Earnings Fall for Top 10 Credit Unions in Q2

The nation’s 10 largest credit unions generated lower net income in the second quarter than in the first quarter because of lower net interest income, lower operating income and higher loan loss provisions.

NCUA Call Reports showed the Top 10 credit unions generated $820.9 million in net income in the three months ending June 30, or an annualized 0.82% of average assets, down from 1.00% ROA both a year ago and in the first quarter.

The Top 10 credit unions encompassed 26 million members and $400.5 billion in assets as of June 30 — only about $70,000 more than three months earlier. The group accounts for nearly 20% of all credit union assets and members.

CU Times analyzes the Top 10 results each quarter to get a quick read on earnings trends for the recently closed quarter. Their earnings fare better than smaller credit unions, but tend to follow the same patterns.

From the first quarter to the second quarter ROA fell 18 basis points:

About 6 basis points were lost as net interest margins fell from 3.60% in the first quarter to 3.54% in the second. They were still up from 3.15% a year earlier.

Fee income added 3 bps, while all other operating income fell by 8 bps.

Operating expenses increased by only 1 basis point.

The biggest contributor to the second quarter drop was a 10-bps increase in loan loss provisions, which accounted for an annualized 1.07% of average assets in the second quarter, up from 0.97% in the first quarter and 0.45% in 2022’s second quarter.

Operating income replaces loan loss provisions with actual net charge-offs. In the second quarter net charge-offs shaved only 6 bps from income. Operating income was $1 billion, or an annualized 1.03% of average assets, down from 1.16% in the first quarter. It was up from 1.00% in 2022’s second quarter.

The charge-off ratio, which is based on the quarter’s average loan balance, did worsen from 1.18% in the first quarter to 1.23% in the second quarter. A year earlier it had been 0.75%.

The usual spring uplift in lending helped originations rise 18% from the first quarter to $32.7 billion in the second quarter. But production was down 22% from a year earlier, with drops across major categories:

• Auto loans, credit cards, personal loans and other consumer loans had the smallest drop from a year ago, but they also had the smallest gain from the first quarter. Originations were $20.8 billion in the second quarter, down 9.1% from a year earlier and up 10.9% from the previous quarter.
• First mortgage originations were $7.3 billion, down 43% from a year earlier and up 44% from the previous quarter.
• Originations of home equity lines of credit, second liens and other residential loans was $2.2 billion, down 30% from a year earlier and up 19% from the previous quarter.
• Commercial loan production was $2.3 billion, down 28% from a year earlier and up 19% from the previous quarter.

The composition of the Top 10 was unchanged from the first quarter. The rankings shifted as Mountain America Federal Credit Union of Salt Lake City ($17.3 billion, 1.2 million members) rose to No. 9, replacing First Tech Federal Credit Union of San Jose, Calif. ($16.9 billion, 650,424 members), which fell to No. 10.

Summary results of the Top 10 were:

1. Navy Federal Credit Union, Vienna, Va. ($165.3 billion, 12.9 million members) had ROA of 1.09% in the second quarter, compared with 1.22% a year earlier and 1.32% in the first quarter. Originations were $15.1 billion, down 17% from a year earlier and up 19% from the previous quarter.

2. State Employees’ Credit Union, Raleigh, N.C. ($49.6 billion, 2.8 million members) had ROA of 0.81% in the second quarter, compared with 1.06% a year earlier and 1.13% in the first quarter. Originations were $2.8 billion, down 6% from a year earlier and up 21% from the previous quarter.

3. Pentagon Federal Credit Union, Tysons, Va. ($35.5 billion, 2.9 million members) had ROA of 0.36% in the second quarter, compared with 1.04% a year earlier and 0.37% in the first quarter. Originations were $2.4 billion, down 56% from a year earlier and up 27% from the previous quarter.

4. BECU, Tukwila, Wash. ($29 billion, 1.4 million members) had ROA of 0.7% in the second quarter, compared with -0.10% a year earlier and 0.78% in the first quarter. Originations were $3 billion, down 8.2% from a year earlier and up 11.8% from the previous quarter.

5. SchoolsFirst Federal Credit Union, Santa Ana, Calif. ($28.7 billion, 1.3 million members) had ROA of 0.48% in the second quarter, compared with 0.76% a year earlier and 0.64% in the first quarter. Originations were $1.7 billion, down 28% from a year earlier and up 6.1% from the previous quarter.

6. Golden 1 Credit Union, Sacramento, Calif. ($20.5 billion, 1.1 million members) had ROA of 0.5% in the second quarter, compared with 0.65% a year earlier and 0.68% in the first quarter. Originations were $2 billion, down 8.9% from a year earlier and up 14% from the previous quarter.

7. Alliant Credit Union, Chicago ($19 billion, 809,880 members) had ROA of 0.37% in the second quarter, compared with 1.27% a year earlier and 0.35% in the first quarter. Originations were $1.3 billion, down 31% from a year earlier and up 28% from the previous quarter.

8. America First Federal Credit Union, Riverdale, Utah ($18.7 billion, 1.3 million members) had ROA of 0.97% in the second quarter, compared with 0.97% a year earlier and 1.31% in the first quarter. Originations were $1.6 billion, down 2.8% from a year earlier and up 4.8% from the previous quarter.

9. Mountain America Federal Credit Union, Salt Lake City ($17.3 billion, 1.2 million members) had ROA of 1.30% in the second quarter, compared with 2.02% a year earlier and 1.40% in the first quarter. Originations were $1.8 billion, down 22% from a year earlier and up 21% from the previous quarter.

10. First Tech Federal Credit Union, San Jose, Calif. ($16.9 billion, 650,424 members) had ROA of 0.21% in the second quarter, compared with 0.20% a year earlier and 0.31% in the first quarter. Originations were $864.9 million, down 47% from a year earlier and up 40% from the previous quarter.