ALEXANDRIA, Va. Earnings at the nation’s credit unions continued to surge in the fourth quarter, creating record net income for the year, NCUA reported this morning, the latest sign the travails of the financial crisis have been left behind.
Credit unions reported a record $2.1 billion of net income for the fourth quarter, creating a 36% surge in annual net to an all-time high of $8.5 billion for 2012, even as the record low interest-rate environment continued and credit unions continued to grapple with increasing regulations enacted to cope with the financial crisis.
The surge in net income created an industry return-on-average-assets, or ROA, of 86 basis points, up from 68 bps for 2011, and the highest since 2008, before the onset of the financial crisis.
“There are many reasons to be optimistic about the credit union industry’s future,” said NCUA Chairman Debbie Matz.
The NCUA announcement came three days after the FDIC announced a 37% surge in fourth quarter earnings, and a 19% increase for the year, for the nation’s banks.
Despite the record credit union income, an increasing amount continues to be concentrated in fewer credit unions, with just the five biggest credit unions reporting $1.3 billion in net income, or 15% of the total, and the 15 biggest reporting $1.9 billion, or 22% of the total. Navy FCU reported net income of $760 million, Pentagon FCU $146 million, North Carolina State Employees’ CU $121 million, BECU $143 million and SchoolsFirst FCU $130 million.
NCUA said the record earnings were fueled by two major trends. The first is the continuing decline in loan charge-offs and delinquencies, allowing credit unions to set aside far less allowance for loan losses and moving those funds directly to the bottom line. The second is record growth in credit unions members, who are opening new accounts and adding vast amounts of savings and loans to the credit unions’ ledgers. Yet another reason is the redused size of NCUA's corporate credit union assessment last year, down$1.2 billion from the 2011 assessment--which also went straight to credit unions' bottom lines.
Credit unions added another two millions members last year, up from 1.3 million new members for 2011, and one of the best years ever.
Lending, which was in decline for most of the first half of the year, rebounded to grow by 4.6% for the year. Savings grew by 6.1% for 2012, adding more than $54 billion to credit union coffers for the year.
Growth was most robust in credit unions with assets above $250 million. This group of 751 credit unions showed the largest gains in nearly every category, including membership, net worth, market share, loans and assets. Smaller credit unions tended to have higher net worth, but showed slower growth. Credit unions with assets under $10 million had a loss of overall membership and sluggish loan growth compared to credit unions with assets above $250 million.
“The composition of the credit union industry is changing, which presents challenges,” Matz added. “Small credit unions are important to their members and their local economies. It’s our job to monitor their health and, to the extent possible, find ways to keep them sustainable.”
Industry consolidation also continued throughout 2012. The number of federally insured credit unions fell by 275 in 2012 from 7,094 to 6,819 during the year.
