Third Quarter Net Interest Margin Surpasses National Average For Nebraska Credit Unions

Credit unions in the Cornhusker state best national average by 25 basis points.

 
 

Nebraska credit unions reported robust growth in loans, shares, membership, and capital in the third quarter of 2013. According to quarterly data collected and analyzed by Callahan & Associates, the yield on loans  posted by Nebraska credit unions contributed to higher interest income and net interest margin compared to national credit unions.

As of September 2013, Nebraska credit unions increased outstanding loan balances by 4.7% annually to top $2.4 billion. First mortgage loan balances grew 7.7%, bringing in an additional $53.5 million to reach $753.6 million. Additionally, Cornhusker credit unions sold $207.0 million in mortgages to the secondary market in the first nine months of the year.

ANNUAL LOAN GROWTH BY COMPONENT
Data For September 30, 2013, For All Nebraska Credit Unions
© Callahan & Associates | www.creditunions.com

NE_Loan_Growth_for_Article

Source: Callahan & Associates’ Peer-to-Peer Analytics

Nebraska credit unions posted slightly higher interest income yet lower interest expense than the national average as of September 2013. Nebraska’s interest income ratio in the third quarter stood at 3.59% versus the national average of 3.39%. The state’s higher interest income is the result of its higher yield on loans. Yield on loans is the income credit unions generate on loans relative to the amount of loans. That is calculated by taking the interest earned on loans, subtracting any interest refunded, then dividing that by the average amount of loans over period. In the third quarter, Nebraska credit unions had a yield on loans of 5.11%, which is five basis points above the national average of 5.06%. This is due to a higher mix of consumer loans on Nebraska credit unions’ balance sheet.

YIELD ON LOANS
Data For September 30
© Callahan & Associates | www.creditunions.com

NE_Yield_on_Loans_for_Article

Source: Callahan & Associates’ Peer-to-Peer Analytics

Meanwhile, Nebraska’s interest expense ratio was 0.53% compared to the national average of 0.59%. The wider spread between the interest income and interest expense ratios at Nebraska credit unions led to a higher net interest margin. Net interest margin at Nebraska credit unions came in at 3.05% as of September; that’s 25 basis points higher than the national average.

However, Nebraska credit unions’ operating expense ratio, including stabilization expenses, stood at 3.93% versus the national average of 3.16%. Despite a higher net interest margin, higher operating expense ratio pushed down Nebraska credit unions’ ROA to 50 basis points. National credit unions posted an ROA of 80 basis points for the third quarter.

Asset quality at Nebraska credit unions improved from the previous September and is better than the national credit union and national bank averages. Delinquency at Nebraska credit unions decreased to 0.87% at the end of September, significantly lower than the national credit union average of 1.02% and the national bank average of 2.83%

Total shares at Nebraska credit unions reached $3.2 billion as of September 2013, up 4.1% from the previous year. Every core deposit category — regular shares and deposits, money market shares, and share drafts — posted solid growth, with money market shares increasing at the fastest pace.

ANNUAL SHARE GROWTH BY COMPONENT
Data For September 30, 2013, For All Nebraska Credit Unions
© Callahan & Associates | www.creditunions.com

NE_Share_Growth_for_Article

Source: Callahan & Associates’ Peer-to-Peer Analytics

Over the past 12 months, Nebraska credit unions brought in 9,402 new members to reach 452,798 in the third quarter. The annual 2.1% growth is on par with the national average. Due to growth in loans, shares, and members, the average member relationship at Nebraska credit unions rose 2.2% annually to $12,055 as of September.

Nebraska credit unions were more highly capitalized than the national credit union and their bank peers on both regional and national levels. As of September 2013, Nebraska credit unions reported an average capital ratio of 11.2%.

For the past five years, Nebraska credit unions’ yield on loans has consistently surpassed the national average, leading to a larger net interest margin. A strong yield on loans is important for credit unions, as interest on loans is the single largest source of income for the industry. With strong net interest margin, robust growth in outstanding loans, and improving asset quality, the financial profile of Nebraska credit unions remains strong. 

 

 

 

Dec. 19, 2013


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