One in Four Credit Unions Generate Q4 Losses

One in four credit unions reported a net loss for the fourth quarter, and the breadth of the losses was rivaled by their depth.

A CU Times analysis of data released by the NCUA Tuesday showed 1,188 of the nation’s 4,702 federally insured credit unions had a net loss for the three months ending Dec. 31.

Together they lost $658.0 million in the three months ending Dec. 31, or an annualized -0.80% of their average assets.

That’s far higher than either a year earlier when 983 credit unions lost $163.7 million (-0.50% ROA), or the third quarter when 761 credit unions lost $149.5 million (-0.42% ROA).

The credit unions with losses were afflicted with the same pestilences as profitable ones — just more so.

Loan originations: They fell 20% to $109.8 billion in the fourth quarter for profitable credit unions, and fell 33% to $14.8 billion for the credit unions with losses.

Provisions for loan losses: They rose 87% to $3 billion for credit unions with gains, and more than doubled to $826.5 million for credit unions with losses.

Net charge-off ratios: They rose from 0.41% in 2022′s fourth quarter to 0.71% in 2023′s fourth quarter among credit unions with gains, and rose from 0.54% in 2022′s fourth quarter to 1.09% in 2023′s fourth quarter for credit unions with losses.

Net interest margins: They fell from 3.13% in 2022′s fourth quarter to 3.08% for credit unions with gains, and fell from 2.76% in 2022′s fourth quarter to 2.49% in 2023′s fourth quarter for credit unions with losses.

Non-interest income: It rose a bare 0.6% for credit unions with profits, while falling 30% to $645.3 million for those with losses.

And the losses were deeper than usual.

Losses greater than $10 million in a three-month period are unusual for credit unions, but there were 18 credit unions with losses greater than $10 million in 2023’s fourth quarter with a combined net loss of $381.2 million (-1.27% ROA).

Since the fourth quarter of 2019, losses greater than $10 million have been rare. Six were reported for the first quarter of 2020 when credit unions made huge loan loss provisions as the COVID-19 pandemic began — many of those provisions were reclaimed later as credit unions realized the economic effects were not as great as feared. Six more occurred in the final three quarters of 2020.

Besides those, there were three in the fourth quarter of 2019, one in the third quarter of 2021, three in the fourth quarter of 2022 and one in the first quarter of 2023.

CU Times has previously reported six of the big fourth-quarter losses, most recently the $12.2 million loss (-0.70% ROA) at Hudson Valley Credit Union of Poughkeepsie, N.Y. ($7.1 billion, 357,235 members). Two of the other losses resulted from $40 million in special dividends distributed in the fourth quarter by credit unions that had strong profits for the year even with the big payouts: A typical pattern for them.

The other 10 large losses occurred at:

• Chevron Federal Credit Union of Concord, Calif., 31 miles northeast of San Francisco ($4.7 billion, 135,514 members), which lost $30 million (-2.55% ROA) in the fourth quarter, worsening from a $4 million loss (-0.33% ROA) a year earlier. For the year, it lost $17.4 million (-0.36% ROA), down from an $86 million gain (1.85% ROA) in 2022.
• Diversified Members Credit Union of Detroit ($481.1 million, 30,356 members), which lost $10.4 million (-8.62% ROA) in the fourth quarter, down from a scant $262,252 (0.21% ROA) a year earlier. For the year, it lost $9.2 million (-1.86% ROA), down from a $1.7 million gain (0.32% ROA) in 2022.
• General Electric Credit Union of Cincinnati ($5.1 billion, 279,569 members), which lost $11.5 million (-0.91% ROA) in the fourth quarter, down from a $4.3 million gain (0.37% ROA) a year earlier. For the year, it lost $5.1 million (-0.10% ROA) in 2023, down from a $33.9 million gain (0.79% ROA) in 2022.
• Greater Nevada Credit Union of Carson City, Nev. ($1.8 billion, 88,042 members), which lost $10.4 million (-2.33% ROA) in the fourth quarter, down from a $3.3 million gain (0.76% ROA) a year earlier. For the year, it lost $10.6 million (-0.59% ROA) in 2023, down from an $8 million gain (0.47% ROA) in 2022.
• Oregon Community Credit Union of Eugene, Ore. ($3.3 billion, 264,575 members), which lost $11.5 million (-1.35% ROA) in the fourth quarter, down from a $3.4 million gain (0.39% ROA) a year earlier. For the year, it earned $1.4 million (0.04% ROA), down from $29.9 million (0.95% ROA) in 2022.
• Pennsylvania State Employees Credit Union of Harrisonburg ($8.2 billion, 591,730 members), which lost $15.5 million (-0.76% ROA) in the fourth quarter, down from a $13.1 million gain (0.64% ROA) a year earlier. For the year, it earned $49.5 million (0.14% ROA), down from $243.3 million (0.72% ROA) in 2022.
• Resource One Credit Union of Dallas ($763 million, 70,529 members), which lost $11.2 million (-5.76% ROA) in the fourth quarter, up from $1.2 million (-0.57% ROA) a year earlier. For the year, it lost $12.5 million (-1.58% ROA) in 2023, down from a $1.4 million gain (0.18% ROA) in 2022.
• Star One Credit Union of Sunnyvale, Calif. ($9.9 billion, 126,042 members), which lost $11.7 million (-0.47% ROA) in the fourth quarter, down from a $15 million gain (0.57% ROA) a year earlier. For the year, it earned $12.2 million (0.12% ROA), down from $41.7 million (0.38% ROA) in 2022.
• Tyndall Federal Credit Union of Panama City, Fla. ($1.9 billion, 112,154 members), which lost $12.4 million (-2.59% ROA) in the fourth quarter, worsening from a $6.9 million loss (-1.39% ROA) a year earlier. For the year, it earned $6.6 million (0.34% ROA), down from $10.8 million (0.53% ROA) in 2022.
• Unify Financial Federal Credit Union of Los Angeles ($3.8 billion, 260,479 members), which lost $24.6 million (-2.55% ROA) in the fourth quarter, down from a $5.6 million gain (0.54% ROA) a year earlier. For the year, it lost $20.7 million (-0.52% ROA), down from a $47 million gain (1.22% ROA) in 2022.