CUs Outshine Banks in the First Quarter

With stronger share and asset growth and better performance in the loan portfolio, credit unions outperformed banks in the first quarter.


Credit unions had a strong first quarter. With shares growing at the fastest pace in four years and loan quality remaining high, the industry is positioned for momentum in 2007. The first quarter results released from the Federal Deposit Insurance Corporation by comparison, pointed to struggles in the nation’s 8,650 banks.

Credit Union Growth Outpaces Banks

Quarterly Growth



Credit Unions

Deposit Growth*



Loan Growth



RE Loan Growth**



Credit Card Growth



Asset Growth



# of Insitutions



*Domestic deposits


The up-tick in share growth for credit unions was the highest level of quarterly share growth, at 4.2% ($25.6 billion) since the first quarter of 2003. Where did these shares come from? Some were brought in because of the 0.5% quarterly jump in membership, the highest level in the past two years.

Credit union real estate loan growth remains modest at 1.4% since the end of 2006. Despite the slow growth, originations during the first quarter of the past four years have been on the rise. Much of the activity was brought about by re-financings. Because of higher loan quality, credit unions did not have to restrict lending standards as much as banks did during the weakening of the real estate market. The effect on banks can be seen in the –0.3% quarterly decline in their mortgage portfolios.

The Credit Union Difference Seen in the Business Model

Business Model



Credit Unions

Net Interest Margin



Non-Interest Income



Provision for Loan Loss



Operating Expenses






ROA for both banks and credit unions decreased significantly over the first quarter. The main driver of this for banks was a 54.6% increase in their provisions for loan loss as banks had significant uncertainty in their loan portfolios. For credit unions, higher dividends to members caused the drop in ROA as the interest expense increased 37.8% over the past year. This illustrates the credit union difference.

Overall, 2007 holds a lot of promise for credit unions. With share growth at its strongest point in years and loan growth steady, the industry is on solid footing to increase their market share in the financial services sector.




June 4, 2007


  • Thank you for your comment. We appreciate the feedback. The main reason that the ROA calculation does not seem to add up is that ROA for banks is calculated after income taxes are taken out. For banks this quarter, income taxes were 0.56% of average total assets. Credit unions differ in this respect as they are non-profit institutions and do not pay income taxes on interest income. Also, net interest margin is calculated by the FDIC using average earning assets, where as the other components are calculated using average total assets, including ROA.
    Mike Werstuik (Author)
  • The bank percentages in the business model chart don''t make any sense. Margin plus non-interest income, less provision and expenses, should equal ROA.