Credit Union Q2 Earnings on Par with Q1

Credit union earnings were flat in the second quarter despite record loan production and rising net interest margins, Callahan & Associates reported Wednesday.

During the Washington, D.C., credit union company’s quarterly Trendwatch webinar, it showed credit unions’ net income was an annualized 0.86% of their average assets in the second quarter, down from 1.16% a year earlier and 0.87% in the first quarter.

The decline from a year ago was related to low provisions for loan losses in early 2021 as credit unions reclaimed overly pessimistic provisions made in 2020 at the start of the COVID-19 pandemic. Results for the first and second quarters have also been lowered by heavy write-downs in investment assets to reflect market downturns.

But the underlying trends were positive.

Net interest margins were 2.66%, up from 2.53% a year ago and 2.57% in the first quarter.

Credit unions originated a record $412.7 billion in loans in the three months ending June 30, up 6.2% from $388.7 billion in 2021’s second quarter and $192.3 billion in the first quarter.

Real estate originations were $174.3 billion, down 1.5% from $177 billion a year earlier. However, non-real estate originations, which include autos and other consumer loans, rose 12.6% to $238.4 billion.

Indirect lending contributed to a spike in auto lending. Credit unions’ balance of total indirect loans on June 30 was 24.4% higher than a year earlier, its highest annual growth rate in at least five years.

Credit unions sold about $17.8 billion in first mortgages to the secondary market, or 14.4% of mortgage originations. It was on par with first-quarter sales of $17.6 billion, but down from about $30 billion in 2021’s second quarter. Sales peaked in the fourth quarter of 2020 at 37.2% of mortgage originations, but have been declining since as rising interest rates have reduced volume and the profitability of sales.

Credit unions have also been buying fewer loan participations as their organic loan growth has accelerated. Credit unions bought $8.5 billion in loan participations in the second quarter, down from $9.4 billion in the first quarter, but up from $6.4 billion in 2021’s second quarter.

During the height of the COVID-19 pandemic savings were rising at double-digit annual rates, while loans were rising much slower. This year the opposite trend has been true. The 12-month gain in loan balances was 16.2% through June 30, while savings grew 8.2%.

As a result, the loan-to-share ratio spiked to 74.7% as of June 30, up from 70.1% a year earlier and 70.6% on March 31.

More than 5.5 million people joined a credit union in the past year. Membership rose 4.3% to 134.1 million.

Credit unions employed about 347,600 full- and part-time employees on June 30, up 4.8% from a year earlier.

The average credit union member had a total of $23,379 in loans and savings with their credit union, a “relationship” value that is 6.3% higher than a year earlier. The average loans per member was $9,386, up 9.5% from $8,575 a year earlier, while the average shares per member rose 4.4% to $13,993.