Loan Loss Provisions Drag Down Top 10 Income

Second quarter net income was flat for the nation’s 10 largest credit unions as loan loss provisions spiked, according to NCUA data.

Net income fell for half of them and was made up for by gains among the rest. All had healthy levels of returns on assets.

Those with income drops were:

• Navy Federal, Vienna, Va. (No. 1 with $91.8 billion in assets, 7.9 million members);
• State Employees’ Credit Union, Raleigh, N.C. (No. 2 with $38.4 billion in assets, 2.3 million members);
• PenFed, Tysons, Va. (No. 3 with $23.7 billion in assets, 1.7 million members);
• Golden 1 Credit Union, Sacramento, Calif. (No. 7 with $12 billion in assets, 958,258 members);
• Alliant Credit Union, Chicago (No. 8 with $10.6 billion in assets, 411,379 members).

Those with income gains were:

• BECU, Seattle (No. 4 with $18.6 billion in assets, 1.1 million members);
• SchoolsFirst Federal Credit Union, Santa Ana, Calif. (No. 5 with $15 billion in assets, 825,349 members);
• First Tech Federal Credit Union, Mountain View, Calif. (No. 6 with $12.1 billion in assets, 529,290 members);
• America First Federal Credit Union, Riverdale, Utah (No. 9 with $10.1 billion in assets, 976,394 members);
• Security Service Federal Credit Union, San Antonio (No. 10 with $9.5 billion in assets, 767,034 members).

Net interest income, before loan loss provisions, rose 15.2% to $2.1 billion, while total non-interest expenses grew 11.8% to $1.6 billion. Fee income rose 15.8% to $256.8 million, while other operating income rose 8.8% to $473.7 million.

Wages and salaries rose 10.4% to $791 million, tracking asset growth, but other non-interest expenses rose slightly faster: 13.3% to $762.3 million.

The biggest swing in income was in loan loss provisions. They rose 38% to $570.5 million for the three months ending June 30, even as total loan portfolios increased only 10.6% and originations rose 10%. Net charge offs rose 22.7% to $457.5 million.

Navy Federal and BECU had the highest annualized return on assets: both 1.5%. Navy Federal’s net income was $339.6 million, down 1.4%, while BECU’s was $69.9 million, +21.9%.

Alliant had the lowest ROA and the biggest increase in loan originations. Its ROA was 0.57%, as its net income fell 17.7% to $15 million. However, real estate originations rose 4.1% to $220.5 million, while other loans rose 106% to $761.8 million.

Assets grew 8.5% to $241.8 billion for all 10 credit unions with the fastest growth occurring at First Tech, where assets grew 14.7%, and America First, where assets grew 13.1%.

Their growth pushed both up one place in the rankings. First Tech rose one place to No. 6, while Golden 1 fell a notch to No. 7. America First rose to No. 9, replacing Security Service, which fell to No. 10.