Credit union net income rose 22.5% during the first quarter of this year over the first quarter last year, even as credit union total income dropped 5% for the first time in recent memory.
Those projections are based on data submitted by 220 credit unions participating in Callahan & Associates' First Look program, which represent total assets of $143 billion (28% of industry assets). representing about 28% of industry assets.
Callahan's noted the income decline is occurring even as credit unions extend investment maturities, with investments of one year or more accounting for 42% of the portfolio versus 32% a year ago.
"We see in this data that credit unions continue to post extraordinary results in an uncertain environment," says Callahan President Charles A. "Chip" Filson. "Strong growth, asset quality and capital base simply verify more than ever why members look to their credit union as a stable, trusted financial partner."
According to Callahan's, the First Look data shows that despite a 21.9% 12-month increase in investments, a more than 200 basis point (BP) drop in yield on investments resulted in a 20% drop in investment income for these credit unions. A nearly 100 BP drop in yield on loans also hurt total income. In addition, operating expenses rose 7.5% from one year ago and now account for 41% of total income.
But the data also indicate that credit unions lowered their average cost of funds 150 basis points in the first 12 months as the Fed cut rates by 275 basis points. The result: a 1.2% annualized ROA.
Other findings:
* Shares, particularly in short-term deposits, continue to grow with a 5.6% 3-month growth at March 31, 2002. Since first quarter is typically when share growth is strongest, it is unlikely this pace will be maintained throughout 2002, Filson indicated.
* Loan growth continues to struggle at 1.3% for the first three months. First mortgage loans, however, remain the primary source of lending activity, rising 5.6% since year-end.
* Net worth to assets has declined due to rapid asset growth, but remains solid at 9.7%. Even with an unstable economy, asset quality remains good with delinquency at 0.6% and the allowance for loan loss covering 1.4 times delinquent loans for this group of CUs.
