Low Cost of Funds Credited For Big Rise In Income

An early mid-year analysis of credit union data indicates that in the year ending June 30, credit unions recorded an astonishing 35% increase in net income, due in large part to declining costs of funds.

That finding is part of Callahan & Associates "First Look" program, which bases its most recent numbers on 327 participating credit unions that represent $143 billion in total assets.

"Cost of funds remained steady versus first quarter results at 2.9%. This figure is down sharply from the 4.5% recorded through the first six months of 2001, and led to an astonishing 35% growth in net income over the last 12 months," Callahan's said. "The rise in net income, resulting in an ROA of 1.2%, occurred despite flat revenue caused by the change in the interest rate environment."

Participating CUs recorded an 8.2% increase in deposits over the first six months of 2002, a figure that is actually below the 9.6% increase seen during the same period one year earlier.

Share growth continues to be led by short-term savings categories, Callahan's reported, with regular shares and money market shares growing 16.1% and 13.33%, respectively, from January through June.

"The nineties were a time of double-digit loan growth and single digit share growth as the stock market, and people's portfolios, grew rapidly" said Callahan VP Jay Johnson.

Credit unions wanting to participate in the no-cost program should e-mail their 5300.txt files to mail to:5300 creditunions.com.