MADISON, Wis. – As clean-up efforts continue from the obliteration left behind from Hurricane Katrina, credit unions will likely see government debt translating into a "drag" on long-term economic growth potential. This is one of the findings from the July Credit Union Trends Report from CUNA Mutual Group. Near-term, economic growth will slow, but the recovery/rebuild spending will provide a boost late in the fourth quarter and into 2006, according to Dave Colby, CUNA Mutual chief economist. "There is little doubt the impact of Katrina will be felt throughout our economic system, especially through higher energy costs," Colby said, noting that report data came out before Katrina struck. Based on early FEMA official Disaster Declarations, it is estimated that there are 372 credit unions in the FEMA designated areas, 228 of which are below $10 million in assets. Total membership here is 1.7 million and credit union assets of $9.1 billion. As of July, the industry's credit union count is down by 197. "Many of these credit unions will have a difficult time resuming operations given the magnitude of destruction and the likely personal priorities of staff and volunteers," Colby said. Still, "Done right, credit unions should emerge as partners with members, making a real difference in extremely challenging times." CUNA Economics & Statistics estimates show 9,149 CUs at the end of July. This represents a net decline of 353 CUs over the past year and the loss of 22 CUs in July. Colby pointed out that current data does not reflect the impact of semiannual benchmark revisions based on mid-year 2005 NCUA 5300 call report information. "Our forecast for a net decline of 371 credit unions in 2005 may understate final results given the impact of Hurricane Katrina," Colby said. CUNA's pre-benchmark revision data shows total CU membership of 87.4 million at the end of July. Year-to-date, membership is up 1.3 million or roughly 143,000 more than the total gain for all of 2004.Over the past year, the nation's CUs have added 1.6 million members, reflecting annual growth of a "healthy" 1.9%, the report showed. Mid-year NCUA data shows the 500 largest CUs, as measured by total assets as of the beginning of 2005, accounted for 75% of all membership gains. Additionally, there were 4,353 CUs (48% of all CUs) reporting membership declines through the first half of 2005. "The membership growth recovery indicates we should easily top our 2005 growth forecast with total membership likely to exceed 88 million by the end of the year," Colby said. In other areas, the report showed surplus funds declined by 2.6% or $5.5 billion in July despite a small savings asset gain as credit unions reduced investments to fund loan demand. At $208.8 billion, surplus funds are down 8.6% or $19.6 billion from July 2004. CUNA Economics & Statistics estimates that 50.1% of all surplus funds will mature in one year or less. "This represents a small increase in liquidity over last year," Colby said. Over the past 12 months, the distribution of surplus funds has moved to more agencies (44.3%) and more at corporate CUs (15.6%). Even with the reduction in surplus funds, they represent over 30% of all assets and small yield improvements could add significantly to CUs' bottom lines, Colby said. Year-over-year savings and asset growth continues to decline, according to the report. Member savings deposits are up just 2.1% YTD and 2.4% since July 2004. Over the past year, the $18 billion increase or 14.5% in certificates of deposit accounted for more than 130% of the total savings gain as share drafts, regular shares and money market accounts are all down from July 2004′s levels. At $688.5 billion, total assets were up $1.0 billion in July, but are $2.2 billion below the peak reached in April. Deposit yields on one-year CDs have now risen to 3.22%, but all other account types show little change from prior year levels. As recently as February 2003, growth in savings-per-member was 10.0%, but the July reading has now declined to 0.5%. "Our forecast assumes savings and asset growth will improve by year-end," Colby said. "This may prove to be a challenge in the wake of rapidly escalating energy costs following Hurricane Katrina." [email protected]