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Credit union profit rebounds in Q1'16

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Credit union profit rebounds in Q1'16

Continuedasset growth and falling loan loss provisions contributed to a quarter-over-quarterincrease in aggregate credit union profit. Aggregate net income in the industrywas $2.31 billion in the first quarter, up from $1.82 billion in the , but stilloff the recent high of $2.42 billion set in the second quarter of 2015. Return onaverage assets on an aggregate basis was 0.75%, up 15 basis points compared to thelinked quarter.

Totalcredit union assets increased 3.0% during the quarter to $1.26 trillion. Total loanswere up $12.6 billion from Dec. 31, 2015, while total shares and deposits jumped$35.3 billion. Bigger balance sheets drove growth in net interest income, whichwas up $264.9 million quarter on quarter, and helped offset a sluggish margin trend.The first-quarter net interest margin on a fully taxable-equivalent basis of 2.87%was 1 basis point lower from the prior quarter.

Membershipgrew, as well. Total members stood at 105.0 million at March 31, up from 104.0 millionat year-end 2015 and 101.2 million a year ago.

Alsoof note, credit unions were able to hold the line on expenses even through its recentgrowth spurt. Total noninterest expense fell $4.3 million from the preceding quarter.Operating expenses as a percentage of operating revenue declined to 73.64% from75.24%.

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Changesin the loan loss provision have played a significant role in credit union profitduring the last four quarters. The aggregate provision was $1.09 billion in thefirst quarter, representing a linked-quarter decline of $221.8 million. The provision-to-netcharge-offs ratio likewise fell, to 105% from 122%. For the last four quarters,the ratio has exceeded 100%.

Amongcredit unions with greater than $500 million in total assets, the medianreturn on average assets in the first quarter was 0.67%, down 10 basis points ona year-over-year basis. Durham,N.C.-based Self-Help Federal CreditUnion topped the list at 2.52%, which was almost twice as high relativeto its ratio in the first quarter of 2015. Self-Help FCU closed two branches in April, bringing its number of branchesdown to 23.

New York-based ProgressiveCredit Union had the lowest ROAA in this particular group at negative9.87%, as well as the highest net worth-to-assets ratio at 37.23%.The credit union also recorded a loss in the fourth quarter of 2015, but its first-quarter2015 ROAA was 1.26%. Progressive is one of the biggest business lenders in the credit union industry.

The largestcredit union by total assets — Vienna, Va.-based Navy Federal Credit Union — just missed the top-25 ROAA list.Its first-quarter return of 1.50% was up 20 basis points compared to the year-agoquarter. In the last four quarters, the credit union has expanded its by 20.

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Click here to view aggregate financials for U.S. credit unions.

Click here to download a template that allows users to quantify the value credit unions are delivering to their members by calculating a score based on industry-specific metrics that help measure member return.

Click here for a webinar about using S&P Global Market Intelligence for credit union peer analysis.