Quarterly Return on Assets for credit unions dropped 10 basis points in the 4th quarter to 0.90%. However, this drop would've been much greater had it not been for credit unions' strong performance in service income. Throughout the year, credit unions had numerous internal and external factors affecting their bottom line. Externally, the Fed chose to keep interest rates at their current low rate. As a result, credit unions continued to see low interest yields and the net interest margin only increased slightly to 3.42% from 3.41% last quarter.
Internally, credit unions had their operating expenses as a percentage of average assets increase from 3.20% in the 3rd quarter to 3.23% in the 4th quarter. Since the net interest margin couldn't cover operating expenses combined with provision for loan losses, non-interest income was a key factor. Fortunately, non-interest income as a percentage of average assets remained strong at 1.11%. The graph below shows the impact it has played on ROA.