Top 10 CUs See Income Rise Despite ReFi Drop

The 10 largest credit unions increased net income in the first quarter as they increased their originations of loans to consumers and businesses, offsetting flat real estate lending.

The Top 10 generated $706.9 million in net income in the three months that ended March 31, up 22.2% from 2017’s first quarter. Their annualized return on average assets (ROA) was 0.96%, up 15 basis points, according to call reports posted by NCUA this month.

The group’s members did not change, but America First FCU, Riverdale, Utah ($10 billion in assets, 949,099 members), which entered the Top 10 in December, moved up one place to No. 9 with surges in both real estate and non-real estate originations. Security Service FCU of San Antonio ($9.5 billion in assets, 765,305 members), a leader in car lending, moved down to No. 10 as non-real estate originations declined.

The Top 10 represent roughly 15% of the assets and members of the nation’s nearly 5,700 credit unions. Altogether the Top 10 had $247.6 billion in assets as of March 31, up 8.3% from a year earlier, while membership rose 9% to 18 million.

Key components of income included:

• Loan growth was slightly above average for the movement, and income increased twice as fast as expenses.
• Net interest income rose 11.7% to $1.4 billion, reduced by loan loss provisions, which rose 26.8% to $544.4 million.
• Fee income rose 14.9% to $230 million, while other operating income rose 26.7% to $529.3 million. One-time gains and other special income categories fell 40.2% to $12.3 million.
• Employee pay and benefits rose 10.3% to $790.3 million, while all other non-interest expenses rose 12.8% to $718 million.

Real estate originations showed the greatest differences among the credit unions. Purchases have generally been increasing, and refinances have been falling. The Top 10 generated $7.8 billion in real estate originations during the three months that ended March 31, barely 0.4% less than a year earlier.

However, six of the 10 had declines in real estate originations, led by BECU of Seattle ($623.1 million, -31.1%) and Alliant CU of Chicago ($145.7 million, -28.3%).

Scott Strand, BECU’s senior vice president of lending and wealth management, said the drop in originations was expected as higher interest rates dried up demand for mortgage refinancing.

“Our purchase originations are up over last year, reflecting our strategy in this area supported by new programs like our First Time Homebuyer Grant program, developed to help our members with a key barrier to homeownership: the down payment,” Strand said.

The overall number of real estate originations was pulled above the waterline by increases from Navy Federal of Vienna, Va. ($3.6 billion, +12.2%), PenFed of Tysons, Va. ($914.4 million, +7.1%), America First FCU of Riverdale, Utah ($322 million, +27%) and Security Service FCU ($207.5 million, +3.1%).

The credit unions found better results in car loans and elsewhere. Non-real estate loan originations rose 14.3% to $18.6 billion. Eight showed increases: Alliant CU ($595.7 million, +58.5%), BECU ($1.3 billion, +29.6%), America First FCU ($1.7 billion, +21.3%), SchoolsFirst FCU of Santa Ana, Calif. ($527.3 million, +19%), Navy Federal ($10.2 billion, +16.4%), PenFed ($1.5 billion, +4.2%) and State Employees’ CU of Raleigh ($1 billion, +0.3%).

The two with declines were First Tech FCU of Mountain View, Calif. ($247.6 million, -15.3%) and The Golden 1 CU of Sacramento ($757 million, -6.1%).

Member Business Loans were $4.8 billion as of March 31, up 28.2% from a year earlier. The biggest increase came from BECU ($1.6 billion, +63.2%), which now has 47,000 business members.

Golden 1 CU’s results were typical. Its first quarter ROA was 0.99%, up from 0.89% a year ago. Car loans remained strong, but real estate originations fell 6.8% to $202.9 million.

“With interest rates increasing and the market shifting from a refinance to a purchase market, we have seen a slight reduction in mortgage originations year-over-year,” Hill said. “We continue to pursue strategies to boost production levels, including the opening of a new home loans branch in Santa Clara County, and the recent addition of FHA lending.”

1. Navy Federal, Vienna, Va. ($89.8 billion in assets, 7.8 million members)
2. State Employees’ CU, Raleigh, N.C. ($38.4 billion in assets, 2.3 million members)
3. PenFed, Tysons, Va. ($23.4 billion in assets, 1.7 million members)
4. BECU, Seattle ($18.6 billion in assets, 1.1 million members)
5. SchoolsFirst FCU, Santa Ana, Calif. ($14.7 billion in assets, 812,426 members)
6. The Golden 1 CU, Sacramento, Calif. ($11.9 billion in assets, 942,809 members)
7. First Tech FCU, Mountain View, Calif. ($11.8 billion in assets, 517,268 members)
8. Alliant CU, Chicago ($10.3 billion in assets, 391,433 members)
9. America First FCU, Riverdale, Utah ($10 billion in assets, 949,099 members)
10. Security Service FCU, San Antonio ($9.5 billion in assets, 765,305 members)