rick in a statement from CUNA.

The difference in the interest rate-4% for certificates compared with 1% for share accounts-drove the change in distribution.

Over the course of the year, credit union numbers were down to 9,014-332 fewer than year-end 2004.

Rick said experts are expecting that the number of credit unions will drop below 9,000 this year.

Membership growth was 1.7% in 2005, right around the percentage of population growth.

It was slower than the long-term average of 2.4%, however. Credit union membership stood at 87.5 million at the end of 2005, CUNA said.

For 2006, a group of credit union economists last week forecast strong loan growth, but not at the pace seen during 2005.

In addition, the group is forecasting that members will do a better job of saving during the year, unlike 2005 when savings were almost flat.

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