Margins Stable in 4th Quarter for Top 10 CUs

The nation’s largest credit unions maintained their margins in the fourth quarter despite a decline in real estate loan originations.

The Top 10 credit unions by assets generated $701.6 million in net income in the three months that ended Dec. 31, 2018, up 10.1% from 2017’s fourth quarter. Their annualized return on average assets (ROA) was 1.13% for 2018’s fourth quarter, up 2 basis points from a year earlier.

For the year, their net income rose 12.7% to $2.9 billion, as ROA rose 4 bps to 1.19%.

Boosts to fourth-quarter earnings included:

• Net interest before loan loss provisions rose 13% to $2.2 billion.
• Fee income rose 16.4% to $277.1 million.
• Employee compensation rose a modest 2.6% to $778.6 million, as other non-interest expenses fell 0.2% to $758.4 million

Drags to fourth-quarter earnings included loan loss provisions rising 13.4% to $527.5 million, as other operating income rose only 4.4% to $477.6 million.

The Top 10’s total loan portfolio rose 9.7% to $182.1 billion by Dec. 31, outperforming the loan portfolio for all U.S. credit unions, which CUNA estimates show rose 9.1% to $1.07 trillion.

The combined Top 10 real estate portfolios rose sharply for year, fed by big gains by the nation’s largest credit union: Navy Federal of Vienna, Va. The Top 10’s 1st-lien residential real estate rose 9.9% to $85.8 billion, and 2nd-liens rose 30% to $11.2 billion.

However, real estate originations were down sharply in the fourth quarter. The Top 10 produced $8 billion in real estate loans in the fourth quarter, down 14.8% from a year earlier. Real estate originations for the year fell 3.2% to $34.7 billion.

Other types of originations rose 13.6% to $20.5 billion for the quarter, and rose 11.9% to $79.3 billion for the year.

The Top 10’s composition was unchanged, and the rankings shifted only with Golden 1 Federal Credit Union of Sacramento, Calif. ($12.3 billion in assets, 1 million members) returning to No. 6; pushed down a notch was First Tech Federal Credit Union of Mountain View, CA ($12.2 billion in assets, 554,529 members).

The Top 10 credit unions and their margins are:

1. Navy Federal Credit Union, Vienna, Va. ($96.9 billion in assets, 8.2 million members) had ROA of 1.72% for the quarter (+3 bps), and 1.65% for the year (+7 bps).
2. State Employees’ Credit Union, Raleigh, N.C. ($38.8 billion in assets, 2.4 million members) had ROA of 0.68% for the quarter (-10 bps), and 0.75% for the year (-1 bps).
3. PenFed, Tysons, Va. ($24.5 billion in assets, 1.7 million members) had ROA of 0.46% for the quarter (+14 bps), and 0.66% for the year (-15 bps).
4. BECU, Seattle ($19.6 billion in assets, 1.2 million members) had ROA of 1.21% for the quarter (+8 bps), and 1.36% for the year (+9 bps).
5. SchoolsFirst Federal Credit Union, Santa Ana, Calif. ($15.2 billion in assets, 862,933 members) had ROA of 1.08% for the quarter (+24 bps), and 1.09% for the year (+21 bps).
6. Golden 1 Federal Credit Union, Sacramento, Calif. ($12.3 billion in assets, 1 million members) had ROA of 0.56% for the quarter (-9 bps), and 0.8% for the year (-1 bps).
7. First Tech Federal Credit Union, Mountain View, Calif. ($12.2 billion in assets, 554,529 members) had ROA of 0.67% for the quarter (-58 bps), and 1.05% for the year (-6 bps).
8. Alliant Credit Union, Chicago ($11.2 billion in assets, 439,028 members) had ROA of 0.4% for the quarter (-27 bps), and 0.59% for the year (-15 bps).
9. America First Federal Credit Union, Riverdale, Utah ($10.3 billion in assets, 1 million members) had ROA of 1.12% for the quarter (+27 bps), and 1.22% for the year (+15 bps).
10. Security Service Federal Credit Union, San Antonio ($9.5 billion in assets, 774,333 members) had ROA of 0.78% for the quarter (+40 bps), and 0.75% for the year (+31 bps).