Top 10 Credit Unions: Earnings Improve in Q1

The nation’s 10 largest credit unions had a sharp improvement in earnings in the first quarter as they made smaller provisions for loan losses and collected greater net interest income.

NCUA reports posted last week showed the Top 10’s net income was $905.9 million in the three months ending March 31, or an annualized 0.84% return on assets, compared with 0.74% a year earlier and 0.44% in the fourth quarter.

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Almost all of the change can be explained by a lowering of loan loss expectations. Provisions were $1.2 billion in the first quarter, or an annualized 1.07% of average assets. First-quarter ROA was a 9 basis point improvement from a year earlier and a 40 bps improvement from the fourth quarter.

Changes in other parts of the income statement largely canceled each other out.

From the fourth quarter to the first quarter, fee income fell by 12 basis points, but was largely canceled out by an improvement nearly as large for non-payroll overhead (+ 9 bps) and net interest income (+ 2 bps).

Measured from a year earlier, a 22 bps gain in net interest income was zeroed out by lower fees and higher overhead.

Originations were $28.1 billion in the first quarter, up 14% from a year earlier. The biggest gains were from residential mortgages, second-lien residential loans and commercial loans.

Commercial loan production grew 37% to $582 million.
First-lien residential mortgage originations grew 30% to $5.7 billion.
Helocs and other second-lien residential loans grew 20% to $2.7 billion.
The large remainder, which consists of auto and other consumer loans, rose only 9% to $19.1 billion.

Signs of member distress eased.

Loans at least 60 days late were 1.20% of the Dec. 31 balance, down from 1.33% a year earlier and down from 1.54% three months earlier.

Net charge offs were $1.3 billion in the first quarter, or 1.67% of average loans, down from a net charge-off ratio of 1.78% a year earlier and 1.88% in the fourth quarter.

Loan-to-share ratios fell as loan growth slowed. It was 82.0% on March 31, down from 82.5% a year earlier and 85.1% on Dec. 31.

Credit unions held $312.2 billion in loans March 31, up 5.2% from a year earlier and up 0.5% from Dec. 31.

Total shares and deposits were $380.7 billion March 31, up 5.8% from a year earlier and up 4.4% from Dec. 31.

The Top 10 comprised 29.5 million members and $441.7 billion in assets, or nearly 20% of all credit union assets.

CU Times analyzes the results for the 10 largest credit unions each quarter to get a quick gauge of trends emerging as the NCUA posts Call Reports. They account for nearly 20% of assets and tend to have higher ROA, but other credit unions are usually sharing the same trends.

The one change in the lineup was Suncoast Credit Union of Tampa, Fla. ($18.8 billion in assets, 1.3 million members) regaining the No. 10 spot from Randolph-Brooks Federal Credit Union of San Antonio ($18.5 billion in assets, 1.2 million members). CU Times revises past aggregate comparisons to be consistent with the current Top 10.

There will be more Top 10 changes if a couple of proposed mergers are completed. One result would be that neither Suncoast nor Randolph-Brooks will be in contention for the Top 10 for a while.

Digital Federal Credit Union of Marlborough, Mass. ($12.9 billion in assets, 1.2 million members) last September proposed acquiring First Tech Federal Credit Union of San Jose, Calif. ($17 billion in assets, 700,117 members). They hope the merger will be completed late this year. Based on their March 31 assets, they would join the list at No. 5.

And Alliant would drop off the list when Ent Credit Union of Colorado Springs, Colo. ($10 billion in assets, 558,171 members) completes its acquisition of Wings Financial Credit Union of Apple Valley, Minn. ($9.7 billion in assets, 374,509 members) — which it expects to do sometime next year. The combined entity would rank No. 10 based on March 31 assets.

The Top 10, along with their income and origination results, were:

Navy Federal Credit Union, Vienna, Va. ($190.2 billion, 14.5 million members) had ROA of 1.05% in the first quarter, compared with 0.99% a year earlier. Originations were $14 billion, up 7.1%.
State Employees’ Credit Union, Raleigh, N.C. ($55.4 billion, 2.9 million members) had ROA of 0.33% in the first quarter, compared with 0.48% a year earlier. Originations were $2.6 billion, up 25%.
SchoolsFirst Federal Credit Union, Santa Ana, Calif. ($33.4 billion, 1.5 million members) had ROA of 0.55% in the first quarter, compared with 0.4% a year earlier. Originations were $1.7 billion, up 20%.
PenFed Credit Union, Tysons, Va. ($30.6 billion, 2.8 million members) had ROA of 0.77% in the first quarter, compared with 0.27% a year earlier. Originations were $950.9 million, down 26%.
BECU, Tukwila, Wash. ($29.5 billion, 1.5 million members) had ROA of 0.69% in the first quarter, compared with 0.59% a year earlier. Originations were $1.4 billion, down 6.7%.
America First Federal Credit Union, Riverdale, Utah ($22.6 billion, 1.5 million members) had ROA of 1.38% in the first quarter, compared with 1.05% a year earlier. Originations were $1.6 billion, up 9.5%.
Mountain America Federal Credit Union, Salt Lake City ($21.2 billion, 1.4 million members) had ROA of 0.94% in the first quarter, compared with 0.88% a year earlier. Originations were $1.8 billion, up 18%.
Golden 1 Credit Union, Sacramento, Calif. ($20.3 billion, 1.2 million members) had ROA of 0.56% in the first quarter, compared with 0.58% a year earlier. Originations were $1.5 billion, up 24%.
Alliant Credit Union, Chicago ($19.7 billion, 913,284 members) had ROA of 0.4% in the first quarter, compared with 0.42% a year earlier. Originations were $1.2 billion, up three fold.
Suncoast Credit Union, Tampa, Fla. ($18.8 billion, 1.3 million members) had ROA of 0.97% in the first quarter, compared with 0.87% a year earlier. Originations were $1.4 billion, nearly double the amount a year earlier.