As expected, early reporting credit unions are seeing tighter margins and less
service revenue leading to lower earnings. The 202 credit unions that have participated
in Callahan & Associates’ First Look program report an ROA of 0.97%
at the end of the first quarter, 22 basis points below their collective 1.19%
ROA at the end of 2003.
These 202 credit unions total $104 billion in assets and represent approximately
16% of the credit union industry. The decline began at the end of 2003 as margins
continued to tighten and credit unions were less successful in supplementing
their revenue with a stream of service revenue. Credit union ROA for this sample
was 1.00% in the last three months of 2003 - not far from the 0.97% they report
for the first three months of 2004.
First Look participants report a net interest margin of 3.04, 12 basis points
down from 2003 but only 4 basis points below the fourth quarter of 2003. Similarly
their service revenue to average assets is 1.14% at the end of the first quarter,
12 basis points below 2003 but only 2 basis points below the fourth quarter.
Operating expenses to average assets remained unchanged for the group at 2.83%.