ALEXANDRIA. Va. – The nation’s biggest credit unions brushed off NCUA’s $2 billion corporate credit union assessment in the third quarter and moved past the huge loan losses of the prior three years to record one of their best years ever in 2011.
Some of the biggest problem credit unions are reporting big turn-arounds that have moved them from the red to the black, helping them to rebuild diminished capital.
Florida’s $5 billion Suncoast Schools FCU, once an NCUA problem case, went from a $30 million loss for 2010 to a $21.4 million net for 2011, while rebuilding its net worth to the 6% mark. California’s Arrowhead Central CU, under NCUA conservatorship for the past year, went from $50 million in losses for 2009 and 2010, to a $25 million net for 2011, while rebuilding its net worth to 6.7%. Utah’s America First CU, which reported a $9.3 million 2010 loss, had a net of $10.6 million last year. Florida’s GTE FCU, which had $47 million in losses for 2009 and 2010, had a $3.9 million 2011 net.
The boost in earnings for most of these credit unions, according to CUNA’s chief economist Bill Hampel, is mainly due to the big declines in additions to loan loss provisions as credit quality is improving nationwide, and to reductions in operating expenses, especially among credit unions that have reported poor financials over the past few years.
While delinquencies increased over the past few years, credit unions moved growing amounts to their provisions for loan losses. Now that delinquencies and loan losses are receding credit unions are moving far less into their reserves, “This is the single biggest driver for all of this,” Hampel told the Credit Union Journal this afternoon.
Another important factor is the maintenance of non-interest income, Hampel pointed out, noting that fee income has yet to decline from some of the Dodd-Frank Bill’s new provisions as much as the credit union industry had feared.
Most of the nation’s biggest credit unions all over the country are reporting robust financials for 2011.
Navy FCU, the nation’s biggets credit unions with $46 billion in assets, reported a 14% rise in net income to a whopping $649.3 million, translating to a 1.38% ROA. Pentagon FCU reported a 70% surge in net income to $121.5 million. Minnesota’s Wings Financial CU had a 91% surge in net income to $45.5 million; Alaska USA FCU reported a 17% rise in net income to $41.7 million; CEFCU in Illinois reported a 15% rise in net income to $36.1 million and Michigan’s DFCU Financial reported a 34% increase in net income to $20.4 million—even after paying its members a $21 million bonus dividend for 2011.
The increased earnings are expected to result in an industry ROA of around 90 basis points--before the deduction of the $2 billion NCUA charge—which would be the best since before the 2008 recession. “Back to the good old days,” is how Hampel put it. NCUA will not report aggregate numbers for 2011 for another month or so.
