Fourth Quarter Income Rises at Credit Unions

Credit unions continued to benefit from rising interest rates in the fourth quarter as net income rose 6.8%.

The gain came despite a drop in real estate loan originations and noninterest expenses rising faster than assets.

A CU Times analysis of NCUA data showed the nation’s 5,482 credit unions generated $2.9 billion in net income in the three months that ended Dec. 31, 2018. The return on average assets was an annualized 0.78%, unchanged from 2017’s fourth quarter.

Net interest income measured before loan loss provisions was $11.5 billion for the quarter, up 10.5%. That compared with a growth rate of 5.9% for assets, which ended the year at $1.47 trillion.

The provision for loan losses and fee income grew on par with assets, and other operating income did only slightly better, rising 7.2%.

Employee compensation and benefits rose 7.6% to $5.9 billion, while other noninterest expenses rose 10.9% to $5.9 billion.

The biggest change in fourth-quarter results was real estate loan originations, which fell 7.3% to $41.4 billion. This followed a 3.1% increase for the first nine months of the year. For the year, real estate originations rose only 0.5% to $174.7 billion.

The Mortgage Bankers Association estimated that total residential real estate originations fell 6.6% to $1.64 trillion last year for all lenders. This year they are expected to fall 0.9% as refinance volume drops for the third year in a row.

Credit unions did much better with car loans and all other non-real estate originations. They rose 6.5% to $80.3 billion for the quarter, and 5.7% to $510.3 billion for the year.

Total credit union originations rose 1.4% to $121.7 billion for the quarter, and 5.7% to $510.3 billion for the year.

Net income for the 12 months ending Dec. 31 was $13.1 billion, 20.7% higher than in 2017. The year’s ROA was 0.92%, up 10 basis points, including a five bps bump from the NCUA’s insurance fund rebates last year.

This year’s $160.1 million rebate, which the NCUA announced Thursday, is likely to add only about one basis point to ROA. The NCUA said it expects to distribute the funds in the second quarter.

ROA continued to rise with size for the year:

• The 1,448 credit unions with assets of less than $10 million had ROA of 0.25%, up 10 bps.
• The 1,727 with assets of $10 million to $49 million had ROA of 0.51%, up 18 bps.
• The 705 with assets of $50 million to $99 million had ROA of 0.61%, up 14 bps.
• The 1,051 with assets of $100 million to $499 million had ROA of 0.68%, up 16 bps.
• The 551 with assets of $500 million or more in assets had ROA of 1.01%, up eight bps.