ALEXANDRIA, Va.-Declining loan losses and continued cost-cutting sent net income at the nation's credit unions surging by 19% for the first quarter of the year to a record $2.1 billion, up from $1.7 billion for the same period last year, according to new data released by NCUA.
The improved earnings pushed the industry's return-on-assets ratio to a five-year high of 0.84%, compared to 0.74% for the first quarter of 2011, as credit unions continued to sweep the financial woes of the economic crisis behind them and ride a new wave of credit union membership.
The industry's ROA has grown 66 basis points from a low of just 18 BPs at Dec. 31, 2009, the depths of the economic crisis.
The soaring credit union profitability comes as banks too reported their best quarter in five years, an ROA of 1.02% for the first three months of 2012.
Continuing the hot streak prompted by last fall's Bank Transfer Day, credit unions added almost 700,000 new members in the first quarter of the year, putting 2012 on pace for the best year ever for membership growth.
"Credit unions now have the potential to lend to 667,000 more members added in the first quarter, on top of the 1.4 million members added in 2011," said NCUA Chairman Debbie Matz.
The membership growth is having an effect on deposits, which rose almost 5% in the first quarter, the best performance in more than five years as $39 billion of new savings poured into the nation's credit unions. That's almost as much as the $41 billion in new savings added in all of 2011.
Lending Remains Stagnant
But lending continues to stagnate, rising less than 1% for the first three months of the year, NCUA reported. A rise in first mortgages, used vehicles loans, and non-federally insured student loans offset declines in other lending products such as credit cards, unsecured loans, and other real estate loans.
Credit unions reported declines in delinquencies and charge-offs during the first quarter. The industry's delinquency ratio dropped 16 bps to 1.44%; while the net charge-off ratio fell 13 bps to 0.78%. Despite these positive declines, both ratios remain elevated above historical norms.
New bankruptcy filings by members also increased. For the first three months of 2012, credit unions reported 70,938 members filing for bankruptcy, a 34.5% increase over the prior quarter. However, the percentage of loans charged off due to bankruptcy fell significantly to 20.69% of charged-off loans, a decrease of 318 bps for the quarter.
