LOAN GROWTH AT CREDIT UNIONS CAUSING TIGHT LIQUIDITY

Primary Financial Experiencing Increase in Credit Unions Issuing Share Certificates to Generate Funds

9/9/2005

COLUMBUS, IN—The latest statistics by the National Credit Union Administration (NCUA) and Credit Union National Association (CUNA) state what many credit unions executives already know: loan growth continues to outpace share growth, and by widening margins.

While this scenario is a boon to many credit unions, an increasing number of credit union CFOs are finding it harder to fund these new loans. As such, more and more credit unions are turning to Primary Financial and its thirty corporate credit union owners to generate liquidity. Since January of this year, the number of credit unions that have signed on to issue share certificates to other credit unions through the SimpliCD program has increased 76%, with 150 credit unions now able to issue through Primary Financial. For the month of August alone, more than $51 million was generated by credit unions issuing through Primary Financial.

The reason credit unions are looking for new liquidity sources is in the numbers. According to CUNA’s Monthly Credit Union Estimates report for July, loans have grown at a rate of 5.96% for the year through July 31 and savings growth trailed at a rate of only 2.14%. The NCUA’s mid-year 2005 Call Report data indicated similar numbers for federally insured credit unions, showing loan growth at a rate of 4.9% from January through June, and savings growth at a rate of 2.9% for the same period. As expected, loan-to-share (LTS) ratios are also on the rise, with CUNA reporting LTS at 77.4% in July and the NCUA reporting LTS at 75.9% in June, the highest it has been since December 2000.

“The increase in loan-to-share ratios is just one reason we’re seeing an up tick in the number of new credit unions issuing certificates through our program,” said, Mark Solomon, president and CEO of Primary Financial. “But even more exciting for us is the number of credit unions that have come back to us a number of times to generate funds. These credit unions have experienced the ease with which they can generate large blocks of funding, and at the same time are pleased with the rates at which we can issue certificates on their behalf. Plus, they can work with their trusted partners at their corporate to establish the terms of issuance,” he said.

“Generating funds using the team at Primary Financial could not have been easier,” said Ann Brittin, president and CEO of Cornerstone Community Federal Credit Union. “Primary Financial and Mid-Atlantic Corporate FCU helped us determine the appropriate market rates to generate the amount of liquidity we needed. After that, the rest just fell into place. We were able to generate $12 million is just 5 days.”

Primary Financial, with offices in Columbus, Ohio and Columbus, Indiana, is a credit union service organization (CUSO) owned by thirty corporate credit unions. Primary Financial has been in business since 1996 and currently serves more than 2,600 credit unions throughout the United States through the SimpliCD certificate placement service, with almost $3 billion in credit union investments outstanding.

For more information, please contact Paul Hixon at 800/282-2560 ext. 9313.