ALEXANDRIA, Va.—The nation's biggest credit unions continued to trim their loan-loss provisions and cost of funds in the third quarter pushing net income higher still, according to reports filed last week with NCUA.
California's Patelco CU, for example, reported negative $9.6 million provision for loan losses in the third quarter compared with $13.6 million last year-a $23.2 million swing-fueling a $5 million rise in three quarter earnings to $48 million.
San Diego County CU went from a $10 million PLL last year to negative $9 million this year-a $19 million swing that pushed the $6 billion credit union's three-quarter net up 10% over last year to a new high of almost $67 million.
Michigan's DFCU reduced its provisions for loan losses in the third quarter by almost $4 million helping the $3.5 billion credit union report a $2.5 million increase in three-quarter net income to $41 million.
Many other credit unions are reporting healthy bottom lines, even if not better than last year's. California's Star One CU, for example, reported a $39 million net through the first three quarters for a healthy 0.82 ROA-but still down from last year's robust $44 million (0.94 ROA) nine-month net. Three-quarter net at Alaska USA FCU was flat at almost $33 million, even as the $5 billion credit union continues to open new branches and expand throughout Washington and California.
"We're seeing continued improvement in the local economy allowing us to keep cutting back on our provisions for loan losses," Brad Beal, president of OneNevada CU said of his credit union's quadrupling of three-quarter earnings in economically hart-hit Las Vegas to almost $6 million.
What Spurred The Turn-Around
Beal attributed the turn-around in his credit union's fortunes to lower loan losses allowing for reduced loan loss provisions; slashing of cost of funds (the $700 million credit union paid only $500,000 in dividends for the first nine months of the year); and increasing fee income. "Our cost of funds is quite low right now, but right around what the market rates are," said Beal.
NAFCU Chief Economist David Carrier said his monthly surveys show a spike in return-on-assets in the middle of the third quarter, fueled by higher loan growth and lower charge-offs. "Loan growth was higher in July and August than at any point since January," he said. "And net charge-offs were down to their lowest all year."
The trends, combined with a lower corporate credit union assessment from NCUA, has the biggest credit unions on pace for another record year for earnings-topping records set in each of the last two years.
The improved earnings are enabling credit unions across the nation to rebuild capital depleted during the financial crisis, make plans for new technology and facilities; expand into new markets; and please the regulators, who have been keeping a close watch the past few years.
Utah's Mountain America CU had a $45 million net for the first nine months; Desert Schools FCU in Phoenix reported a $41 million net for the first three quarters; Florida's VyStar CU had a $34 million three-quarter net; CommunityAmerica CU in Kansas City a $17 million net; MidFlorida CU a $15 million net; Randolph-Brooks FCU in Texas a $53 million net for the three quarters; California's Schools Financial FCU a $12 million net; and Michigan's lake Trust CU a $7 million net.
