FirstLook: 10 Largest Credit Unions Post Strong Growth, Higher Earnings

The 10 largest credit unions began 2010 in great shape, reporting strong growth, higher ROAs, and increasing capital levels.


Initial data for the first quarter of 2010 shows credit unions are faring well in the new decade. As the economy pulls itself out of the “Great Recession,” credit unions face a number of new challenges and opportunities.

Growth, Quality, And Strength In The Largest 10

According to data from Callahan’s FirstLook program, credit unions reported strong, balanced growth in several key metrics – such as earnings, share balances, and membership totals – during the first quarter of 2010. For a more nuanced analysis, the industry’s 10 largest credit unions provide a suitable proxy.

Based on March’s data, earnings are on the rise. As the 10 largest credit unions moved further into the first quarter and away from corporate write-offs and the initial NCUSIF Stabilization Expense, they renewed their financial strength. This group reported an annualized ROA of 85 basis points in March, up 35 basis points from December, and back in positive territory from the 1.33% annualized loss reported the previous March.

The group also reported strong growth across traditional balance sheet metrics such as share balances (an increase of 7.7%) and membership totals (an increase of 5.4%). The pace is strong, although the rate is admittedly slower than it was at year-end and in March 2009. In contrast to growing share balances and member totals, competition and consumer deleveraging have chipped away at loan balances, which have declined 31 basis points over the past 12 months.

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Key Financial Performance Ratios
Data as of March 31, 2010
Rk Name St Total Assets Share Growth Loan Growth Member Growth OpEx Ratio DLQ Ratio ROA Capital Ratio
1 Navy VA $39.6B 8.30% -2.25% 5.81% 2.97% 1.78% 1.19% 10.60%
2 State Employees NC $19.6B 15.05% 6.80% 4.65% 1.93% 1.16% 1.15% 6.82%
3 Pentagon VA $14.0B 5.99% 1.46% 8.00% 0.96% 0.66% 0.80% 9.46%
4 BECU WA $8.6B 1.15% -3.96% 6.90% 2.35% 1.67% 0.80% 9.27%
5 SchoolsFirst CA $8.0B 3.32% -12.05% 8.48% 1.87% 2.24% 0.30% 11.04%
6 The Golden 1 CA $7.6B 4.95% -7.20 -2.12% 1.95% 3.11% 0.01% 10.43%
7 Alliant IL $7.0B 18.50% 3.51 1.36% 0.73% 1.00% 0.79% 10.55%
8 Security Service TX $5.5B 8.02% 10.17 8.18% 2.47% 1.33% 0.75% 8.98%
9 Suncoast Schools FL $5.4B -8.30% -7.64% 4.36% 1.86% 5.05% -0.98% 8.99%
10 STAR One CA $5.1B 10.67% 21.62% 3.52% 0.71% 0.32% 1.43% 11.17%
Averages For
Top 10 CUs
$12.0B 7.73% -0.31% 5.36% 2.09% 1.67% 0.85% 9.64%

The slowdown in loan demand makes quality underwriting standards more critical. During the past two years, economic turmoil has affected delinquency. For this group of credit unions, however, March’s reported delinquency ratio is the same as December’s – 1.67% – indicating credit unions may be through the worst. Like delinquency trends, March’s annualized net charge-offs – 1.49% – also remains unchanged.

Stabilizing loan quality allowed credit unions to better manage their provisions, leading to an average coverage ratio of 113.1%. Such a coverage ratio grants additional flexibility for meeting member loan demand.

Difficulties in the external market have presented credit unions with a number of new challenges over the past two years. Based on the data for the 10 largest credit unions, the industry is well-positioned to capitalize on these new opportunities. The credit unions listed above reported a capital ratio of 9.64% in March, up 80 basis points over the past year. This group of credit unions started 2010 with a solid foundation of strong underwriting standards, money to lend, and financial capital to back loans. Now they must use this groundwork to reintroduce growth into their loan portfolios.

What First Quarter Results For The Largest 10 Mean For The Industry

A collective increase in financial stability is important for the entire system, as is the member confidence and net capital created by these 10 credit unions. So how did they accomplish this? Each credit union has a different market, history, and business focus, but virtually all have achieved their top 10 ranking through organic growth, by being good at implementing their strategic vision.  

  • Pentagon is zealous about expense reduction, enabling it to deliver unmatched pricing value;
  • State Employees creates loan products tailored for its balance sheet, with every borrower receiving the same rate on each product;
  • Star One clearly defines its intended market and looks at its performance and balance sheet “investments” using an economic cycle that does not limit its decisions to the traditional budget or fiscal year time frame;
  • Security Service uses its mergers to extend its indirect auto lending prowess;
  • BECU has developed innovative member solutions with a focus on process management.

Being a leader is more than size. It requires consistent, persistent, focused strategy. This may be the most important lesson these leaders have for the credit union industry. 

Find out more with Callahan’s FirstLook. Look up individual credit union data or download the full set using Peer-to-Peer and CU Analyzer.