Top 10 Credit Unions: Earnings Fall With Drop in Non-Fee Income

A slump in non-fee income caused first-quarter earnings to fall for the 10 largest credit unions.

Together they generated net income of $903.8 million in the three months ending March 31, or an annualized return of 0.95% of average assets. That’s down from 1.43% ROA in 2021’s first quarter.

CU Times regularly tracks Top 10 results because they account for 18% of the credit union movement’s assets and members, and provide an early indication of results for all credit unions. Callahan & Associates will release their estimates for all credit unions at their Trendwatch webinar on May 18, and the NCUA will post its universe of data in early June.

Over the past year, ROA peaked at an unusually high 1.66% in 2021’s second quarter for this Top 10, and a record 1.16% for all credit unions. At that time, credit unions were clawing back excessive loan loss provisions from the first year of the COVID-19 pandemic when the economic risks seemed immense.

Higher loan loss provisions contributed only 10 basis points to the 48-bps drop in Top 10 ROA from a year ago.

The far bigger cause was declining operating income.

While fee income rose 5 bps, non-fee income has fallen 46 bps. Net interest margins improved by 7 bps, while payroll and other overhead rose only slightly.

The discrete “Other Income” category had ranged from 0.78% to 0.88% of average assets from the first to the fourth quarter of 2021, but fell to 0.45% in this year’s first quarter. Another contributor was $92 million (-0.10%) in losses on “Equity and Trading Debt Securities,” compared with an $18.2 million (0.02%) gain a year earlier.

The Top 10 originated $41.7 billion in loans in the three months ending March 31, up 8.5% from a year ago and up 8.1% from the fourth quarter. Production by type was:

• $778.0 million in commercial loans, up 47% from a year ago and double production in the fourth quarter.
• $18.4 billion in residential loans, up 30% from a year ago and up 31% from the fourth quarter
• $22.5 billion in other loans (which includes auto loans and personal loans), down 5% from a year ago and down 7% from the fourth quarter.

First mortgages sold to the secondary market rose 16% to $6.8 billion. Pentagon Federal Credit Union, based near Washington, D.C., nearly doubled its sales to $4.4 billion, while others cut back.

The Top 10 tend to generate higher margins and faster growth than the credit union movement as a whole. Their assets grew 11.8% to $389.6 billion and membership grew 9.6% to 24.4 million in the 12 months ending March 31.

Among all credit unions, CUNA reported assets grew 8.4% and membership grew 3.4% in the 12 months ending in March.

The NCUA reports for March included many changes in the data. Some provide new information, while some historic comparisons will disappear or be inexact.

For one thing, the new report showed the distribution of indirect loans by type. Automotive loans were traditionally seen as the largest part of the indirect portfolio, but other types from solar to recreational vehicles have grown.

The new report showed automotive loans accounted for 56% of the Top 10’s $29.6 billion in indirect loans as of March 31. And the $16.5 billion in automotive indirect loans accounted for 30% of the Top 10’s $55.9 billion in total car loans.

A third of the indirect portfolio, or $9.7 billion, was for residential real estate.

The composition of the Top 10 changed in the first quarter with First Tech Federal Credit Union ($15 billion in assets, 629,940 members) falling out of the Top 10 to No. 11, and Randolph-Brooks Federal Credit Union of Live Oak, Texas ($15.4 billion in assets, one million members) returning at No. 9.

As usual, past comparisons were recalculated to be consistent with the current set.

The first quarter’s Top 10 were:

1. Navy Federal Credit Union, Vienna, Va. ($160.4 billion, 11.4 million members), which had ROA of 1.05% in the first quarter, down from 1.79% a year earlier. Originations were $12.5 billion, down 36%.

2. State Employees’ Credit Union, Raleigh, N.C. ($53.1 billion, 2.7 million members), which had ROA of 1.09% in the first quarter, down from 1.08% a year earlier. Originations were $3.7 billion, up 65%.

3. Pentagon Federal Credit Union, Tysons, Va. ($35.4 billion, 2.7 million members), which had ROA of 0.90% in the first quarter, up from 0.85% a year earlier. Originations were $11.6 billion, up 126%.

4. BECU, Tukwila, Wash. ($30.4 billion, 1.4 million members), which had ROA of 0.01% in the first quarter, down from 1.18% a year earlier. Originations were $2.8 billion, up 19%.

5. SchoolsFirst Federal Credit Union, Santa Ana, Calif. ($27.9 billion, 1.2 million members), which had ROA of 0.62% in the first quarter, down from 0.68% a year earlier. Originations were $1.9 billion, up 20%.

6. Golden 1 Credit Union, Sacramento, Calif. ($18.6 billion, 1.1 million members), which had ROA of 0.68% in the first quarter, up from 0.64% a year earlier. Originations were $1.6 billion, up 8.2%.

7. America First Federal Credit Union, Riverdale, Utah ($17.6 billion, 1.2 million members), which had ROA of 0.89% in the first quarter, down from 1.67% a year earlier. Originations were $2.6 billion, up 15%.

8. Alliant Credit Union, Chicago ($15.4 billion, 668,274 members), which had ROA of 1.17% in the first quarter, down from 2.43% a year earlier. Originations were $1.4 billion, down 2.5%.

9. Randolph-Brooks Federal Credit Union, Live Oak, Texas ($15.4 billion, 1 million members), which had ROA of 2.09% in the first quarter, unchanged from a year earlier. Originations were $1.8 billion, up 43%.

10. Suncoast Credit Union, Tampa, Fla. ($15.3 billion, 1 million members), which had ROA of 0.97% in the first quarter, down from 1.09% a year earlier. Originations were $1.8 billion, up 45%.