Credit Union Data Shows Postive Trends In First Quarter 2010

Significant improvements to credit unions’ income statements yielded a $1 billion increase in net income over first quarter 2009.


The US economy is bouncing back. In a recent sign of recovery, GDP growth hit 3.2%. Credit unions, likewise, are showing their own signs of recovery. In the first quarter of 2010, net income prior to the NCUSIF Stabilization expense is up more than $1 billion from the first quarter of 2009. Using its FirstLook analysis, Callahan & Associates has featured the success stories of credit unions with remarkable performances over the past year, putting faces, names, and heartbeats to the recovery. But how is the industry performing overall?

Credit Unions Experience Significant Improvement in EarningsEarnings Model

Credit Unions Experience Significant Improvement In Earnings
Data as of March 31, 2010
  1Q 2009
($ Billions)
1Q 2010
($ Billions)

($ Billions)

Difference (%)
Interest Income $10.51 $10.18 ($0.33) -3.18%
Non-Interest Income $2.31 $2.69 $0.38 16.46%
  Provision For Loan Losses $2.05 $1.85 ($0.20) -9.77%
  Cost Of Funds $4.07 $2.97 ($1.10) -27.09%
  Operating Expense $6.66 $6.92 $0.26 3.91%
Pre-Assessment Income $0.04 $1.11 $1.08 3,002.42%
Average Assets $826.43 $890.79 $64.36 7.79%
Source: Callahan & Associates' FirstLook

The $1.1 billion drop in the cost of funds (not including NCUA’s assessment) has had the largest effect on the industry’s bottom line. This cost dropped despite an approximate $55 billion, or 7.6%, rise in shares, which was primarily driven – to the tune of $29 billion – by lower interest money market funds. Meanwhile, higher interest share certificate accounts fell by $12 billion.

It’s also important to understand earning figures compared to the growth of the credit union system. When considering the income statement in relation to average assets, significant trends in the earnings model emerge.

Changes in the Credit Union Earnings ModelIncome Model
Income items expressed annualized, as a percentage of average assets
Source: Callahan’s Peer-to-Peer Software

Changes In The Credit Union Earnings Model
Data as of March 31, 2010
  1Q 2009 1Q 2010 Difference (bps)
Interest Income


4.57% -52
Non-Interest Income 1.11% 1.21% 10
  Provision For Loan Losses 1.00% 0.83% -17
  Cost Of Funds 1.97% 1.33% -64
  Operating Expense 3.23% 3.11% -12
Pre-Assessment ROA 0.00% 0.50% 50

Income items expressed annualized as a percentage of average assets.

Source: Callahan & Associates' FirstLook

The biggest shift in the credit union earnings model is the decline in both interest income and interest expense. The cost of funds decline is discussed above. The decline in interest income is driven by a 40 basis point decline in loan income and a 12 basis point decline in investment income. Loan income declined across the board because of a 23 basis point fall – to 6.13% – in the yield on average loans. Rates fell across the board for investments as well, but credit unions held a greater portion of their investment portfolio (46%) in investments with a maturity of less than one year.

Exogenous factors, such as market rates, largely determined these shifts in interest income, although credit unions actively managed their balance sheets by selling the majority of fixed rate mortgage originations – among other things – to control the impact of these factors. There are positive trends in non-interest income, loan losses, and operating expenses, which are income items over which the credit union has greater control. Given both controllable and non controllable factors, credit unions’ core income model yielded a higher ROA in the first quarter of 2010.