How Did Credit Unions Perform versus Banks in 2006?

Year-end results for both credit unions and FDIC-insured institutions reveals that credit unions performed well versus their larger competitors in key categories.


Year-end results are in for both credit unions and FDIC-insured institutions. The data reveals that credit unions performed well versus their larger competitors in key balance sheet categories. Although credit union earnings are well below another record year of bank net income, the relative differences in earnings largely reflect credit unions’ focus on providing members with better rates on loan and savings products.

Lending Success Seen in Real Estate, Credit Cards
As shown in the table below, the loan portfolios for credit unions and FDIC-insured institutions (including savings & loans) grew at similar rates in 2006. However, credit unions posted higher growth rates in real estate loans and credit card balances. A breakout of auto loans is not provided in the FDIC’s Quarterly Profile.

Credit unions increased outstanding first mortgage and other real estate loans by 11.8% each while bank portfolios rose 6.6% and 4.7%, respectively. While there is not a direct comparison of origination volume, credit union first mortgage originations declined approximately 10% versus 2005 results in a market that declined 17% nationally according to the Mortgage Bankers Association. Therefore, credit unions picked up market share in a declining market.

Card balances at credit unions have shown momentum throughout the year and closed 2006 on a strong note. The 10.8% annual growth rate is the highest portfolio growth rate in ten years for credit unions. Card balances at banks declined during the year even when factoring in securitizations of card receivables.

While deposit growth in credit unions fell below that of banks, the bank results include commercial deposits and are therefore not quite an apples-to-apples comparison. Nevertheless, the gap in these growth rates narrowed during the year as credit union deposit growth accelerated and bank deposit growth slowed.

Earnings Reflect Success Measures
The earnings difference between credit unions and banks, seen in both the net interest margin and return on assets, reflects both different asset mixes as well as different measures of success. Credit union results point to a focus on helping members succeed while bank results point to a focus on institutional success.

While the loan portfolios grew at similar rates, bank interest income grew 23% during the year while credit union interest income rose only 16%. In addition, higher deposit growth at banks did not translate to higher interest expense growth versus credit unions. While bank interest expense rose 52.9% versus 2005, credit union dividends rose 60%. The combination of these trends resulted in a tighter net interest margin for credit unions but also meant that members benefited from credit union rates.

Although competition within financial services continues to intensify, 2006 results show credit unions remain an important source of value that is recognized by consumers.

Key Year-End 2006 Performance Results


Credit Unions

All FDIC-Insured Institutions

12-month Growth: Loans & Leases Outstanding



12-month Growth: 1st Mortgages Outstanding



12-month Growth: Home Equity Loans Outstanding



12-month Growth: Credit Card Outstandings



Deposit Growth



Net Interest Margin



Return on Assets



*1-4 Family Residential Mortgages
**Home Equity Lines
***Growth of domestic office deposits
****Net interest margin before corporate restructuring expenses
*****After-tax return on assets

For a complete recap of 2006 results, join us for the complimentary Trendwatch calls on March 6 and 7.