Revenue at U.S. credit unions increased 11.0% annually to $19.7 billion as of March 31, 2019, according to estimates from Callahan & Associates based on first quarter performance data.
Analysts at Callahan attribute a full 98.9% of this increase to interest income. Loan income and investment income rose 13.0% and 24.2%, respectively, from this time last year. Operating expenses grew at a slower rate of 7.4% to $11.7 billion. This dynamic fueled year-over-year net income growth of 11.1%, with aggregate net income for the industry totaling $3.2 billion.
Larger bottom lines allow credit unions to use excess earnings to return value to members in the form of immediate savings, dividends, and improved service offerings.
The Federal Open Market Committee (FOMC) raised its benchmark interest rate four times in 2018. As a result, funding costs have moved higher even into the first quarter of 2019. The average cost of funds rose 25 basis points year-over-year to 0.93%. As of March 31, credit unions have paid $2.7 billion in member dividends, an increase of 52.4% from the same time last year.
FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.19
Four rate bumps in 2018 by the Federal Reserve of its benchmark funds rate has resulted in an annual increase in yield on investments, cost of funds, and yield on loans at U.S. credit unions.
Total investment balances increased 1.6% year-over-year. The share of the investment portfolio held by products maturing within a year increased 46 basis points from the first quarter of 2018. Short-term rates growing faster than long-term rates has caused an increase in average investment yields. Up 55 basis points year-over-year, yield on investments reached 2.34% as of the first quarter.
Yield on loans increased 17 basis points annually to 4.76% as of March 31. The relatively large portion of the portfolio held in consumer loans has allowed credit unions to gradually reprice at higher rates. In the near-term, these yields will likely continue to move in lockstep as the FOMC conducts monetary policy through the management of short-term interest rates.
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