The country's largest credit unions, led by Navy FCU at $38.7 billion, down to Arizona State's 100th ranking at $1.3 billion, show a wide variation in first quarter operating results.
This group manages $320 billion or approximately 36% of all the 7,900 credit union assets. Their trends are an important indicator for the overall direction of the industry. (To see a performance comparison for the Top 100, click here to download a PDF. It is formatted to fit on an 8 x 14 sheet of paper).
The strongest performance was in share growth which averaged 9.8 %. Many credit unions reported double digit share growth. For example, Alliant’s shares rose 22.8%, Teachers (NY) by 25.6%, Tinker by 23%, Wright-Patt and Service both by 20%. (Note: we have excluded growth due primarily to mergers)
Fourteen members of the group reported share declines, often from efforts to keep capital ratios in line due to declines in net worth. Two credit unions had share outflows of 10% or more: GTE FCU and Fairwinds, both in Tampa, Florida’s troubled real estate market. Wescom Central, in Southern California, reported a 9.2% decline over the past year.
Loan growth was steady at 7.5%. Delinquency at 1.49% was up slightly from the 1.34% at 2008 yearend. However the loan growth average does not reflect the range of individual performance. For example loans grew 49% at Star One, and 20% or more at Mountain American, Wright-Patt, Veridian and Service credit unions.
Overall Loan Quality Trends
The Top 100's consolidated $320 billion balance sheet includes $222.5 billion in loans, almost 60% real estate secured. At March 31, total average delinquency was 1.5%, up from 0.8% at March of 2008. However this approximate doubling of delinquency was matched by a loss provision increase of $1.1 billion, or 116% higher than last year's first quarter. The allowance for loan loss has similarly doubled to $3.2 billion from a year earlier. The coverage ratio, measured by dividing the loan allowance account by total delinquent loans, was 97%, up slightly from the prior March.
Five credit unions report operating expense ratios of less than 1% of average assets, led by State Farm’s incredibly low 9 basis points! This is followed by APCO at 45 basis points, Star One and Alliant at 80 basis points, and Pentagon at 93 basis points expense ratios. The overall operating expense average for the top 100 was 2.56%.
Earnings before any NCUSIF write downs were flat at 2 basis points and a negative 32 after NCUSIF adjustments. Some credit unions reported first quarter earnings way above a 1% ROA; thirty-four credit unions reported negative first quarter operating results. The net worth ratio of 8.46% for the group was down about 1%, but it is difficult to tell how much is due to retroactive expensing of the NCUSIF deposit versus operating losses.
What does the data mean?
First, share growth is incredibly strong even though many credit unions are not seeking savings because of uncertainties about the impact of NCUA’s corporate plans on their capital ratios. Members are seeking safe places to deposit money.
Second, most large credit unions are lending with many reporting double-digit loan growth even in an uncertain economy.
Earnings show a wide dispersion of results, but this is an advantage cooperatives have in times of difficulty. Capital is stored up for difficult times. Three credit unions, however, would appear to need capital assistance given their current net worth levels.
Most importantly, despite all the regulatory surprises and changes in Corporate stabilization expense estimates, the top 100 have sustained their financial momentum, helping members with both loans and savings in a time of economic uncertainty.
By every measure these credit unions are investing in the future having opened almost 200 more branches, increased members by over 1.5 million and added almost 2000 employees versus March 2008 totals. With $85 billion in investments, liquidity is strong, and credit unions’ loss reserves are keeping up with loan charge-offs as these occur.
These credit unions are demonstrating the ability of cooperatives to lead America’s economic recovery.